Certain attachment, executions in winding up by tribunal to be avoid?

Introduction: There are certain provisions imposed for the attachment, execution in winding up by the Tribunal to be avoided. It was affected by 15-12-2016, wherein any company, if it is being wound up by the Tribunal if it is attached, distress or executed by the force, without leave of the Tribunal against the Estate or that effects of the company, after that provisions of the commencement of the winding up or, any sale held without leave of the tribunal of any of the properties, or effects of the certain companies, after such an commencement  of the provisions shall be of the winding up of the company. Or if any sale held up, without leave of the tribunal of any of the properties of effects of the company, any  such an commencement of the provision shall be void. As per section 335 of the provisions shall be apply to any proceedings for the recovery of the certain taxes or impost or any dues held for the payable to the government in such case also the winding up the company by the Tribunal to be void. 

Sec 537 – Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of Court.

(1) Where any company is being wound-up by or subject to the supervision of the Court

(a) any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up ; or

(b) any sale held, without leave of the court, of any of the properties or effects of the company after such commencement ;

shall be void.

(2) Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government.

Section 335:-Certain attachment, executions in winding up by tribunal to be avoid

 (1) Where any company  is being wound up by the Tribunal ,—

(a) any attachment, distress or execution put in force, without leave of the Tribunal against the estate or effects of the company, after the commencement of the winding up; or
(b) any sale held, without leave of the Tribunal of any of the properties or effects of the company, after such commencement, shall be void.

(2) Nothing in this section shall apply to any proceedings for the recovery of any tax or impost or any dues payable to the Government.

Jyoti Prasad Singh vs Patmohana Collieries Ltd. on 24 November, 1930

Equivalent citations: AIR 1931 Cal 569

Landmark Judegement:

1.This appeal is by the decree-holder against an order of the Additional Subordinate Judge of Asansol, dated 15th December 1928, staying the execution of a decree. The Patmohana Collieries Ltd. went into voluntary liquidation and appointed Mr. Charles Ernest Walker, Mr. Benjamin Stanley, and Edwin John Carter liquidators in September 1927. The appellant had obtained a decree against the company in 1924, and in 1928, on his application, certain immovable properties belonging to the company, were attached.

On 17th November 1928, the liquidators filed an application before the Additional Subordinate Judge of Asansol for stay of execution of the decree and for vacating the order of attachment and the sale proclamation that had been published in connexion thereof. The learned Subordinate Judge, by his order dated 15th December 1928, dismissed the execution proceedings. The decree-holder appeals to this Court and it is contended on his behalf that the order of the Court below is without jurisdiction. The learned Subordinate Judge is of opinion that the assets of the company

Section 207, Companies Act so he had no jurisdiction to continue the execution, and the decree-holder was not entitled to execute the decree against the assets of the company and to realize the full amount to the detriment of the other creditors. It is argued that the learned Subordinate Judge had no jurisdiction to pass an order like the one with which we are now dealing. We think that this contention is correct.

2. Under the companies act the winding up of a company may be attested in three ways: (1) by the Court, (2) by voluntary liquidation, (3) subject to the supervision of the Court. The provisions relating to these three modes of liquidation are given in the Act under separate heads. In the case of winding-up by the Court as per section 171 ,provides that 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.

3. Under Section 222 in the case of winding-up under the supervision of the Court, it is provided that when any company is being wound up by or subject to the supervision of the Court, any attachment, distress or execution put in force without leave of the Court against the estate or effects of the company after the commencement of the winding up shall be void. No such corresponding provision is to be found under the sub-head, “voluntary winding-up.”

As per section 207, Clause (1), under that head, lays down that the assets of the company shall be applied in satisfaction of its liabilities pari passu. The learned Subordinate Judge thinks that because of this statutory provision that the assets of the company in voluntary liquidation must be distributed proportionately, he has no power to continue the execution in the ordinary way. The question is not exactly what ” the Court” can do when the company has gone into voluntary liquidation, but the question is as to whether the learned Subordinate Judge has the power to make the order he has made.

The Court” has been defined in Section 2(3) of the Act as meaning the Court having jurisdiction under the Act. So that all orders to be passed under the Act must be passed by the Court which has jurisdiction under the Act and that is the High Court; and it is clear that the Court of the Subordinate Judge, Asansol, executing the decree is not a Court which had jurisdiction under

the Companies Act 1913. The provision that the assets of the company in voluntary liquidation shall be applied in satisfaction of its liabilities is intended for the guidance of the private liquidator. The legislature did not like to leave him with an unlimited power so as to enable him to give unfair or fraudulent preference to a particular creditor. No such procedure is to be found in the case of liquidation by the Court or liquidation under the supervision of the Court, where “the Court” is the proper authority to order distribution of the assets in such proportion as it thinks proper. If the liquidator is confronted with a decree which has to be satisfied out of the assets of the company before distribution of the assets among the creditors, the proper procedure is to approach the Court, meaning a Court having jurisdiction under the Act, under  for proper direction.

