The main legal point established in the judgment is that the appointment of a provisional liquidator is justified to protect the assets of a company when there is a risk of transfer or alienation, and when the company is unable to pay its debts.

INDERMEET KAUR, J. (Oral)

Co. Application No. 143/2012

1. This is an application filed by the petitioning creditor seeking appointment of a provisional liquidator.

2. The present petition had been filed under Section 433 (e) & (f) read with Sections 434 and 439 of the Companies Act; the petitioning creditor is M/s ESPN Software (India) Ltd.; it had succeeded in satisfying the Court that the respondent is unable to pay its debts within the meaning of Section 433 (e) of the Act; Company Petition had been admitted on 02.03.2009; a provisional liquidator had also been appointed. Admittedly this Company Petition was unaccompanied by any separate application for appointment of a provisional liquidator.

3. The respondent company was aggrieved by the order dated 02.03.2009. It had preferred an appeal before the Division Bench. The Division Bench had inter-alia recorded the following order:-

“6. After hearing the learned counsel for the parties, we are not inclined to interfere with the impugned order dated 2March 2009 insofar as it admits the company petition. Suffice it to state that the learned Company Judge has taken into consideration various aspects of the matter and concluded therefrom that the debt is due and payable by the appellant to the respondent and the appellant is unable to pay the said debt. No doubt, the decree is passed by the Supreme Court of New York which is not a reciprocal territory. The only bar would be that such a decree is not executable under Section 44A of the Code of Civil Procedure. However, such a decree which is passed by a competent Court of law, albeit, of a foreign jurisdiction, can be utilized as a mere corroboration of the respondent?s principal plea that the appellant is unable to pay its debt and justify the order of the High Court. It is also not in dispute that on the basis of such a decree a suit can be filed and the question as to whether such a decree is to be acted upon or not, is to be decided on the touchstone of the provisions of the conditions stipulated in Section 13 of the Code of Civil Procedure. We find that plea to this effect has been taken by the appellant. Learned counsel for the appellant had pointed out certain purported irregularities/defects in the proceedings which culminated into the said decree and it appears that on that basis it was sought to be argued that this decree would not be enforceable since the company petition is only admitted and these arguments would be available to the appellant, before the Court proceeds further and decides winding up of the appellant company, orders are to be passed or not, such issues can be thrashed out at that stage.

7. We may only note that by relying on the aforesaid decree, the learned Company Judge had taken into consideration some alleged admissions made by the appellant company of the debt, in certain communications as well as the balance sheet. The learned Company Judge has also taken into consideration of the fact that no reply was given by the respondent under Section 433(e) of the Act. The learned Company Judge has also taken into consideration the Directors Report dated 21st June, 2002 mentioned under the hearing „Performance Review? that the company had suffered loss of Rs. 7579 lacs in the previous year and also incurred loss of Rs. 5039 lacs in that year with specific averment that the appellant company did not have substantial source of income during the year. Once we find that the company petition is admitted taking into consideration all these aspects, we find no reason to interfere with the impugned order.

8. However, while passing the order on admission and directing the publication of citation in para 58 of the impugned order the learned Company Judge has also appointed the Provisional Liquidator. The discussing in this behalf is contained in para 59 which reads as under:-

“59. The Official Liquidator attached to this Court is appointed as the provisional liquidator of the company. The provisional liquidator sha