1. ' SAEEDUZZAMAN SIDDIQUI, J.--The above appeal through leave of this Court is filed by the appellants to call in question the order of Lahore High Court, dismissing I.C.A. No,3 of 1981, filed by the appellant to challenge the order of Company Judge, dated 28-2-1981, granting the application of respondent No,6 (Ch. Muhammad Aslam) under section 183 (5) of Companies Act in the winding up proceedings (C.O. 67 of 1980). The leave granting order in the case reads as follows:-- "Leave to appeal has been sought by the petitioners against the dismissal of the Intra-Court Appeal filed by Begum Sultana (now dead and represented by her legal heirs) by the Lahore High Court.
2. ' Petitioner Begum Anwar Sultana (now dead and represented by her legal heirs) submitted an application on 8-7-1980 for winding up of the Company and appointment of a Liquidator.
3. Consequently, a Liquidator was appointed on 26-(?)-1980 for the purpose. The Income Tax Recovery Officer initiated recovery proceedings against Messrs A.B.M. Associates, respondents herein, as a result of which proclamation was made in the Press on 2nd April, 1980 for the sale of Muslim Ginning Factory which fell into the share of Begum Anwar Sultana and on 15-9-1980 tenders were invited for the sale of the said factory. Two persons offered their tenders out of whom one was an old lessee of the concern and the other was his son i,e, respondent No,6 herein and ultimately, the said factory worth Rs,70 lacs was sold away in favour of the respondent No,6 only for a sale consideration of Rs,10 lacs. Begum Anwar Sultana moved a petition for stopping the Tax Recovery proceedings and the respondent No, 6 also filed an application claiming the protection of the sale of the factory in his favour by the Tax Recovery Officer, under the Companies Act. The stay application of the petitioner was rejected on 16th June, 1980.
4. On 26-11-1980, the learned Judge seized by the winding up matter, appointed the Provisional Liquidator and directed him to take charge of all the assets of the factory with an immediate effect.
5. Respondent No,6 moved an application under section 183(5) of the Companies Act for quashment of the said notice on the plea that the assets of the Muslim Ginning Factory no more belong to A.B.M. Associates Limited as he has lawfully purchased it. Begum Anwar Sultana also filed application for setting aside the sale of the said factory in favour of the respondent No,6. A learned Single Judge who heard both the matters accepted the application of respondent No,6 and rejected that of the petitioner. The petitioner then filed Intra-Court Appeal in the Lahore High Court which was also dismissed by a Division Bench, vide impugned judgment.
6. ' After hearing the learned counsel for the petitioners, we consider it a fit case for the grant of leave to appeal to examine whether the learned High Court has correctly adjudicated the matter involved in this petition.
7. ' Security is Rs, 5,000.
8. ' Limited stay already granted on 12th February, 1986 is to continue. Appeal is to be prepared on the present record with direction to the parties to add necessary documents, if any."
9. ' Mst. Begum Anwar Sultana (deceased), predecessor-in-title of appellants and a Director and shareholder of Company, M/s. ABM Associated Ltd., Faisalabad (hereinafter to be referred as 'the Company'only) filed Petition No, C.O. 67 of 1980 before the Lahore High Court on 8-7-1980 for winding up of the Company under section 162 of the Companies Act, 1913 (hereinafter to be referred as 'the Act' only). Before presentation of the above winding up petition, the Tax Recovery Officer, Central Zone, Lahore, had commenced proceedings against the Company for recovery of the outstanding demand of income-tax and attached Muslim Ginning Factory, Tandlianwala, (hereinafter to be referred as 'the Factory' only) one of the properties belonging to the Company, on 25-3-1980. The Tax Recovery Officer issued proclamation for sale of the Factory which was published in 'Pakistan Times' and the `Mashriq'; on 27-3-1980 and 2-4-1980, respectively. The proceedings for sale of the Factory were, however, stayed by the High Court of Lahore in a writ petition filed, by one Noor Muhammad son of Kaman which was later on withdrawn. The Tax Recovery Officer, thereafter, issued another publication in 'Pakistan Times' and the `Mushriq' on 17- 9-1980, inviting tender for sale of the Factory up to 5-10-1980. Respondent No,6 offered a bid of Rs, 10 lacs for the Factory in response to the above tender notice which was found highest and upon its acceptance/confirmation on 10-11-1980, he deposited the bid amount in Government Treasury on 25-11-1980, on which date the possession of the Factory was handed over to him. It is an admitted position in the case that although winding up petition was filed in the Court on 8-7-1980, no application was made to the learned Company Judge to stop the sale of the Factory by the Tax Recovery Officer. However, on 26-11-1980, the learned Company Judge, upon hearing of the winding up petition appointed a Provisional Liquidator and directed him to take charge of the properties of the Company. The Provisional Liquidator, accordingly, served notice on respondent No,6 for taking over possession of the Factory which was resisted and respondent No,6 filed Application (C.M.
