TaxTMI 
TaxTMI 
2024 (8) TMI 28
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....terests of justice and equity." 2. The petitioner ('petitioner Company' hereinafter) is one of the creditors to the respondent Apollo Tubes ('judgment debtor' hereinafter). The judgment debtor was a company incorporated in the year 1973 under the Companies Act, 1956. 3. In the year 1993, the petitioner entered into a lease agreement with the judgment debtor for a total amount of Rs. 99,75,000/- to be payable in equally divided installments of Rs. 2,77,084 within a period of 35 months. 4. In the year 1998, the judgment debtor was directed to be wound up by this Court vide order dated 22nd November, 1998 and an official liquidator was appointed for the same and the procedure for winding up of the judgment debtor was initiated. 5. During the course of proceedings before this Court, i.e. prior to winding up, the petitioner/applicant had filed a suit before the Madras High Court and had gotten the leave under Section 446 of the Companies Act, 1956 from this Court for continuance of the same vide order dated 6th May, 2004. 6. Thereafter, the suit bearing COS no. 833/2022 filed before the Madras High Court was decreed in favor of the petitioner/applicant vide order dated 24....
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....e for the unsecured creditors. 17. It is further submitted that captioned application, if allowed, would prolong the case and not serve any purpose as there are no funds available for the unsecured creditors. 18. Therefore, in view of the foregoing submissions, the learned Standing Counsel for OL submitted that the present application, being devoid of merits, may be dismissed. 19. Heard the learned counsel for the parties and perused the records. 20. The captioned application has been filed by the petitioner for seeking permission to execute the decree granted in favor of the petitioner by the Madras High Court vide order dated 24th November, 2023 and therefore, the petitioner is entitled to recover the amount from the judgment debtor. During the pendency of the suit, the petitioner had sought permission of this Court to continue the same as the judgment debtor was already directed to be wound up by this Court. 21. In the said application filed for seeking permission of this Court, the Court had allowed the same vide order dated 6th May, 2004 and held as under: CA 293/2001 By this application under Section 446 of Companies Act, 1956 the applicant M/....
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....ourt vide order 24th November, 2023. 27. In order to answer the query posed before this Court, it is imperative for this Court to look into the relevant provision under which such permission is sought by the creditor. The said provision, i.e. Section 446 of the Companies Act, 1956 is reproduced herein: "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 [Tribunal] and subject to such terms as the [Tribunal] may impose. (2) The [Tribunal] shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of - (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under section 391 by or in respect of the company; (d) any question of priorities or....
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....tution of execution proceeding at the instance of the successful party. It is true that the sanction obtained by the liquidators is granted under Section 179 of the Companies Act to initiate or enforce a claim of the company or to defend an action, whereas the leave of the Court to institute or to continue a suit against the company in winding up is obtained under Section 171. It would be giving effect to a technicality divorced from the true object of the section to hold that even in a suit filed or prosecuted with the sanction of the Court, the decree may not be enforced by a successful party without leave under Section 171 of the Act. 7. Even granting that sanction under Section 179 does not dispense with the leave under Section 171 of the Act, to institute a proceeding in execution against a company ordered to be wound up, we do not think that there is anything in the Act which makes the leave a condition precedent to the institution of a proceeding in execution of a decree against the company and failure to obtain leave before institution of the proceeding entails dismissal of the proceeding. The suit or proceeding instituted without leave of the Court may, in our jud....
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.... epicenter of the dispute revolves round the leave to be granted under Section 446 of the Act to proceed with the Execution Petitions filed by the applicants which are pending consideration before the competent Executing Court pursuant to the winding up order passed by this Court on 07.02.2017 in COP No. 162/2013. 9. Section 446 of the Act reads thus:- "Sec 446 - Suits stayed on winding up order. (1) When a winding up order has been made or the Official Liquidator has keen appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date if the winding up order, shall be proceeded with, against the company, except by leave of the 4[Tribunal] and subject to such terms as the [Tribunal] may impose. [(2) [Tribunal] shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under section 391 by or in respect of the c....
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....nuation of the execution proceedings [See Bank of Bihar Limited, Patna v. Secretary of State, Official Liquidator, Calicut Bank Limited v. Nekkat, Ram Achhiyavar Singh v. J.K. Manufacturers, Industrial Finance Corporation of India v. Cemury Metals Limited and Sarju Thakur v. Registrar of Companies]. Therefore proceedings under Section 33-C (2) of I.D. Act, even if they are in the nature of execution proceedings, requires the leave of the Company Court, under Section 446 of Companies Act. 18. Section 446 of the Act makes it clear that no suit or other legal proceeding shall be commenced or proceeded with after a winding up order is made, without leave of the Company Court. We have already held that proceedings under Section 33(2) is a legal proceeding, for purposes of Section 446. Even if the said proceeding had been initiated prior to the order of winding up, as the order of winding up was passed during the pendency of such proceeding, it was mandatory for the applicants to have obtained leave of the Company Court. A statutory mandate cannot be avoided on the ground of ignorance or hardship, it should also he noticed that the order was obtained ex parte without impleading ....
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....over the claims breaking the queue to recover the amount, merely based on the decree obtained from foreign Courts and the execution proceedings pending before the Indian Courts. The Companies Act provides a machinery/mechanism for the Official Liquidator to consider the claims of the creditors and the said proceedings have to be in consonance with the provisions of the Act. In the present scenario, granting permission to the applicants would adversely affect the rights of other creditors and all the contributors of the Company, who are standing in the queue. This appears to be the essence of Sections 447, 456, 529, 529A and 520 of the Act, permitting the applicants to proceed with execution proceedings would amount to giving a preferential right to such decree holders finally disturbing the rights of the secured creditors. The resultant factor, i.e., disturbing the rights of the secured creditors if to be avoided or interest of all the creditors should be uniformly safeguarded or maintained, this Court must exercise the power under Section 446 (1) with circumspection while considering the permission claimed by the decree holders in the execution proceedings to execute their decrees....