Leave to continue suit against a company in liquidation may be granted with conditions, while asset control stays with the winding up court.

Leave to continue a pending suit against a company in liquidation may be granted under section 446(1) of the Companies Act, 1956, because proceedings cannot continue without the company court's permission; the court may also impose conditions to protect the liquidation estate, and here leave was allowed subject to costs being deposited with the official liquidator and further orders before execution. Control over the company's mortgaged and hypothecated assets remained with the winding up court and the official liquidator under sections 453 and 456, so no order was made to continue the receiver, and that aspect was left to be worked out in the liquidation proceedings.

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Issues: (i) Whether leave should be granted under section 446(1) of the Companies Act, 1956 to continue the pending suit against the company in liquidation, and on what terms; (ii) Whether the receiver appointed by the Bombay High Court should be continued in respect of the company's mortgaged and hypothecated assets or the matter should be left to the winding up court under sections 453 and 456 of the Companies Act, 1956.

Issue (i): Whether leave should be granted under section 446(1) of the Companies Act, 1956 to continue the pending suit against the company in liquidation, and on what terms.

Analysis: Section 446(1) bars continuation of legal proceedings against a company in winding up except with leave of the company court and subject to terms imposed by that court. The suit had been instituted before the winding up order and had been pending for several years. As the applicant was a secured creditor seeking to pursue realization of its security, there was no reason to refuse leave, but the court could lawfully impose conditions to protect the interests of the liquidation estate and the official liquidator.

Conclusion: Leave to continue the suit was granted, but subject to deposit of costs with the official liquidator and subject to further orders before execution of any decree.

Issue (ii): Whether the receiver appointed by the Bombay High Court should be continued in respect of the company's mortgaged and hypothecated assets or the matter should be left to the winding up court under sections 453 and 456 of the Companies Act, 1956.

Analysis: The statutory scheme places the company's assets under the control of the winding up court and the official liquidator so that the assets are administered for the benefit of all creditors and workmen. In view of the liquidation proceedings and the absence of any separate application by the official liquidator for transfer, the court declined to grant substantive relief on the prayer for continuation of the receiver. The proper course was for the official liquidator to approach the Bombay High Court for appropriate orders regarding removal of the receiver and for the parties to seek further directions from the winding up court if necessary.

Conclusion: No order was made for continuation of the receiver and the matter was left to be pursued before the Bombay High Court and the winding up court.

Final Conclusion: The application succeeded only to the extent of permission to proceed with the pending suit, while the remaining prayers concerning the receiver and sale of assets were declined and left to be worked out in the liquidation proceedings.

Ratio Decidendi: Leave to continue proceedings against a company in liquidation may be granted under section 446(1) with suitable conditions, but control over the company's assets remains with the winding up court and the official liquidator to ensure equitable administration of the estate.

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