10. No,455-L-80) before the Company Judge for quashment of the notice issued by the Provisional Liquidator. The appellants' predecessor, Mst. Begum Anwar Sultana, also filed Application (C.M. No, 465-L-80) before the learned Company Judge praying for setting aside of the auction sale by the Tax Recovery Officer in favour of respondent No,6. The learned Company Judge heard both the Applications (C.M.No, 455-L80 and C.M.No, 465-L-80) together and by his order dated 282-1981, dismissed the application of Begum Anwar Sultana and allowed the application of respondent No,6, upholding the auction sale by the Tax Recovery Officer. Mst. Begum Anwar Sultana, challenged the order of Company Judge before the Lahore High Court in I.C.A. No,3 of 1981 but without any success, giving rise to the above appeal through leave of this Court.
11. ' The learned counsel for the appellants has raised two-fold contentions before us in support of the above appeal. It is firstly contended that the sale of the Factory by the Tax Recovery Officer, in favour of respondent No,6 was fraudulent and collusive as the Factory worth Rs,60 lacs was sold to respondent No,6 for a petty amount of Rs,10 lacs. This contention was examined at length by the learned Company Judge and he repelled the same as without any substance. The learned Judges of the Division Bench once again examined this contention in the Intra-Court Appeal and rejected it as follows: "Learned counsel for the appellant lastly argued that the sale in dispute was collusive and fraudulent. His precise objection was that the property worth Rs,70 lacs was sold for 10 lacs only and that the sale was made in favour of a person who was already in possession of the factory, in question as a lessee and the sale in his favour was, therefore, made collusively. This objection is devoid of any substance. Undeniable position is that before the sale in question was made proclamations were published twice in daily "Pakistan Times" and "Mashriq".
12. ' As regards the price, it has not been shown that any other person offered a bid higher than Rs, 10 lacs. During the hearing of the appeal, learned counsel for the Income Tax Department placed on record photo copy of a letter purported to have been written by the Secretary of the Company to the Tax Recovery Officer on 12-8-1979 stating that after the best efforts, Muslim Ginning Factory can be sold for Rs,8,25,000. Tax Recovery Officer allowed the Company to sell the factory in question for the said amount. This letter also negates the allegation that the factory in question was sold for a lesser price. In these circumstances, finding of the learned Single Judge that the sale was not fraudulent is not open to any exception."
13. The above conclusions of the learned Judges of the High Court do not suffer from any legal or factual infirmity so as to call for an interference. We, accordingly, overrule the first contention of the appellants.
14. ' The second contention of the learned counsel for the appellants is that the sale by auction of the property of the Company in liquidation after the presentation of the petition for winding up was void and as such the learned Company Judge as well as the learned Judges of the Division Bench of the High Court should have annulled the sale in favour of respondent No,6. In support of the above contentions reliance is placed on sections 168 and 171 of the Act.
