Permod Kohli, J.
1. The present application has been presented by the Haryana Financial Corporation for setting aside the attachment and sale of the land measuring 14 kanals and 4 marlas comprising khewat No. 94/92, khatoni No. 106, khasra No. 22, rec. No. 2 and killa Nos. 18 and 23 at village Bibipur, tehsil and district, Jind, made on October 8, 2002, by invoking the jurisdiction of this Court under Section 446 read with Section 441 of the Companies Act, 1956.
2. Briefly stated the facts leading to the filing of present petition are that respondent No. 1-company, namely, M/s. Dev Papers P. Ltd. (in liquidation) secured a loan of Rs. 30 lakhs from the applicant for setting up of an industry. The company executed a mortgage deed dated July 23, 1986, mortgaging its land, building, plant and machinery of the unit in favour of the applicant-Corporation. The total mortgage land was measuring 55 kanals 2 marlas comprising khewat No. 65, khatoni No. 70, killa Nos. 6/3-11, 14/5-7, 15/8-0, 16/8-0, 17/8-0, 18/6-16, 23/7-8, 24/8-0 (6.88 acres, i.e., 2755 sq. mtrs) at village Bibipur, tehsil and district, Jind. The mortgage land also include khewat No. 94/92, khatoni No. 106, khasra No. 22. On failure of the company to repay the loan, the Corporation recalled the loan. It is stated that besides the Haryana Financial Corporation, the company had also secured loan from HSIDC amounting to Rs. 76 lakhs and pan passu charge was made on the assets of the company in favour of the applicant as well as HSIDC.
3. The company filed a reference before the BIFR under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. The Board for Industrial and Financial Reconstruction (BIFR) vide its order dated March 8, 1994, declared the company as a sick company. Since the company could not have been rehabilitated in those proceedings, the BIFR vide its order dated May 15, 1999, recommended the winding up of the company to this Court being the competent court. On receipt of the reference, the company judge vide its order dated April 6, 2000, issued notice to the company for May 11, 2000. The applicant-Corporation filed a Company Application No. 120 of 2000 for keeping the Corporation outside the winding up and for permission to sell the property of the company under Section 29 of the State Financial Corporations Act. During the pendency of the winding up proceedings, Corporation was permitted to sell the assets of the company vide order dated May 24, 2006, by associating with the official liquidator and other secured creditors but the sale could only be confirmed under the orders of this Court.
4. In the year 1999, respondent No. 4 filed a Suit No. 112 of 1999 against the company in the Court of the Civil Judge (Senior Division), Panvel, for recovery of an amount of Rs. 1,34,628. The suit was decreed ex parte by the said court vide its judgment and decree dated November 30, 2000. Respondent No. 4 filed an Execution Application No. 28 of September 19, 2001, for execution of the ex parte decree. In the execution of the aforesaid decree, land comprising khewat No. 94/92, khatoni No. 106, khasra No. 22 situated in village Bibipur, tehsil and district, Jind, was attached and thereafter land of rec. No. 22, killa Nos. 18 and 23, measuring 14 kanals 4 marlas was sold in favour of respondent No. 5 for a sum of Rs. 2,60,000 on October 8, 2002, to satisfy the decree. The applicant-Corporation filed the application for setting aside the sale in favour of respondent No. 5 before the civil judge which was still pending at the time of filing of the present application. The applicant has accordingly filed the present application invoking the jurisdiction of this Court under Section 446 read with Section 441(2) of the Companies Act, 1956, for setting aside the sale having been made in respect of the property of the company in liquidation during the pendency of the winding up proceedings. It is stated that though the company was ordered to be wound up on July 24, 2003, however, by virtue of Section 441(2), the winding up proceedings shall be deemed to commence at the time of presentation of the petition. It is stated in the present case that recommendation for winding up of the company were made by the BIFR on May 15, 1999 and notice was issued to the company vide order dated April 6, 2000 and thus, the date of the recommendation or at least the date when notice were issued should be deemed to be the commencement of the winding up proceedings. It is accordingly argued that the proceedings before the civil court could not have continued beyond April 6, 2000, nor decree could have been executed without the leave of this Court under Section 446. It is further contended that the decree having been passed and executed during the pendency of the winding up proceedings without the leave of the court is liable to be set aside. This application is, however, resisted by the contesting respondent No. 5 who is the purchaser of the land in execution of the sale made by the civil court on the following amongst other grounds:
(i) order of the civil court is not a void but only voidable at the application of the official liquidator as is the requirement of Section 446 and in the present case, the official liquidator has not filed any such application challenging the sale.
