“The expression ‘legal proceeding’ has been the subject matter of consideration in the Federal Court decision in Governor-General in Council v. Shiromani Sugar Mills Ltd., AIR 1946 FC 16. In that decision Section 171 of the Indian Companies Act, 1913 came up for consideration. That Section reads as follows: “When a winding-up order has been made or a provisional liquidator has been appointed, no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the court, and subject to such terms as the court may impose.” The Federal Court held that the expression ‘other legal proceedings’ in Section 171 of the Indian Companies Act, 1913 comprises any proceeding initiated by the revenue for recovery of tax dues under the Indian Income Tax Act. There is no warrant for a narrow construction of such expression as meaning ‘proceedings only in courts’. The Federal Court specifically held that initiating and putting into force the collection of arrears of income tax as arrears of land revenue by authorities under the Income Tax Act would be a ‘legal proceeding’.”
– Hon’ble Justice R.F. Nariman, Ludovico Sagrado v. Cirila Rosa, [Civil Appeal No. 8756 of 2016].