2008 (6) TMI 355 - HC - Companies Law

Winding up - Powers of Liquidator - Company Application to order and direct the Official Liquidator to pay to the Applicants a sum of USD 3.5 million (approximately ₹ 18,25,00,000) together with interest at the rate of 12 per cent per annum as compensation/damages for the wrongful and illegal removal, misappropriation and/or theft of the Plant and Machinery belonging to the Applicants from the custody of the Official Liquidator at the factory site of Otoklin Plant and Equipments Ltd. at 4, Kandla Free Trade Zone, Gandhidham, Kutch, Gujarat Held that - There is no question of the applicant being allowed to circumvent the order by piecemeal or part adjudication as suggested by Mr. Diwan. If evidence has to be led by bringing in all parties and proving the case against each of them, then, obviously civil suit is the remedy. Even this application is summary remedy in the sense spoken of by brother Khanwilkar. Therefore and when the applicants have themselves impleaded all parties, then, this Court cannot by pass the competent Civil Court. More so, when some of the parties are not within the territorial jurisdiction of this Court. It is for this reason that this Court made the observations in para 13 and thereafter in 14 as well. In my view, without entering into any larger controversy and considering the above observations and peculiar facts of this case, it can safely be concluded that the present application is not maintainable.

Issues Involved:
1. Compensation/Damages for wrongful and illegal removal, misappropriation, and/or theft of plant and machinery.
2. Jurisdiction and maintainability of the Company Application.
3. Ownership and valuation of the missing goods.
4. Role and accountability of the Official Liquidator.

Detailed Analysis:

1. Compensation/Damages for wrongful and illegal removal, misappropriation, and/or theft of plant and machinery:
The applicants sought compensation of USD 3.5 million for the wrongful and illegal removal, misappropriation, and/or theft of their plant and machinery from the custody of the Official Liquidator at the factory site. The machinery was allegedly removed between 1-7-2003 and 9-8-2003, with the involvement of Centurion Bank and its dismantling agent, R.K. Steel Syndicate. The Official Liquidator was accused of negligence and collusion in this removal. The applicants argued that the removal and misappropriation of their machinery caused them significant losses, and they sought restitution based on the principle of compensation for the loss of their property.

2. Jurisdiction and maintainability of the Company Application:
The Official Liquidator contended that the application was misconceived and not maintainable in summary proceedings, as it involved complicated questions of fact and ownership disputes that required evidence. The Court agreed, noting that the Company Application was not the appropriate forum for resolving such disputes. The Court emphasized that the applicants needed to pursue substantive proceedings to establish ownership and quantify the value of the lost goods. The Court referred to an earlier order dated 21-6-2004, which directed the applicants to take recourse to appropriate proceedings against all involved parties, including Centurion Bank and R.K. Steel Syndicate.

3. Ownership and valuation of the missing goods:
The Court noted that both the applicants and Centurion Bank claimed ownership of the missing items, creating a dispute that could not be resolved in summary proceedings. The Court highlighted that the applicants needed to establish their ownership and the value of the lost goods through substantive proceedings. The Court referred to the applicants' failure to take timely action to claim the remaining 30% of the machinery at the site and their awareness of the proceedings initiated by Centurion Bank. The Court concluded that the applicants must lead evidence to prove their case, including the ownership and valuation of the goods.

4. Role and accountability of the Official Liquidator:
The applicants accused the Official Liquidator of gross negligence and dereliction of duty, arguing that the machinery was removed from his custody. The Court acknowledged that the Official Liquidator, as an officer of the Court, had a duty to safeguard the assets in his custody. However, the Court noted that the applicants needed to establish their claims through substantive proceedings, as the current application was not the appropriate forum for determining the liquidator's liability. The Court emphasized that the applicants must pursue a civil suit to address their grievances and seek compensation for the alleged losses.

Conclusion:
The Court dismissed the Company Application, concluding that it was not maintainable in summary proceedings. The applicants were directed to pursue substantive proceedings to establish ownership, quantify the value of the lost goods, and seek compensation for their losses. The Court emphasized the need for a thorough examination of the facts and evidence in a civil suit, rather than in summary proceedings before the Company Court.

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