Guarantor liability in winding up is not an incidental matter unless needed for effective company liquidation.

Section 446 of the Companies Act, 1956 enlarges the company court's jurisdiction to questions arising in winding up, but only to the extent needed for effective liquidation and summary disposal of incidental matters. A guarantor's independent liability to indemnify a creditor does not, by itself, arise in the course of winding up, and it is not necessary for the company court to determine that liability for the company's winding up. The guarantor may pursue available defences in the proper forum, including quia-timet relief where appropriate, but that does not convert the dispute into an incidental winding up question. The company court therefore should not assume jurisdiction over the guarantor's liability dispute.

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Issues: Whether an application under section 446 of the Companies Act, 1956, at the instance of a guarantor was maintainable for adjudication of the guarantor's liability and for stay of recovery proceedings against him in the course of winding up.

Analysis: Section 446(2)(d) enlarges the jurisdiction of the company court to decide questions of law or fact arising in the course of winding up, but that jurisdiction is intended to facilitate effective winding up and the summary disposal of matters incidental to it. The liability of a guarantor to indemnify the creditor does not, by itself, arise out of the winding up proceedings nor is it necessary for effective winding up that the company court should determine the guarantor's independent liability. The guarantor may raise available defences in appropriate proceedings and may pursue quia-timet relief in the proper forum, but that does not make the guarantor's liability an incidental winding up question.

Conclusion: The application by the guarantor under section 446 was not maintainable for adjudication of his liability in the company court, and the court declined to exercise jurisdiction to decide the dispute.

Ratio Decidendi: A guarantor's liability to a creditor is not a question arising in the course of winding up so as to fall within section 446(2)(d) of the Companies Act, 1956, unless its determination is necessary for effective winding up of the company.

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