2001 (3) TMI 958 - HC - Companies Law

Winding up - Appointment and powers of provisional liquidator, Avoidance of certain attachments, executions etc.

Issues Involved:
1. Non-payment of debt by the respondent-company.
2. Appointment of provisional liquidator for the respondent-company.
3. Validity of orders passed under the Punjab Co-operative Societies Act, 1961.
4. Conflict between the Punjab Co-operative Societies Act and the Companies Act, 1956.
5. Equitable distribution of assets among creditors.

Detailed Analysis:

1. Non-payment of Debt by the Respondent-Company:
The petitioner, engaged in manufacturing watches and jewelry, supplied watches to the respondent-company, which failed to make substantial payments. Despite statutory notices, the respondent-company did not respond, leading to the filing of the winding-up petition under section 439 of the Companies Act, 1956.

2. Appointment of Provisional Liquidator for the Respondent-Company:
The court noted that the respondent-company failed to file any written statement despite multiple opportunities. The provisional liquidator of Punwire requested to file a written statement, but it was eventually filed by an Assistant Manager of the respondent-company. The court observed that the respondent-company was not effectively managed, with directors absconding or resigning, and assets being mismanaged or taken away. Consequently, the court appointed the official liquidator as the provisional liquidator to manage the respondent-company's affairs during the pendency of the winding-up petition.

3. Validity of Orders Passed Under the Punjab Co-operative Societies Act, 1961:
The Registrar, Co-operative Societies, Punjab passed orders attaching the properties of the respondent-company and appointing receivers for the management of these properties. The court examined the provisions of sections 55 and 56 of the Punjab Co-operative Societies Act, 1961, and concluded that these orders were void as they were passed without the leave of the court after the commencement of winding-up proceedings.

4. Conflict Between the Punjab Co-operative Societies Act and the Companies Act, 1956:
The court held that the provisions of the Companies Act, 1956, which are referable to entry 43 of List-I (Union List) of the Seventh Schedule of the Constitution, have overriding effect over the Punjab Co-operative Societies Act, 1961, a state legislation referable to entry 32 of List-II (State List). The court emphasized that any attachment of properties after the commencement of winding-up proceedings without the court's leave is void under section 537 of the Companies Act.

5. Equitable Distribution of Assets Among Creditors:
The court noted that there were multiple winding-up petitions filed by unsecured creditors against the respondent-company. It was observed that the appointment of receivers by the Registrar, Co-operative Societies, Punjab, was to the exclusion of other creditors, which was contrary to the spirit of the Companies Act. The court stressed the need for equitable distribution of assets among all creditors, both secured and unsecured.

Conclusion:
1. The court allowed C.P. No. 4 of 2001, quashing the orders of attachment and appointment of receivers passed by the Registrar and Deputy Registrar, Co-operative Societies, Punjab.
2. The winding-up petition (C.P. No. 47 of 2000) was admitted, and its admission was ordered to be published.
3. The official liquidator was appointed as the provisional liquidator of the respondent-company during the pendency of the winding-up petition.
4. The provisional liquidator was directed to manage the respondent-company effectively and file a written statement by the specified date.

The court deferred further proceedings to allow the respondent-company to file an effective reply and demonstrate its ability to discharge its liabilities.

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