2019 (9) TMI 1535 - HC - Companies Law

Winding of company - Appointment of Official Liquidator - notice not given to the company and give a reasonable opportunity to it to make its representations - appellant is not afforded any opportunity of hearing, nor the reasons are recorded - HELD THAT - In the case at hand as evident from the impugned order that no application seems to have been filed by the petitioner for appointment of Liquidator. It is merely on information that the Liquidator has not been appointed, learned Company Judge has directed for appointment of Liquidator. Sub-section (2) of Section 450 of Act, 1956 no doubt does empower the Company Judge to appoint a provisional liquidator even without issuing notice to the Company Concerned, however, for that incumbent it is for the Company Judge to have recorded reasons which are conspicuously absent in the case at hand. Further contention on behalf of respondent that the procedure prescribed under section 450 of 1956 Act and the Rules applies at initial stage of proceedings is taken note of and rejected at the outset. Fair reading of section 450 of 1956 Act does not contemplate that pendency of the petition under sections 433 and 434 of 1956 Act, the procedure is to be given a go bye - when the impugned order dated 8.7.2019 is tested on the anvil of the stipulations contained under section 450 of the Act, 1956 the same is not sustainable in the eyes of law, accordingly set aside. Appeal allowed.

Summary

Issues:
1. Validity of the order passed under Section 448 of the Companies Act, 1956.
2. Compliance with the procedure under Section 450 of the Companies Act, 1956 for the appointment of a liquidator.

Analysis:

Issue 1: Validity of the order passed under Section 448 of the Companies Act, 1956
The judgment concerns an appeal under section 10(f) read with section 483 of the Companies Act, 1956 and section 303 of the Companies Act, 2013 against an order dated 8.7.2019 passed in Company Petition No. 1/2012. The order directed the appointment of an Official Liquidator (OL) in accordance with Section 448 of the Companies Act, 1956. The appellant challenged the order, arguing that the procedure prescribed under Section 450 of the Act was not followed. The appellant contended that the appointment of a liquidator was unwarranted as there was no complaint of mismanagement or insolvency. The judgment highlighted the provisions of Section 448 regarding the appointment of an Official Liquidator and the powers and remuneration associated with the position.

Issue 2: Compliance with the procedure under Section 450 of the Companies Act, 1956 for the appointment of a liquidator
The appellant raised concerns regarding the lack of adherence to the procedure outlined in Section 450 of the Companies Act, 1956 for appointing a provisional liquidator. The appellant argued that they were not given an opportunity to be heard, as mandated by sub-section (2) of Section 450. The judgment referenced a previous case to emphasize that the appointment of a provisional liquidator is a drastic measure that should only be taken in special circumstances or cases of urgency. The judgment highlighted the necessity for the court to be satisfied of the absolute necessity of such an appointment before taking such a drastic step. It was noted that the impugned order lacked reasons for dispensing with the notice to the company concerned, as required by the law.

In conclusion, the judgment set aside the impugned order dated 8.7.2019 as it did not comply with the stipulations contained under section 450 of the Companies Act, 1956. The appeal was allowed, and no costs were awarded in the matter.