Special recovery statute overrides company court control over secured creditors' pending suits, while winding up expenses may still be ordered.

A later special recovery statute governing banks and financial institutions was treated as overriding the Companies Act, 1956 in respect of pending recovery proceedings by secured creditors. On that basis, the company court's power under section 446 to stay, withdraw, or require leave for those suits was excluded, and continuation before the specialised forum did not require leave. For the same reason, permission under section 537 was also unnecessary for execution or continuance of the proceedings. However, the winding up court could still make ancillary directions to protect the liquidation process, including requiring secured creditors benefiting from the assets to contribute towards the official liquidator's necessary winding up expenses.

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Issues: (i) Whether suits filed by secured creditors pending before the Bombay High Court could be withdrawn to the company court or continued only with leave under section 446 of the Companies Act, 1956, in view of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. (ii) Whether leave or permission under section 537 of the Companies Act, 1956, was necessary for execution or continuance of proceedings, and whether secured creditors could be directed to contribute towards winding up expenses.

Issue (i): Whether suits filed by secured creditors pending before the Bombay High Court could be withdrawn to the company court or continued only with leave under section 446 of the Companies Act, 1956, in view of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

Analysis: Section 446 gives the company court power to stay, regulate, or withdraw proceedings involving a company in winding up, but the later special enactment governing recovery by banks and financial institutions contains a jurisdictional bar, a transfer provision for pending matters, and an overriding clause. The court treated the applicant creditors as financial institutions and held that their pending suits fell within the special recovery regime. Applying the principle that a later special law overrides an earlier special law, the court held that the company court's power under section 446 stood excluded for such suits after the appointed day. Consequently, no leave was required for continuation of those suits before the specialised forum, and no withdrawal to the company court could be ordered.

Conclusion: The request to withdraw the suits or require leave under section 446 was rejected, and the issue was decided against the applicants.

Issue (ii): Whether leave or permission under section 537 of the Companies Act, 1956, was necessary for execution or continuance of proceedings, and whether secured creditors could be directed to contribute towards winding up expenses.

Analysis: Since the later recovery statute was held to override the Companies Act in relation to the pending recovery proceedings, permission under section 537 was also held unnecessary. At the same time, the winding up court retained authority to ensure that the official liquidator had funds to represent the company and proceed with liquidation work. The court relied on the continuing need to preserve the winding up process and the earlier direction for preliminary expenses, and held that secured creditors who were benefiting from the assets had to bear the necessary expenses for the liquidation administration.

Conclusion: Leave under section 537 was held unnecessary, but directions for payment of winding up expenses by the secured creditors were sustained, in favour of the official liquidator.

Final Conclusion: The proceedings for withdrawal and leave were held not maintainable in view of the later recovery legislation, while the official liquidator's entitlement to receive funds from secured creditors for liquidation expenses was upheld.

Ratio Decidendi: Where a later special statute creates a specialised recovery mechanism with an overriding clause, the company court's power under section 446 of the Companies Act, 1956, is excluded in respect of covered proceedings, though the winding up court may still make ancillary directions to secure liquidation expenses.

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