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Judgment
V.V.S. Rao, J.—The official liquidator attached to this Court filed the instant application purportedly under Sections 448, 449 and 450 of the Companies Act, 1956, inter alia, seeking to recall the order of this Court dated June 30, 2006, in Company Application No. 570 of 2006 and also the order dated September 28, 2006, in Company Petitions Nos. 140 and 144 of 2001, whereby and whereunder this Court ordered winding up of M/s. Southern Udhyans Ltd., (in liquidation) (hereafter called, "the SUL"), M/s. Southern Wonder World Resorts Ltd., (in liquidation) (hereafter called, "the SWL") and M/s. Southern Continental Contractors Ltd. (in liquidation) (hereafter called "the SCL"). The official liquidator also seeks modification of the said order to the effect that the advocate commissioners appointed by this Court as liquidators be directed to function under overall control and superintendence of the official liquidator. Various other directions are also sought.
The application was initially listed before the company judge on September 28, 2007. Learned company judge passed orders on September 28, 2007, directing the official liquidator to file an affidavit stating the authority under which the present application is filed.
The official liquidator filed preliminary statement and compliance statement with reference to the order of this Court. This Court also directed the official liquidator to furnish specific information with regard to M/s. ITC Agrotech Ltd. (in liquidation) and M/s. Allwyn Watch Ltd. Having regard to the submission made by the official liquidator that he has no sufficient staff to take possession of the assets of M/s. Allwyn Watch Ltd., and that he took eight months time to take possession, this Court also directed the official liquidator to file affidavit as to how he did not take possession within the specified period.
The matter was listed on October 4, 2007. The affidavit as directed was not filed by the official liquidator. This Court, therefore, passed orders on October 4, 2007, directing the official liquidator to be present in the court and explain the circumstances under which the order of this Court was not complied with. The matter was listed again on October 9, 2007. By that time the official liquidator filed an affidavit without complying with the directions of this Court. It was represented to the court that an affidavit of the official liquidator has to be filed in the court after obtaining approval of the controlling ministry.
This Court, therefore, opined that the official liquidator declined to file an affidavit and accordingly initiated suo motu contempt proceedings and ordered notice to the official liquidator under the Contempt of Courts Act, 1971. Thereafter, the matter was again listed before this Court. This Court ordered notice to the advocate commissioners appointed by this Court for winding up of SUL, SWL and SCL. After service of notice, Mr. M. Anil Kumar, one of the two advocate commissioners, appeared and opposed the application. Lengthy arguments were heard regarding the maintainability of such application filed by the official liquidator attached to this Court regarding power of this Court to appoint advocates or non-advocates as liquidators of the company ordered to be wound up.
The brief background of the case leading to filing of this application may be noticed. By an order dated December 3, 2001, in C. P. No. 144 of 2001 SUL was ordered to be wound up. By another order dated January 2, 2002, in C. P. No. 140 of 2001 SWL was ordered to be wound up by this Court. The SCL is a sister concern of these two companies. Therefore, this Court suo motu passed orders on June 7, 2006, appointing the official liquidator attached to this Court as provisional liquidator. The applicant alleges that by reason of Section 44 of the Act, the official liquidator became the liquidator of SUL and SWL also. Be that as it is the official liquidator allegedly took into possession 250.00 acres of land, leaving the other extent of land to be identified and surveyed with the help of the Revenue Department. The official liquidator filed C. A. Nos. 568 and 569 of 2006 for direction to MRO and valuation of the same through approved surveyor. Another application C. A. No. 570 of 2006 was filed to sell the land after survey and valuation. While these applications are pending consideration, this Court passed orders dated June 30, 2006 in C. A. No. 570 of 2006 appointing a committee of two advocate commissioners, M/s. M. Jagannadha Sarma and M. Anil Kumar, for taking up sale of assets as ordered by this Court. This Court also directed the advocate commissioners to invite claims from the depositors, adjudicate their claims and submit report before this Court. A similar order was also passed in respect of SCL. The official liquidator was directed to transfer the records, amounts and four members of the company paid staff to the advocate commissioners. Subsequently by the order dated September 28, 2006, made in C. P. Nos. 140 and 144 of 2001, this Court clarified that the advocate commissioners are appointed in the place of the official liquidator to represent three companies and that they shall discharge all functions of the official liquidator with reference to the companies.