15. ' The learned counsel for the respondents on the other hand, contended that the proceeding for recovery of income-tax dues against the Company having commenced much before the presentation of winding up petition in the Court, the validity of the recovery proceedings could not be affected by initiation of winding up proceedings. It is also contended by the learned counsel for the respondents that after presentation of the winding up petition in Court, it was open to the learned Company Judge, to have stayed the proceedings before the Tax Recovery Officer and that having not done in the case, no permission was neccessary from the learned Company Judge for continuing the proceeding for sale of the Factory belonging to the Company by the Tax Recovery Officer in view of the provisions of section 171 of the Act. The learned counsel for the respondents also contended that the sale of the prc petty of the Company by the Tax Recovery Officer is otherwise protected under subsection (2) of section 232 of the Act. We have heard the learned counsel for the parties, at length, and our conclusions are as follows:-- Under section 168 of the Act the winding up of a Company is deemed to have commenced on the date of presentation of the petition for winding up in the Court. Section 227(2) of the Act provides that in case of winding up of a Company by or subject to supervision of Court, every disposition of the property of Company including actionable claims of the Company and every transfer of shares or alteration in the status of its members made after the commencement of the winding up shall, unless the Court otherwise orders, be void. It may be correct that under section 171 of the Act the permission of the Company Judge is obligatory for commencing or continuing a suit or other legal proceedings against the Company, only when an order of winding up of the Company has been made or a provisional liquidator of the Company has been appointed by the Court but section 171 of the Act is not to be read in C isolation. It is to be read with sections. 168, 169, 170, 227 and 232 of the Act. The cumulative effect of the above-mentioned sections of the Act is that the winding up of the Company shall be deemed to have commenced on the date of presentation of the petition for winding up in the Court (section 168). After presentation of the petition for winding up of the Company and before passing of an order of winding up, the Court may, in its discretion, restrain further proceedings in any suit or proceedings against the Company upon such terms and conditions as it thinks fit (section 170). As soon as the Court passes an order of winding up of the Company or appoints a provisional liquidator of the Company, neither any suit nor any other legal proceeding can be commenced or continued against the Company except with the leave of the Court and subject to such terms and conditions as the Court may deem fit to impose (section 171).
16. As a corollary, it can be stated that no permission from the Company Judge, is needed for commencing or continuing a suit or any other legal proceedings against a Company until such time, an order of winding up is made by the Court or a provisional liquidator of the Company is appointed. In the case of voluntary winding up or winding up by or subject to supervision of Court, any disposition of the property (including an actionable claim) of the Company, transfer of its shares or alteration in the status of its members, made between the dates of presentation of a petition of winding up in Court and the passing of the order of winding is void unless the Court orders otherwise (section 227). Similarly, in the case of winding up of a Company by or subject to the supervision of Court, any order of attachment, distress or execution put in force in respect of the assets of the Company and any sale of the properties C of the Company, without the leave of Court, after the date of presentation 'of the petition for winding in Court is void, except when such attachment, distress or sale takes place in proceedings by the Government (section 232). It is, therefore, quite clear that except for attachment, distress and sale which takes place in proceedings by the Government, all other orders for attachment, distress, sale or execution put in force, against the assets of the Company without the leave of the Court, after the commencement of winding up shall be void. These consequences will also equally follow in those cases where the proceedings were either commenced or continued, without leave of the Court, after the presentation of the petition for widing up, for the reasons that no order of winding up or appointment of provisional liquidator of the Company was made by the Court.
17. ' In the case before us, the proceedings for recovery of income-tax dues from the Company were started by the Government, much before the presentation of the petition for winding up of the Company and the sale had also taken place before the appointment of provisional liquidator by the Court. At the hearing of petition, we enquired from the learned counsel for the appellants, if an order of winding up of the Company has been made but he replied in the negative. Even in the written note submitted by the counsel for the appellants in the case, after we reserved judgment, in the case, there is no indication that an order of winding up of the Company has been made by the Court todate. Unless an order of winding up is made by the Court, the consequences provided in sections 227 and 232 of the Act do not follow. In these circumstances, the High Court rightly held that the sale of the Factory by the Government was unexceptionable. There is no merit in the appeal which is accordingly dismissed but there will be no order as to costs.