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Issues: (i) Whether, in an application under section 446(1) of the Companies Act, 1956, the parties to the suit were entitled to notice and an opportunity of hearing under rule 117 of the Companies (Court) Rules, 1959. (ii) Whether an application seeking leave to continue a pending suit or proceeding after a winding-up order was barred by limitation under article 137 of the Limitation Act, 1963.
Issue (i): Whether, in an application under section 446(1) of the Companies Act, 1956, the parties to the suit were entitled to notice and an opportunity of hearing under rule 117 of the Companies (Court) Rules, 1959.
Analysis: Rule 117 requires notice to the official liquidator and to the parties to the suit or proceeding sought to be commenced or continued. The provision contemplates that, after a winding-up order, the company court must hear not only the official liquidator but also the parties to the proceeding. A guarantor impleaded as a defendant in the suit therefore falls within the category of persons entitled to be heard before leave is granted under section 446(1).
Conclusion: The parties to the suit, including the guarantor-defendant, were entitled to notice and hearing before the leave application was allowed.
Issue (ii): Whether an application seeking leave to continue a pending suit or proceeding after a winding-up order was barred by limitation under article 137 of the Limitation Act, 1963.
Analysis: Section 446(1) operates differently for a fresh suit or proceeding and for a pending suit or proceeding. Where the suit is already pending, the company court is only called upon to grant leave to proceed with it; such an application is not one asserting a substantive claim for relief or enforcement. A restoration application pending in the suit is itself a proceeding in that suit, and permission to continue the suit extends to that ancillary proceeding as well. Article 137 applies where a relief is claimed by application, but not to an application that merely seeks leave to continue an existing pending proceeding.
Conclusion: The application for leave to continue the pending suit or proceeding was not barred by limitation.
Final Conclusion: The recall application failed on merits because the order granting leave to proceed with the pending suit was legally sustainable, and no limitation bar applied.
Ratio Decidendi: An application under section 446(1) of the Companies Act, 1956 seeking leave to continue a suit already pending at the time of winding up is not governed by article 137 of the Limitation Act, 1963, and the parties to the suit are entitled to notice under rule 117 of the Companies (Court) Rules, 1959.
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