Madhavpura Mercantile Co-op. Bank Ltd. vs Modern Dye Chem Pvt. Ltd. and Others

R.K. Abichandani, J.—This judge''s summons is taken out for obtaining permission u/s 446(1) of the Companies Act, 1956, to proceed with Arbitration Suit No. 17 of 1989, filed by the applicant against the respondent company in the court of the Board of Nominees at Ahmedabad. It is the case of the applicant that it is a secured creditor having priority of claim u/s 48 of the Gujarat Co-operative Societies Act, 1961, under which the society has a first charge upon any immovable property which may have been hypothecated, pledged or otherwise mortgaged by the debtor with the society. According to the applicant, hypothecation agreements were entered into in respect of the goods and machinery by the company in favour of the applicant and a sum of Rs. 41,85,749.88 was due as on September 30, 1988, by the company to the applicant. The applicant, therefore, filed Arbitration Suit No. 17 of 1989 for the recovery of the said amount.

The winding up order of the respondent company was made on January 29, 1985, and the suit has been filed by the applicant on January 3, 1989. As per the provisions of section 446(1) no such suit could have been commenced except by the leave of the court. Reliance was placed on the decision of the Supreme Court in Bansidhar Shankarlal Vs. Mohd. Ibrahim and Another, , by learned counsel for the applicant in support of his submission that such leave was not a condition precedent to the institution of the proceedings and can be subsequently granted. The Supreme Court in Bansidhar Shankarlal Vs. Mohd. Ibrahim and Another, , has held in the context of the provisions of section 171 of the Indian Companies Act, 1913, which were identical with the provisions of section 446(1) that there was nothing in the Act which made the leave a condition precedent to the institution of proceedings in execution of a decree against the company and failure to obtain leave before institution of the proceeding does not entail dismissal of the proceedings. It was held that the suit or proceeding instituted without leave of the court may be regarded as ineffective until leave is obtained, but once leave is obtained the proceeding will be deemed to be instituted on the date of granting leave. In view of the decision of the Supreme Court in Bansidhar Shankarlal Vs. Mohd. Ibrahim and Another, , it is clear that leave can be granted u/s 446(1) of the Act even after the suit is instituted but once leave is granted, the suit will be treated as having been instituted on the date on which the leave is granted.

It was contended on behalf of the official liquidator that if permission is granted u/s 446(1) in such cases then the flood gates would be opened and various suits will be filed in different courts. Reliance was placed on the decision of the Gujarat High Court in Star Engineering Works Ltd. v. Official Liquidator [1977] 47 Comp Cas 30 in support of the contention that no leave should be granted to the petitioner u/s 446(1) of the Act. In Star Engineering Workers Ltd. v. Official Liquidator [1977] 47 Comp Cas 30 (Guj), it was in fact observed that whether leave should or should not be granted would depend upon the merits of each particular case or litigation but the principle that leave should be granted ordinarily where the claim is of a nature which cannot be investigated into by the company court or the judge dealing with company matters has been recognised. In the present case, the application for leave can u/s 446(1) be only granted in respect of the suit against the company and there can be no question of granting leave for a suit against other parties. Having regard to the nature of controversy and the fact that even outsiders are involved in the dispute with the company, it is desirable that the dispute against the company should be decided in the action which is already instituted against the company. Leave is, therefore, granted to the applicant to proceed with Arbitration Suit No. 17 of 1989 in the court of the Board of Nominees at Ahmedabad against the company. The fees of counsel appearing for the official liquidator are quantified at Rs. 1,000 to be borne by the applicant. The application stands disposed of accordingly.