A secured creditor cannot proceed with a suit against a company in winding up without leave of the company court.

T.S. Doabia, J.

1. The brief facts which have led to the filing of this petition Under Section 115 of the Code of Civil Procedure be noticed.

2. Petitioner No. 1 M/s Oshi Foods Ltd. is a company registered under the Companies Act. It has its head office at New Delhi. As it was unable to meet some of its financial commitments, a company petition was filed in the Delhi High Court. This bears No. 28 of 1992. On 17th of March, 1992, Delhi High Court has passed an order directing winding up of the company. One Shri A. K. Das has been appointed as official liquidator. This official liquidator has taken over the assets of the company on 29th of September, 1993. In a nutshell, it can be stated that the company is now under winding up process.

3. Against the company a suit was filed by the State Bank of India at Gwalior. To the maintainability of the suit, a preliminary objection was taken. This objection was to the effect that the suit cannot proceed unless and until leave of the company court in terms of 444 and 446(1) of the Companies Act, is obtained. The trial Court has held that the suit can proceed notwithstanding the provisions contained in Section 446 of the Companies Act. It is against the above order, this petition has been filed.

4. Reliance is being placed on the decision reported as M. K. Ranganathan v. Govt. of Madras, AIR 1955 SC 604. In this judgment it was observed that if a secured creditor wants to take the assistance of the Court then it has to obtain leave of the Court. The Supreme Court of India was at the relevant time dealing with Section 171 of the Companies Act, 1913. The decision referred to above was noticed in the decision reported as Central Bank of India v. Elmot Engineering Company, (1994) 4 SCC 159. Para 14 is relevant and be noticed again.

"This section aims at safeguarding the assets of a company in winding-up against wasteful or expensive litigation as far as matters which could be expeditiously and cheaply decided by the company court are concerned. In granting leave under this section, the Court always takes into consideration whether the company is likely to be exposed to unnecessary litigation and cost. The position of secured creditor came to be decided by this Court in M. K. Ranganathan. At AIR pp. 607 and 608, in paragraphs 15 and 16 it was held :

"The phrase "outside the winding up" is an intelligible phrase if used, as it often is, with reference to a secured creditor, say a mortgagee. The mortgagee of a company in liquidation is in a position to say "the mortgaged property is to the extent of the mortgage my property. It is immaterial to me whether my mortgage is in winding up or not. I remain outside the "winding up" and shall enforce my rights as mortgagee".

This is to be contrasted with the case in which such a creditor prefers to assert his right, not as a mortgagee, but as a creditor. He may say 'say' 'I will prove in respect of my debt'. If so, he comes into the winding up.

It is also summarised in Palmer's Company precedents, Vol. II, p. 415.

"Sometimes the mortgagee sells, with or without the concurrence of the liquidator, in exercise of a power of sale vested in him by the mortgage. It is not necessary to obtain liberty to exercise the power of sale, although orders giving such liberty have sometimes been made".

The secured creditor is thus outside the winding up and can realise his security without the leave of the winding up Court, though if he files a suit or takes other legal proceedings for the realisation of his security he is bound under Section 231 (corresponding with Section 171, Indian Companies Act) to obtain the leave of the winding-up Court before he can do so although such leave would almost automatically be granted.

5. Section 231 has been read together with Section 228(1) and the attachment, sequestration, distress or execution referred to in the latter have reference to proceedings taken through the Court and if the creditor has resort to those proceedings he cannot put