4. This point came up for consideration in Surajbhan v. Boot & Equipment Factory, Agra [1916]38 All. 407, where under similar circumstances the execution was being proceeded with in the Court of the Subordinate Judge. The company having gone into private liquidation the liquidators applied to have the execution stayed by the Subordinate Judge who refused to stay execution.

 Section 207,Companies Act is no bar by itself to the progress of execution unless and until an order has been obtained from a Court having jurisdiction under the Companies Act either for winding up or for stay of proceedings.

5. A similar view was expressed in Oudh in the National Bank of Upper India Limited v. Sheo Mangal Bajpai A.I.R. 1924 Oudh 406 where it was held by the Judicial Commissioner that a voluntary liquidation cannot have the effect ipso facto of putting an end to an attachment already in force under a decree passed prior to liquidation. The law in England is not different. See Halsbury, Vol. 5, para. 1006:

The passing of resolutions for voluntary winding up does not like an order for winding up or under supervision of the Court, stay any proceedings or invalidate executions or distresses or prevent actions or other proceedings being brought or continued against the company without the leave of the Court. On application however the Court has jurisdiction to stay any action, proceeding, attachment, distress or execution against the company or its estate or effects upon terms as it thinks fit.

6. Reported decisions upon this point are few because the wording of the section is so clear that little doubt can exist with regard to the power of the executing Court; but a contrary view was taken in Bank of Upper India Limited v. Shiv Ram A.I.R. 1930 Lah. 299 decided by a single Judge of the Lahore High Court in which it appears that the previous decisions were not cited.

7. Mr. Mitter for the respondent has argued that there is no apparent distinction between the law relating to winding up by the Court, or under the supervision of the Court and voluntary liquidation. This cannot be correct because in. a case of voluntary liquidation there is no provision in the

Act similar to Sections 171 & 232 relating to liquidation by the Court or by the supervision of the Court. In Currie v. Consolidated Kent Collieries Corporation Limited [1906] 1 K.B. 134 an action was brought against a company in voluntary liquidation for money alleged to be payable to the plaintiff in respect of services rendered by him to the company. The liquidators denied any liability and applied to the Court for stay of proceedings in the action. The application was refused on the ground that the liability of the company is a question which was prima facie properly determinable in the ordinary way by an action. In delivering the judgment of the Court Collins, M. E. observed:

It appears to me that the counsel for the liquidator sought in argument to put the case of a claim made against the company, where the company is in voluntary liquidation, on precisely the same footing as that of one made where the company is being compulsorily wound up which is what the legislature appears to have deliberately abstained from doing.

8. Mr. Mitter further argues that an executing Court has concurrent jurisdiction with the Court under the Companies Act. There is no authority for this proposition and it must be rejected. He then refers to the English Act and argues that under the English law the executing Court is the proper Court to pass orders under section 177, Companies act 1908, corresponding to Section 207, Companies Act. This contention also is untenable.Section 140 of the English Act dealing with a case arising out of proceedings relating to winding-up of a company by the Court, says:

Where any action or proceeding against a company is pending in the High Court the company or any creditor may apply to that Court for the stay of proceedings in that Court; but where any other action or proceeding is pending against a company in any other Court it must apply to the Court having jurisdiction to wind up the company to restrain further proceedings in the action or proceeding.

9. There is no corresponding section in the Indian Act, but the rule must be the same here.

Conclusion: Taking into consideration the provisions of Companies Act, 1956, the Companies (Transfer of Pending Proceedings) Rules, 2016 and the provisions of IBC, 2016, we conclude the following: Possibility of IBC filing at various stages of winding up process is as follows: If application is served to the respondent company and / or pending before the High Court and no Order has been passed as on the date – Application under IBC, 2016 can be filed with NCLT without any leave from the High Court If a winding up order has been passed – Application under IBC, 2016 can be filed with NCLT with prior leave from the respective High Court There is no nexus between transition rules, and the stay arising due to sec 446 of the Companies Act 1956 In our view, nothing should be blocking an entity to file an application for resolution of a company for which winding up proceedings has been initiated. Even in case where order has been passed in this regard, seeking leave from the Court is a matter of protocol only. This should not be a stumbling block. Assuming OL has been appointed, and a creditor goes to NCLT seeking resolution, and therefore, goes to court for seeking leave, there is no reason why the court should not grant leave.

Reference

http://www.mca.gov.in/Ministry/pdf/CompaniesTransferofPending_08122016.pdfhttps://indiankanoon.org/doc/275545/

https://indiankanoon.org/doc/1719381

https://indiankanoon.org/doc/1753977/

https://indiankanoon.org/doc/12453563/

http://nclt.gov.in/Publication/Principal_Bench/2017/Others/AMR%20Infrastructure%20Ltd.%20(Nikhil%20Mehta).pdf

http://nclt.gov.in/Publication/Chennai_Bench/2017/Others/vasan%20health%20care%20(2).pdf

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