Scope of Section 446 Companies Act, 1956

Principles governing staying of suit in pursuance of winding up proceedings

Companies Act, 1956 – Section 446 – Suits stayed on winding up order – Grant of leave – Scope The following has been held by the Supreme Court • Grant of leave of the Court is not a condition precedent for initiation of a civil action or the legal proceedings. It is because the Section does not expressly provide for annulment of a proceeding that is undertaken without the leave of the court. • The leave of the winding up court can be obtained even after initiation of the proceeding. • The seminal object behind engrafting of the said provision is to see that the interest of the Company is safeguarded so that it does not face deprivation of its right and claims are adjudicated without the knowledge of the Company court and further the court has a discretion to see whether leave should be granted and, if so, with what conditions or no condition. • The court may grant leave if it felt that the company should not enter into unnecessary litigation and incur avoidable expenditure. [Erach Boman Khavar vs. Tukaram Shridhar Bhat and Anr.] (SC – 12.12.2013)