1998 (8) TMI 446 - HC - Companies Law

Summary

Issues Involved:
1. Lack of notice and hearing before the appointment of the provisional liquidator.
2. Justification for the appointment of the provisional liquidator.
3. Impact of the provisional liquidator on the company's ability to approach other forums like BIFR.
4. Equitability and necessity of continuing the provisional liquidator.

Detailed Analysis:

Issue 1: Lack of Notice and Hearing
The applicant argued that they had no notice and were not heard before the order dated 11-6-1998 was passed, appointing the provisional liquidator. However, the court found this contention devoid of merit. The record showed that notice was issued along with C.P. No. 196 of 1997, and despite several opportunities, no reply was filed by the respondent-company. The requirements of section 450 of the Companies Act were fully satisfied, and the provisional liquidator was appointed justly. The court also noted that the applicant had been heard at length and had placed all desired documents on record.

Issue 2: Justification for Appointment of Provisional Liquidator
The applicant contended that there were no serious allegations or grounds for the appointment. The court, however, found that sufficient material and reasons existed, which remained unrefuted at the time of the order. The company's conduct and the reasons recorded in C.P. No. 196 of 1997 justified the appointment. The review application failed to present any new facts or grounds that could persuade the court to recall the order. The affidavit filed by the company's manager was found to be factually incorrect and intended to withhold correct facts. The official liquidator's affidavit revealed that the company's units were closed and heavily indebted, further justifying the appointment.

Issue 3: Impact on Approaching Other Forums
The applicant argued that the appointment of the provisional liquidator would obstruct the company from approaching forums like BIFR. The court dismissed this contention as misconceived, noting that no attempt was made by the company to pursue remedies before the BIFR. The court provided directions to the provisional liquidator to ensure that the company could still pursue its matters before competent forums, including BIFR.

Issue 4: Equitability and Necessity of Continuing the Provisional Liquidator
The court found it just and equitable to continue the provisional liquidator to protect the interests of creditors and prevent the pilferage and disposal of the company's limited assets. The company had no free assets, was heavily indebted, and had no viable scheme for revival. The court emphasized that the appointment of a provisional liquidator is a serious step but necessary in this case to protect the interests of all concerned. The court provided detailed directions to the provisional liquidator to prepare inventories and reports, and to assist the company in pursuing its matters before other forums.

Conclusion:
The review application was dismissed. The court issued specific directions to the provisional liquidator to ensure transparency and assist the company in pursuing its matters before competent forums. The appointment of the provisional liquidator was found to be justified and necessary to protect the interests of creditors and prevent asset disposal.