The official liquidator mainly contends that Section 414 of the Indian Companies Act, 1913, which provides for appointment of private persons as liquidators has been omitted in the Companies Act, 1956, and, therefore, a private person and an advocate cannot be appointed as liquidator. Strong reliance was placed on Sections 448, 449 - 453 of the Companies Act, 1956, in support of the contention that in all cases the official liquidator attached to this Court shall alone act as liquidator as well as provisional liquidator and any committee of advocates or private persons can only assist the liquidator in discharging his functions including the sale of the assets of the company in liquidation.
The official liquidator also relies on Rules 272 to 274 of the Companies (Court) Rules, 1959, ("the Rules" for brevity) to support the application to recall the advocate commissioners. Learned Assistant Solicitor General who was engaged by the official liquidator to appear in this application reiterated these submissions and also placed reliance on some of the reported cases in In Re: Indo Burma Wood Products (P) Ltd., , International Shipping Ltd. v. Chandpur Jute Co. Ltd. [1982] 52 Comp Cas 121 Industrial Credit and Investment Corporation of India v. Sidco Leathers Ltd. [1999] 96 Comp Cas 527 Mafatbhai V. Shah v. Secretary, Government of India [2001] 104 Comp Cas 326 Raghunath Rai Bareja and Another Vs. Punjab National Bank and Others, and P. Hema v. M. Muthusamy [2007] 139 Comp Cas 214 .
As noticed supra, Sri M. Anil Kumar represented advocate commissioners. He vehemently opposed application. He raised preliminary objection regarding maintainability of C. A. (SR) No. 5881 of 2007. He contends that though the official liquidator is appointed by the Central Government and though for the purpose of service conditions and disciplinary control, the official liquidator is subordinate to the Central Government and he has no independent existence in so far as winding up of companies is concerned. The official liquidator has to act in obedience to and in accordance with the directions issued by the company court. He cannot have any independent existence in so far as winding up matters are concerned and, therefore, he cannot file such an application without leave of the company court. In so far as merit of the application is concerned, he submits as follows. Initially, the official liquidator was appointed as liquidator/provisional liquidator of the three companies. As the official liquidator did not show any progress nor he filed proper applications and status reports before this Court even after lapse of four years after the winding up orders in respect of SUL and SWL, this Court appointed advocate commissioners for expeditious disposal of part of the lands and for inviting claims of the depositors with a view to settle them. Such a method is permissible under law.
Appointment of advocates/chartered accountants and other persons as liquidators of the company in winding up instead of the official liquidator attached to this Court the company court is well recognised. Such appointment of advocate commissioners is also approved by the Supreme Court. He has placed reliance on a decision in National Investors Forum v. Golden Forests (India) Ltd. [2004] 118 Comp Cas 587 (P & H) and an unreported decision of the Supreme Court in Securities and Exchange Board of India v. Golden Forests (I) Ltd. (I.A. Nos. 28, 36, 41 to 50 of 2004, in Transfer (Civil) Case No. 2 of 2004, dated September 5, 2006). He has also placed reliance on a Full Bench judgment of this Court, to which I was a member, in Remu Pipes Limited, Hyd. Vs. Industrial Finance Corporation of India, Hyd. and Others, .
Learned counsel next submits that after taking over the assets of three companies in June, 2006, the advocate commissioners realised a sum of Rs. 25.49 crores by selling acres 523.25 guntas of land of SUL, Rs. 2.20 crores by selling 8027.74 sq.yards of land of SWL, and Rs. 15.63 crores by selling various plots belonging to SCL to a large number of plot allottees and that 1,200 individual notices were issued to depositors inviting claims. He also submits that substantial work in winding up has been attended to by the advocate commissioners and claims are also invited for payment to the depositors. He lastly submits that the advocate commissioners appointed by this Court to be an independent committee accountable to this Court and they cannot be made accountable to the official liquidator nor can they be asked to work under overall control of the official liquidator especially when the official liquidator himself cannot take any independent decision in winding up proceedings.
