Prior leave for suits against companies in liquidation is not fatal if later granted, and limitation is preserved.

A suit against a company in liquidation filed without prior leave under section 171 was held not to be a nullity and should ordinarily be stayed rather than dismissed, because the borrowed statutory language was construed consistently with the settled English practice. Where leave is later granted, the proceedings remain valid, and the later grant does not defeat the suit on limitation grounds merely because it was obtained after expiry of time. The operative effect is that prior leave is required for continuation, but subsequent leave can cure the defect and preserve the action for limitation purposes.

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Issues: Whether a suit instituted against a company in liquidation without prior leave of the Court is liable to be dismissed, and whether leave obtained after the expiry of limitation cures the defect and preserves the suit.

Analysis: Section 171 of the Companies Act, 1913 was construed in the light of the English provision from which it was borrowed. The wording was held to carry the settled English practice that proceedings commenced without leave are not a nullity and should ordinarily be stayed so that leave may be obtained, rather than dismissed outright. The Court further held that where leave is subsequently granted, the institution of the suit is not invalidated merely because leave came after limitation had expired, since the suit is treated as having been properly presented for limitation purposes.

Conclusion: A suit against a company in liquidation is not to be dismissed solely because leave under section 171 was not obtained before institution, and subsequent leave validates the proceedings for limitation purposes.

Final Conclusion: The reference was answered in favour of permitting the suit to proceed, subject to leave being obtained, and the limitation question was resolved on the footing that the later grant of leave does not defeat the suit.

Ratio Decidendi: Where a statute borrows language from an English enactment already carrying a settled judicial meaning, that meaning is presumed to accompany the borrowed words; accordingly, proceedings commenced without prior leave under section 171 are not a nullity and need not be dismissed if leave is later granted.

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