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2013 Supreme(Mad) 1398
High Court of Judicature at Madras
VINOD K. SHARMA, J.
The Official Liquidator High Court, Madras, As the Liquidator of M/s. Akber Leather Limited
Versus
The Collector, Vellore District & Others
Comp. A. No. 1087 of 2008 in C.P. No. 14 of 1997
Decided on: 26-03-2013
The main legal point established in the judgment is that the word 'void' in the context of section 536(2) of the Companies Act, 1956 does not necessarily indicate that any disposition should be ab initio void. The court has the power to order otherwise, and the word 'void' is not employed peremptorily, allowing for alternative interpretations.
Headnote:
Companies Act - Official Liquidator - 460(4), 536(2) - The judgment discusses the application filed by the Official Liquidator under section 460(4) of the Companies Act, 1956 to declare the auction sale null and void. The court analyzed the provisions of section 536(2) and the legality of the auction sale conducted by the District Collector and Thasildar. The judgment also refers to the judgment of the Hon'ble Supreme Court in NGEF Ltd. vs. Chandra Developers Pvt. Ltd. and another (2005)127 Comp Case 822 (SC) and Pankat mehra and another vs. State of Maharashtra and others (2000)2 SCC 756 to interpret the legal provisions and their implications on the present case.
Fact of the Case:
The Official Liquidator filed an application to declare the auction sale null and void, claiming that it was conducted after the commencement of the winding up, and therefore, void under section 536(2) of the Companies Act, 1956. The company's assets were ordered to be wound up, and the Official Liquidator sought to revalue the assets and pay security charges due to a security agency.
Finding of the Court:
The court found that the auction sale conducted by the District Collector and Thasildar was not void ab initio and had been upheld by previous court decisions. The Official Liquidator was held to have no locus standi to challenge the auction sale, as it had attained finality and the sale proceeds had been utilized to discharge the company's dues.
Issues: The main issue was the legality of the auction sale conducted after the commencement of winding up and the authority of the Official Liquidator to challenge the sale.
Ratio Decidendi: The court interpreted the provisions of section 536(2) of the Companies Act, 1956 and relied on previous court judgments to determine the legality of the auction sale and the Official Liquidator's standing to challenge it.
Final Decision: The court dismissed the application filed by the Official Liquidator, stating that the auction sale was not void ab initio and had been upheld by previous court decisions. The Official Liquidator was held to have no standing to challenge the auction sale, as it had attained finality and the sale proceeds had been utilized to discharge the company's dues.
1. This application under section 460(4) of the Companies Act, 1956 read with Rules 9, 11(b) of the Companies (Court) Rules, 1959 has been filed by the Official Liquidator to declare that the auction sale conducted by the District Collector and Thasildar, Vaniyambadi, Vellore District as null and void in view of section 536(2) of the Companies Act, 1956. It is also prayed respondent No.3 be directed to hand over the property to the Official Liquidator, Madras and to permit the Official Liquidator to revalue the entire assets of the company in liquidation through an approved Valuer. To permit the Official Liquidator to pay the security charges due to Security Agency M/s. Swastik security service from the date of appointment to till date from the common Establishment charge account and later to recover from the sale proceeds.
2. It may be noticed here that this application is again not in the form prescribed under the Companies (Court) Rule 1959 and has been filed in the form of Judges Summons in support of which no affidavit has been filed, but report of the Official Liquidator has only been filed.
3. In the report submitted by the Official Liquidator, it is reported that M/s. Akber Leathers Ltd. Was ordered to be wound up on 20.9.2006 by this Court in C.P.No.14 of 1997. The Official Liquidator attached to this Court was appointed as Liquidator with a direction to take charge of all the assets and effects of the company in liquidation.
4. In pursuance to the order passed by this Court, the Official Liquidator deputed his officials to take possession of the assets of the company on 19.12.2006 after issuing necessary notice to all the ex-directors, secured creditors and petitioning creditors.
5. It is reported that one representative of the company Shri M.K. Mustiaque Ahmed came to the work spot and handed over the keys of the premises but did not furnish any information about the affairs of the company including the details of the assets and where abouts of the company's records.
6. It was reported by the officials deputed by the Official Liquidator that the factory premises has been sealed and winding up notice fixed on the factory premises in the presence of the representatives of the company and Vijaya Bank. The Official Liquidator appointed M/s.Swastik Security services to safeguard the assets of the company in liquidation.
7. It is also further reported that the ex-directors of the company filed statement of affairs with the Official Liquidator on 20.9.2006. As per the statement of affairs filed by the ex-directors, the company owned immovable property measuring 19.5 acres with superstructure thereon, at M.C. Road, Solur Village, Vellore district. The ex-directors in the statement of affairs also pointed out that movable and immovable assets belonging to the company in liquidation was sold by the District Collector, Vellore District under the Revenue Recovery Act, to settle the labour dues.
8. In order to ascertain the correctness of this, a letter was issued to the District Collector, Vellore District to furnish details of the sale and amount realised along with the Copies of the order.
9. The reply to the letter of Official Liquidator was sent by the Thasildar, Vaniyambadi stating therein that the property of the Company in liquidation was sold by auction on 9.1.2003 for a total sale consideration of Rs.42,55,000/-(Rupees forty two lakhs fifty five thousand only) to Hindu Educational Society.
10. It was also pointed out that a sum of Rs.36,59,790/-(Rupees thirty six lakhs fifty nine thousand seven hundred and ninety only) was disbursed to workers and balance of Rs.5,95,210/- (Rupees five lakhs ninety five thousand two hundred and ten only) was given to Tamil Nadu Industrial Investment Corporation.
11. It is reported that Thasildar, Vaniyambadi did not provide any other information with regard to immovable property i.e. Survey No., extent of property and the details of valuation and order of confirmation by the Dis
