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Issues: Whether leave under section 171 of the Indian Companies Act should be granted to permit continuation of proceedings before the Rent Controller for fixation of fair rent while the company is under provisional liquidation.
Analysis: Section 171 operates as a prohibition on commencing or continuing suits or legal proceedings against a company after a winding up order or appointment of a provisional liquidator except by leave of the court; the provision aims to protect the company's assets for equitable distribution and to prevent a scramble of creditors. Leave is discretionary and not to be granted automatically; principles guiding the exercise include whether the question can be properly and conveniently determined in the winding up and consideration of rights of third parties outside the winding up. A proceeding before the Rent Controller to fix fair rent is a specialised statutory remedy within the exclusive jurisdiction of that forum and is concerned with a right vested in both parties which cannot be usefully determined by the winding up court.
Conclusion: Leave under section 171 is granted to permit continuation of the proceedings before the Rent Controller; no terms are imposed because the applicants are paying the existing rent until disposal of the Rent Controller proceedings.
Ratio Decidendi: Where a pending proceeding concerns a right that falls within the exclusive competence of a specialised forum and cannot conveniently be determined in winding up, the court may, in the exercise of its discretion under section 171, grant leave to continue that proceeding to protect the rights of third parties while safeguarding the company's assets.
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