2004 (9) TMI 394 - HC - Companies Law

Issues Involved:
1. Appointment of Provisional Liquidator and status of winding-up proceedings.
2. Transfer of cases and execution proceedings from Consumer Disputes Redressal Forums to the High Court.
3. Application of Section 446 of the Companies Act, 1956.
4. Nature of proceedings under Section 27 of the Consumer Protection Act, 1986.
5. Discretionary power of the court to stay proceedings.

Detailed Analysis:

1. Appointment of Provisional Liquidator and Status of Winding-Up Proceedings:
In CP No. 323/99, the Provisional Liquidator was appointed on 9th November 2000, and the petition was admitted to hearing. The Provisional Liquidator was tasked with taking possession of the assets, records, and books of account of the respondent company. The Provisional Liquidator has been managing the liquidation affairs since then, although final winding-up orders have not been passed. The ex-Directors have recorded statements under Rule 130 of the Companies (Court) Rules, 1959, and filed statements of affairs, which have certain deficiencies that they are required to rectify.

2. Transfer of Cases and Execution Proceedings from Consumer Disputes Redressal Forums to the High Court:
Several applications were filed by ex-Directors of the company in provisional liquidation, seeking the transfer of cases and execution proceedings from the Consumer Disputes Redressal Forums in Ghaziabad and New Delhi to the High Court. These cases involved claims by investors for refunds of fixed deposits with interest, which were allowed by the Consumer Forums, and subsequent execution proceedings where non-bailable warrants were issued against the Managing Director and ex-Directors for non-payment.

3. Application of Section 446 of the Companies Act, 1956:
Section 446(1) of the Companies Act, 1956, states that when a winding-up order has been made or the Official Liquidator appointed as provisional liquidator, no suit or other legal proceeding shall be commenced or continued against the company except with the leave of the Tribunal. This provision aims to centralize all legal proceedings against the company in the Company Court, ensuring that the Official Liquidator, who represents the company, manages all such matters.

4. Nature of Proceedings under Section 27 of the Consumer Protection Act, 1986:
Section 27 of the Consumer Protection Act, 1986, provides for penalties, including imprisonment and fines, for failure to comply with orders of the Consumer Forums. The court noted that these proceedings are in the nature of criminal proceedings but are related to the assets of the company. The court distinguished these proceedings from other criminal proceedings, emphasizing that the liability arises from the company's failure to comply with orders, and the Directors are held responsible due to the company's inability to be imprisoned.

5. Discretionary Power of the Court to Stay Proceedings:
The court highlighted that while Section 446(1) of the Companies Act allows for the stay of proceedings, this power is discretionary. The Supreme Court in "Official Liquidator v. Dharti Dhan (P.) Ltd." held that the power to stay is discretionary. However, in the present case, the court found that the proceedings under Section 27 of the Consumer Protection Act are related to the assets of the company and thus fall within the ambit of Section 446(1).

Conclusion:
The court concluded that the proceedings under Section 27 of the Consumer Protection Act are covered by Section 446 of the Companies Act. Therefore, such proceedings cannot continue except with the leave of the High Court. The court ordered the transfer of the execution proceedings under Section 27 of the Consumer Protection Act to the High Court. The registry was directed to request the District Consumer Forums in New Delhi and Ghaziabad to transmit the records of those proceedings to the High Court. The applications were accordingly disposed of.

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