(ii) no order of winding up had been passed at the time of passing of the decree dated November 30, 2000. It is stated that winding up order was passed on July 24, 2003, much after the passing of decree when the proceedings stood concluded and even the decree was executed and satisfied by sale of the land on October 8, 2002, i.e., prior to the passing of winding up order and hence, the provisions of Section 446 are not attracted in the present case.
(iii) Section 441(2) will not apply in the present case as the order of winding up cannot be deemed to have commenced on the date of issuance of notice but only when the court formulates an opinion that the circumstances under Section 424G exist.
5. I have heard learned Counsel for the parties at length. From the record, it appears that the BIFR recommended the winding up on May 15, 1999. On receipt of the recommendations, notice was directed to be issued on April 6, 2000, for May11, 2000. The winding up order came to be passed on July 24, 2003, when the official liquidator was appointed as liquidator for the company. The applicant-Corporation was allowed to sell the mortgaged property on May 24, 2006. Respondent No. 4 filed a civil suit in the year 1999 which was decreed on November 30, 2000. The execution petition was filed on September 19, 2001 and the land was sold on October 8, 2002. From the above dates, it is evident that admittedly the decree was passed after the recommendations made by the BIFR and issuance of notice to the company on April 6, 2000. Thus, passing of decree and all subsequent proceedings in the civil suit including the sale of the property was held after the recommendations of the BIFR and issuance of notice by this Court though before the passing of the order of winding up and appointment of the official liquidator on July 24, 2003.
6. The crucial issue thus is whether Section 441(2) is attracted to bring the sale within the purview of Section 446 by reckoning the date of commencement of winding up proceedings from the recommendations of the BIFR on May 15,1999, or the date of issuance of notice for the winding up on April 6, 2000 or the winding up in the present case will commence on passing of the winding up order on July 24, 2003, on formulation of an opinion by this Court to accept the recommendations of the BIFR.
7. Section 433 specifies the circumstances in which the company may be wound up by the court, which reads as under:
Section 433. Circumstances in which company may be wound up by the Tribunal.-A company may be wound up by the Tribunal:
(a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal ;
(b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting ;
(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year ;
(d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two ;
(e) if the company is unable to pay its debts ;
(f) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up ;
(g) if the company has made a default in filing with the Registrar its balance-sheet and profit and loss account or annual return for any five consecutive financial years ;
(h) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign states, public order, decency or morality ;
(i) if the Tribunal is of the opinion that the company should be wound up after the circumstances specified in Section 424G:
Provided that the Tribunal shall make an order for winding up of a company under Clause (h) on application made by the Central Government or a State Government.
8. Section 441 deals with the commencement of the winding up and reads as under:
Section 441. Commencement of winding up by Tribunal.-(1) Where, before the presentation of a petition for the winding up of a company by the Tribunal, 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 of passing of the resolution, and unless the Tribunal, 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.
(2) In any other case, the winding up of a company by the Tribunal shall be deemed to commence at the time of the presentation of the petition for the winding up.
9. Section 446 deals with the stay of the suits, etc., which reads as under:
Section 446. Suits stayed on winding up order.-(1) When a winding up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of winding up order, shall be proceeded with, against the company, except by leave of the court (Tribunal) and subject to such terms as the court (Tribunal) may impose.
(2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of:
(a) any suit or proceeding by or against the company ;
(b) any claim made by or against the company (including claims by or against any of its branches in India) ;
(c) any application made under Section 391 by or in respect of the company;
(d) any question of priorities, or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company ;
whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.
