The court established that it had the power to order a stay of proceedings under the Revenue Recovery Act under S.518(1)(b) read with S.446, and that the provisions of S.537 did not nullify this power.

1. This is an application under S.518(1)(b) of the Companies Act brought by the Liquidator in a members voluntary winding up. What it seeks is a stay of the proceedings taken by the 1st respondent Rubber Board (the contesting respondent and hereinafter referred to as merely the respondent) under the provisions of the Revenue Recovery Act for the realisation of Rs. 6,57,367.60 due from the company by way of cess levied under S.12 of the Rubber Act.

2. The facts set out in Para.6 to 11 of the affidavit filed in support of this application are not controverted; nor is it the case of the respondent that the declaration of solvency made by the directors of the company (a copy of which has been marked as Ext. P-1) is in any respect false. That being so I think I ought to grant the stay if I have the power to do so. For, from the circumstances disclosed, I am satisfied that if the respondent is to bring the properties of the company to sale at this stage for the recovery of the dues instead of waiting for payment in the winding up, that would gravely prejudice the winding up.

3. It is true that the respondent claims to be a preferential creditor. (Strictly speaking according to the respondent's case the Central Government is really the creditor, the respondent being only a collecting agent). It is not admitted that it is but I shall proceed on the assumption that it is, for I do not propose to decide that question here. There is, on that assumption, no question of a pari passu distribution as between the respondent and the ordinary creditors. Nor is it the case of the petitioner that there are other preferential creditors entitled to take pari passu with the respondent who will be prejudiced by the respondent being allowed to recover forthwith. Indeed, in the face of the declaration of solvency which puts the total value of the assets at nearly Rs. 53/- lakhs and of the liabilities at Rs. 40.4 lakhs, nearly Rs. 8 lakhs of the liabilities being secured and the rest unsecured, it would be difficult to put forward such a case. Therefore, on the assumption that I have made that the respondent is a preferential creditor, this might not be a case where, unless there are special circumstances calling for a refusal, a stay has to be granted as a matter of course on the ground that to deny a stay would be to make the pari passu distribution enjoined by S.511 difficult, and I am prepared to regard it as a case where special circumstances must be shown as to how it would be just and beneficial within the meaning of S.518(4) to stop a preferential creditor from recovering otherwise than in the winding up.

4. As I have already said there are, in my view, such special circumstances. The entire assets of the company, including its stock in trade, are subject to charges in favour of the two secured creditors to whom a total sum of about Rs. 8 lakhs is due. The stock in trade valued at about Rs. 12 lakhs consists almost entirely of unfinished goods, foam rubber cushions, made to the special specifications of a particular customer, namely, the Hindustan Motors Ltd., and these goods are of little use to any one else. These goods can be sold only after they are finished and after the excise duty levied on th2m is paid and the charge on them in favour of the secured creditors is released by the payment to these creditors of their value. There is not now enough money on hand to pay the respondent. The cash in hand and at the bank at the commencement of the winding up was only about Rs. 1.5 lakhs, and this (with the realisations since made) is being utilised for finishing the goods, paying the excise duty, meeting other expenses of the liquidation, and paying the secured creditors to whom about Rs. 1.4 lakhs has so far been paid during the six months that have elapsed. Once the stock in trade is sold and its value realised there will be a substantial balance left after paying the secured creditors in full and the rest of the valuable assets of the