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2013 (1) TMI 667 - HC - Companies LawWinding up petition - amount lying in the account of Defaulters Committee whether be remitted to the OL in the winding up proceedings or not? - Held that - Although the company was expelled as a trading member on 27th July 2009 from NSEIL, prior to the order of winding up, resulting in the deposit made by it with NSEIL vesting in the Defaulters Committee, the claims of the investors had not been met out of that fund by the Defaulters Committee. It, in fact, set aside Rs. 83,91,000 pursuant to the letter written to the NSEIL by the OL. It has met the claims of 68 investors in part out of IPFT. Therefore, the deposit made by the company with NSEIL, which constitutes its property under Section 456 (1) of the Act, remains intact. With the process of liquidation of the company already in progress, the scheme of Section 456 of the Act will have to be followed. The inevitable result would be that wherever any property of the company is available, the possession of such property would have to come to the PL appointed by the Court. Investors, who are before the Defaulters Committee, will now have the option of pursuing their claims before the OL in accordance with law. Consequently, the plea of NSEIL that its Defaulters Committee should be allowed to continue to be in possession and control of the deposits of Rs. 1.10 crores lying with it to the credit of the company cannot be upheld - thus directing NSEIL to remit to the OL the sum of Rs. 1.10 crores together with interest, if any accrued thereon within a period of four weeks from today.
Issues:
1. Direction to deposit sum with Official Liquidator under Companies Act, 1956 2. Dispute over control of funds between National Stock Exchange of India Ltd. (NSEIL) and Official Liquidator (OL) 3. Interpretation of Section 456 of the Companies Act regarding custody of company's property 4. Application of NSEIL byelaws and rules in relation to winding up proceedings Analysis: 1. The first issue revolves around an application by the Official Liquidator under Section 446 of the Companies Act, 1956, seeking a direction for the National Stock Exchange of India Ltd. (NSEIL) to deposit a specific sum with the Official Liquidator. This application was accompanied by another application by NSEIL seeking permission for its Defaulters' Committee to handle the funds in question. 2. The dispute arises from the winding up of a company and the subsequent expulsion of the company from NSEIL membership. NSEIL contends that the funds in question are subject to its byelaws, rules, and regulations, and should be managed by its Defaulters' Committee as per the relevant provisions. 3. The interpretation of Section 456 of the Companies Act is crucial in determining the custody of the company's property. The Official Liquidator argues that upon the passing of a winding up order, all claims and assets are to be managed by the Official Liquidator, as specified in Sections 529, 529A, and 530 of the Act. 4. The court's analysis delves into the interplay between NSEIL's byelaws, rules, and regulations, and the provisions of the Companies Act. While NSEIL asserts its right to control the funds through its Defaulters' Committee, the court emphasizes that upon the initiation of liquidation proceedings, the Official Liquidator assumes control over the company's assets, including the funds deposited with NSEIL. 5. The judgment clarifies that the funds deposited by the company with NSEIL constitute company property, which falls under the jurisdiction of the Official Liquidator once a winding up order is issued. The court rejects NSEIL's argument that its Defaulters' Committee should retain control over the funds, directing NSEIL to remit the specified amount to the Official Liquidator within a stipulated timeframe. 6. Ultimately, the court allows the Official Liquidator's application and dismisses NSEIL's application, affirming the Official Liquidator's authority over the company's assets during the liquidation process, in accordance with the provisions of the Companies Act, 1956.
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