2004 (5) TMI 318 - HC - Companies Law

Summary

Issues Involved:
1. Non-compliance with Section 488 of the Companies Act, 1956.
2. Compliance with Sections 500 to 509 of the Companies Act, 1956.
3. Appointment of a liquidator under Section 515(1) of the Companies Act, 1956.
4. Annulment of asset transfers made by directors post-winding up.
5. Prevention of asset transfers under Section 518(1)(b) of the Companies Act, 1956.

Detailed Analysis:

1. Non-compliance with Section 488 of the Companies Act, 1956:
The applicant, a creditor of the company, alleged that the company and its directors failed to comply with Section 488 of the Companies Act, 1956. The court examined whether the declaration of solvency was made and delivered in accordance with Section 488(2). The declaration dated 5-6-2003 was submitted to the Registrar of Companies only on 29-7-2003, which did not meet the requirement of being delivered before the date of the resolution (3-7-2003). Additionally, the declaration was not accompanied by the auditor's report as required by Section 488(2)(b). The court concluded that these failures rendered the declaration of no effect, resulting in the winding up being classified as "creditors' voluntary winding up."

2. Compliance with Sections 500 to 509 of the Companies Act, 1956:
The applicant sought the court's intervention to ensure compliance with Sections 500 to 509, particularly Sections 500(1) and (2). The court found that due to non-compliance with Section 488, the winding up should be treated as a creditors' voluntary winding up, necessitating adherence to the relevant provisions under Sections 500 to 509.

3. Appointment of a Liquidator under Section 515(1) of the Companies Act, 1956:
The applicant requested the appointment of a professional chartered accountant or another person as the liquidator. The court appointed the Official Liquidator attached to the High Court as the liquidator of the company with all the powers available under the Act. Additionally, Shri Ravindra N. Vepari, Chartered Accountant, was appointed to examine and verify the company's accounts and transactions during the voluntary winding up.

4. Annulment of Asset Transfers Made by Directors Post-Winding Up:
The applicant sought to annul any asset transfers made by the directors after the commencement of winding up. The court's appointment of the Official Liquidator implicitly addressed this issue, as the liquidator would oversee and rectify any improper transactions.

5. Prevention of Asset Transfers Under Section 518(1)(b) of the Companies Act, 1956:
The applicant aimed to prevent the company from transferring or disposing of any assets. The court's decision to appoint the Official Liquidator ensured that no unauthorized asset transfers would occur, safeguarding the creditors' interests.

Conclusion:
The court concluded that there was a failure to comply with the mandatory requirements of Section 488(2) of the Companies Act, 1956, resulting in the winding up being classified as "creditors' voluntary winding up." The Official Liquidator was appointed to oversee the liquidation process, and an independent Chartered Accountant was tasked with verifying the company's accounts. The court rejected the request to stay the operation of the order, emphasizing the need for compliance with statutory provisions.