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Judgment
Kuppuswami Ayyar, J.—The only point for consideration in these two appeals is whether the decree-holder should obtain the sanction of
the. Court which passed orders winding up the Calicut Bank (appellant) u/s 171 of the Indian Companies Act, for the purpose of continuing
execution proceedings taken out against that Bank which is now under liquidation.
Both these appeals arise out of execution proceedings started by the decree-holders, and in both the appellant Bank was added as a party on
the ground that it had obtained a subsequent mortgage of the properties which were sought to be sold in execution of the ''hypothecation decrees
obtained by the decree-holders, in the two suits out of which these appeals arise. The Bank was a party to the suits and to the proceedings in
execution. It went into liquidation subsequent to the filing of the execution petitions. The contention now is that the execution proceedings cannot be
continued without the sanction of the Court which ordered the winding up of the Bank and appointed a liquidator.
The first Court held, that, as the Bank was only a puisne mortgagee, there was no relief granted as against the Bank, that the Bank had only a
privilege of redeeming but not a liability to pay and that consequently it was not necessary that the sanction of the Court should be obtained and it
relied upon the decision of this Court in S. Narayanachari Vs. T.V.A.K.T. Annamalai Chettiar, . The appellate Court followed the same decision
and dismissed the appeals. It however stated that, u/s 80 Civil Procedure Code, it was not necessary that a notice should be sent to a pro forma
defendant if no relief is asked against him and that the same principle should be applied to the facts of this case. Hence these appeals by the Bank.
The decision in S. Narayanachari Vs. T.V.A.K.T. Annamalai Chettiar, , was the decision of a single Judge and it has been overruled by a Bench
of this Court in Periaswami Chettiar and Another Vs. S.A. Ramaswami Goundan, It is also pointed out in that case that there were several rulings
of this Court which held differently from what Newsam, J., held in S. Narayanachari Vs. T.V.A.K.T. Annamalai Chettiar, . In that case it was held
that a puisne mortgagee is also a person liable to pay the amount due under the mortgage decree, that he is entitled to have the debt scaled down
under the Madras Agriculturists'' Relief Act. It cannot therefore be said that the Bank is not a defendant against whom a relief was granted under
the decree. The Bank was hence not a mere pro forma defendant.
It is urged for the respondents that the proceedings referred to in Section 171 of the Companies Act refers to an original proceeding like a suit
started by the filing of a document similar to a plaint and not to execution and for this reliance is placed on the observations in Shakuntala v.
Peoples'' Bank of Northern India ILR (1941) Lah. 760 There their Lordships had to consider the question as to whether a suit filed under Order
21, Rule 63 was a suit in respect of which sanction should be obtained u/s 171, and the contention was that the suit was really a proceeding in the
nature of an appeal against a summary order passed on a claim petition and was not a suit proper. But it was held that it was a suit as it started
with a plaint and therefore sanction was necessary. Reference was made to the meaning of the expression ""proceeding"" as used in that section and
it was observed that it must be construed as meaning original proceedings similar to a suit. With great respect, I do not think I will be justified in
accepting that interpretation of the word "" proceeding."" In S. Narayanachari Vs. T.V.A.K.T. Annamalai Chettiar, , Venkatasubba Rao, J., after
referring to the meaning of the word ""proceeding"" as given by Stroud and in Black''s Law Dictionary, points out that the Word need not necessarily
relate to an independent originating proceedings, but may also relate to supplemental proceedings. Further it was pointed out in In re Artistic
Colour Printing Co.2 with regard to a similar provision in the Companies Act, 1862, which runs thus,
No suit, action, or other proceeding shall be proceeded with or commenced against the company except with the leave of the Court.
that the word ""proceeding"" includes execution under a judgment in an action. Further the object of the section is to enable the Court, which
ordered the liquidation or the winding up of a company, to know whether it will be necessary to continue the execution proceedings and whether it
will not be advisable to adjust the matter out of Court and to give the necessary instructions to the liquidator.
I therefore find that both the lower Courts were wrong in finding that it is not necessary to obtain the sanction of the Court u/s 171 to continue
the execution proceedings taken against the Company after a winding up order has been made and a provisional liquidator has been appointed.
In the result, both the appeals are allowed, and the petitions are remanded to the Court of First Instance to enable the parties to get the
necessary sanction to continue the proceedings. The respondents-decree-holders will pay the appellant costs both in this Court and in the lower
appellate Court. Leave refused.