Two points would arise for consideration : Firstly, whether the official liquidator can file an application to recall the order of this Court appointing a committee of advocate commissioners to act as liquidators. Secondly, if answer to this question is in the affirmative, whether any case is made out by the official liquidator attached to this Court to recall the order. If the answer to the first question compels in limine rejection of the application to recall, it would not be proper for this Court to go into the second question.
Sections 448 - 453 of the Act deals with the official liquidators. The official liquidator is appointed by the Central Government as a whole-time officer and he shall be attached to each High Court, if there is sufficient work for a whole-time officer. Section 449 of the Act provides that on a winding up order being made in respect of a company, the official liquidator shall by virtue of his office become the liquidator of the company. These provisions cannot be read in isolation nor these provisions dilute or diminish inherent powers of the company court which are saved by virtue of Rule 9 of the Rules which are promulgated by the Supreme Court in exercise of powers u/s 643 of the Act. Section 490 of the Act enables the company opting for voluntary winding up to appoint a liquidator ignoring the official liquidator attached to this Court. Whatever be the situation, the liquidator cannot act independently. He is always accountable to the company court and subject to such directions as may be issued, the official liquidator is bound to obey the orders of the company court. A reference to Sections 455, 457 and 458 of the Act would suffice to sustain the point.
The question therefore is whether the official liquidator can file an appeal/revision/review or application to recall an order passed by the company court earlier without obtaining prior approval or permission of the company court)
A perusal of Section 457 of the Act which deals with the powers of the liquidator would show that the official liquidator while acting as liquidator or otherwise has no such power to file application on his own without leave of the company court. In Official Liquidator v. Golcha Properties P. Ltd. [1981] Tax LR 2561, the Rajasthan High Court considered a similar question. It was laid down therein as below:
The official liquidator under the provisions of the Companies Act, 1956, can institute or defend suits only with the sanction of the court. He has no independent functioning. As a matter of fact, the official liquidator being an officer of the court is an adjunct to the court and cannot file any appeal against the order of the court. The official liquidator was not in any way prejudiced by the orders of the court dated October 19, 1979, if it were the creditors. The creditors were paid before the order dated October 19, 1979, was passed. The creditors could file a special appeal if it was permissible under the law if they thought proper. It is strange that the official liquidator who is an adjunct of the court should take up the matter on behalf of the creditors and file an appeal. The creditors did not themselves intend to file any appeal against the orders of this Court.... For the reasons stated above, I am of the considered opinion, that the official liquidator has no locus standi to file an appeal before the Division Bench unless he obtains sanction u/s 457 of the Companies Act.
In this case the official liquidator cannot be said to have any grievance. Had he applied for permission to move the present application, the company court would have rejected the same. By filing such an application without leave of the company court, the official liquidator has committed grave act of impropriety. Secondly, though this Court directed to file affidavit, he did not file affidavit within time taking all unsustainable grounds. Be it noted that when this Court directs the official liquidator to file a report or personal affidavit of official liquidator, permission of controlling ministry would not be required because the official liquidator attached to this Court would be filing an affidavit to bring the facts and circumstances on record and the Central Government would not be in a position to vet any affidavit in such case. The ground or justification for not filing affidavit within time therefore is misconceived and unsustainable.
In conclusion, this Court holds that the official liquidator has no locus standi nor power to file such application to recall earlier order. The official liquidator cannot even file an appeal against the order earlier passed by this Court appointing advocate commissioners as liquidators without leave of the court. On this ground alone this application is liable to be dismissed.
In so far as contempt proceedings initiated against the official liquidator are concerned, non-compliance with the orders of this Court dated September 28, 2007, is ex facie contempt of the court. But the official liquidator has appeared and expressed unconditional apology before this Court. Therefore, he can be let off with a warning that in future he should strictly comply with the orders of this Court as and when directions are issued to file affidavits, reports and/or to produce records.
In the result, the application is rejected and contempt proceedings are closed, directing the official liquidator to be more diligent. There shall be no order as to costs.