Official Liquidator Of M/S Mercara Curers Private Limited, Bangalore v. Karnataka state industrial investment and development Corporation Limited, Bangalore, rep. By its Dy. Manager
2009-10-27
D.V.SHYLENDRA KUMAR, L.NARAYANA SWAMY
body2009
DigiLaw.ai
Judgment :- 1. Even at the initial stages of this appeal, we did entertain a doubt as to the tenability of the appeal filed under Section 483 of the Companies Act, 1956 (for short, the Act), for the reason that the appeal was against the orders passed by the learned Company Judge functioning as a Company Court and the appellant being the Official Liquidator, who incidentally also happens to be the Official Liquidator attached to the Court when the Company Court is supervising the winding up proceedings of a Company which has been ordered to be wound up by the very Court. 2. In view of the position of the Official Liquidator, who is virtually a limb of the Company Court and the order that is questioned of the Company Court itself, we entertained as to whether the Official Liquidator, who Court itself, can turn around and question of the order passed by the Company. 3. On this aspect, we Deepak, learned Counsel for the Official has drawn our attention to the statutory of section 483 of the Act. This section of appeal as an intra-Court appeal against order passed by the learned company Judge in of winding up of a Company and the appeal Bench may be in terms of the rules statutory provisions governing intra-Court app Court in this case the High Court. 4. Mr. Deepak has also attention to the provisions of Section 457 the powers of the liquidator. Mr. Deepak that even while the Official Liquidator acts as Company Court, he also has the dual resp if representing the Company under liquidation, which though has been ordered to be wound up, nevertheless retains its independent and distinct identity as a legal person being a Company and having not yet gone out of existence and in such circumstances, if it is found that there is a need for filing an appeal against an order, having regard to the duty cast on the Official Liquidator to protect the Company which he represents, such an appeal can definitely be filed in terms of Section 483 of the Act, a substantive provision enabling any aggrieved person to file an appeal and therefore, the appeal is very much tenable. 5. Our attention is also drawn to the judgment of the Supreme Court in the case of SHANKARLAL AGGARWALA AND OTHERS Vs.
5. Our attention is also drawn to the judgment of the Supreme Court in the case of SHANKARLAL AGGARWALA AND OTHERS Vs. SHANKARLAL PODDAR AND OTHERS reported in AIR 1965 Supreme Court 507, to submit that the Supreme Court had occasion to examine the scope of the corresponding statutory provision under the erstwhile Indian Companies Act, 1913 and Section 202 of this Act corresponding to the present Section 483 of the Act. Learned Counsel also submits that in terms of this judgment, it has been recognised that the Official Liquidator has the power to file an appeal and maintain an appeal under Section 483 and provisions of Section 457 confer such a power on the Official Liquidator. 6. Sri Manjunath, learned Counsel appearing for the first respondent would point out that the Official Liquidator, assuming that he represents the Company has no independent existence and that the comes into picture only because of the statutory provisions and as a person who assists or helps the Company Court in supervising the winding up proceedings. 7. It is also pointed out that the Official Liquidator’ basic duty can only be to protect the interest of the community of creditors and the shareholders, as the object of any winding up proceedings is primarily to liquidate the Company, in the sense, to liquidate the assets of the Company ensuring an equitable distribution of the remaining assets of the Company. A Company which as recognised by the Court, is unable to carry on its affairs in a manner as proclaimed in its articles and memorandum and which is only required to be wound up and if so, unless the order sought to be appealed against is indicated to be an order detrimental to the interest of the community of creditors and shareholders, the appeal per se is not one which can be said to be tenable and at any rate at the instance of the Official Liquidator, for examination by this Court etc. 8. We find that while the statutory provisions of Section 483 no doubt, provides for an intra-Court appeal against any order passed during the winding up proceedings of a Company, that is only an enabling provision to maintain an appeal under certain circumstances and is not a provision with reference to the Official Liquidator or any other person for that matter.
