' An application under section 162 of the Companies Act, 1913 was filed on 27-7-1980 for winding up of Ramay Idustries Ltd. On 1-10-1980 public notice was ordered to be issued and a Provisional Liquidator appointed. On 6-10- 980 United Bank Ltd. Filed a suit for recovery of Rs, 2 45,797 against the company and the Directors, before the Special Judge (Banking), Lahore. Public notices earlier ordered were actually published, on 9-11-1980 and 18-11-1980. United Bank Ltd. Submitted its written statement in the winding up proceedings on 11-12-1980. Order of winding up was passed and Official Liquidator appointed by the learned Company Judge on 6-5-1981. On the same day, on the application of the United Bank Ltd. (C. M. No, 457-L/80) permission was granted to proceed with its suit before the Special Judge (Banking) subject to the condition that "any execution against the property of the company shall be with the permission of this Court". Before the Special Judge (Banking) in the suit of the United Bank Ltd. Against the company earlier ordered to be wound up, the company was represented by a learned counsel, The counsel for the company accepted the liability in respect of the loan and denied liability for penal interest. In accordance with the statements of the learned counsel for the parties, the learned Special Judge (Banking) decreed the suit on the original loan with interest. The penal interest was, however, not allowed. This is vide order dated 5-10-1981.
2. It is submitted by the learned counsel for the United Bank Ltd. And of the company that the original loan was under a registered mortgage deed for a sum of Rs,1,25,000 and that the decreed amount comes to Rs, 2,11,417 in addition to the costs. After having obtained the decree, the United Bank Ltd. Has filed an application bearing No, C. M. 18-L/83 for permission to execute the decree in view of the condition imposed by the learned Company Judge allowing the applicant to proceed with the suit vide order dated 6-5-1981. This opplication had been filed on 25-1-1983.
3. In the course of hearing of this application it transpired that the company having been ordered to be liquidated and an Official Liquidator appointed, the Official Liquidator was nonetheless not impleaded as a party by the United Bank Ltd. In its suit against the company pending before the Special Judge (Banking) nor he himself had applied to be impleaded to defend the suit against the company, nor, was he heard. Therefore, the question arose as to whether the decree passed in the absence of the Official Liquidator should be permitted to be executed against the company?
4. Lengthy arguments were addressed by the learned counsel for the United Bank Ltd. Decree- holder, for the company under liquidation, and by the Official Liaquidator. The contention of the learned counsel for the decree-holder is obviously that the decree obtained in proceedings which were allowed by this Court to be concluded, should be allowed to be executed.
5. The contention of the learned counsel for the company as well as the Official Liquidator has been that the decree passed by the learned Special Judge (Banking) withoat impleading the Official Liquidator or him having been afforded an opportunity of defending the proceedings against the company which has already been ordered to be wound up, the decree is a nullity and, therefore, the question of permission for its execution does not arise. It was submitted by the learned counsel for the company that the fact that the company was represented by a counsel before the learned Special Judge (Banking) and had admitted the liability except to the extent of the penal interest, can have no effect because the company having been ordered to be wound up and Official Liquidator appointed, it was only the latter who could make any statement on behalf of the company or defend the suit against the company. Learned counsel for the company cited AIR 1962 All. 256 to show that under the Insolvency Law when a receiver has been appointed in insolvency proceeding, non-impleadment of, the insolvency Court was fatal and no decree passed in any proceeding in the absence of the insolvency Court, therefore, would be of any legal effect. It was submitted that the position of a Liquidator appointed for a company ordered to be liquidated is identical.
6. In reply the learned counsel for the United Bank Ltd. Has submitted that there is a fundamental difference between the provisions of Provincial Insolvency Act, 1920 and the Companies Act, 1913.
Under section 28 (2) of the Insolvency Act the whole of the property of the insolvent vests in the Court. This element has been clarified in the same case. "After the order of adjudication either the Court or the receiver as the case may be, becomes owner and the insolvent is divested of his rights with respect to the property under adjudication." Under section 178(2) of the Companies Act the Court is only the custodian of the property of the company and the ownership of the property of the company continues to vest in the company under winding up order. The company thus retains its entity to sue or to be sued even under winding up order. In the present case the Hon'ble Company Judge allowed the company to be sued.
7. Notwithstanding the distinction drawn, the fact of the matter remains that if a Court were to permit, in the presence of its appointee, proceedings to be continued and ultimately a decree is passed, it would be rather strange to deny recognition to the decree granted-unless miscarriage of justice had taken place. May be the party suing was not too careful to implead the Official Liquidator. But the permission to proceed with the suit .Was granted by the Court in the presence of the Official Liquidator who himself could have applied to the learned Judge granting permission to go and defend the suit against the company pending before the Special Judge (Banking). The loan of the decree-holder, United Bank Ltd. Was based on registered deed. It was admitted by the learned counsel for the company. Normal interest has been allowed per his agreement. Learned counsel for the company ha tenaciously opposed this application and there is no doubt that he had don his best before the learned Special Judge (Banking) too. Virtually a consent decree hasen passed, as nothing else could have been done on behalf of the company in the defence of the suit.
The Official Liquidator in the circumstances of the case even if had appeared to defend the suit could have hardly done any better. The loan was taken under deed by the company. Usual interest has been allowed. Therefore, there is no justification to withhold permission for execution of the decree well based on merits only for formality. The application is, therefore, allowed but there shall b no order as to costs.
8. Learned counsel for the company and the Official Liquidator submit that it will be open to them to take any valid legal objection regarding the priority or otherwise execution of the decree before the Executing Court. It is obviously so. Every party has a right to take all legal pleas available to them in all Courts. The application is disposed of in the above terms.