Date of commencement of winding-up by Court (Section 441):

Where, before the presentation of a petition for the winding-up of a company by the Court, a resolution has been passed by the company for voluntary winding-up, the winding- up of the company shall be deemed to have commenced at the time the resolution was passed. Unless the Court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding- up shall be deemed to have been validly taken. In any other case, the winding- up of the company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding-up.

This date is important for several reasons. Some of the immediate effects are that the Official Liquidator becomes the liquidator of the company (Section 449). A statement as to the affairs of the company has to be submitted to him and he has to report thereon to the Court (Section 454 and 455). The winding-up order constitutes a notice of discharge to the officers and employees of the company except when the business of the company is continued [Section 445(3)]. The Court has to communicate winding- up order forthwith to the Official Liquidator and the Registrar (Section 444).

Within 30 days from the date of the making of a winding- up order, a certified copy of the order must be filed with the Registrar by the petitioner and the company [Section 445(1)]. In computing this period of 30 days, the time required for obtaining a certified copy of the order is to be excluded. Then the Registrar shall make a minute thereof of in his book relating to the company and shall notify in the Official Gazette that a winding- up order has been made.

When the winding-up order has been made or the Official Liquidator has been appointed as provisional liquidator no suit or other legal proceeding can be commenced or if pending at the date of the order, shall be proceeded with against the company except by leave of the Court and subject to terms imposed by it [Section 445 (1)]. The expression: “or other legal proceeding”, in Section 446 does not mean a legal proceeding analogous to a suit (Shaikh Mansoor vs. Government A.I.R. 1952 T.C. 14). An award under the Industrial Disputes Act is not a legal proceeding (Price vs. Chandrashekharan A.I.R. 1951 Mad 987). Leave of Court will be granted where a shareholder applies for rescission or the suit is for specific performance.

A regards the “Leave of the Court‟ appearing in Section 446 (1) the Supreme Court decision is that the Court has the jurisdiction to grant leave to proceed with a suit or other proceedings against a company in liquidation, even if such leave was not obtained for the commencement of the suit or proceeding. ” The proceedings may at best be regarded as instituted on the date on which the leave was obtained from the Court” [Hansidhar Shankarlal vs. Mohammed Ibrahim (1971) Comp. Cas. 21]. But the Court does not grant this leave as a matter of course. The facts and circumstances of each case have to be probed into by the Court. The discretion of the Court must be exercised judicially but not capriciously or arbitrarily. Usually, leave is granted where outsiders get linked up with some dispute with the company and the Court thinks it fit that the dispute should be settled in an action by the ordinary Civil Court. It has  been held that against an order refusing leave to institute a suit, an appeal lies under Section483 (Balakrishan vs. Indian Association Chemical Industries Ltd. A.I.R. (1959) Bom. 41

Suppose, RC, a labourer of GD & Co. Ltd. which is in liquidation, prays for permission of the Court to implead the Official Liquidators as the party respondent in a claim petition made before the Labour Court subsequent to the winding- up order. Should the leave be granted in this case? It has been held [R. Chidambaranathan vs. Gannon Dunkerly& Co. (Madras) Ltd. (1973) 43, Comp. Cas. 500] that the prayer for leave under Section 446 (1) was misconceived. In the event of such leave being granted, a flood gate of litigation would be opened before the Labour Court and every labourer would be filing petitions and drawing the Official Liquidator to
the Labour Courts for defending the case of the company. The purpose and the intention of the Act was that all such claims against the company which has been wound up would have to be filed before the Official Liquidator who was empowered to decide such claims. The petition was, therefore, dismissed. It has, however, been held that RC could withdraw the proceedings before the labour Court and file the same before the Official Liquidator for appropriate reliefs.

It has been held that the following proceedings are not affected by [Section 446]: (a) a private sale outside the Court by public auction by a mortgagees [Ranganathan vs. Govt. or Madras 1955, S.C. 604 ;]. (b) a defendants plea of set- off or counted claim in defence [Andhra paper Mills Co. Ltd. vs. Anand Bros. (1951) I.M.L.T. 340]: (c) proceeding by persons out of jurisdiction on a foreign country [Re. Voclain (Foreign) Ltd. (1932) 2, Ch. 196]; (d) a claim petition by a third party where a company in winding-up has attached the property of a judgement debtor [Seiva Lyer vs. Mathura Mercantile bank (1962) 32, Comp Cas. 47] .

It may be noted that the proceedings for assessing a company to income tax under the Income tax Act are not legal proceedings and hence are not affected by Section 446. Until the I.T.O. makes an assessment order, he is not a creditor, and as such can not prove his claim in the winding-up [Tilk Ram and Sons (Private) Ltd. vs. Commissioner of Income- tax (1964) 4 Comp. Cas. 151]. However, it has been held in [Rele vs. Deshpande, (1967) Comp, L.J. 210] that the re-assessment proceedings by the Income-tax authorities cannot be commenced or continued without the leave of the Court.

It may further be noted that if a secured creditor realises his security without intervention of the Court, he will be outside the jurisdiction of the Court in the winding up. But where the secured creditor invokes the aid of the Court and takes any legal proceeding against the company within the meaning of Section 446, it will be necessary for him to seek leave of the Court [Ranganathan vs. Government of Madras, Supra].

In the winding-up, the Court which is winding up the company shall have the jurisdiction to entertain or dispose of; (i) any suit or proceeding by or against the company; (ii) any claim made by or against the company including claims by or against any of its branches in India; (iii) any application made under Sections 391 by or in respect of the company; (iv) any question of priorities or any other question of law or fact which may relate to or arise in the course of the winding-up of the company [Section 446 (2)]. Any such suit or proceeding pending in any other Court may be transferred to or disposed of by the Court in which the winding-up proceedings are taken [Section 446 (3)]. The provisions contained in sub-section (1) or (3) as aforementioned, shall not be applicable to any proceeding in appeal either before the Supreme Court or a High Court [Section 446 (4)].

Section 446 is designed to safeguard the assets of the company in winding-up against wasteful or expensive litigation in regard to matters capable of being determined expeditiously and cheaply by the winding-up Court itself “An even- handed justice requires that the Court should have power to intervene at an early stage for the protection of the assets, and this power is given by Section 446.”

The winding- up order operates in favour of all the creditors and contributories of the company as if it had been made on the joint petition of a creditor and of a contributory [Section 477].