Winding-up leave requirement may be waived where the liquidator knowingly acquiesces in execution sale proceedings.
A company's interest as a puisne mortgagee in the equity of redemption was treated as part of its estate or effects, so execution of a first mortgage decree could fall within the winding-up protections under the Companies Act. The sale was also not invalidated because the official liquidator, having notice of the sale and having sought adjournments to arrange payment of the decree debt, was held to have consciously waived the requirement of leave of the company court. On that basis, the sale could not be set aside for want of leave.
Issues: (i) Whether execution of a mortgage decree against property in which a company in liquidation held a puisne mortgage amounted to a proceeding against the company's estate or effects so as to attract section 171 and section 232 of the Indian Companies Act; (ii) Whether the requirement of leave of the company court was validly waived by the official liquidator.
Issue (i): Whether execution of a mortgage decree against property in which a company in liquidation held a puisne mortgage amounted to a proceeding against the company's estate or effects so as to attract section 171 and section 232 of the Indian Companies Act.
Analysis: The phrase "estate or effects of the company" was treated as wide enough to include the company's interest as a puisne mortgagee in the equity of redemption. A sale by the first mortgagee necessarily affected that interest, because it extinguished the company's mortgage interest in immovable property. The execution was therefore regarded as one proceeding against the company's estate within the meaning of the winding-up provisions.
Conclusion: Yes. Such execution was capable of falling within section 171 and section 232 of the Indian Companies Act.
Issue (ii): Whether the requirement of leave of the company court was validly waived by the official liquidator.
Analysis: The official liquidators had notice of the sale and repeatedly obtained adjournments to arrange payment of the decree debt. That conduct was treated as a conscious waiver of the statutory protection requiring leave. The bar under section 171 was therefore not available, and section 232 did not render the sale void where the want of leave had been validly waived.
Conclusion: Yes. The requirement of leave was validly waived by the official liquidator.
Final Conclusion: The sale could not be set aside for want of leave, and the appellant succeeded.
Ratio Decidendi: The statutory requirement of leave in winding-up proceedings, though mandatory in origin, may be waived by the company or its liquidator, and a sale in execution is not void where such waiver is established.
TaxTMI 
AI Drafter ✕
TaxTMI 
