Company Liquidation and Revenue Recovery: independent restraint suits need leave, limitation does not bar Collector recovery, and interstate enforcement is permitted.

An independent suit filed to stop a company in liquidation from realising its decree debt through revenue recovery is treated as a proceeding against the company and requires prior leave under section 446(1) of the Companies Act, 1956. By contrast, revenue recovery steps before the Collector are not court proceedings, so the Limitation Act does not apply and a limitation defence is unavailable. The Kerala Revenue Recovery Act, 1968 may also be used by the official liquidator outside Kerala where the Act has been extended by notification and reciprocal recovery arrangements exist, enabling recovery through the local Collector.

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Issues: (i) whether a suit filed by a person against a company under liquidation to restrain recovery of a decree debt through revenue recovery proceedings is a proceeding against the company requiring leave under section 446(1) of the Companies Act, 1956; (ii) whether the limitation defence can be invoked against recovery under the Kerala Revenue Recovery Act, 1968; and (iii) whether the official liquidator can invoke the Kerala Revenue Recovery Act, 1968 outside Kerala to realise the decree debt.

Issue (i): whether a suit filed by a person against a company under liquidation to restrain recovery of a decree debt through revenue recovery proceedings is a proceeding against the company requiring leave under section 446(1) of the Companies Act, 1956.

Analysis: The protective bar in section 446(1) applies to proceedings where liability is sought to be fastened on the company or its assets. Defensive steps taken in the same proceeding initiated by the company, such as appeal, revision, review, or setting aside an ex parte decree, do not require leave. But an independent suit brought to prevent the company from enforcing its decree is not a mere defence to the original claim; it is a fresh proceeding intended to obstruct realisation of the decree debt and therefore falls within the mischief of section 446(1).

Conclusion: The suit was a proceeding against the company and prior leave under section 446(1) was required.

Issue (ii): whether the limitation defence can be invoked against recovery under the Kerala Revenue Recovery Act, 1968.

Analysis: Revenue recovery proceedings before the Collector are not court proceedings, and no adjudication comparable to a suit is involved. The Limitation Act governs proceedings before courts and does not apply to recovery steps taken by the Collector under the Revenue Recovery Act.

Conclusion: The limitation defence was unavailable against revenue recovery proceedings.

Issue (iii): whether the official liquidator can invoke the Kerala Revenue Recovery Act, 1968 outside Kerala to realise the decree debt.

Analysis: The State Government had, by notification under section 71 of the Kerala Revenue Recovery Act, extended the Act for recovery of amounts due to the official liquidator. The court also recognised reciprocal revenue recovery arrangements between States, enabling recovery from the respondent in Karnataka through the local Collector.

Conclusion: The official liquidator was competent to invoke the Kerala Revenue Recovery Act for recovery in Karnataka.

Final Conclusion: The objections raised against the stay application failed, and the suit and further proceedings in the Belgaum court were ordered to be stayed.

Ratio Decidendi: An independent suit filed to restrain a company in liquidation from enforcing its decree is a proceeding against the company requiring leave under section 446(1), while limitation does not bar revenue recovery proceedings before the Collector.

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