We find that while the statutory provisions of Section 483 no doubt, provides for an intra-Court appeal against any order passed during the winding up proceedings of a Company, that is only an enabling provision to maintain an appeal under certain circumstances and is not a provision with reference to the Official Liquidator or any other person for that matter. However, Section 457 does indicate the powers of the Official Liquidator and though the Section is given the caption and reads as “Powers of the Official Liquidator”, if at all, it can be understood as the functions and duties of the Official Liquidator and not any power. After all the Official Liquidator comes on the scene only as an official attached to the Company Court for supervising the winding up proceedings of a Company, which is being done under the supervision of the Company Court. The Official Liquidator can never claim an independent status or identity, but for the recognition under the Act for the purpose of assisting the Company Court as is available in our legal system Courts, particularly Judges, who man the Courts do not function as administrators and winding up operation is essentially an administrative function for salvaging the assets of the Company for an equitable distribution amongst the creditors and shareholders. It is for this reason, the Companies Act has envisaged an independent official to the extent of carrying out the operations of gathering the assets and their equitable distribution albeit under the provisions of the Act. It is also significant to notice that Sub-section (2) of Section 457 which indicates that the Official Liquidator virtually acts as part of the Management, in place of the Board of Directors of a Company which is under liquidation and it is for the purpose of salvaging the assets of the Company as indicated in Sub-Section (1) and for achieving this in an efficient manner, the Official Liquidator as indicated in Sub-section (2) of Section 457 is brought on the scene and therefore, to the extent that Official Liquidator is required to function in a most efficient and proper manner is salvaging the assets of the Company for the benefit of the community of creditors and the shareholders and for equitable distribution.
The powers rather than duties and responsibilities are conferred and to this extent, one may infer an element of discretion in the Official Liquidator to file and maintain an appeal under Section 483, if it is found that an order passed during the winding up proceeding is detrimental to the interest of the community of creditors and shareholders. 9. We are of the opinion that this is an essential requirement of all appeals at the instance of an Official Liquidator and though Sri Deepak, learned Standing Counsel for the Official Liquidator has submitted that it has never been a practice to seek permission or sanction from the Court in every case of filing an appeal by the Official Liquidator, it can be deemed to be sanctioned, the moment the Court takes note of the appeal, recognizing the filing of the appeal and directing issue of summons to the respondents in itself may be one possibility, to presume that there is deemed permission but that cannot be the rule always and it can only be an exception in a justifiable circumstance. 10. Even here, though the provisions of Section 458 of the Act to which our attention is drawn by Sri Manjunath, learned Counsel, does provide for a situation to confer on the Official Liquidator a discretion to exercise the powers under Sub-section (1) of Section 457, that provision is for institution of legal proceedings on behalf of the Company even without the prior sanction or intervention of the Court and that again is in the discretion, which the liquidator gets only on an order being passed by the Court to this effect and not by the discretion, conferred directly on the Official Liquidator under the statute. Section 458 reads as hereunder: Discretion of liquidator: 458. “The [Tribunal – now court] may, be order, provide that the liquidator may exercise sanction or intervention of the [Tribunal – Court]: Provided always that the exercise by the liquidator of such powers shall be subject to the control of the [Tribunal – Court].” 11. The proviso is also significant to be noticed as whatever is done by the Official Liquidator, all actions and exercise of power by the Official Liquidator is always, subject to the control of the Court. It means nothing could escape the attention of the Court and Official Liquidator should always function under the strict vigil of the Court.
The proviso is also significant to be noticed as whatever is done by the Official Liquidator, all actions and exercise of power by the Official Liquidator is always, subject to the control of the Court. It means nothing could escape the attention of the Court and Official Liquidator should always function under the strict vigil of the Court. Such is the legal position. 12. While for the present, we proceed with the examination of the appeal on merits, it is very necessary that the Official Liquidator becomes aware of this legal position henceforth and evinces commensurate awareness whenever appeals are filed by the Official Liquidator and in respect of the orders passed by the learned Company Judge to indicate that the appeal is either necessary or desirable to protect the interest of community of creditors and shareholders. 13. Ordered accordingly. 14. Issue notice on Misc.Cvl. No.8428/2009. 15. All necessary steps by the Official Liquidator in two weeks.