Post-institution leave in company liquidation suits may be granted where the dispute is fit for trial and liquidation is not prejudiced.

Leave under the Companies Act, 1956 may be granted even after a suit has been instituted against a company in liquidation; once granted, the proceeding is treated as instituted from the date of leave. An earlier refusal based on a proposed amendment did not bar a fresh request because there had been no decision on the merits and liberty had been reserved. Leave to pursue the eviction suit was considered appropriate where the dispute involved issues better tried by the civil court, the claim was not shown to be frivolous, and any decree would remain subject to leave before execution against the company in liquidation.

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Issues: (i) Whether leave under section 446 of the Companies Act, 1956 could be granted after institution of the suit. (ii) Whether the earlier order refusing to grant leave on the basis of a proposed amendment barred the present application by res judicata or a similar principle. (iii) Whether leave to proceed with the eviction suit should be granted in the facts of the case.

Issue (i): Whether leave under section 446 of the Companies Act, 1956 could be granted after institution of the suit.

Analysis: The governing principle is that prior leave is not a condition precedent to the institution of proceedings against a company in liquidation. If leave is obtained later, the proceeding is treated as instituted from the date of grant of leave. The objection that the suit had already been filed therefore did not defeat the court's power to grant leave subsequently.

Conclusion: Yes. Post-institution leave could be granted.

Issue (ii): Whether the earlier order refusing to grant leave on the basis of a proposed amendment barred the present application by res judicata or a similar principle.

Analysis: The earlier order did not decide the application on merits. It merely recorded a concession regarding amendment and expressly reserved liberty to apply again if necessary. In the absence of an adjudication of rights, the principle of res judicata or its analogue was not attracted.

Conclusion: No. The present application was not barred.

Issue (iii): Whether leave to proceed with the eviction suit should be granted in the facts of the case.

Analysis: Leave under section 446 is discretionary and is ordinarily granted where the question cannot conveniently be decided in winding up proceedings. The tenancy rights of the company were not treated as an asset of liquidation, and the Official Liquidator did not require the premises for the company. The dispute involved issues such as the applicability of rent protection and the status of the sub-tenant, which were matters for the trial court. The proposed suit was not shown to be frivolous or bound to fail, and any decree could be made subject to leave for execution against the company in liquidation.

Conclusion: Yes. Leave was warranted, subject to the condition that any decree would not be executed against the company in liquidation without leave of the court.

Final Conclusion: The application for leave to sue and proceed with the eviction action was upheld, with the matter of execution against the company in liquidation kept under the control of the winding up court.

Ratio Decidendi: Leave under section 446 of the Companies Act, 1956 may be granted even after the suit has been instituted, and should ordinarily be allowed where the controversy is not fit for adjudication in winding up and the proceedings will not prejudice the liquidation estate.

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