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2002 Supreme(Ker) 439
Judges : J.B.KOSHY,K.K.DENESAN
Prabhu - Appellant
Versus
Ameerul Millath - Respondent
Case No : M.F.A. No. 1074,1097 of 1997
Decided On : 07/17/2002
Advocates Appeared :
Dinesh R. Shenoy; For Appellant Chacko George; K. Moni; For Respondents
Headnote:
Companies Act –Sections 543(1), 457, 448(1)(a), 450, 509, 235, 512(a) –Issue on Official Liquidator liability –– Whether an Official Liquidator appointed as liquidator of a particular Company in winding up proceedings can be proceeded under the Companies Act is the main question to be decided in this case – The argument raised by the counsel for the appellant is that even if Official Liquidator will not come within the category of liquidator as per the third part of the Act, he will necessarily be an officer of the Company, liable to be proceeded under law –Held, Merely because a petition is maintainable under S. 543 against the Official Liquidator, Company Court need not always proceed with the case unless the court is satisfied that there is prima facie case – There may be cases where the particular action challenged is specifically approved by the court and court has earlier considered the allegations now raised and found that nothing wrong therein, there is no necessity to proceed with the case –Therefore the Company Court can proceed with the matter only if there is a prima facie case and there is substance in the allegations – Official Liquidator is entitled to protection – If the act is done in good faith, Official Liquidator cannot be proceeded as he is protected under this section – Hence, court set aside the matter and remand the same to the Company Court for first finding out whether there is a prima facie case to be proceeded with and then, if there is any prima facie case, proceed with the case in accordance with law –Both the appeals are disposed of accordingly – When the judgment was pronounced in open court, the learned counsel appearing for the appellant prayed for leave to file appeal in Supreme Court –Court is of the opinion that it is not a fit case to grant leave –Liquidator will be free to take all his defenses before the Company Court –Appeals disposed of
1. Whether an Official Liquidator appointed as liquidator of a particular Company in winding up proceedings can be proceeded under S.543(1) of the Companies Act is the main question to be decided in this case. The first respondent in this case who was the Official Liquidator, High Court of Kerala was the liquidator of M/s. Mittal Steels Perolling Industries (P) Ltd. which was a company in liquidation as per the court order. M.C.A. Nos. 94/95 and 29/96 were filed by the appellant herein against the respondents under S.543(1) of the Companies Act. The learned Company Judge found that the applications against the first respondent who is the Official Liquidator will not lie and the applications are not maintainable.
Therefore preliminary objections were upheld and M.C.As were dismissed as not maintainable. Before considering the reasoning of the Learned Company Judge, we will extract S.543(1) of the Companies Act below:
"543. Power of Court to assess damages against delinquent directors, etc. (1) If in the course of winding up a company, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, manager, liquidator or officer of the company
(a) has misapplied, or retained, or become liable or accountable for, any money or property of the company; or
(b) has been guilty of any misfeasance or breach of trust in relation to the company;
the Court may, on the application of the Official Liquidator, or the liquidator, or of any creditor or contributory, made within the time specified in that behalf in sub-s. (2), examine into the conduct of the person, director, manager, liquidator or officer aforesaid, and compel him to repay or restore the money or property or any part thereof, respectively, with interest at such rate as the Court thinks just or to contribute such sum to the assets of the Company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks just."
2. The above section provides that in the course of winding up if any person who has taken part in the promotion or formation of the company or any past or present director, manager, liquidator or officer of the company has misapplied any money or property of the company or has been guilty of any misfeasance or breach of trust, then such persons can be proceeded upon for misapplication, retainer, misfeasance or breach of trust. The next part of the section provides who are competent to file application under the above section. Application can be filed by the Official Liquidator or Liquidator or any creditor or contributory, made within the time specified in sub-s. (2). Therefore, it is clear that an Official Liquidator or Liquidator or any creditor or contributory can file an application under the section. The last part of the section indicates that on such application court can take action against such director, manager, liquidator or officer aforesaid and take action against them in respect of misapplication, retainer, misfeasance or breach of trust. The learned judge found that in the first part and the last part only the word "liquidator" is mentioned, whereas for filing an application, in the second part'Official Liquidator' was specifically mentioned. Therefore, Official Liquidator can file an application under the section. But complaint cannot be filed against the Official Liquidator, but only against a liquidator and it is also held that specifically the name of Official Liquidator is not mentioned in the first part or the last part. But that is only used for enabling an Official Liquidator to file an application and therefore no action can be taken against the Official Liquidator. Only a liquidator other than the Official Liquidator can be proceeded under the section. Learned Judge also noticed that under S.457 of the Companies Act complaints can be filed against the Official Liquidator and therefore if there is any complaint against the
