Secured creditor rights in winding up: leave to sue may be granted on terms, but separate receivership and unilateral sale were refused.

In winding up, a secured creditor must obtain leave of the company court before instituting proceedings against the company, and such leave may be granted on protective terms. Leave was allowed to commence the suit, subject to costs and to further orders before execution of any decree. The court refused appointment of a separate receiver over the mortgaged and hypothecated properties because the official liquidator already holds custody of the company's assets and safeguards the estate. Leave to sell the charged assets and realise dues was also declined, since unilateral sale would disturb the company court's control over the liquidation estate and prejudice the pari passu rights of other creditors and workmen.

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Issues: (i) whether leave could be granted to the secured creditor to institute a suit against the company under section 446(1) of the Companies Act, 1956; (ii) whether appointment of a receiver over the company's mortgaged and hypothecated properties could be permitted under section 453 of the Companies Act, 1956; (iii) whether leave could be granted under section 537 of the Companies Act, 1956 to sell the charged assets and realise the dues.

Issue (i): whether leave could be granted to the secured creditor to institute a suit against the company under section 446(1) of the Companies Act, 1956.

Analysis: Section 446(1) bars continuation of legal proceedings against a company in winding up except with leave of the company court and on such terms as the court may impose. A secured creditor seeking enforcement of security is nevertheless required to obtain such leave, though leave is ordinarily granted. The court held that the suit could be instituted at Bombay, and that inconvenience to the official liquidator did not justify ing leave. Since the company court retains control over the winding up estate, suitable conditions could be attached to protect the liquidation process and the interests of creditors and workmen.

Conclusion: Leave to institute the suit was granted, subject to deposit of costs with the official liquidator and the further requirement that any decree obtained would not be executed without further orders of the winding up court.

Issue (ii): whether appointment of a receiver over the company's mortgaged and hypothecated properties could be permitted under section 453 of the Companies Act, 1956.

Analysis: Upon a winding up order, the official liquidator is in custody of the company's money, property, books and papers, and his position is substantially akin to that of a receiver. In those circumstances, appointment of another receiver over the same properties was considered neither expedient nor proper, especially when the official liquidator must safeguard the interests of the general body of creditors and workmen.

Conclusion: The prayer for appointment of a receiver was rejected.

Issue (iii): whether leave could be granted under section 537 of the Companies Act, 1956 to sell the charged assets and realise the dues.

Analysis: Section 537 is intended to keep winding up assets under the control of the company court so that they are administered equitably for all creditors. The court held that permitting one secured creditor to sell the company's assets at that stage would prejudice other creditors, including workmen who enjoy pari passu rights under section 529A. The liquidation estate had to remain under the court's supervision.

Conclusion: The prayer for leave to sell the charged assets and recover dues by sale was rejected.

Final Conclusion: The secured creditor was permitted to commence its suit, but the additional reliefs for appointment of a receiver and for sale of the company's assets were declined in order to preserve the equitable administration of the winding up estate.

Ratio Decidendi: In winding up, a secured creditor must obtain leave of the company court to sue, and such leave may be granted on terms, but the court will not permit appointment of a separate receiver or unilateral sale of the company's assets where that would undermine the liquidator's custody and the pari passu treatment of creditors.

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