TaxTMI 
TaxTMI 
1996 (2) TMI 370
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.... been wound up. This view has been holding field ever since a three-Judge Bench decision of this Court in M.K. Ranganathan v. Government of Madras [1955] 2 SCR 374. As this legal position has not been assailed by any of the parties, we need not advert to the reasons which led this Court in M.K. Ranganathan's case (supra) to hold as above. Despite this being the legal position, there were some provisions in the Indian Companies Act, 1913, which enactment preceded the present Companies Act, 1956 (the 'Act') in which also a parallel provision find place, which put some restrictions on the aforesaid power. 3. It would be profitable to note these provisions of the Act at the threshold itself. These are sections 446, 529(1) and (2), 529A and 537 of the Act, reading as below: "446. Suits stayed on winding-up order.-(1) When a winding-up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose. (2) The Court which is wi....
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.... by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of section 529A. (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding-up, and make such claims against the company as they respectively are entitled to make by virtue of this section: Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to pay (his portion of) the expenses incurred by the liquidator (including a provisional liquidator, if any, for the preservation of the security before its realization by the secured creditor). Explanation: For the purposes of this proviso, the portion of expenses incurred by the liquidator for the preservation of a security which the secured creditor shall be liable to pay shall be the whole of the expenses less an amount which bears to such expenses the same portion as the workmen's portion in relation to the security bears to the value of the security....
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....th voidness of sale, operates when the sale is pursuant to attach-ment of company court. This, however, would be the position where a company has not been wound up, but is in the process of being wound up. 5. None of the parties has assailed the aforesaid propositions of law as well. The real bone of contention is as to when (i) leave of the winding-up court should be granted to a secured creditor to proceed with the suit after an order of winding-up has been made; and (ii) when should a winding-up court transfer to itself any suit or proceeding by or against the company during the pendency of the winding-up proceeding. 6. The aforesaid questions arise because a secured creditor who has initiated a suit or proceeding in a Civil Court is interested in realisation of his debt only, whereas the company court looks after the interest of all the creditors; so too, the workmen's dues, which rank pari passu with debts due to secured creditors. This is brought home not only by section 529A, which was inserted by the Companies (Amendment) Act, 1985, but also by the proviso to sub-section (1) of section 529 inserted by the same Amend-ment Act. The winding-up court does these acts throu....
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....as re-enacted in sub-section (1) of section 446. There was thus no specific provision conferring jurisdiction to the court winding up the company analogous to the one conferred by sub-section (2), which was introduced to enlarge the jurisdic-tion of the winding-up court so as to facilitate the disposal of winding-up proceedings. This sub-section, as originally enacted, did not meet with the requirement fully, with the result that the Committee appointed for examining comprehensive amendment to the Act recommended that "a suit by or against a company in winding up should notwithstanding any provision in law for the time being be instituted in the court in which the winding-up proceedings are pending". The Committee made this recom-mendation having noticed that on winding-up order being made and the Official Liquidator being appointed, he has to take into his custody company property as required by section 456 of the Act. Then, section 457 confers power on the liquidator to sell the properties of the company and to realise the assets. The Committee felt that at the stage when winding- up order is made, the company may as well have subsisting claims and to realise these claims the liq....
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....al institutions in recovering loans and enforcement securities charged with them. Earlier, recovery procedure used to block a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. An urgent need was, therefore, felt for successful implementation of the financial sector reforms, to work out a suitable mechanism through which dues to these institutions could be realised without delay. To achieve this purpose, the aforesaid Act visualises establishment of the Debts Recovery Tribunal(s) by the Central Govern-ment, with its own procedure which is speedy in nature. Section 18 of this Act has barred jurisdiction of other courts, except the writ power of the higher courts, in relation to the matters specified in section 17 the same being recovery of debts due to such institutions. 11. Shri Subba Rao, who appeared for Official Liquidator in many cases, however, urged that it is the liquidator who can look after the interests of all the secured creditors, and so, his actions should be allowed to prevail over that of the receiver. He submitted that section 529 contains many provisions to duly protect the interest of secured cre....