10. Section 537 deals with the avoidance of attachments, execution, etc., in winding up and reads as under:
Section 537. Avoidance of certain attachments, executions, etc., in winding up by Tribunal.-(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 applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government.
11. Sub-section (1) of Section 446 creates an embargo for commencement of the suit or legal proceedings after the passing of the winding up order or the appointment of the official liquidator as the provisional liquidator and even prohibits the continuance of such proceedings against the company-in-liquidation except with the leave of the court. Sub-section (2) empowers the company court to entertain or dispose of any suit or proceeding by or against the company, any claim made by or against the company, any application under Section 391 by or in respect of the company and all questions of priorities relating to or arise in the course of winding up of the company-in-liquidation whether instituted before or after the commencement of the passing of winding up order. From the plain reading of this section, it appears that the prohibition contemplated by Section 441 is attracted on passing of the winding up order or appointment of the provisional liquidator for institution of the fresh proceedings by or against the company or continuance of the proceedings pending at the date of winding up order without the leave of court. However, Sub-section (1) of Section 441 provides that where before presentation of the petition for the winding up of a company by the Tribunal, a resolution has been passed by the company for voluntary winding up, winding up proceedings shall be deemed to have commenced on the date of passing of resolution unless the Tribunal/court directs otherwise on proof of fraud or mistake. This deals with the winding up of the company under Clause (a) of Section 433. Sub-section (2) of Section 441, however, provides that in all other cases, the winding up of a company by the Tribunal shall be deemed to commence at the time of the presentation of the petition for winding up. This apparently applies to all clauses from (b) to (i) of Section 433. No distinction has been made between Clause (i) and other clauses between (b) to (h) of Section 433. According to learned Counsel for respondent No. 5, under Clause (i) of Section 433, the Tribunal has to formulate an opinion that the company should be wound up under the circumstances specified in Section 424G. To further explain it is argued that no such opinion is required to be formulated in so far as the Clauses (b) to (h) are concerned and mere allegations are sufficient whereas mere recommendations of the BIFR is not enough to act under Clause (i) unless an opinion is formulated by the company court regarding the existence of the circumstances specified in Section 424G. This contention of learned Counsel for the respondent is totally fallacious and misconceived. The present proceedings for winding up have not been initiated under Part VI-A as inserted by the Companies (Second Amendment) Act, 2002, which deals with the revival and rehabilitation of sick industrial companies and thus, the provisions of Section 424G are not attracted at all. As a matter of fact Clause (i) of Section 433 has no application in the present case. The present proceedings have been initiated pursuant to the recommendations of the BIFR under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985. It may be relevant to refer to the said provisions:
20. Winding up of sick industrial company.-(1) Where the Board, after making inquiry under Section 16 and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of opinion that the sick industrial company is not likely to make its networth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court.
(2) The High Court, shall on the basis of the opinion of the Board, order winding up of the sick industrial company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956 (1 of 1956).
(3) For the purpose of winding up of the sick industrial company, the High Court may appoint any officer of the operating agency, if the operating agency gives its consent, as the liquidator of the sick industrial company and the officer so appointed shall for the purposes of the winding up of the sick industrial company be deemed to be, and have all the powers of, the official liquidator under the Companies Act, 1956 (1 of 1956).
(4) Notwithstanding anything contained in Sub-section (2) or Sub-section (3), the Board may cause to be sold the assets of the sick industrial company in such manner as it may deem fit and forward the sale proceeds to the High Court for orders for distribution in accordance with the provisions of Section 529A and other provisions of the Companies Act, 1956 (1 of 1956).
12. In the present case, undisputedly the BIFR has already formulated its opinion and recommended the winding up of the company to this Court. Sub-section (2) of Section 20 clearly provides that the High Court has to proceed on the basis of the opinion of the Board. This situation may fall under Clause (e) or at least Clause (f) of Section 433 of the Companies Act. Sub-section (2) of Section 441 of the Companies Act is clearly attracted. The recommendations were received by this Court from the BIFR after May 15, 1999 and acting on the recommendations, this Court issued the notice to the company on April 6, 2000. Thus, at least April 6, 2000, should be deemed to be the date of commencement of the winding up proceedings. The decree in the suit was passed on November 30, 2000, i.e., after the commencement of the winding up and all proceedings thereafter, i.e., execution and sale of the property have been conducted after the commencement of the winding up proceedings.
