1. This application raises a question of some importance. In December last year the plaintiff filed a suit against Kanhaiyalal Lohawalla and the Rajputana Films Co. Ltd. It now appears that prior to the institution of the suit, that is to say, on 6th October 1938, an order was made at the instance of a creditor by the District Judge of Ajmere for the compulsory liquidation of the defendant company. The plaintiff states that at the time when the suit was instituted he was unaware of the order for compulsory liquidation, and accordingly he made no application to the Court having jurisdiction in the winding up proceedings for leave under Section 171, Companies Act, to sue the company. The liquidator now applies that the suit should be dismissed against the company as being incompetent on account of the plaintiff's failure to ask for and obtain leave to sue.
2. The position, when a suit has been instituted against a company after an order for its compulsory liquidation without the leave of the Court, was considered by me in In re Steel Construction Co. Ltd. (1936) 40 C.W.N. 312. In that case the winding up order had been made by this Court, and an application was made by the liquidator to restrain a suit subsequently instituted in the Court of the first Subordinate Judge of Comilla. It appears from the report that the suggestion was made that the application to restrain the proceedings in the Comilla suit should be adjourned in order to give the plaintiff an opportunity of regularizing his position by asking for and obtaining leave under Section 171. As to that I observed:
In my opinion it such application were made the Court would have no jurisdiction to grant it. As I read 8. 171 it means that leave to proceed with a pending legal proceeding can only be granted where that proceeding has been instituted prior to the winding up order. I do not consider that the Court has jurisdiction to give the plaintiff leave to continue a suit instituted without leave subsequent to the winding-up order.
3. It has been pointed out to me that the opposite view has been taken in the Allahabad High Court and in the Bombay High Court, though it seems that my view has commended itself to the Lahore High Court. There is clearly no authority binding on me which compels me to modify the opinion I expressed in In re Steel Construction Co. Ltd. (1936) 40 C.W.N. 312. On the authority of that case I feel constrained to accede to the liquidator's application. On the assumption that the plaintiff had no knowledge of the winding up order, my decision is undoubtedly productive of hardship. I suggested that a solution might be found if the plaintiff were to make an application to withdraw this suit with leave to institute a fresh suit on the same cause of action, and thereafter were to apply to the Court in which the company is being wound up for leave to commence fresh proceedings. That suggestion however did not commend itself to the plaintiff, and there may be very good reasons for this.
4. It has been urged that there is no rule which specifically empowers the Court to dismiss a suit on an interlocutory application in circumstances such as the present. That indeed must be conceded, but it is by no means uncommon for the Court to make order in interlocutory proceedings dismissing a suit, where it is clear that there is no jurisdiction to entertain it. In my opinion the Court has inherent jurisdiction to take such a course, and if the Court considers that at some stage or other it will be compelled, because of the absence of leave under Section 171, to dismiss a suit as against a defendant company, I cannot see that any harm is done by taking this course at the earliest opportunity. I have been referred to cases in England where it has been held that the Court will not stay proceedings where the company is a necessary party to a suit framed against it and other defendants. I will assume, though a perusal of the plaint does not convince me of this, that if the company is dismissed from the suit, the Court cannot grant relief against the other defendant. However, I do not think that this is a consideration which ought to influence me in view of my previous decision. In these circumstances the suit must be dismissed as against the company with costs, including the costs of this application. At the same time if the liquidator is willing to entertain the company's claim, nothing that I have said should affect his decision, whether, if the main claim is maintainable, the plaintiff should be allowed to add to it any of the costs which he has incurred in respect of these proceedings.