Arbitration against a company in winding up needs leave of court, and claims must be pursued through liquidation.

Section 446(1) of the Companies Act, 1956 bars commencement or continuation of arbitration against a company in winding up without leave of the court, and that bar extends to arbitration proceedings. Leave was properly refused because the arbitration was initiated after the winding-up order, without leave, at a preliminary stage, and the unsecured creditor had an adequate statutory remedy to prove its claim before the Official Liquidator under the liquidation scheme. Proceedings begun in breach of the statutory bar are without authority of law and cannot be continued; the creditor must pursue its claim in liquidation.

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Issues: Whether leave could be granted under section 446(1) of the Companies Act, 1956 to continue arbitration proceedings commenced after the winding-up order, and whether the creditor was required instead to pursue its claim in liquidation.

Analysis: Section 446(1) imposes a statutory bar on the commencement or continuation of legal proceedings against a company under winding up except with leave of the court. The expression covers arbitration proceedings as well. The discretion to grant leave must be exercised fairly and with due regard to the interests of the company in liquidation and all its stakeholders. Here, the applicant was an unsecured creditor, the arbitration had been initiated after the winding-up order and without leave, the matter was still at a preliminary stage, and the Companies Act and the Rules provide a specific mechanism for proving claims before the Official Liquidator, including appeal from the liquidator's decision. In these circumstances, no prejudice would be caused to the applicant by requiring it to pursue the liquidation remedy. Proceedings initiated without leave after winding up are without authority of law and cannot be continued.

Conclusion: Leave to proceed with the arbitration was rightly refused, and the arbitration proceedings initiated after the winding-up order without leave were held to be incompetent.

Final Conclusion: The creditor was left to work out its claim through the liquidation process rather than through the pending arbitration.

Ratio Decidendi: Arbitration proceedings against a company in winding up, commenced after the winding-up order and without leave under section 446(1) of the Companies Act, 1956, are a nullity and cannot be continued; the creditor must prove its claim in liquidation under the statutory scheme.

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