Raghava Rao, J. - (1.) THE interesting question of law debated before me in this second appeal is whether when a company in winding up attaches certain property in execution of a decree in its favour as that of its judgment -debtor, any claim petition by a third patty is to be regarded as "other legal proceeding" within the meaning of Section 171, Companies Act, which shall not be proceeded with or commenced against the company except by leave of the Court.
(2.) THE appellant before me is the plaintiff in the original suit who sued to set aside an order on a claim petition filed by defendant 1 on the basis of an assignment in his favour by defendant 2 regarding the rents of certain properties which had been attached by the plaintiff. The claim succeeded in the execution Court, and the case of the plaintiff is that the assignment was a sham transaction unsupported by consideration which was entered into by defendant 2 with a view to defeating the claim of the plaintiff in execution of its decree against defendant 2 in O. S. No. 195 of 1936 on the file of the District Munsif's Court at Palghat. Both the Courts below have found against the case of the plaintiff in the attack made against the transaction on its merits, and the only question which arises fair consideration is whether the claim proceeding started by defendant 1 and the order made on it by the execution Court should be regarded as null and void on account of want of the Court in the winding up under Section 171, Companies Act. On this latter question too, the Courts below have concurrently held against the plaintiff. The argument for the appellant is that the claim proceeding constitutes an independent legal proceeding which cannot be proceeded with or commenced against the company except by leave of the Court, while the contention for the respondents is ,that it is in the nature of a defensive proceeding in answer to the execution petition of the plaintiff, for which no leave is necessary under the Act. The learned counsel for the appellant says that as ruled by Kuppuswami Ayyar J., in the Calicut Bank Ltd. v. : AIR1944Mad84 , the word "proceeding" in the section of the Act applies to execution proceedings also and is not confined to original proceedings, and that the claim petition is itself a proceeding in execution which falls within the mischief of the section, But as the lower Court rightly puts the matter. "In the present case no execution proceedings were started by defendant 1 against the Wariar Bank (in liquidation). On the other hand, the Official Liquidators as representing the Wariar Bank (in liquidation) applied in I. A. No. 225 of 1943 for attachment of the mesne profits or of the rent payable by defendant 8 to defendant 2 and the claim petition was filed by defendant 1 as E. A. No. 506 of 1943 only in the attachment proceedings started by the liquidators." The decision in the Calicut Bank Ltd. v. : AIR1944Mad84 , does not therefore apply to the present case where defendant 1 only put forward a claim as a defence to the execution proceedings already started by the Official Liquidators.
(3.) IT is observed in Palmer's Company Law, Edn. 19 by A. F. Topham K. C. at p. 404 : "'' The object of the winding up provisions of the Companies Act,' 1862 said Lindley L. J. in Be Oak Pitts Colliery Co., (1882) 21 Oh. D. 322 'is to put all unsecured creditors upon an equality and to nay them pari passu.' To accomplish this, it was indispensable that proceedings against the company by way of action, execution, distress or other process should be suspended, otherwise the winding up would resolve itself into a (scramble for the assets. Accordingly the Act of 1862 gave the Court jurisdiction in various cases to restrain proceedings. Section 24(5) of the Judicature Act, 1873, modified these provisions to some extent by providing that no proceeding in the High Court can be restrained by injunction but this did not alter in substance the jurisdiction. Now by Section 226 of the Act of 1948, the Court can, after presentation of the petition, restrain proceedings, and by Sections 227 and 231, on a winding up order being made, or a provisional liquidator appointed, proceedings are automatically stayed and cannot be proceeded with without leave of the Court. In this way creditors and others are compelled to come in and prove their claims in the winding up and a rateable and just distribution of the company's assets is effected." Judged from the stand point of the object and purpose of the statutory provision, it is clear to my mind that the proceeding by way of a claim petition with which defendant 1 intervened in the course of the execution proceeding of the plaintiff does not fall within the purview of the section of the Act.;