Leave to continue recovery proceedings against a company in liquidation may be granted even if the case began before winding-up, subject to asset protection.

Section 446(1) requires leave of the company court for continuation of proceedings against a company in liquidation, and that discretion is exercised to protect company assets while avoiding unnecessary delay and expense. Leave may ordinarily be granted where no legal impediment is shown and the merits are to be decided by the proper forum. A bank's recovery proceedings before the Debts Recovery Tribunal were allowed to continue even though they had been initiated before the winding-up order, and execution against the company's assets remained subject to further permission of the company court.

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Issues: Whether leave under section 446(1) of the Companies Act, 1956 should be granted to a bank to continue recovery proceedings before the Debts Recovery Tribunal against a company in liquidation, and whether such leave could be granted even though the proceedings had been initiated before the winding-up order.

Analysis: Section 446 requires leave of the company court for the continuation of legal proceedings against a company in liquidation. The discretion under that provision is to be exercised so as to protect the assets of the company while also avoiding unnecessary delay and expense in adjudication. Where the company court does not itself transfer the proceedings for trial before it, permission is ordinarily granted if no legal impediment is shown. The court found that the bank's claim was prima facie due, that adjudication of merits belonged to the proper forum, and that the fact that the DRT proceedings had been initiated before the winding-up order did not preclude a later application for leave.

Conclusion: Leave under section 446(1) was granted to the bank to continue and prosecute the recovery proceedings before the Debts Recovery Tribunal, subject to the condition that no execution against the assets of the company could take place without further permission of the company court.

Final Conclusion: The petition was allowed and the bank was permitted to pursue its recovery remedy against the company in liquidation, while safeguarding the company assets from execution without leave of the court.

Ratio Decidendi: Leave to continue proceedings against a company in liquidation should ordinarily be granted where adjudication is to occur before the proper forum and no legal bar to continuation is shown, even if the proceedings were instituted before the winding-up order.

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