The main legal point established is the court's discretion to remove a liquidator and appoint an official liquidator in his place under the Companies Act, emphasizing the duty of the liquidator to protect the interests of the company, contributors, and creditors.

Ashok Bhan, J.

1. This is a petition filed under Sections 524 and 525 of the Companies Act, 1956 (hereinafter called "the Act"), read with Rule 9 of the Companies (Court) Rules for the removal of Shri B. K. Kapoor, liquidator, appointed by this court. The facts giving rise to the present petition are as under : Hindustan Forest Co. (Pvt.) Ltd. (In Liquidation) (hereinafter referred to as "the company") filed an application numbered as C. A. No.169 of 1974, under Sec.522 of the Companies Act for winding up of the company under the supervision of this court. The aforesaid application was allowed by this court on February 27, 1975, and Shri B. K. Kapoor, ex-managing director of the company, was appointed as liquidator of the company for winding up of the company under the supervision of the court. On June 17, 1975, notices under Rule 148 of the Companies (Court) Rules, 1959 (hereinafter referred to as "the Rules"), were issued to the creditors for filing their claims within the prescribed period. The petitioners in the present petition in whose favour a decree in the sum of Rs.43,690.23 has been passed by the Jammu and Kashmir High Court and another decree in the sum of Rs.800, passed by a civil court filed their claim in pursuance of the notice under Rule 148. Thereafter, on June 25, 1979, that is after a lapse of four years, notices were issued to the creditors by Sh. B. K. Kapoor, liquidator, under Rule 149 asking the creditors to file proof of debt in order to prove the debt. The petitioners, on July 19, 1979, filed their affidavit in terms of Rule 150. Thereafter, the liquidator issued notices under Rule 159, asking the creditors to file proof of their evidence. The petitioners, on July 15, 1981, sent their reply along with the documents which were in their possession.

2. The allegation of the petitioners is that after July 15, 1981, no communication has been received by them from the liquidator relating to the determination of their claim. The liquidator is duty bound under Rule 163 either to accept or reject the claim of the creditors. The failure of the liquidator to communicate the determination or to decide the claim has prejudiced the rights of the petitioners. It is further averred that the liquidator has no right legal or moral to continue with the winding up of the company subject to the supervision of the court. It is further alleged that the liquidator has not paid off any creditor and that he is prosecuting his claims only. The liquidator has failed to discharge his duties, and, therefore, has no right to continue or officiate as the liquidator and, therefore, sought the removal of Sh. B. K. Kapoor as liquidator of the company and prayed that in his place an official liquidator be appointed for the winding up of the company subject to the supervision of the court.

3. Under Rule 163, the liquidator after such investigation as he thinks necessary, is required either to admit or reject the proof submitted by the creditor either in whole or in part. The said decision of the liquidator is required to be communicated to the creditors concerned by post under postal certificate where proof is admitted and by registered post for acknowledgment where proof is rejected. It is further provided that it would not be necessary to give notice of the admission of the claim to the creditor who has appeared before the liquidator and acceptance of his claim has been communicated to him or in writing at the time of acceptance.

4. This petition was resisted by the respondent. In the written statement, it was alleged that the petition is frivolous, mala fide, and untenable and it has been instituted with a design to coerce the answering respondent in order to enforce claims against the company. That the claim of the petitioners is no longer due from the company and the same is barred by limitation and not payable in law. The allegation of the petitioner on merits that no action has been taken by the liquidator after putting in