The Official Liquidator becomes the custodia legis and exercises all rights regarding the company in liquidation, and contributories can request the Official Liquidator to challenge perceived wrongs.

JUDGMENT :

Sanjib Banerjee, J.

Prayer: Appeal filed under Order XXXVI Rule 1 of the Original Side Rules read with Clause 15 of the Letters Patent against the order dated 18.9.2020 passed in Company Application No.79 of 2020 in Company Petition No.151 of 2013.

The appeal is directed against a rather elaborate order of September 18, 2020 passed on several company applications, primarily brought by the former chairperson of a company in liquidation.

2. There is no dispute that company VTX Industries Limited went into liquidation in 2014 pursuant to an order of this Court. The Official Liquidator attached to this Court was directed to take possession of the company and its assets and it appears that the Official Liquidator took possession of the registered office and factory premises of the company in liquidation by or about August 7, 2015.

3. The company in liquidation had obtained credit facilities from several banks and financial institutions prior to its liquidation. Some of such secured creditors of the company in liquidation transferred their securities and the debts due from the company in liquidation to the asset reconstruction company which is arrayed as the second respondent in the present appeal. Divers steps were taken by or at the behest of the contributories of the company in liquidation to thwart the secured creditors realising their dues. Even a writ petition is pending in this Court challenging the sales conducted by the second respondent herein. The writ petition has been filed by the present appellant.

4. In the detailed judgment impugned herein, the initial consideration was as to the locus of the appellant herein to complain of the matters pertaining to the company in liquidation. The issue was answered substantially against the appellant, particularly since the Official Liquidator had stepped in to take control over the company and its assets and all matters pertaining thereto. In the scheme of things as they stood under the Companies Act, 1956, the Official Liquidator became the custodia legis and all rights qua the company had to be exercised by or in the name of the Official Liquidator. In such a scenario, the chairman or the erstwhile chairman of the company in liquidation could brandish the former designation in a decorative visiting card, but it would be of little practical use in a court of law. Indeed, a former director of a company or even its chairperson may only assert such rights as are available to a contributory as an erstwhile shareholder of the company in liquidation becomes upon the company going into liquidation.

5. On the more practical side, given the huge debts of the company in liquidation in the present case and where the secured creditors of the company in liquidation may not be able to realise the entire quantum of their dues, there would be little or nothing left over down the line to hand over to the contributories of the company after meeting the debts of the other persons who stand ahead of the shareholders in the order of preference. Thus, the element of financial prejudice suffered by the appellant in this case has to be regarded as remote almost to the vanishing point.

6. The second aspect of the matter was that if the law as it stands does not give the shareholder of a company the right to proceed against a secured creditor of the company as a person aggrieved, a contributory of a company in liquidation would have almost no right. It is for the Official Liquidator of the company in liquidation to protect the interest of all secured and other creditors and of the contributories of the company in liquidation. At the highest, a contributory could approach the Company Court with a request to direct the Official Liquidator to challenge anything perceived to be wrong after, prima facie, establishing that there was something remiss.

7. There are several creditors of the company in liquidation, including secured creditors whose assets may not have been assigned to the second respondent herein.