RAMASWAMI J.

This is an application for leave under section 171 of the Indian Companies Act

The facts are : Messrs. T. V. Purushottam and Co., dealing in wines took a lease of a portion of the Subhodaya Buildings, Mount Road, Madras, from the voluntary liquidators of the Subhodaya Publications Ltd., Messrs. C. Vasudevan and Raghavarama Sastri. In paragraph 2 of the affidavit of T. P. Satyanathan, it is stated that the rent for the said portion of the premises was agreed at the time of the tenancy at Rs. 200 per month and that subsequently the applicants learnt that according to the valuation of the building by the Corporation of Madras at Rs. 500, the said rent of Rs. 200 for the portion of the premises was too high. Therefore the applicants are stated to have filed Application No. 1675 of 1954 before the House Rent Controller, Madras, for fixing the fair rent. In the reply affidavit filed by the company it is stated that the voluntary liquidators agreed to rent the portion first at Rs. 150 per month and wanted two months' rent in advance and when on the next day the applicants sent to the voluntary liquidators a cheque for Rs. 300, they changed their mind and demanded Rs. 200 per month. On the other hand, the voluntary liquidators state in their counter affidavit that they did not ask for Rs. 150 in the first instance and changed it to Rs. 200 the next day, that they fixed the sum of Rs. 200 per month as the rent after ascertaining on measurement that the portion of the building which the applicants were taking on lease was one-third of the total extent of the premises, the other portions being occupied by Messrs. Gordon Press and a book-binder, Thyagi, for which the previous tenants, Messrs. Parsons and Whittmore, were paying Rs. 600 per month. The voluntary liquidators have now got converted into provisional liquidators. The applicants want to continue the proceedings before the Rent Controller taking the leave of the court under section 171 of the Companies Act alleging that they are now paying rent at Rs. 200 per month, that they want the rent to be assessed by the Rent Controller and fair rent fixed and that for that purpose they should allowed to continue the proceedings initiated before the Rent ControllerSection 171 of the Companies Act runs as follows

"When a winding up order has been made, no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the court, and subject to such terms as the court may impose." *

The policity of section 171 and of the analogous sections 169 and 232 is to protect the assets for equitable distribution among those entitled, and to prevent the administration being embarrassed by a general scramble of creditors. When a winding up order has been made, the combined effect of sections 171 and 232 is that such order operates automatically as a stay of all actions, executions, distress, etc., against the company, subject to the discretion of the court to allow such actions, executions, etc., to proceed notwithstanding the winding up

The winding up of a company by the court involves the realisation and protection of assets and an administration of its affairs by the court. Consequently once the court has taken the assets of a company into its control or has passed an order for the winding up of the company, it would be improper to allow proceedings to be initiated or continued against the company and thus allow its assets to be wasted. The legislature has therefore enacted this section 171 with the intention of safeguarding the company's assets against wasteful or expensive litigation in regard to matters which are capable of determination more expeditiously and more cheaply in the winding up : Per Pearson J. in Mukherji v. Krishna Dassi This section prevents the commencement of new proceedings or the continuation of pending proceedings against the company after the appointment of a provisional liquidator or after the making of a windin