LexSUDARSAN CHITS (I) LTD. versus O. SUKUMARAN PILLAI & ORS .
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511
SUDARSAN CHITS (I) LTD.
v.
O. SUKUMARAN PILLAI & ORS .
August 16, 1984
(D.A. DESAI, V. BALAKRISI!NA ERADI AND V. Kl!AL!D, JJ.)
The Companies Act, 1956 (I of 1956), Section 446 (2) (b)-Scop• of.
Words and phrases-Meaning of "Court which is winding up the company"
-Section 446 (Z)-Companies Act, 1956.
The appellant, a limited company governed by the Companies Act,
1956 (for short, the Act) challenged before a Division Bench of the High
Court the order or the Company Judge, winding up the appe1lant .. company
and appointing Official Liquidator, on three petitions moved by the crediiors
under s. 439 of the Act on tbJ ground that the appellant-company was un-
able to pay its debts.
The appellate Bench of the High Court disposed of
the appeals after approving the scheme of compromise and arrangement
under s. 391 of the Act and directed that {i) the winding up order passed by
the Company Judge sba11 be held in abeyance on certain undertakings being
filed by the appellant .. company within the prescribed time before
the
High Court to abide by the conditions imposed in the judgment; (ii) the
Official Liqui~ator will be considered as appointed to function as the provj ..
sional Liquidator on the first payment of Rs. 25 lacs being made within
four weeks of the judgment; and (iii) in case of any default the winding up
order will stand confirmed.
Since tben
the scheme of compromise anlil
arrangement was being irr1p1ernented meticulously.
In the course of imple ..
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B
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mentation of the scheme the appellant-company moved an application before
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the _Appel1ate Bench praying that the J)rovisiooal Liquidator be directed to
file claim petitions under s. 446 (2) of the Act for realising the claims of the
company which would further assist and facilitate the implementation of the
scheme of compromise and arrangement as supervised by the Court.
Res·
poodent No. 1 opposed this application.
The High Court while rejecting
the application, held that as the winding up proceeding in respect of the
appe11ant-company is no more pe~ding and there is no court which could be
said to be the court winding up the company J the claim petition on behalf
of the company which is not being wound up could not be instituted as con-
templated by s. 446 (2).
Hence this appeal by special leave.
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Allowing the appeal,
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B
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512
SUPREME COURT REPORTS
[1985] I S.C.R.
HELD : (1) It would be advantageous to notice the historical evolution
of the provision as well as its present setting before considering the true
scope and ambit of the jurisdiction conferred on Ille court winding up a
company by sec. 446(2) (b) of the Act. Section 171 of the Indian Companies
Act 19131 which did not contain any provision similar or identical to"that of
sec. 446(2), is re-enacted with little modification as Sec. 446(1) of the Com·
panies Act 1956
Since there was no specific provision in the repealed
Companies Act 1913 conferring jurisdiction on the court winding up the
company analogous to the one conferred by sec. 446(2), the official Liqui·
dater in order to realise and recover the claims and sub .. isting debts owed to
the company had the unenviable fate of filing suits.
To save the company
which is ordered to be wound up from this prolix and expensive litigation
and to keep all incidental proceedings in winding up before the court which
is winding up the company, its jurisdiction was enJarged by sec. 446(2) to
entertain petition amongst others for recovering the claims of the company.
This was the object behind enacting s. 446(2) and therefore it must receive
such construction at the hands of the c;:;urt as would advance the object and
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at any rato not thwart it. [516H, 517A, B, 518A, B]
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B
2.
Section 446(1) provides that when a winding up order has been
made or the official Liquidaior has been appointed as provisional Liquidator,
no suit or other !,;,gal proceeding sb11l ba 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.
It envisages two situations in which the court will
h:ive juaisdiction lo m1k~ the order thereunder contemplated.
These tNo
situations are : where a winding up order his been mad<! or where the
official Liquidator has been appointed as provision1l
Liquidator.
The
first of the two situations envisages an oExcerpt shown. Read the full judgment & AI analysis in Lexace.