Leave to continue suit against a company in liquidation is not time-barred under Article 137 and cannot override creditor rights.

An application for leave under section 446(1) of the Companies Act, 1956 to continue a pending suit against a company in liquidation is interlocutory and regulates only the forum; it does not attract Article 137 of the Limitation Act, 1963, so limitation did not bar the application. While granting leave, the Company Court may impose terms, but not conditions inconsistent with law or the creditor's substantive rights. A direction requiring recovery first from guarantors, despite the joint and several liability of principal debtor and guarantors and the creditor's choice of remedy, was impermissible and was deleted. Leave to proceed with the suit was upheld.

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Issues: (i) Whether an application for leave under section 446(1) of the Companies Act, 1956 to proceed with a pending suit against a company in liquidation is governed by Article 137 of the Limitation Act, 1963. (ii) Whether the Company Court could impose a condition that the decretal amount be recovered first from the guarantors and only thereafter from the company in liquidation.

Issue (i): Whether an application for leave under section 446(1) of the Companies Act, 1956 to proceed with a pending suit against a company in liquidation is governed by Article 137 of the Limitation Act, 1963.

Analysis: Section 446(1) only regulates the forum and requires leave to proceed with a pending suit after a winding up order. It does not create or enforce the underlying claim, and an application for leave to continue a pending suit is interlocutory in nature. The Court held that Article 137, a residuary provision for applications for which no limitation is prescribed, does not apply to such an application. Even assuming Article 137 applied, the right to apply for leave accrues so long as the suit remains stayed, and therefore the application was within time.

Conclusion: Article 137 does not govern an application for leave to proceed with a pending suit under section 446(1) of the Companies Act, 1956, and the application was not barred by limitation.

Issue (ii): Whether the Company Court could impose a condition that the decretal amount be recovered first from the guarantors and only thereafter from the company in liquidation.

Analysis: While granting leave under section 446(1), the Company Court may impose terms, but only for good and valid reasons and not in a manner contrary to law or affecting the rights of third parties. The liability of the principal debtor and the guarantors is joint and several, and the creditor has the option to proceed against either. A condition requiring first recovery from guarantors was inconsistent with that legal position.

Conclusion: The condition directing prior recovery from the guarantors was impermissible and had to be deleted.

Final Conclusion: The grant of leave to proceed with the suit was upheld, the improper condition attached to it was removed, and the appeal failed.

Ratio Decidendi: An application under section 446(1) of the Companies Act, 1956 to continue a pending suit after a winding up order is not an application attracting Article 137 of the Limitation Act, 1963, and conditions imposed while granting leave cannot override the creditor's substantive rights or established principles of joint and several liability.

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