Section 446 of the Companies Act, 1956 allows all suits and legal proceedings to be brought under the control of the winding up Court to avoid wasteful or expensive litigation and safeguard the assets of the Company.

Headnote:
Companies Act, 1956 - Section 446 - Leave to prosecute suits - Secured Creditors
Fact of the Case:

The applicants, secured creditors of respondent No. 1, sought leave under section 446 of the Companies Act, 1956 to continue prosecuting mortgage suits filed in a lower court, after the respondent No. 1 was ordered to be wound up and an Official Liquidator appointed.
Finding of the Court:

The Court granted leave to the applicants to continue prosecuting the suits but ordered them to be transferred to the Court for trial. The operation of the order was stayed for four weeks.
Issues: Whether the applicants, as secured creditors, were entitled to prosecute the suits outside the scope of winding up proceedings. Whether the suits should be transferred to the Court for trial.
Ratio Decidendi: Section 446 of the Companies Act, 1956 allows all suits and legal proceedings, regardless of the plaintiff, to be brought under the control of the winding up Court to avoid wasteful or expensive litigation and safeguard the assets of the Company. The leave of the Court is not granted as a matter of course and is intended to avoid wasteful expenditure.
Final Decision: The applicants were granted leave to continue prosecuting the suits, but the suits were ordered to be transferred to the Court for trial.

JUDGMENT - S.M. JUNJHUNUWALA, J.:---The applicants have applied for leave under section 446 of the Companies Act, 1956 to continue to prosecute the original Suit No. 7 of 1986 and original Suit No. 507 of 1989 filed in the Court of Additional Subordinate Judge, Ranga Reddy District at Saroor Nagar, in Andhra Pradesh.

2. According to the applicants, applicants are secured creditors of respondent No. 1 and the said Suit No. 7 of 1986 filed by the applicants is a mortgage suit and as secured creditors, the applicants are entitled to file proceedings in order to realise mortgage debt and other securities created by the respondents No. 1 in favour of the applicants.

3. The Premier Automobiles Limited had filed a winding up petition against the respondent No. 1, being the Company Petition No. 645 of 1988. By an order dated 23rd June, 1990, the respondent No. 1 was ordered to be wound up an Official Liquidator has been appointed as Liquidator of the respondent No. 1 Company. In view of the said order passed on 23rd June, 1990, the applicants have filed the present application for leave as aforesaid.

4. Mr. Sanghavi, the learned Counsel appearing for the applicants, has submitted that the applicants are the secured creditors of respondent No. 1 and as such, outside the scope of the winding up of respondent No. 1. Mr. Sanghavi has further submitted ordinarily leave to sue is granted by the Court unless there are special grounds to refuse the same. In the submission of Mr. Sanghavi, there exists no special ground for refusal of such leave and as such, the leave as sought be granted by this Court.

5. Even if the applicants are outside the scope of the winding up, no realization of dues by the applicants can take place without the leave of this Court. Section 446 of the Companies Act, 1956 is wide in its terms and is not restricted to any category of suits or any class of plaintiffs. It is wide enough to cover all suits and other legal proceedings whoever may be the plaintiff. The object of the section is to see that the assets of the Company are brought under the control of the winding up Court to avoid, wherever possible, expensive litigation and to see that all matters in dispute which are capable of being expeditiously disposed of by the winding up Court are taken up by that Court. The section is intended to safeguard the assets of a Company in winding up against wasteful or expensive litigation in regard to matters capable of being determined expeditiously and cheaply by the wind up Court itself. The leave of the Court is not granted as a matter of course or merely for the asking. On examination of facts and circumstances of the case, I am of the opinion that defending at a far distance in the Court of Additional Subordinate Judge, Ranga Reddy District at Saroor Nagar in Andhra Pradesh is going to be more expensive than if the said suits are continued and tried in this Court on the same being transferred to this Court. It is neither convenient nor proper that the Official Liquidator appointed Liquidator of the respondent No. 1 should be asked to defend the said suits in that Court. Since the wasteful expenditure is to be avoided.

6. I pass the following order :

Applicants are granted leave under section 446 of the Companies Act, 1956 to continue to prosecute the original Suit No. 7 of 1986 as also the original Suit No. 507 of 1989 filed against respondent No. 1 and others., However, these suits are ordered to be transferred from the Court of Additional Subordinate Judge, Ranga Reddy District at Saroor Nagar, Andhra Pradesh to this Court for being tried by this Court.

Mr. Sanghavi applies that the operation of Order transferring the said suit for trial to this Court be stayed for a period of four weeks. Since the order passed is composite one, on the application of Mr. Sanghavi, the operation of the entire above order is stayed for a period of four weeks.

Issuance of copy expedited.

Order accordingly.

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