A.K. Banerji, J. - (1.) The above-noted application (A-18) has been filed by the Industrial Development Bank of India (hereinafter referred to as "the applicant-bank"), under Sections 446(1), 453 and 537 of the Companies Act, 1956, inter alia, seeking the following reliefs : (1) To grant leave under Section 446(1) of the Act for continuation of Suit No. 2945 of 1990 pending in the High Court of Judicature at Bombay. (2) To grant leave under Section 453 of the Act for appointment and continuation of the receiver of the High Court of Bombay regarding the mortgaged and hypothecated properties of the respondent-company. (3) To grant leave under Section 537 of the Act for recovery of the applicant's dues by sale of the movable and immovable properties of the respondent-company charged in favour of such dues and enforcement and other execution and distress proceedings as the Bombay High Court may direct in the above-noted suit.
(2.) The relevant facts in brief as set out in this application are that the applicant-bank granted term loans to the respondent-company for modernisation of its textile mills at Hastinapur in the State of U. P., which was secured by the respondent-company and its guarantors, by hypothecation of movable and immovable properties of the company and deposit of title deeds, which charge was duly registered with the Registrar of Companies, Kanpur, under Section 132 read with Section 125 of the Act. Respondent No. 2 also personally guaranteed payment of the applicant's dues. The applicant-bank made demands against the respondent-company and respondent No. 2 for making payment of the amounts due but they failed and neglected to make the payment, hence the applicant had no option but to file Suit No. 2945 of 1990 before the Bombay High Court for enforcing the mortgaged, hypothecated and other securities. Subsequently, by the order dated December 8, 1993, the Bombay High Court appointed the court receiver as the receiver of the company's properties in pursuance whereof physical possession of the company's properties was taken by the receiver on February 3, 1994. It appears that the company became a sick industrial company within the definition of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985, and made a reference to the Board for Industrial and Financial Reconstruction ("the BIFR" in short), which recommended the winding up of the company, vide its order dated April 17, 1990. On the said recommendation, this court had vide its order dated March 27, 1991, passed in Company Petition No. 3 of 1990 ordered the winding up of respondent No. 1. Subsequently, by the order dated July 10, 1991, this court had directed that the winding up order dated March 27, 1991, be put in abeyance until further orders, as an appeal had been preferred by the respondent-company before the Appellate Authority for Industrial and Financial Reconstruction ("the AAIFR" in short). As the appeal preferred before the AAIFR was dismissed on May 13, 1993, this court vide its order dated April 12, 1994, directed the official liquidator appointed, vide the order dated March 27, 1991, to proceed with the winding up of the respondent-company. The present application has been filed thereafter by the applicant-bank for the reliefs mentioned above.
(3.) Copy of this application was served on the official liquidator who was has filed a counter-affidavit to the same. A rejoinder-affidavit to the said counter-affidavit has been filed on behalf of the applicant. I have heard Shri R.P. Agarwal, learned counsel for the applicant-bank and the official liquidator. It has been contended by Sri Agarwal on behalf of the applicant that the suit was filed much prior to the winding up order and is pending before the Bombay High Court, consequently, permission to continue the proceedings of the suit should be granted by this court as a matter of course. He has further contended that grant of leave is the rule and refusal the exception. In support of his submission, learned counsel has referred to certain decisions. I am, however, of the view that as I find force in this submission made by learned counsel, it is not necessary to refer to the decisions cited by learned counsel. The language of Section 446(1) of the Act is plain, clear and unambiguous. The mandate of the section is when a winding up order has been made, no suit or legal proceedings shall be proceeded with against the company except with the leave of the company court and subject to such terms as the court may impose. In the present case, the suit was filed in the month of August, 1990, and winding up order was passed by this court on March 27, 1991, but was subsequently kept in abeyance. The order was revived by the subsequent order dated April 12, 1994. Prior to this date however, on December 8, 1993, the Bombay High Court had appointed a receiver over the assets of the company (in liquidation) and the receiver had already taken possession on February 3, 1994. The suit before the Bombay High Court is pending for the last five years. There is, therefore, no reason to refuse the grant of permission to continue the proceedings of this suit. That apart, the Supreme Court in M. K. Ranganathan v. Government of Madras [1955] 25 Comp Cas 344 has held that if a secured creditor files a suit for the realisation of his security, he is bound to obtain leave of the winding up court as provided in the Act, "although such leave would almost automatically be granted". The official liquidator has, however, contended that he has no objection for continuing the suit filed by the applicant. However, the same should be transferred to the winding up court under Section 446(3) of the Act, which lays down that any suit or proceedings against the company which is pending in any court other than the winding up court notwithstanding any other law for the time being in force should be transferred to and disposed of by the said court. He has further contended that the official liquidator does not have funds to contest the suit on behalf of the company before the Bombay High Court, whereas, the applicant-bank has its office in the State of U. P. and, therefore, it can continue the proceedings of the suit before this court without any difficulty. I am, however, not impressed with the said argument. Firstly, because there is no such application on behalf of the official liquidator filed before this court praying for the transfer of the suit. That apart, as already noticed above, the suit filed by the applicant-bank was pending before the Bombay High Court for the last over five years, where the proceedings are being pursued. When the suit was filed, the winding up proceedings had not been instituted and the Bombay High Court had jurisdiction to entertain the suit. It would not be expedient, therefore, to transfer the suit to this court only because it would be convenient for the official liquidator to contest the said suit. However, as noticed above an order under Section 446(1) of the Act is subject to such terms as the court may impose. Taking into consideration the said aspect of the matter, I am of the view that the permission to continue the suit as prayed for by the applicant can be granted subject to the condition that the applicant-bank deposits with the official liquidator a sum of Rs. 15,000 only towards the cost and expenses to be incurred by the official liquidator in engaging a counsel and for contesting the suit at Bombay, and, further if the said suit is decreed by the court the decree shall not be executed without obtaining further orders from this court.;