1996 (5) TMI 378 - HC - Companies Law

Summary

Issues Involved:
1. Appointment of a receiver over the properties of a company in liquidation.
2. Rights of secured creditors in the context of winding up proceedings.
3. Interaction between the official liquidator and the receiver.
4. Applicability of legal precedents and statutory provisions.

Issue-wise Detailed Analysis:

1. Appointment of a Receiver over the Properties of a Company in Liquidation:
The primary question before the court was whether a receiver can be appointed over the properties of a company on which secured creditors have first charge, especially when the company is in winding up and the official liquidator has already taken possession of the same. The court concluded that it would not be appropriate to appoint a receiver in such circumstances. The official liquidator, appointed by the court, already has similar functions to a receiver, with additional responsibilities under the Companies Act, 1956. The court emphasized that the intention of the statutory provisions is to avoid competition between a receiver and an official liquidator, and preference should be given to the official liquidator to continue managing the assets.

2. Rights of Secured Creditors in the Context of Winding Up Proceedings:
The applicants, as secured creditors, argued that they have the right to remain outside the winding up proceedings and to file a suit for recovery of their dues and execute the decree by selling the charged properties, with the leave of the court under section 537 of the Companies Act, 1956. They contended that their application under section 453 for the appointment of a receiver should be granted as a matter of course to safeguard their interests. However, the court noted that the law has evolved to recognize that the official liquidator, as a representative of the workmen, has a pari passu charge on the properties of the company, even if the secured creditor opts to realize its security by standing outside the winding up. Therefore, the property cannot be sold outright ignoring the official liquidator or the court.

3. Interaction between the Official Liquidator and the Receiver:
The court addressed the contention that a receiver could still be appointed with the leave of the court, even when an official liquidator is in place. The court referred to various legal precedents and statutory provisions, including section 453 of the Companies Act, which states that a receiver shall not be appointed for the assets in the hands of a liquidator except by, or with the leave of, the court. However, the court found that appointing a receiver to oust the possession of the official liquidator would not be appropriate, as it would lead to unnecessary competition and duplication of roles. The court cited the decision of the Calcutta High Court in Kharkharee Collieries Ltd., which held that the assets of the company, though subject to a charge, must be managed by the official liquidator to avoid competition between a receiver and a liquidator.

4. Applicability of Legal Precedents and Statutory Provisions:
The court considered various legal precedents cited by the applicants, including the Supreme Court decision in M.K. Ranganathan v. Government of Madras and the Karnataka High Court decision in International Coach Builders Ltd. (In Liquidation) v. Karnataka State Financial Corporation. However, the court distinguished these cases based on the specific provisions of the Companies Act, 1956, and the facts of the present case. The court also referred to English law principles and decisions, such as Potters Oils Limited and Halsbury's Laws of England, but found them not directly applicable due to the specific statutory framework in India. The court emphasized that the official liquidator's role and responsibilities under the Companies Act are designed to protect the interests of all creditors, including secured creditors, and to manage the assets of the company efficiently.

Conclusion:
The court concluded that it would be neither expedient nor proper to grant leave for the appointment of a receiver under section 453 of the Companies Act, 1956, in the present case. The official liquidator, stationed close to the factory site, is better positioned to manage the assets of the company in liquidation, and the interests of the secured creditors can be safeguarded through joint efforts with the official liquidator. Consequently, the application for the appointment of a receiver was rejected.