1982 (11) TMI 116 - HC - Companies Law

Issues Involved:
1. Admission of winding-up petition
2. Discrepancies in financial statements
3. Issuance of citation
4. Appointment and powers of provisional liquidator
5. Sealing of premises and seizure of books
6. Recovery of outstanding amounts
7. Operation of frozen bank accounts

Issue-wise Detailed Analysis:

1. Admission of Winding-Up Petition:
The appeal challenges the order admitting the winding-up petition filed by the respondents. The respondents claimed that the appellants owed them over Rs. 43 lakhs, reflected in the appellant's books of account. The respondents argued that the appellant's business activities were minimal, with liabilities far exceeding their share capital, justifying the winding-up petition.

2. Discrepancies in Financial Statements:
The appellants contested the amount due, arguing that the respondents had inflated the figures. Both parties were directed to file statements of transactions and accounts. The respondents' affidavit showed total sales through the appellants amounting to Rs. 5,55,01,354.79, with remittances of Rs. 5,23,71,460.70 and a commission of Rs. 22,44,790.34, leading to outstanding claims of Rs. 34,42,867.77. The appellants' figures differed, showing lower sales and remittances, and a different commission amount. The court noted that the exact liability was not agreed upon.

3. Issuance of Citation:
The court emphasized that issuing a citation is a serious matter and should not be rushed. It noted that liquidation should be avoided if possible, to prevent economic and corporate sector harm. The court set aside the order directing the issuance of citation and remitted the matter back to the learned single judge for a detailed examination of the data before deciding on issuing the citation.

4. Appointment and Powers of Provisional Liquidator:
The learned single judge had appointed a provisional liquidator to seal the appellant's premises and seize their books. The court upheld the provisional liquidator's appointment but limited his powers. The premises would remain in the court's custody through the provisional liquidator, who would allow the appellant company to use them under specific conditions, including filing an affidavit of undertaking by the directors.

5. Sealing of Premises and Seizure of Books:
The court directed that the premises should not remain sealed, as it would hinder the appellant company's business operations. The provisional liquidator was instructed to inventory the assets in various offices and file it in court. The appellants were restrained from transferring or subletting the premises, which remained under the court's custody.

6. Recovery of Outstanding Amounts:
The court ordered that all recoveries due to the company would be made by the provisional liquidator, with the appellants restrained from recovering any such amounts. The appellants were required to file quarterly statements of accounts for all transactions. The court allowed the respondents to seek appropriate orders if they believed the appellants were engaging in harmful transactions.

7. Operation of Frozen Bank Accounts:
The court permitted the appellants to operate the previously frozen bank accounts, as the remaining balance was minimal. Any recoveries received by the appellants or direct payments from debtors were to be passed on to the provisional liquidator.

The appeal was disposed of with no costs, and a copy of the order was sent to the official liquidator.

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