CENTRAL BANK OF INDIA versus ELMOT ENGINEERING COMPANY AND ORS.

Citation: [1994] 3 S.C.R. 766 · Decided: 27-04-1994 · Supreme Court of India · Bench: M.N. VENKATACHALIAH, S. MOHAN
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Judgment (excerpt)

A 
CENTRAL BANK OF INDIA 
v. 
~ • 
ELMOT ENGINEERING COMPANY AND ORS. 
APRIL 27, 1994 
B 
(M.N. VENKATACHALIAH, CJ. ANDS. MOHAN, J.] 
The Companies Act, 1956 : s. 446-Company-Suits against-by 
• 
mortgagor for recovery of money under equitable mortgage by deposit of title 
c 
deeds-Company ordered to be wound u~Application by mortgagor for leave 
to prosecute suits against Company in civil court-Leave granted by Company 
Court transfening suits to itself-ff eld, transfer of suits to Company Court will 
result in greater expenditure to plaintiff-The part of order directing transfer 
set aside. 
D 
The appellant Bank filed two suits against respondent no.1, a limited 
Company, and its advisors and Directors, respondents no. 3 and 4 respec-
lively, - one for enforcement or equitable mortgage seeking recovery of 
certain amount witb interest tbereon and, In default of payment, a final 
decree directing tbe sale of mortgaged properties and for ancillary reliefs 
E 
was sought; and tbe otber, for recovery of expenses incurred from time to 
time in respect or tbose properties-in tbe court of Subordinate Judge, 
Saroor Nagar, District Rangareddy in Andhra Pradesh, witbin whose 
jurisdiction tbe property was situated. 
During the pendency of the suits, a winding up petition against 
F 
respondent no. 1 was filed before tbe Bombay High Court. The Company 
was ordered to be wound up and respondent no. 2 was appointed as the 
Official Liquidator. 
\., 
The appellant filed a Company Application, under s.446 or the 
G 
Companies Act, 1956, in the Company Petition, for leave to prosecute the 
two soi.ls before the civil court concerned. The Company Court granted 
leave but directed transfer of the suits to itself holding that for the Official 
Liqnidator it would be more expensive to defend the suits at a far distance 
in Hyderabad an,d the wasteful expenditure could be avoided by transfer. 
The appeal filed by tbe appellant was dismissed summarily by the Division 
4 
\ 
H Bench of the High Court. 
766 
CENTRAL BANK OF INDIA v. ELM OT ENGG. CO. 
767 
In appeal to this Court, it was contended on behalf of the appellant A 
" ·"-
that the High Court erred in not correctly appreciating s.446 of the 
Companies Act, inasmuch as a secured creditor claiming under an equi~ 
table mortgage stood outside the winding up proceedings; the properties 
being situated in Andhra pradesh, it would be not only just and convenient 
) 
but also proper for the suits to be conducted there and convenience of the B 
Official Liquidator alone should not be the concern. 
On behalf of the respondents, it was contended that in view of 
sub-sections (2) and (3) of s. 446 of the Act, the Company Court was 
entitled to grant leave on such terms and conditions as it would impose 
and was empowered to transfer before it all proceedings pending against C 
the Company at different places as it would be convenient for the winding 
up of the Company's affairs expeditiously. 
Allowing the appeal in part, this Court 
HELD : In the facts of the instant case, the order of. transfer of the D 
suits to the High Court of Bombay cannot be supported. The appellant is 
admittedly a secured creditor. It sues on a mortgage by deposit of title 
deeds. Such a suit is not likely to involve a long drawn out trial. The 
transfer will result in greater expenditure to the appellant Bank which 
certainly is avoidable "than the wasteful expenditure' to the Official Liq· E 
uidator. Accordingly, the part of the High Court's order directing the 
transfer is set aside. (772-D-H; 773-B-C) 
M.K Ranganathan v. Govt. of Madras, AIR (1955) SC 604, relied on. 
Sudarsan Chits (I) Ltd. v. G.Sukumarann Pillai, AIR (1984) SC 1579, F 
referred to. 
Palmer's Company Precedents, Part II, 17th Edu., p.302, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3911 of 
1994. 
(} 
From the Judgment and Order dated 15.9.92 of the Bombay High 
Court in A. No. 428 of 1992. 
Anil B. Diwan, P.H. Parekh and Ms. Smriti Mishra for the Appel-
lants. 
H 
768 
SUPREME COURT REPORTS 
{1994] 3 S.C.R. 
A 
Arvind Kumar, K.R. Venkataraman and Ms. Laxmi Arvind for the 
Respondents. 
The Judgment of the Court was delivered by 
MOHAN, J. Leave granted. 
B 
The appellant filed a suit bearing O.S. No.7 of 1986 against Respon-
dent Nos. 1, 3 and 4 in the Court of Subordinate Judge, Rangareddy 
District at Saroor Nagar, Andhra Pradesh for recovery of Rs. 97,21,274.11 
with interest thereon. The further prayer was, in defaul
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