Winding-up leave protection under company law requires a prima facie case; section 446 is in substance unchanged from earlier law.

Section 446 of the Companies Act, 1956 protects a company in liquidation from unnecessary litigation and expense by requiring leave before a suit proceeds. Leave is ordinarily granted only where the dispute cannot be effectively resolved in the winding-up proceedings; here, the claim over goods supplied on a sale-or-return basis did not disclose a prima facie case that property in the goods remained with the claimant, so the company court could itself examine the matter and leave was refused. The provision was also treated as in pari materia with section 171 of the Indian Companies Act, 1913, the change in language not altering the substance of the legal position governing leave to sue.

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Issues: (i) Whether leave should be granted under section 446 of the Companies Act, 1956, to proceed with the suit against the company in liquidation. (ii) Whether section 446 of the Companies Act, 1956, is materially different from section 171 of the Indian Companies Act, 1913.

Issue (i): Whether leave should be granted under section 446 of the Companies Act, 1956, to proceed with the suit against the company in liquidation.

Analysis: Section 446 is intended to protect the assets of the company in liquidation from unnecessary litigation and costs. Leave is ordinarily granted where the dispute is one that cannot be effectively decided in the winding-up proceedings. On the facts, the claim related to goods supplied on a sale-or-return basis, and the materials placed before the Court did not disclose a prima facie case that the property in the goods had remained with the applicant. The company court could itself examine the claim in the liquidation proceedings.

Conclusion: Leave to proceed with the suit was rightly refused.

Issue (ii): Whether section 446 of the Companies Act, 1956, is materially different from section 171 of the Indian Companies Act, 1913.

Analysis: The provision in the 1956 Act was held to be an expanded version of the earlier enactment but not a departure in substance. The two provisions were treated as being in pari materia, and the change in language did not alter the legal position governing leave to proceed against a company in liquidation.

Conclusion: Section 446 of the Companies Act, 1956, was held not to differ in substance from section 171 of the Indian Companies Act, 1913.

Final Conclusion: The application for leave to continue the suit failed, and the challenge to the interpretation of the winding-up leave provision was also rejected.

Ratio Decidendi: Leave to proceed against a company in liquidation should be refused where the claimant fails to show a prima facie case and the company court can itself adjudicate the claim in the winding-up proceedings; the protective object of the winding-up leave provision is to prevent unnecessary litigation and expense.

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