2022 (3) TMI 513 - HC - Companies Law

Maintainability of instant suit - abatement - restraint from carrying out the valuation and sale of the concerned goods - HELD THAT - Upon a plain reading of Order 22 Rule 8 it is patently clear that in case of a company that goes into liquidation, the suit shall not abate unless the liquidator declines to pursue the said suit. The other conditions prescribed in Rule 1 with regard to security for costs and the procedure enumerated in Rule 8 Clause 2 are in my view not relevant for the present lis. What is to be noted in the present case is that the liquidator was appearing before the Receiver with regard to the sale of ten thousand metric tons of Met Coke and had also appeared before the Court, that is, the Single Bench Division Bench of Hon ble Calcutta High Court, with regard to the sale of the coke. Undoubtedly, the liquidator even after having assured the High Court that steps would be taken for impleading himself into the litigation failed to do so. Such failure may amount to a lackadaisical approach of the liquidator but cannot under any circumstances be seen as a positive assertion to decline to continue the suit. Rule 9 under Order 22, clearly allows the liquidator and/or the company to apply for setting aside of the abatement or the dismissal of the suit under conditions provided in the said rule. In the present case there has been no order of the Court seeking an explanation from the liquidator or any order of Court seeking a security for the costs incurred by the defendants. Furthermore, it is very apparent that the liquidator has been acting in the suit with reference to the movable suit property in question and has taken all necessary steps therein - it is crystal clear that the liquidator is fighting tooth and nail with regard to this litigation and a mere delay in making an application for substituting his name in the records of the suit would not in any manner lead to an abatement of the suit. Application seeking abatement of the suit is dismissed.

Issues Involved:
1. Abatement of the suit due to the plaintiff's liquidation.
2. Amendment of the plaint to include the liquidator as a party.
3. Sale of 10,000 Metric Tons of Met Coke.

Detailed Analysis:

Issue 1: Abatement of the suit due to the plaintiff's liquidation
The primary issue revolves around whether the suit should abate due to the plaintiff company being declared insolvent and going into liquidation. The defendant no. 2 argued that the suit has abated as the liquidator has declined, refused, and/or neglected to pursue the litigation, citing Order 22 Rule 8 of the Civil Procedure Code. The defendant no. 2 sought the dismissal of the suit and possession of the Met Coke.

The court, however, noted that Order 22 Rule 8 clearly states that a suit shall not abate upon the insolvency of the plaintiff unless the liquidator declines to continue the suit. The court observed that the liquidator had been actively participating in the suit, including attending meetings with the Special Officer and appearing before the court. Therefore, the court concluded that the liquidator's failure to formally apply for substitution in the suit records did not amount to a refusal to continue the suit. The court emphasized that the liquidator's actions demonstrated a clear intent to protect the plaintiff's interests, thus the suit could not be considered abated.

Issue 2: Amendment of the plaint to include the liquidator as a party
The plaintiff sought to amend the plaint to bring the liquidator on record to represent the company in liquidation. The court acknowledged that the liquidator had assured the court of such an application, albeit belatedly. Given that the liquidator had been actively involved in the proceedings, the court found it appropriate to allow the amendment of the plaint to formally include the liquidator. The court noted that this was a technical requirement and did not impact the substance of the liquidator’s involvement in the case.

Issue 3: Sale of 10,000 Metric Tons of Met Coke
The court addressed the ongoing issue of the sale of 10,000 Metric Tons of Met Coke, which had been subject to various orders and appeals. Initially, the court had allowed the sale to secure the claim of the defendant no. 2, appointing a Special Officer to oversee the process. The Supreme Court later directed a fresh valuation and public notice for the sale, specifying that the reserve price should be exclusive of taxes.

The plaintiff's liquidation complicated the sale process, with the liquidator indicating an inability to share costs due to lack of funds. Despite these challenges, the court directed the Receiver to proceed with the sale in accordance with the Supreme Court's guidelines, dismissing the defendant no. 2's application for abatement and allowing the plaintiff's application for amendment.

Conclusion:
The court dismissed the application seeking abatement of the suit and allowed the amendment to include the liquidator in the records. It directed the Receiver to continue with the sale of the Met Coke as per the Supreme Court's instructions, ensuring that the liquidation status of the plaintiff did not hinder the ongoing litigation and sale process. The court's decision emphasized the active role of the liquidator and the importance of procedural compliance in insolvency cases.

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