Winding-Up Jurisdiction and Void Execution Sales: liquidator can recover proceeds from post-commencement sale without leave of court

The company court may, under section 446(2) of the Companies Act, entertain by judge's summons questions arising in winding-up proceedings, including a challenge by the official liquidator to a void share sale. Any attachment, execution or sale of company property put in force after commencement of winding up, without leave of court, is void under section 537(1), and the sale proceeds are recoverable by the liquidator. Article 137 of the Limitation Act does not govern such special winding-up applications; in any event, section 458A excludes the relevant period and the application was timely.

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Issues: (i) whether the official liquidator could seek a declaration by judge's summons in the company winding-up proceedings that the sale of the company's shares was void and recover the sale proceeds; (ii) whether the attachment and execution sale made after commencement of winding up, without leave of the court, were void under section 537 of the Companies Act, 1956; and (iii) whether the application was barred by limitation.

Issue (i): whether the official liquidator could seek a declaration by judge's summons in the company winding-up proceedings that the sale of the company's shares was void and recover the sale proceeds.

Analysis: Section 446(2) confers wide jurisdiction on the company court to entertain and dispose of claims and any question of law or fact arising in the course of winding up. The liquidator is statutorily bound to collect the company's assets, and a void transaction affecting those assets can be challenged in the winding-up court. The Companies (Court) Rules, 1959 contemplate applications by judge's summons, and requiring a separate suit would defeat the object of expeditious winding up.

Conclusion: The summons was maintainable and the liquidator was entitled to invoke the company court's jurisdiction.

Issue (ii): whether the attachment and execution sale made after commencement of winding up, without leave of the court, were void under section 537 of the Companies Act, 1956.

Analysis: Winding up is deemed to commence from presentation of the petition under section 441(2). Section 537(1) renders void any attachment, execution, distress, or sale put in force or held without leave of the court after such commencement. A prior attachment before judgment did not create any title or charge in favour of the creditor, and the later sale of the shares after commencement of winding up attracted section 537. The respondent's receipt of the sale proceeds under that void transaction was therefore recoverable by the liquidator.

Conclusion: The sale was void and the respondent was liable to refund the sale proceeds to the official liquidator.

Issue (iii): whether the application was barred by limitation.

Analysis: Article 137 of the Limitation Act, 1963 was held not to govern this special application under the Companies Act in winding-up proceedings. Even assuming a three-year period applied, section 458A of the Companies Act, 1956 excluded the relevant period between commencement of winding up and the winding-up order, together with one year thereafter, making the summons timely.

Conclusion: The plea of limitation failed.

Final Conclusion: The company court granted relief to the liquidator, declared the execution sale ineffective against the winding-up estate, and directed repayment of the realised amount with future interest in instalments, leaving the respondent to prove his claim in the winding up.

Ratio Decidendi: In winding-up proceedings, the company court may, under section 446(2), decide by summons any question arising in the course of winding up and, under section 537(1), any post-commencement attachment or sale of company property without leave of court is void and recoverable by the liquidator; such special company applications are not governed by article 137 of the Limitation Act, 1963.

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