1981 (4) TMI 13 - HC - Income Tax

LIC must seek court approval before Public Premises Act proceedings

The court held that the Life Insurance Corporation (LIC) must obtain leave from the winding-up court under Section 446 of the Companies Act before ... Legal proceedings - leave of the winding-up court - eviction of unauthorised occupants - public premises - protection of assets in winding up - generalia specialibus non derogant - exclusive jurisdiction of a special statuteLegal proceedings - eviction of unauthorised occupants - public premises - Whether proceedings before the Estate Officer under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 fall within the scope of 'legal proceedings' for the purposes of s. 446(1) of the Companies Act, 1956 so as to require leave of the winding-up court. - HELD THAT: - The Full Bench held that proceedings under the 1971 Act for eviction or recovery of rent/damages are proceedings of a nature that can appropriately be dealt with by ordinary courts and therefore attract the concept of 'legal proceedings' in s. 446(1). The court emphasised that the 1971 Act does not create rights and liabilities completely distinct from ordinary law but provides a special forum and remedy for enforcement against public premises; absent the special forum, the landlord's remedy would be by ordinary suit. Given the object of s. 446 to protect the assets of a company in winding up and to prevent a scramble among creditors, proceedings which can appropriately be decided by the winding-up court fall within s. 446. Authorities were examined to distinguish statutes that create independent statutory regimes (e.g., assessment proceedings under the I.T. Act) where leave may not be required at initiation, from proceedings like eviction/recovery which are ordinarily civil rights and therefore fall within s. 446 when the defendant is a company in liquidation. The court applied the principle that a general statute (here the 1971 Act) does not override the special administration and asset-protection regime of the Companies Act in the context of a company under winding up.Proceedings under ss. 4 and 7 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 are 'legal proceedings' within the meaning of s. 446(1) of the Companies Act and thus require leave of the winding-up court before initiation or continuation against a company in liquidation.Leave of the winding-up court - protection of assets in winding up - exclusive jurisdiction of a special statute - Whether the exclusive jurisdiction conferred by s. 15 of the 1971 Act displaces the requirement of leave under s. 446(1) when the occupant is a company under winding up. - HELD THAT: - The Bench held that s. 15's ouster of ordinary civil courts does not have undiluted operation so as to defeat the Companies Act regime when the occupant is a company in liquidation. Where a company in winding up occupies public premises, the Companies Act operates as the special scheme for protection and equitable distribution of assets; accordingly, the 1971 Act must be read down so that proceedings under it against a company in liquidation cannot be initiated or continued except with leave of the winding-up court. The court relied on the maxim generalia specialibus non derogant and relevant precedents distinguishing statutes that create wholly distinct rights and procedures (in which case leave may not be required at the initiation stage) from statutes which merely provide an alternate forum for rights that would otherwise be enforceable in ordinary courts.Section 15 of the 1971 Act does not negate the requirement of leave under s. 446(1) where the defendant is a company under winding up; leave must be obtained before initiating or continuing proceedings under the 1971 Act against such a company.Leave of the winding-up court - Whether the question of granting or refusing leave to initiate or continue proceedings under the 1971 Act against the company was determined by the Full Bench. - HELD THAT: - The Full Bench expressly refrained from deciding the merits of whether leave should be granted or refused. It confined its determination to the legal question of the necessity of obtaining leave under s. 446(1). The exercise of discretion to grant leave, and any terms to be imposed, were left to the company judge who was seized of the LIC's leave application under s. 446.The question of whether leave should be granted, and on what terms, is remitted to the learned single judge; the Full Bench made no decision on the merits of the leave application.Final Conclusion: Leave of the winding-up court under s. 446(1) of the Companies Act must be obtained before initiating or continuing proceedings under ss. 4 and 7 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 against a company which is under winding up; the question whether such leave should be granted is left to the company judge. Issues Involved:1. Whether the Life Insurance Corporation (LIC) is required to seek leave of the winding-up court under Section 446 of the Companies Act, 1956, before initiating proceedings under Sections 4 and 7 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971.Issue-wise Detailed Analysis:1. Applicability of Section 446 of the Companies Act, 1956:The court examined whether the LIC must seek leave under Section 446 of the Companies Act before initiating proceedings under the 1971 Act. Section 446(1) states that no suit or other legal proceeding shall be commenced against a company in winding-up except with the leave of the court. Section 446(2) extends the court's jurisdiction to entertain any suit or proceeding by or against the company, including claims and questions of property. The court noted that the term 'legal proceedings' should be interpreted broadly and includes proceedings before the Estate Officer under the 1971 Act.2. Nature of Proceedings under the 1971 Act:The 1971 Act provides a mechanism for the eviction of unauthorized occupants from public premises and the recovery of rent or damages. The court emphasized that the 1971 Act is not a distinct code creating new rights and liabilities but provides a new forum and remedy for existing rights under ordinary law. Thus, proceedings under the 1971 Act are legal proceedings that fall within the purview of Section 446 of the Companies Act.3. Objective of Section 446:The court discussed the objective of Section 446, which is to protect the company's assets from unnecessary litigation and ensure equitable distribution among creditors. The court cited various judgments, including Governor-General in Council v. Shiromani Sugar Mills Ltd., to emphasize that all claims against a company in winding-up should be handled by the winding-up court to prevent a scramble for assets.4. Precedents and Analogous Cases:The court referred to several precedents, including J.K. (Bombay) P. Ltd. v. New Kaiser-I-Hind Spg. & Wvg. Co. Ltd., which held that once a winding-up order is passed, the company's assets are under the control of the liquidator, and no new rights can be created. The court also cited cases like In re Oak Pits Colliery Co. and General Share and Trust Co. v. Wetley Brick and Pottery Co., highlighting that the winding-up court can order the delivery of possession to the landlord in appropriate cases.5. Special vs. General Legislation:The court addressed the argument that the 1971 Act is a special legislation and should override the Companies Act. The court held that while the 1971 Act deals with public premises, it does not override the Companies Act when the company is under winding-up. The court applied the legal maxim generalia specialibus non derogant, meaning that a general statute does not derogate from a special statute unless there is a conflict.6. Conclusion and Decision:The court concluded that proceedings under the 1971 Act are legal proceedings within the meaning of Section 446(1) of the Companies Act. Therefore, the LIC must obtain leave from the winding-up court before initiating or continuing proceedings before the Estate Officer under the 1971 Act. The court emphasized that it was not expressing any opinion on the merits of the leave application, which should be decided by the single judge handling the application.Final Note:The matter was directed to be listed before the learned single judge for appropriate proceedings, and the court expressed gratitude to the counsel and amicus curiae for their assistance.