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1967 Supreme(Del) 183
Delhi High Court
HARDAYAL HARDY
Hardit Singh Giani - Appellant
Versus
Registrar of Companies, New Delhi - Respondent
F. A. O. No. 47-D of 1966
Decided On : 11/06/1967
H.R. Sawhney, Sr. Advocate with R.C. Beri, for Appellant; Dipak Chaudhry and Satish Chander Saxena, for Respondent.
The Court has the power to remove a liquidator from his office, but such removal can only be ordered for good cause shown and not in an arbitrary manner.
Headnote:
COMPANY - WINDING UP - REMOVAL OF LIQUIDATOR - JURISDICTION AND DISCRETION OF COURT - PRINCIPLES GOVERNING REMOVAL - INTEREST OF LIQUIDATION - FAIRPLAY TO LIQUIDATOR - APPOINTMENT OF ADDITIONAL LIQUIDATOR.
Fact of the Case:
The appellant was the liquidator of a company in liquidation. The Registrar of Companies filed an application for his removal under sections 515(2) and 524(4) of the Companies Act, 1956, read with sections 213(2) and 224(3) of the Indian Companies Act, 1913. The District Judge removed the appellant from his office and appointed the Official Liquidator as Liquidator in his place.
Finding of the Court:
The Court held that the District Judge had the power to remove the appellant from his office, but that such removal could only be ordered for good cause shown and not in an arbitrary manner. The Court further held that the District Judge had not shown towards the appellant that amount of fairplay to which he was legitimately entitled.
Issues: 1. Whether the District Judge had the power to remove the appellant from his office as liquidator? 2. Whether the District Judge had shown towards the appellant that amount of fairplay to which he was legitimately entitled?
Ratio Decidendi: 1. The Court held that the District Judge had the power to remove the appellant from his office as liquidator, but that such removal could only be ordered for good cause shown and not in an arbitrary manner. The Court relied on the following cases: (a) In re: Marseilles Extension Railway and Land Company, (1867) 4 Eq 692 (b) In re, British Nation Life Assurance Association, (1872) 14 Eq. 492 (c) In re, Sir John Moore Gold Mining Co. (1879) 12 Ch. D. 325 (d) Ex Parte, Sheard; In re Pooley (1880) 16. Ch. D. 107 (e) In re, Adam Eyton Ltd. Ex parte Charlesworth, (1887) 36 Ch. D. 299 (f) In re, Pabna Dhanabhandar Co. Ltd. 1936 Com. Cas 422 (g) Kaikhushru Nusservanji Chandabhoy v. Tata Industrial Bank Ltd. AIR 1924 Bom 339 2. The Court held that the District Judge had not shown towards the appellant that amount of fairplay to which he was legitimately entitled. The Court noted that the appellant had been carrying on an extremely arduous job in the face of tremendous opposition, animosity and stubborn resistance. The Court also noted that the appellant had made some mistakes, but that it could not be held that he was actuated by malice or self-interest alone and had sacrificed the real, substantial and honest interest of liquidation.
Final Decision: The Court set aside the order of removal of the appellant passed by the District Judge and directed that Mr. V. S. Juneja official liquidator of this Court to be appointed Additional Liquidator with the appellant and the two of them between themselves should endeavour to conclude the winding up proceedings without any avoidable delay.
JUDGMENT :- I have found it difficult to decide this case. Both during the course of counsel's arguments and afterwards my mind has undergone several modifications and changes of opinion. Even today, I find it a difficult question of jurisdiction and discretion.
2. The appellant Dr. Hardit Singh Giani was Liquidator of National Planners Limited which is now in liquidation. The company was incorporated on 23-2-1946 as a private company limited by shares under the Indian Companies Act 1913, but was soon converted into a public company by a special resolution passed on 5-6-1946. The nominal capital of the company was Rs. 20,00,000/- divided into 100,000 preference shares of Rs. 10/- each and 20,000 ordinary shares of Rs. 5/- each, while its paid up capital according to the latest balance-sheet of the company as on 30-6-1949 filed in the office of the Registrar of Companies Delhi was Rs. 96,394/50. One Roshan Lal (since deceased) was its Managing Director while his brother Kundan Lal was one of its Directors.
3. The main object for which the company was established was to carry on at Ghaziabad in the State of U. P. the business of land development and colonising. But its dealings with the public appear to have attracted the attention of the police and criminal prosecutions were launched in the State of Uttar Pradesh against all the Directors of the company on charges of cheating etc.
4. At a general meeting of the shareholders of the company held on 26-10-1953 it was resolved to wind up the company voluntarily and Dr. Hardit Singh Giani was appointed as a Liquidator. The winding up was subsequently brought under the supervision of the Court by an order made by the then District Judge Delhi, on 26-3-1954 and Dr. Hardit Singh continued to act as Liquidator. On 25-4-1955 the Liquidator settled the list of contributories and the examination of the Managing Director was also concluded by him on 4-11-1955. The Liquidator also filed 25 petitions in the court of the District Judge Delhi for recovery of amounts due from the contributories. Meanwhile on 1-4-1956 the Companies Act 1956, came into force and the District Judge forwarded the record to the High Court of Punjab in the belief that the High Court alone had jurisdiction to deal with the winding up proceedings. The High Court by its order dated 20-11-1957 directed the record to be sent back to the District Judge, Delhi. But it appears that the record was not received in the Court of District Judge till August 1958. Meanwhile on an application filed by Shri Roshan Lal in the court of a Magistrate at Aligarh, where he was being prosecuted, the record was summoned by the learned Magistrate which resulted in a stalemate.
5. The trial of the criminal case pending against Shri Roshan Lal and other Directors of the company ended sometime in 1960 resulting in their conviction and imposition of sentences of imprisonment on them. In the following year the appeals filed by them were disposed of by the High Court of Allahabad.
6. On 26-10-1961 the Liquidator applied for the return of the books and started liquidation proceedings in right earnest. According to his learned counsel, Mr. H. R. Sawhney, the Liquidator had to prosecute or defend 347 cases in various courts in and outside Delhi, out of which 105 cases were hotly contested. The company owned 74,000 sq. yards of land in Ghaziabad and about 700,000 sq. yards of land in Meerut. Due to mismanagement on the part of the Directors of the company land belonging to it was trespassed upon by strangers and the Liquidator had to take action under section 456 (1) of the Companies Act and eventually succeeded in obtaining possession of 74,000 sq. yards of land in Ghaziabad on 31-5-1962. But the possession of the land in Meerut has not been obtained by him till today as the persons in possession thereof have claimed ownership rights therein under the U. P. Abolition of Zamindari Act. The Liquidator, who will hereafter be referred to as "the appell
