P M SEBASTIAN Vs. RUBBER BOARD

JUDGEMENT

(1.) THIS is an application under S. 518 (1) (b) of the companies Act brought by the Liquidator in a members voluntary winding up. What it seeks is a stay of the proceedings taken by the 1st respondent Rubber Board (the contesting respondent and hereinafter referred to as merely the respondent) under the provisions of the Revenue Recovery Act for the realisation of Rs. 6,57,367. 60 due from the company by way of cess levied under s. 12 of the Rubber Act.

(2.) THE facts set out in Para. 6 to 11 of the affidavit filed in support of this application are not controverted; nor is it the case of the respondent that the declaration of solvency made by the directors of the company (a copy of which has been marked as Ext. P-1) is in any respect false. That being so I think I ought to grant the stay if I have the power to do so. For, from the circumstances disclosed, I am satisfied that if the respondent is to bring the properties of the company to sale at this stage for the recovery of the dues instead of waiting for payment in the winding up, that would gravely prejudice the winding up.

(3.) THE question then is whether I have the power to order a stay. THE principal contention of the respondent is that I have not and it is said that S. 518 (1) (b) of the Act has no application. 'that section runs as follows: "518. (1) THE liquidator or any contributory or creditor may apply to the Court (a) xxxxxxxx (b) to exercise, as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the court might exercise if the company were being wound up by the Court. " Now, if this company were being wound up by the court could I have stayed the hands of the respondent? I have little doubt that I could under S. 446 (1) of the Act G. G. in Council v. S. S. Mills AIR. 1946 F. C. 16 has put it beyond doubt that the institution of proceedings under the revenue Recovery Act is a legal proceeding coming within the ambit of that section. No doubt what that section in terms provides for is an automatic stay. THE intervention of the Court is not necessary. All proceedings coming within its ambit are stayed by the statute itself unless leave of the Court is obtained for their commencement or continuance. But, if it is for the Court to decide whether or not a proceeding is to be commenced or continued, I suppose it must have the power to restrain a proceeding commenced or continued without its leave. That seems to be implied and that is how the statute has always been applied both in England and in India see Palmer's Company Precedents Part II, seventeenth Edition, pages 305 and 306 where it is said that where any person acts in violation of S. 231 (S. 446 of the Indian Act) application should be made to the Court to stay or restrain the proceeding; see also Nazir Ahmad v. Peoples Bank of N. I. AIR. 1942 Lahore 289 (F. B) where the following statement of the law by Solomon Judah with reference to the similar provision in S. 171 of the 1913 Act is quoted with approval: "whenever proceedings are commenced without leave the proper course for the liquidator is to apply to the Court for stay of the proceedings, and not to plead the omission to obtain leave as a bar to the further maintenance of the proceedings, as in practice, the section has always been worked out by applying to stay the proceedings. "