2009 (8) TMI 697 - HC - Companies Law

Appointment of Official Liquidator, High Court, Chennai as the provisional liquidator directing him to take charge of the assets of the respondent-company - winding up - Held that - Before invoking the powers of the company court under section 450 of the Companies Act for appointment of the provisional liquidator, the reasons and circumstances which warrant for making such appointment is a must. Under such circumstances, the Court is of the opinion that the orders cannot be sustained. Therefore, the appeals are allowed and the orders passed in C.P. No. 232 of 1998, dated 22-4-2009 and C.P. No. 186 of 1997, dated 21-4-2009, are set aside. The matters are remitted to the company court to consider the same on merits of the matters individually.

Summary

Issues:
1. Appointment of provisional liquidator in company petitions.
2. Consideration of circumstances for appointing provisional liquidator.
3. Compliance with Companies Act, section 450 for appointing provisional liquidator.

Analysis:

Issue 1: Appointment of provisional liquidator in company petitions
The judgment dealt with two appeals arising from a Single Judge's order appointing the Official Liquidator as the provisional liquidator in Company Petition Nos. 232 of 1998 and 186 of 1997. The Division Bench upheld the order for publication, indicating a prima facie case for liquidation. The debtor appealed to the Apex Court, resulting in dismissal of one petition and a directive to decide the other petition on its merits. Subsequently, the Single Judge appointed the Official Liquidator as the provisional liquidator, leading to the appeals in question.

Issue 2: Consideration of circumstances for appointing provisional liquidator
The appellant argued against the appointment of the provisional liquidator, citing the company's ongoing operations and settlement of debts, questioning the necessity for such an appointment. In contrast, the respondent contended that the earlier orders, including those upheld by the Division Bench and Apex Court, justified the appointment based on a prima facie case for liquidation. The Court emphasized the need for a speaking order and consideration of circumstances before appointing a provisional liquidator, especially in light of the Apex Court's directive to proceed uninfluenced by prior observations.

Issue 3: Compliance with Companies Act, section 450 for appointing provisional liquidator
The Court highlighted the importance of satisfying the circumstances warranting the appointment of a provisional liquidator under section 450 of the Companies Act. It noted that such an appointment could significantly impact the company's administration and management, necessitating a clear rationale for the decision. The judgment concluded by allowing the appeals, setting aside the orders for appointing the provisional liquidator, and remitting the matters to the company court for individual merit-based consideration, emphasizing the need for compliance with legal provisions.

This detailed analysis of the judgment underscores the significance of considering circumstances, complying with legal provisions, and issuing speaking orders in matters related to the appointment of provisional liquidators in company petitions.