13. The proceedings in the suit have been continued after the commencement of the winding up proceedings and execution and sale of the property of the company-in-liquidation has been held during the pendency of the winding proceedings without the leave of the court. It is, however, contended on behalf of the respondents that the proceedings are not void ab initio but only voidable that too at the instance of the official liquidator and in the present case, the official liquidator has not moved this Court under Section 446, hence the application is not maintainable. To support his contention, the applicant has relied upon a judgment of the hon'ble apex court in the case of Harihar Nath v. State Bank of India : [2006] 131 Comp Cas 119 : [2006] 143 PLR 638, wherein the hon'ble Supreme Court while interpreting the provisions of Section 446 made the following observations (page 130):
It is now well-settled that if any winding up order is passed during the pendency of a suit against the company, and if the suit is continued without obtaining leave, in spite of that bar contained in Section 446(1), the decree passed is only voidable at the instance of the liquidator, and not void ab initio. In fact, where such decree has been passed against the company and others, the only person who can avoid the decree on the ground of non-compliance with Section 446(1) of the Act, is the official liquidator of the company and not the other defendants. A suit/proceeding filed against a company, prior to the order of its winding up, does not come to an end on the passing of an order of winding up. The order of winding up merely stays further proceedings in the suit/proceeding. The suit/proceeding becomes dormant. Various alternatives are possible when a suit gets so stayed. The plaintiff in the suit can move an application under Section 446(1) of the Act, and when leave is granted, proceed with the suit. If the leave is refused, the suit may be transferred to the company court for being tried and disposed of under Section 446 (2)(a) of the Act. The plaintiff may also file an application for transfer of the suit to the company court for disposal under Section 446(2)(a). Alternatively, the plaintiff may get the suit dismissed with liberty to make a claim under Section 446(2)(b) of the Act. Even if the suit is proceeded with, without obtaining leave of the company court, either not being aware of the order of winding up or ignoring the provisions of Section 446(1), the resultant decree will not be void, but only be voidable at the instance and option of the official liquidator of the company. It is also possible that the court passing the winding up order may at any time, on the application either of the liquidator or of any creditor or contributory, make an order staying the winding up either altogether or for a limited time on such terms and conditions as the court deems fit, under Section 466 of the Act. When the winding up is so stayed, a suit against the company (filed before the winding up order) which stood stayed under Section 446(1) could be proceeded with, even though leave had not been obtained to proceed with the suit. We have referred to these alternative possibilities to show that having regard to the nature of an application under Section 446(1) of the Act, it does not attract article 137.
14. From the reading of Section 446 and interpretation of the said section by the hon'ble apex court, it appears that the decree could only be made void by the official liquidator. It is not in dispute that the present application has been filed by the secured creditor and not the official liquidator. However, Section 537 of the Companies Act deals with the attachment, distress or execution without the leave of court against the estate or property of the company after the commencement of the winding up. Mere enforcing execution is impermissible under this section what to say of attachment or sale of such property without the leave of the court. Even if, it is assumed that Section 446 is not attracted in the present case, for want of action at the hands of the official liquidator, the attachment of the property and sale thereof in execution of the decree of the civil court without the leave of the court is rendered void by operation of Section 537 of the Companies Act, even though the decree may be valid.
15. In the totality of the circumstances and in the backdrop of the legal position, I allow this application setting aside the sale of land measuring 14 kanals 4 marlas comprising khewat No. 94/92, khatoni No. 106, khasra No. 22, rec. No. 2 and killa Nos. 18 and 23 at village Bibipur, tehsil and district, Jind and order that the property of the company-in-liquidation shall revert back to the company and form part of the estate of the company-in-liquidation.