1995 (9) TMI 391 - HC - Companies Law

Court denies stay, no leave needed from Company Court. Rejection of reliance on Section 22

The court dismissed the defendant's application for a stay of proceedings, ruling that no leave from the Company Court was required for the plaintiff to ... - Issues:1. Stay of proceedings in a suit under Sections 442 and 446(1) of the Companies Act.2. Requirement of obtaining leave from the Company Court for prosecuting the suit against a tenant company.3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 to eviction proceedings.4. Interpretation of Sections 442 and 446 of the Companies Act regarding stay orders.Analysis:Issue 1: Stay of proceedings in a suit under Sections 442 and 446(1) of the Companies ActThe defendant Company filed Ia 4234/95 seeking a stay of proceedings in a suit for possession of the property. The defendant argued that as per Section 446(1) of the Companies Act, no legal proceedings can be commenced against a company under winding up without the court's leave. The defendant relied on the Supreme Court's judgment in Sudan-hail Chits (1) Ltd. Vs. C. Sukumaran Pillai to support their contention. However, the court rejected the defendant's plea, emphasizing that the application for a stay order must serve the objective of expeditiously deciding pending claims during winding up proceedings, and not merely to delay adjudication.Issue 2: Requirement of obtaining leave from the Company Court for prosecuting the suit against a tenant companyThe plaintiff argued that the defendant, being a tenant, does not require leave from the Company Court (Bombay High Court) to proceed with the suit for possession after the tenancy's termination. The court referred to the Kerala High Court's decision in Joshi Trading Co. (P) Ltd. Vs Essa Ismail Sait, stating that no leave under Section 446(1) of the Companies Act is necessary when dealing with a tenant company under a Special Act. Therefore, the court held that the plaintiff is not obliged to seek leave from the Company Court to pursue the suit against the defendant.Issue 3: Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 to eviction proceedingsThe defendant invoked Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, seeking a stay of proceedings. However, the plaintiff argued that eviction proceedings are not covered under Section 22, citing the Supreme Court's decision in M/s Shree Chamundi Mopeds Ltd vs. Church of South India Trust Association. The court agreed with the plaintiff, stating that Section 22 does not apply to eviction matters, and thus, the defendant's reliance on this provision was misplaced.Issue 4: Interpretation of Sections 442 and 446 of the Companies Act regarding stay ordersIn The Official Liquidator vs. Dharti Dhan(P) Ltd., the Supreme Court clarified the scope of Sections 442 and 446 of the Companies Act. The court emphasized that a stay order should not be granted to delay adjudication and defeat justice. The court highlighted that the power to grant a stay order is discretionary and not mandatory, and the word 'may' in Section 442 signifies a conferment of power, subject to the context and circumstances of each case. The court dismissed the defendant's application for a stay order, emphasizing the discretionary nature of such decisions.In conclusion, the court dismissed the defendant's application for a stay of proceedings, ruling that no leave from the Company Court was required for the plaintiff to pursue the suit against the defendant. The court also rejected the defendant's reliance on Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, in the context of eviction proceedings. The matter was scheduled for further proceedings to frame issues on a specified date.