State Bank of India vs Trans Asia Tubes and Industries

Tejinder Singh Doabia, J.—One of the Directors of M/s. Trans Asia Tubes and Industries Ltd., has preferred this application in which a

prayer has been made that the suit filed by the State Bank of India be dismissed as this has been filed in contravention of the provisions contained

in Section 446 of the Companies Act, 1956. Section 446 of the Companies Act, 1956, on which reliance is being placed, is reproduced below:--

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 the 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 winding up the company 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 u/s 391 by or in respect of the company;

(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of

the company;

whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made

or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment)

Act, 1960.

(3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is

proceedingmay, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court.

(4) Nothing in Sub-section (1) or Sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court.

A perusal of Sub-section (1) of Section 446 makes it apparent that after an order for winding up has been passed, a suit or other legal

proceedings can commence only with leave of the competent Court and if some proceeding is already pending, then also leave is required. This

leave can be granted even after the proceedings have been instituted. This is the view expressed by the Supreme Court of India in Bansidhar

Shankarlal Vs. Mohd. Ibrahim and Another, . In the above case, the decision given by Calcutta High Court in the case of Harnarain Misra Vs.

Kanhaiyalal Lohawalla and Another, and the High Court of Andhra Pradesh in the case of Godavari Sugar and Refineries Ltd. in liquidation Vs.

Kambhampati Gopalakrishnamurthy and Others, , holding that proceeding instituted without leave of the Court has necessarily to be dismissed was

held to be an incorrect view. It was observed that the suit or proceeding instituted without leave of the Court may be regarded as ineffective unless

leave is obtained, but once leave is obtained, the proceeding will be deemed to have been instituted on the date granting leave. After going through

the application, I am of the opinion that the ends of justice would be served by granting leave to the State Bank of India to pursue the suit in the

Court where it has been filed. The ultimate decision which may be given by the trial Court and the decree which may be passed, would be

executed in terms of the directions which may be given by this Court (Company Judge). As to how, the decretal amount, if any, ultimately allowed

has to be utilised, would depend upon the directions which may be given by this Court. Appropriate directions can be obtained by any of the

parties after the suit is decided.

Disposed of accordingly.