2004 (9) TMI 398 - HC - Companies Law

Summary

Issues:
- Application for directions to Official Liquidator for payment of arrears of property tax and electricity charges.
- Liability of Official Liquidator for payment of dues post asset sale.
- Interpretation of sale terms and encumbrances.
- Legal authority and limitations of Official Liquidator in asset realization.

Analysis:

1. Application for directions to Official Liquidator for payment of arrears:
The applicant, a purchaser of assets of a company under liquidation, sought directions for the Official Liquidator to pay arrears of property tax and electricity charges. The applicant argued that the sale was free from encumbrances, as per the sale deed executed by the secured creditor, and thus, the Official Liquidator should clear the outstanding dues. However, the Official Liquidator contended that they were not aware of these dues and that such liabilities should be claimed by the concerned entities in the winding-up proceedings.

2. Liability of Official Liquidator post asset sale:
The Official Liquidator maintained that they cannot undertake to discharge the company's loans and liabilities post asset sale. All liabilities are to be settled as per statutory provisions and the Companies Act's order of priority. The Official Liquidator's role is limited to realizing assets for distribution among creditors and stakeholders. The law prohibits the Official Liquidator from giving assurances to purchasers regarding liabilities of the company being taken care of post-sale.

3. Interpretation of sale terms and encumbrances:
The sale terms indicated that the property was free from encumbrances, as per the sale deed executed by the secured creditor. However, the Corporation executing the sale deed clarified that the sale was on an "as is where is" basis, without assurances for clearing charges or arrears. The Court analyzed the terms and concluded that the liability cannot be transferred to the Official Liquidator post-sale.

4. Legal authority and limitations of Official Liquidator:
The Court emphasized that the Official Liquidator's role is restricted to asset realization and distribution as per statutory provisions. The Official Liquidator cannot be directed to make preferential payments to specific entities from sale proceeds. The Court dismissed the application, stating that the applicant should enforce any rights under the sale deed against the secured creditor, rather than seeking payment from the Official Liquidator.

In conclusion, the judgment clarifies the limited role and responsibilities of the Official Liquidator in asset realization and distribution, emphasizing adherence to statutory provisions and the Companies Act's order of priority in settling liabilities of a company under liquidation.