P. Elango v. Sundaran Finance Ltd. rep. by Generl Manager
2013-04-08
VINOD K.SHARMA
body2013
DigiLaw.ai
Judgment :- Vinod K. Sharma, J. 1. This application, under Order XIV Rule 8 of Original Side Rules read with Rule, 11(b) and 19 of Company (Court) Rules, 1959, has been filed, with a prayer to set aside the Sale Certificate issued by the Subordinate Judge, Sankari, registered as Document No.429 of 2006, dated 20.03.2006, confirming the sale of the company's assets admeasuring 6.43 acres at Devanna Gounder Villae, Sankari Taluk, Salem District, together with well and building in favour of M.Anand Kumar, the third respondent and the subsequent sale by the third respondent in favour of the 4th respondent vide Document No.1361 of 2008 dated 02.07.2008, pending disposal of the company petition. 2. The applicant is appointed as a member of the Committee of Administrators of M/s.Tan India Limited, (in liquidation), by the Hon'ble First Bench of this Court. 3. M/s.Tan India Limited was ordered to be wound up by order dated 25.06.2001 in C.P.No.243 of 1997. Direction was also issued to the Official Liquidator, High Court, Madras, to take charge of the entire assets of the company in liquidation without any delay. 4. It is submitted that the company had approached BIFR, New Delhi in case No.311 of 2001 and was declared as sick undertaking under SICA. Anand Kumar Cotton Company, the third respondent, filed O.S.No.2 of 1998 before the learned III Additional District Judge, Kurnool, Andhra Pradesh, against the second respondent, claiming an amount of Rs.5,94,409.50 (Rupees Five lakhs ninety four thousand four hundred and nine and Paise fifty only) with interest at the rate of 21% p.a from 22.03.1995 to 23.03.1999 and interest at the rate of 6% per annum from 24.03.1999 to 11.11.1999. 5. The suit was decreed ex parte. The decree holder, thereafter, filed execution proceedings for sale of the assets of the company to execute the exparte decree. 6. A member of the Committee of Administrators, filed objections to the proposed sale in Execution, disclosing the order of winding up passed by this Court as also that of the pendency of the proceedings before the BIFR, New Delhi under the Sick Industrial Companies (Special Provisions) Act. 7. The Hon'ble court rejected the objections and proceeded to auction by reducing the upset price fixed for the sale of 6.43 acres at Devane Gounder Village, Sankari Taluk, Salem District.
7. The Hon'ble court rejected the objections and proceeded to auction by reducing the upset price fixed for the sale of 6.43 acres at Devane Gounder Village, Sankari Taluk, Salem District. In pursuance to sale, the sale certificate was issued on 10.03.2006 in favour of respondent No.3 for a sum of Rs.6,60,000/-(Rupees Six lakhs sixty thousand only), and thereafter, sale was registered on 20.03.2006 as Document No.429 of 2006. 8. It is also the case of the applicant, that when an application filed to set aside the sale, the Executing Court held that the sale stood completed and possession was also handed over, thus dismissed the application. All this was done without prior permission of the company Court or BIFR, New Delhi. 9. It is also pleaded that the third respondent further sold the property to 4th respondent vide registered sale deed dated 20.07.2008. 10. It is submitted that on earlier occasions also, the sales of the assets were set aside in Company Application No.1695 of 2009 and Company Application No.105 of 2006, by holding that the sale deeds are not valid in law. 11. "It is vehemently contended that the applicant has the locus standi to file the present application, as he was appointed as a member of the Committee of Administrators by the Hon'ble First Bench of this Court and the order was confirmed by the Hon'ble Supreme Court. "The question to be decided in this application is whether appointed member of Committee of administrators can perform the function of Liquidator of the Company". 12. On consideration, I find that as a member of the Committee of Administrators, could only assist the Official Liquidator, watch the interest of the company in liquidation. The appointment of administrator by this Court cannot vest the member of the Administrators Committee the powers, which are vested under the statute, with the Official Liquidator. The Companies Act and the Rules framed thereunder stipulates that only the Official Liquidator, can represent the company in liquidation in any Court or move applications on behalf of the Company. The power under a statute cannot be delegated to any other person. 13. It is admitted that sale was effected through Court, and the Court also rejected the objections filed by the company, the member of the Committee of Administrators to challenge the sale.
The power under a statute cannot be delegated to any other person. 13. It is admitted that sale was effected through Court, and the Court also rejected the objections filed by the company, the member of the Committee of Administrators to challenge the sale. However though sale is effected through Court, still it can be challenged by the company under Section 446 of the Companies Act, as it is open to the Company Court to entertain any claim by or against the company in liquidation. 14. The provisions of Section 446(2) of the Companies Act have been interpreted by the Hon'ble Supreme Court, in Sudarsan Chits (I) Ltd., v. O.Sukumaran Pillai and others reported in [1985] 58 Company Cases 633, wherein, it has been held as under :- "Upon its true construction, what is the scope and ambit of the jurisdiction conferred on the court winding up a company by Section 446(2)(b) is the only question of law that arises in this appeal and may be answered in the facts and circumstances of the case.” Section 446(2) reads as under: “446. (2) The court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of—“ (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under Section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; "whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding-up of the company, or before or after the commencement, of the Companies (Amendment) Act, 1960.” Before we advert to the question of construction of Section 446(2)(b), it would be advantageous to notice the historical evolution of the provision as well as its present setting. Section 171 of the Indian Companies Act, 1913, the predecessor of Section 446 (1) did not contain any provision similar or identical to that of Section 446(2).
