The Court has no power to order security to be furnished by the liquidator under the Companies Act, 1956, and the Banking Companies Act.

P. B. MUKHARJI, J.

( 1 ) THIS is an application by the present Court Liquidator attached to the High Court at Calcutta for an order or direction whether the security is to be furnished by him and if so, for fixing the amount of such security and in case security is to be furnished, then he asks leave to be granted to pay the annual premium and the surcharge premium payable to the Insurance Co. in respect of such security out of the funds lying in the separate interest cash account of the different banks in his charge.

( 2 ) THE previous Court Liquidator was asked to furnish security by this Court for the sum of Rs. 2,00,000. The Court made such order following the previous practice when liquidators were private liquidators or Official Receiver appointed as liquidators by the orders of Court in specific cases.

( 3 ) THAT practice however now requires to be reviewed in the light of the new Companies Act, 1956, and the Banking Companies Act. The legal situation has now considerably changed. The question is also an important one from the point of view of administration.

( 4 ) UNDER the old Companies Act of 1913 there was authority for this Court to order security to be furnished by the liquidators of companies and it was the almost invariable practice of this Court to make such orders for security. Under Section 171-A (2) of the old Companies Act, 1913, it is provided that on the making of a winding up order, the Official Receiver shall become the Official Liquidator of the company and shall continue to act as such until his further continuance was terminated by an order of the Court. By Sub-section (4) of Section 171-A the Court was empowered to fix the remuneration of the Official Liquidator. One other provision in the old Act material for the purpose of deciding this question is Section 175. Sub-section (4) of Section 175 ol the old Companies Act provides "the Court may determine whether any, and what, security is lo be given by any Official Liquidator on his appointment''. Thus Section 175 (4) of the previous Companies Act, 1913, was the express authority given to the Court to determine what, if any, security was to be given by the liquidator.

( 5 ) RULES were framed by this Court, on the basis of these statutory provisions under the old Act. The relevant rules are Rules 79 to 84, in appendix 7 of the Company Rules of this Court on the Original Side. An analysis of those Rules shows that if the provisional liquidator or the Official Liquidator failed to furnish the required security within the time ordered, then the Judge could rescind the order and make such other appointment as it considered fit and proper; in fact, the Judge could remove the provisional liquidator or the Official Liquidator who failed to maintain the security ordered to be furnished. The Judge also had the power, in case the security provided was cither inadequate or excessive, to increase or reduce the amount of security.

( 6 ) FOLLOWING these statutory provisions and the Rules, the previous Court Liquidator was asked to furnish security, as indicated above.

( 7 ) IT is contended before me on behalf of the present Court Liquidator that those statutory provisions and Rules are no longer applicable to the Court Liquidator, having regard to the changes brought about by the Statutes. I consider that contention to be right in law. I shall state my reasons very briefly.

( 8 ) THE statutory provision empowering the Court to order security, to be furnished by a liquidator under Section 175 (4) of the old Companies Act, 1913, has now been removed by the new provisions of Sections 448 and 449 of the Companies Act, 1956. Section 448 oi: the Companies Act, 1956, provides that there shall be attached to each High Court an Official Liquidator appointed by the Central Government, who shall be a wholetime officer unless the Central Government considers that there may not be sufficient work for a whole-time officer, in which case a part-time officer may be appointe

Click Here to Read the rest of this document