In Re: M/s Sterling Steels and Wires Limited, and another

R.N. Mittal, J.—The Official Liquidator asked the Transferee Company to produce its account books and some other documents to submit the report. The Transferee Company raised an objection that the official Liquidator could examine the account books and other documents relating to the Transferor Company and not those of the Transferee-Company. On the other hand, the stand of the Official Liquidator is that he is entitled to examine the account books and other documents of both the companies in order to submit the report.

I have heard the Learned Counsel for the Petitioner and the Official Liquidator. The Learned Counsel for the Petitioner made reference to second proviso to Section 394 of the Companies Act which pro-vides that no order for the dissolution of any transferor company under Clause (iv) shall be made by the Court unless the Official Liquidator has, on scrutiny of the books and papers of the Company, made a report to the Court that the affairs of the Company have not been conducted in a manner prejudicial to the interests of its members or to public interest. The Official Liquidator has also placed reliance on the said clause. In addition, he makes reference to rules 86 of the Companies (Court) Rules, 1959. However, Rule 86 provides that the rule comes into operation after the passing of the order sanctioning the compromise or arrangement made and not prier to that. From a reading of second proviso to Section 394 it is clear that the official Liquidator for the purpose of the report can scrutinise the books and papers of the Transferor Company and not that of the Transferee Company in the above said view 1 am fortified by the observation made in Commissioner of income tax v. Bharat General Reinsurance Company Ltd. 977 CC 597. No other provision has been brought to my notice under which the official Liquidator can examine the books of the Transferee Company. Consequently, he shall submit his report after the scrutiny of the books and other papers of the Transferor Company which have already been handed over to him.

Mr. Aggarwal, counsel for the Company law Board requests for six weeks'' time to file the report. Adjourned to 18th October.