A decree passed without leave of the court under Section 446 of the Companies Act, 1956 is not void but voidable at the instance of the liquidator.

B.D.Singh, J.

1. This miscellaneous appeal has been filed by the decree-holder appellants against the order in Misc. case No. 14 of 1963 which was filed by the iudgment debtor in the following circumstances:

The appellants obtained a money decree on 24-6-59 from the Court of 1st Subordinate Judge. Patna against Dhan-raj Mill (Pvt.) Ltd. for Rs. 89,632.50 paise and as cost Rs. 2,724.88 paise. When the decree holders filed execution proceeding in order to execute the decree, an objection was filed by the judgment-deb-tor-company mainly on the following two grounds: (i) That the execution case was barred by limitation.

(ii) That the Bombay High Court had passed orders on 21-1-1959 for winding up the said company and appointing an official liquidator.

After the said objection was filed in the execution case. Misc. Case No. 14 of 1963 was registered and after hearing both the parties the learned Additional Subordinate Judge, Patna passed the following two main orders: (1) That the Patna Court had no jurisdiction to pass the decree after the Bombay High Court had passed orders on 21-1-59 for winding up of the company and appointing the official liquidator. Therefore, he held that the decree is nullity and void ab initio.

(2) That the execution case is barred by time, at least by four days. Being dissatisfied with the aforesaid order the present miscellaneous appeal has been filed in this court by the decree-holders.

2. Learned counsel appearing on behalf of the decree-holder-appellants has attacked the finding of the court below only on point No. 1, According to learned counsel, the decree is not void but it is voidable at the instance of the liquidator. It not being a nullity the executing court cannot go behind the decree. On the other hand, learned counsel appearing on behalf of the respondent company, has urged that obtaining leave of the court is a condition precedent and if leave is not obtained the judgment and the decree are void and they are nullity.

3. To appreciate the main points Involved in this case it will be necessary to refer to Sec. 446 of the Indian Companies Act. 1956 (Act No. I of 1956). The relevant portion of the section reads as follows :-

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"When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be 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."

In the instant case it is admitted case of the parties that the winding up order was passed on 21-1-1959 and the money decree in question was passed on 1-7-1959. Therefore, the suit was proceeding against the company without the leave of the court, i. e. the Bombay High Court It is also admitted that leave has not been obtained in this case. Therefore, the only question which falls for consi-deration is whether in such circumstances the decree passed should be considered as void or voidable. No doubt, in the sec-tion the word "shall" is used, but now it is well established that "shall" may be read as "may". It depends upon legislative intent and the object for which the safeguard has been made in the section. The object of this section is to prevent all litigations against a company which is being wound up except with the sanc-tion of the court. The policy is to protect the assets for equitable distribution among those entitled, and to prevent the administration being embarrassed by a general scramble of creditors.

4. This section may be compared with Sec. 537. the relevant portion of which reads as follows :-

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(1) Where any company is being wound up by or subject to the supervision of the court -- (a) an attachment distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up; or

(b) any sale held, without leave of the court, of any of t