Leave of company court required before execution or attachment against assets of a company in liquidation

Once a winding-up order is passed and an official liquidator is appointed, the company's assets come under the control of the company court, and section 446 of the Companies Act, 1956 bars separate proceedings against the company or its property without leave. The provision is intended to ensure that claims are resolved in winding up and that creditors are treated equitably rather than allowing one creditor to obtain an undue advantage through independent execution or attachment. Accordingly, execution and attachment proceedings before the consumer forum against the property of the company in liquidation were unsustainable, and the attachment was raised.

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Issues: Whether execution proceedings and attachment initiated before the consumer forum against the property of a company in liquidation, without leave of the company court, were barred by section 446 of the Companies Act, 1956.

Analysis: Once a winding-up order had been passed and the official liquidator appointed, the company's assets came under the custody and control of the company court. Section 446(1) barred commencement or continuation of legal proceedings against the company except with leave of the court, and the scheme of the Companies Act required debts and claims to be dealt with in winding up so that all creditors were treated equitably. The object of the provision was to prevent a single creditor from obtaining an undue advantage over others by pursuing separate proceedings and enforcing attachment against assets forming part of the liquidation estate. Proceedings before the consumer forum, including execution and attachment steps against the company in liquidation, therefore could not be sustained in the absence of leave.

Conclusion: The proceedings in execution before the consumer forum were hit by section 446 of the Companies Act, 1956 and were unsustainable; the company applications were allowed and the attachment was raised.

Final Conclusion: Claims against a company in liquidation must be worked out in winding up under the supervision of the company court, and independent enforcement against its assets cannot proceed without the court's leave.

Ratio Decidendi: After a winding-up order, separate legal proceedings against the company or its assets cannot continue without leave of the company court, because liquidation law requires collective and equitable distribution among all creditors.

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