M. Subbarayulu vs Sri Ambuja Petrochemicals Ltd.

S.R. Nayak, J.—This appeal preferred u/s 483 of the Companies Act, 1956, read with Clause 15 of the letters patent is directed against the order of the learned Company Judge dated 26-3-2002 in C.A. No. 531 of 2000 in RCC No. 4 of 1997. C.A. No. 531 of 2000 was filed by the Official Liquidator in RCC No. 4 of 1997 u/s 457(1) of the Companies Act, 1956 (''the Act''), read with Rule 94(11)(b) of the Companies (Court) Rules, 1959 seeking the following relief:

"(i) Permitting the Official Liquidator to publish in Eenadu (Telugu Daily) as to the sale of the car by public auction to be conducted at Office premises of the Official Liquidator;

(ii) to circulate the hand bills as to the sale of the Premier Padmini NE 118, 1995 modal bearing No. A.P. 10G 2142 among various Central Government offices situated at Kendriya Sadan, Koti, Hyderabad;

(iii) To confirm the sale on receipt of total money on the spot (only if the offer is on and above of Rs. 30,000 within the range of the realizable market value given by the values);

(iv) To incur the advertisement expenditure from and out of the funds of the company; and

(v) Order the cost of this application to come out of the assets of the company."

The learned Company Judge by his order dated 9-11-2000 allowed the CA 531 of 2000 and passed the following order:

"This application is not opposed.

According for reasons in the affidavit filed in support of the application for prayers 1, 2, 4 and 5 of the application are granted. With reference to prayer No. 3 of the application, the Official Liquidator is directed to file a fresh application after the proposed auction."

There afterwards, the learned Company Judge, without notice to the appellant herein passed the order impugned in this appeal on 26-3-2002, which reads as follows:

"In this referred case for winding-up of the company, this Court passed orders on 10-4-1998 for winding-up of the company and the Official Liquidator was appointed as a Liquidator of the company. There are many assets, viz., fixed and movable assets and among the movable assets there were three cars, viz., (1) Fiat 118; (2) Fiat: and (3) Ambassador. Further, as per the directions of this Court, the valuer was appointed, who has submitted his report as early as in April, 2000 valuing all the assets of the company including the abovementioned three cars. But, peculiarly, the Official Liquidator, for the reasons best known to him, disposed of only one of the three vehicles on the ground that if the same is not disposed of, it may get spoiled and, in fact, the said disposal of the vehicle is not in conformity with the valuation report referred to above where it was valued at Rs. 70,000 as realizable value. But, contrary to the said report, the Official Liquidator has misused his office and obtained another report from another valuer without any authority and without any sanction of the court and disposed of the same. The relevant file shows that the Official Liquidator had indulged in many irregularities, for which he should be proceeded against for appropriate action by the concerned authorities. This Court had already noticed the irregularities committed in RCC No. 5 of 1997, viz., Republic Forge Company.

It is brought to my notice that the Regional Director is having administrative control over the officials of the Department of Company Affairs in the Southern Region including the State of Andhra Pradesh where the office of the present Official Liquidator is situated. Therefore, this Court would like to know from the Regional Director the scope and the powers that had been exercised by him during the last two years over the office of the Official Liquidator.

Therefore, the Regional Director is directed to file an affidavit disclosing the nature of the powers that have been exercised by him during the last two years. He is also directed to state in the affidavit whether any inspection or enquiry has been conducted after 1st January, 2000 till date, and, if, any reports have been submitted to the higher authorities in the Department of Company Affairs. The Regional Director is directed to disclose the above facts, and, if any, inspection or enquiry has been conducted, the copies of the reports of such inspection/enquiry are directed to be enclosed along with the affidavit directed to be filed before this Court.

The C.A. No. 531 of 2000 is directed to be listed on 8-4-2002 and the Regional Director has to file the affidavit by that date and he is also directed to be present in person before this Court.

The Registry is directed to communicate this order to the Regional Director and Secretary as well as to the Joint Secretary."

The validity of the above order is assailed by Mr. B. Adinarayana Rao, the learned counsel for the appellant mainly on the ground among other grounds that it was made in utter violation of principles of natural justice and without hearing the appellant. The learned counsel contended that the finding of the learned Company Judge that the appellant-official liquidator has misused his office is a very serious charge, which has the effect of tarnishing even the image and integrity of the appellant and if it is allowed to stand, it would also violate his civil liberties and freedoms and that such a finding could not have been recorded by the learned Company Judge without giving an opportunity to the appellant to explain his conduct. Admittedly, the order impugned in the appeal was passed by the learned Company Judge without giving any opportunity to the appellant to explain his conduct. It is brought to our notice, at the time of hearing, by the learned counsel for the appellant and which is not seriously disputed by the learned Additional Advocate-General that the appellant laid down his office as official liquidator in this Court on 5-3-2002 and his successor joined the office on 13-3-2002. However, the learned Additional Advocate-General would contend that the observation made by the learned Company Judge that the appellant has misused his office is well-justified and records of the court would substantiate the same beyond any doubt and, in that view of the matter, it is not a fit case where the Appellate Court should step in and interfere with the order of the learned Company Judge. The impugned order, which has the effect of affecting civil rights and liberties of the appellant, was made by the learned Company Judge without hearing the appellant. There is no controversy on this aspect. We are also of the considered opinion that this is not a case where the court should invoke the technique of post-decisional hearing. It is not even the contention of the learned Additional Advocate-General that the learned Company Judge had no time to spare and that he could not have waited for making the impugned order to avoid or prevent some public mischief and, therefore, it became imperative for the learned judge to pass the impugned order. The affected person should be appraised before an adverse action is taken against him is well-settled principle of law flowing from Article 14 postulates. On that short ground, we are of the considered opinion that the order of the learned Company Judge under appeal cannot be sustained. Accordingly, we allow the appeal and set aside the order under appeal except the direction issued by the learned Company Judge to the Regional Director, Southern Regional of Company Affairs, Chennai, to file an affidavit in the manner and the mode indicated in the order. No costs.