1992 (2) TMI 270 - HC - Companies Law

PICUP must seek leave before appealing in winding-up cases under Companies Act.

The court held that the Pradeshiya Industries and Investment Corporation (PICUP) must seek leave from the court where the appeal is pending, as per ... Stay of proceedings on winding up - Leave of court to commence or proceed with proceedings against a company in liquidation - Exception for proceedings pending in appeal - Construction of subsection (4) of section 446Stay of proceedings on winding up - Leave of court to commence or proceed with proceedings against a company in liquidation - Exception for proceedings pending in appeal - Construction of subsection (4) of section 446 - Whether PICUP was required to obtain leave of the company judge in the High Court to proceed with a Special Leave Petition in the Supreme Court after a winding up order had been passed against the company. - HELD THAT: - The Court held that ordinarily, after a winding up order, no suit or proceeding may be instituted or proceeded with against the company except by leave of the court conducting the winding up. However, subsection (4) of section 446 creates an exception for proceedings that are pending in appeal before the Supreme Court or a High Court. That exception is purposive: where an appeal is already pending, the leave to proceed must be sought from the appellate court in which the appeal is pending rather than from the company judge. In the present matter there was no order of the Supreme Court directing that leave of the company judge be obtained; the only material was a solicitor's communication recording an oral direction and adjournment. Applying subsection (4), the correct procedure is to seek leave from the appellate forum where the appeal or proceeding is pending.Application A-7 dismissed; PICUP must seek leave from the appellate court where the appeal is pending in accordance with subsection (4) of section 446.Final Conclusion: The High Court disposed of PICUP's application under section 446 by interpreting subsection (4) to exempt proceedings pending in appeal from the ordinary stay on proceedings after winding up and directed that leave, if required, be sought from the appellate court; the application is accordingly laid to rest. Issues:1. Whether the Pradeshiya Industries and Investment Corporation (PICUP) requires leave of the High Court to proceed with a Special Leave Petition pending in the Supreme Court.2. The interpretation of Section 446 of the Companies Act, 1956 regarding the requirement of seeking leave for legal proceedings during winding-up proceedings.Analysis:The judgment delivered by R.S. Dhavan, J. addresses the issue of PICUP seeking leave of the High Court to proceed with a Special Leave Petition pending in the Supreme Court. The court notes that there is no specific order from the Supreme Court mandating PICUP to seek leave from the High Court. The communication from PICUP's solicitor indicated that the Supreme Court directed PICUP to seek leave of the company court in Allahabad to proceed with the Supreme Court proceedings. However, the judge highlights that after a winding-up order, legal proceedings against the company require the High Court's permission. It is not customary for parties with claims against a company under winding-up to seek High Court's permission during the winding-up process. The judge emphasizes that the law prohibits initiating legal proceedings against a company under winding-up without the High Court's consent.Furthermore, the judgment delves into the interpretation of Section 446 of the Companies Act, 1956. The judge points out the significance of subsection (4) of Section 446, which provides an exception for proceedings pending in appeal before the Supreme Court or a High Court. The judge emphasizes that if an appeal is pending before the Supreme Court or a High Court concerning a company under winding-up, the requirement of seeking leave shifts to the appellate court where the appeal is pending. Therefore, in the case of PICUP's application seeking leave to proceed with the Special Leave Petition, the judge concludes that the exception clause under Section 446(4) applies, and leave should be sought from the court where the appeal is pending. Consequently, the judge dismisses PICUP's application, stating that it is now concluded with this order.