2014 (8) TMI 1174 - HC - Companies Law

Winding up - working of the office of the Official Liquidator completely collapsed - HELD THAT - Assistant Official Liquidators who are qualified Advocates hardly attended to the matters in Court. The Advocates appearing before the Court repeatedly made a grievance that the entire office of the Official Liquidator would be deserted by 5.30 p.m. and no one would be available to assist them. Advocates briefed in the matters to represent the Official Liquidator also complained that they were receiving briefs at 10.30 in the morning on the day the matter was placed for hearing and no instructions would be forthcoming from the office of the Official Liquidator. The above pathetic functioning of the working in the office of the Official Liquidator had to be brought to the notice of the Learned Chief Justice who was pleased to immediately appoint a Committee to look into and supervise the working of the office of the Official Liquidator. During the initial meetings of the Committee even the Regional Director was requested to remain present and was apprised of the above state of affairs. Though with the appointment of Mr. S. Ramakantha there seems to be some improvement the office of the Official Liquidator needs a complete revamp. Officers like Mr. Reddy and Mr. Gupta are required to be forthwith transferred. The Ministry of Company and Corporate Affiars New Delhi should ensure that the Officers who were appointed as Deputy and Assistant Official Liquidators are willing workers and well versed with the provisions of the Companies Act. In view thereof a copy of this order shall immediately be forwarded to the Secretary Ministry of Company and Corporate Affairs New Delhi for immediate action. Mr. Reddy is called upon to show cause as to why except for writing two letters to the Directors of the Company Amar Remedies Ltd. calling upon them to submit the statutory records no action was taken by his office pursuant to his appointment as the provisional Liquidator of the Company by an order dated 31st July 2013. Mr. Reddy shall give his explanation on affidavit and appear before this Court on 12th September 2014.

Issues:
1. Winding up petitions filed against a company seeking winding up.
2. Company's financial status and inability to pay debts.
3. Appointment of Official Liquidator and directions for winding up.
4. Official Liquidator's failure to take necessary actions.
5. Need for revamping the office of the Official Liquidator.

Issue 1: Winding up petitions filed against a company seeking winding up.
The petitioners filed seventeen company petitions seeking the winding up of the respondent company, M/s. Amar Remedies Limited. The company did not set up any defense on merits and the petitions were admitted by the court. The company's assets were valued at Rs. 100-125 crores, with claims from secured creditors amounting to approximately Rs. 450 crores and claims from petitioners around Rs. 60 crores. The company was found to be commercially insolvent, leading to the court allowing the winding up petitions.

Issue 2: Company's financial status and inability to pay debts.
The court noted that the company was unable to pay its debts and was commercially insolvent. This led to the decision to wind up the company, with the Official Liquidator appointed to take charge of all assets, properties, and business operations of the company under the Companies Act, 1956. The court highlighted the company's failure to pay workers' wages and statutory dues, further indicating its financial distress.

Issue 3: Appointment of Official Liquidator and directions for winding up.
The court ordered the winding up of the company, M/s. Amar Remedies Ltd., and appointed the Official Liquidator to oversee the process. The Managing Director of the company undertook to hand over statutory records to the Official Liquidator and ensure compliance with the winding up order. The court emphasized the importance of following through with the winding up process to address the company's insolvency effectively.

Issue 4: Official Liquidator's failure to take necessary actions.
The court expressed dissatisfaction with the previous Official Liquidator's handling of the case, citing a lack of proactive steps to take charge of the company's assets and records. The court criticized the failure to comply with court orders and highlighted instances of incompetence among Deputy and Assistant Official Liquidators. The court called for immediate action to revamp the Official Liquidator's office and ensure competent and diligent personnel are appointed.

Issue 5: Need for revamping the office of the Official Liquidator.
The court highlighted systemic issues within the office of the Official Liquidator, including a collapse in operations, lack of knowledge among staff regarding legal provisions, and delays in handling cases. The court emphasized the need for a complete overhaul of the office, including the transfer of ineffective officers and the appointment of competent personnel well-versed in the Companies Act. The court directed the Ministry of Company and Corporate Affairs to take immediate action based on the court's observations.

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