Void sale for want of leave: company court may set aside an auction of company property despite execution-court confirmation.

In winding-up proceedings, a sale of company property after commencement of winding up without leave of the company court is void. The Delhi High Court stated that an order permitting execution and attachment did not amount to leave to sell, because express permission to sell was required. It further held that the company court had jurisdiction under the Companies Act, 1956 to set aside the auction sale despite confirmation by the executing court, because a void sale was not protected by res judicata. The liquidator in voluntary winding up under supervision did not waive the right to challenge the sale by participating in the execution proceedings.

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Issues: (i) whether the order dated 19 January 1970 granted leave to sell the company's property in execution; (ii) whether the company court had jurisdiction to set aside the auction sale notwithstanding the executing court's confirmation order and the plea of res judicata; and (iii) whether the liquidator in voluntary winding up under supervision waived his right to challenge the sale.

Issue (i): whether the order dated 19 January 1970 granted leave to sell the company's property in execution.

Analysis: The order only permitted the decree-holders to take out execution and, in the case of the later applicants, to attach the land. It did not contain any express permission to sell the property. Since leave to sell had to be clearly granted, and the surrounding circumstances showed that the parties were concerned only with attachment and possible proceedings relating to compensation, the order could not be read as authorising auction sale.

Conclusion: No leave to sell the property was granted.

Issue (ii): whether the company court had jurisdiction to set aside the auction sale notwithstanding the executing court's confirmation order and the plea of res judicata.

Analysis: Under section 446(2) and section 518 of the Companies Act, 1956, the company court has wide jurisdiction over questions arising in winding up, including setting aside attachments or executions put into force after commencement of winding up. Section 537 renders void a sale of company property held without leave. The executing court's order confirming sale could not bind the company court where the sale was void for want of leave, and the proceedings before the executing court did not create res judicata against the company court.

Conclusion: The company court had jurisdiction to declare the sale void, and the plea of res judicata failed.

Issue (iii): whether the liquidator in voluntary winding up under supervision waived his right to challenge the sale.

Analysis: Section 526 does not validate a sale by the executing court. The liquidator's participation in the execution proceedings and filing of objections did not amount to consent to a sale held without leave, especially when the company court retained supervisory powers and the sale remained open to challenge under the winding-up provisions.

Conclusion: There was no waiver by the liquidator.

Final Conclusion: The auction sale was invalid for want of leave, the company court was competent to declare it void, and the appeal failed.

Ratio Decidendi: In winding-up proceedings, a sale of company property after commencement of winding up without leave of the company court is void, and the company court may independently determine and nullify such sale notwithstanding execution-court proceedings.

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