Section 171 of the Indian Companies Act, 1913, the predecessor of Section 446 (1) did not contain any provision similar or identical to that of Section 446(2). Section 171 only provided for stay of suits and proceedings pending at the commencement of winding-up proceeding, and embargo against the commencement of any suit or other legal proceedings against the company except by the leave of the court. This provision with little modification is re-enacted in Section 446(1). There was no specific provision conferring jurisdiction on the court winding up the company analogous to the one conferred by Section 446(2). Sub-section (2) was introduced to enlarge the jurisdiction of the court winding up the company so as to facilitate the disposal of winding-up proceedings. The provision so enacted probably did not meet with the requirement with the result that the Committee appointed for examining comprehensive amendment to the Companies Act in its report recommended that “a suit by or against a company in winding up should notwithstanding any provision in law for the time being be instituted in the court in which the winding-up proceedings are pending”. To give effect to these recommendations, sub-section (2) was suitably amended to bring it to its present form by Companies (Amendment) Act, 1960. The Committee noticed that on winding-up order being made and the Official Liquidator being appointed a Liquidator of the company, he has to take into his custody company property as required by Section 456. Section 457 confers power on him to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company. Power is conferred upon him to sell the properties both movable and immovable of the company and to realise the assets of the company and this was to be done for the purpose of distributing the assets of the company amongst the claimants. Now at a stage when a winding-up order is made the company may as well have subsisting claims and to realise these claims the Liquidator will have to file suits. To avoid this eventuality and to keep all incidental proceedings in winding-up before the court which is winding up the company, its jurisdiction was enlarged to entertain petition amongst others for recovering the claims of the company.
To avoid this eventuality and to keep all incidental proceedings in winding-up before the court which is winding up the company, its jurisdiction was enlarged to entertain petition amongst others for recovering the claims of the company. In the absence of a provision like Section 446(2) under the repealed Indian Companies Act, 1913, the Official Liquidator in order to realise and recover the claims and subsisting debts owed to the company had the unenviable fate of filing suits. These suits as is not unknown, dragged on through the trial court and courts of appeal resulting not only in multiplicity of proceedings but would hold up the progress of the winding up proceedings. To save the Company which is ordered to be wound up from this prolix and expensive litigation and to accelerate the disposal of winding up proceedings, the Parliament devised a cheap and summary remedy by conferring jurisdiction on the court winding up the company to entertain petitions in respect of claims for and against the company. This was the object behind enacting Section 446(2) and therefore, it must receive such construction at the hands of the court as would advance the object and at any rate not thwart it. "The fasciculus of sections included in Part VII of the Companies Act bears the heading “Winding up”. Section 443 sets out the circumstances in which a company may be wound up by the court. Section 444 provides that where the court makes an order for the winding up of a company, the court shall forthwith cause intimation thereof to be sent to the Official Liquidator and the Registrar. Section 446(1) provides that when a winding-up, order has been made or the Official Liquidator has been appointed as Provisional Liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding-up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose. Then comes sub-section (2) of Section 446. It specifies the contours of the jurisdiction of the court which is winding up the company. It confers special jurisdiction on the court which is winding up the company to do things that are set out in the various sub-clauses notwithstanding anything contained in any other law for the time being in force.
Then comes sub-section (2) of Section 446. It specifies the contours of the jurisdiction of the court which is winding up the company. It confers special jurisdiction on the court which is winding up the company to do things that are set out in the various sub-clauses notwithstanding anything contained in any other law for the time being in force. Section 446(2) thus conferred special jurisdiction on the court winding up the company which otherwise it may not have enjoyed. The court in the Companies Act is defined in Section 2(11) to mean with respect to any matter relating to a company (other than any offence against this Act), the court having jurisdiction under the Act with respect to that matter relating to that company, as provided in Section 10. Section 10 provides that the court having jurisdiction under the Act shall be the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of subsection (2). The winding-up petition has thus to be presented in the High Court before the Judge who is assigned the work under the Companies Act. Therefore, the court which is winding up the company will be the court to whom the petition for winding up was presented and which passed the order for winding up the company. In this case, the order was made by the learned Company Judge in the Kerala High Court directing winding-up of the Company. An appeal lies against the order for winding up the Company under Section 483 to the same Court to which and in the same manner in which and subject to the same conditions under which, appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction. In exercise of this appellate jurisdiction, the Appellate Bench entertained the appeals and directed that the winding-up order shall be held in abeyance till the scheme is implemented and if any default is committed the winding-up order made by the learned Company Judge would be revived." 15.
In exercise of this appellate jurisdiction, the Appellate Bench entertained the appeals and directed that the winding-up order shall be held in abeyance till the scheme is implemented and if any default is committed the winding-up order made by the learned Company Judge would be revived." 15. The judgment of the Supreme Court also shows that the challenge by the company in liquidation can be by the Official Liquidator, and not by the Committee member appointed, as the power with the official liquidator is given under a statute, cannot be performed by any other persons. The learned liquidator as also learned counsel for other respondent supports the view that applicant has no locus standi to challenge the sale on behalf of the company in liquidation. It is for this reason that rejection of objections by executing court filed by the member of committee of administrators cannot come in the way of company to challenge the sale, as it was not open to member of committee of administrators to act on behalf of company in liquidation. The committee could only assist the statutory authority in the interest of company. 16. Consequently, this application is ordered to be dismissed as not competent, with liberty to the Official Liquidator to take appropriate proceedings in accordance with law, if so advised. No costs.