2014 (12) TMI 1431 - HC - Companies Law

Recalling of an order of winding up - Non-payment of security expenses by the non-applicants - whether the avoidance of obligations imposed by this Court on the non-applicants as a condition for the recall of winding up order is justified or a plain obstructionist approach to the administration of justice and falling within the scope of contempt of court ? HELD THAT - There is an apparent breach of the directions of this Court passed on 5.8.2010 directing the non-applicants for payment of security expenses incurred on the protection of assets of the respondent Company to the Official Liquidator. The reply of the non-applicants to the Official Liquidator s application under Rule 9 Company Court Rules shows that the non-applicants have not indicated what the stolen material from its two properties was/ is. They admittedly have no specific reference of the quantities allegedly stolen from site. In-fact the non-applicants require this Court to direct the Official Liquidator to provide complete list of inventory which was prepared by the Official Liquidator on 7.2.2007 when physical possession of E-368 and A-1113 RIICO Industrial Area Bhiwadi (Alwar) was taken from RIICO. The non-applicants do not have copy of any inventory prepared by RIICO showing material on the properties in issue when possession was taken by RIICO in the year 2000. It is also extremely odd that the alleged reprehensible state of the properties of the company in liquidation purportedly found on the alleged visit of 1.6.2011 was never brought to the notice of this Court except over two years thereafter on the occasion of filing the reply to the application filed by the Official Liquidator for payment of security charges as directed by this Court under its order dated 5.8.2010. It is fundamental to a claim that one who alleges has to prove it. The issue of the Official Liquidator being responsible for the loss of the material of the company from its two sites is on the face of it sought to be generated on vague assertions without any semblance of specifics. And if indeed the Official Liquidator is found to be remiss at any stage in the discharge of his obligations he will be called for his explanation. For that however specifics have to be pleaded and proved. Not yet done. In the circumstances obtaining the non-applicants are in palpable non-compliance and consequent compounded contempt of the order of this Court passed on 5.8.2010 where-under while recalling the order of winding up at their instance this Court had directed that while the custody of the company property would remain in the hands of the Official Liquidator the non-applicants as the propounder of the application for recalling the winding up order dated 19.7.2002 would be liable to pay the charges for the security of the assets of the respondent company by way of reimbursement to the Official Liquidator. The application filed by the Official Liquidator under rule 9 of the Companies (Court) Rules 1959 is therefore liable to be allowed. The non-applicants are therefore liable to pay the outstanding amount to the Official Liquidator along- with interest @ 12% p.a from the time the amounts in issue became due till the date of payment - Further as the non-applicants are prima-facie in contempt of the order dated 5.8.2010 issue notice to the non-applicants as to why they should not be punished for the contempt of the order of this Court passed on 5.7.2010. List the matter on 19.12.2014. On that date the respondents to be present in person in Court.

Issues Involved:

1. Non-payment of security expenses by the non-applicants.
2. Status and compliance with BIFR's order.
3. Allegations against the Official Liquidator regarding asset protection.
4. Legal obligations following the recall of the winding-up order.
5. Contempt of court for non-compliance with court orders.

Detailed Analysis:

1. Non-payment of Security Expenses:
The core issue is the non-payment of security expenses by the non-applicants as per the court's order dated 5.8.2010. The non-applicants initially complied with the order, paying security expenses until October 2011, but failed to continue payments despite reminders. The outstanding amount now totals Rs. 7,43,744/-. The court had directed the non-applicants to bear these costs while the assets were under the Official Liquidator's custody. The non-applicants argued that the winding-up proceedings should be considered closed following the recall order, thus negating their obligation to continue payments. However, the court found this argument unpersuasive, emphasizing the binding nature of the order dated 5.8.2010, which was a condition for recalling the winding-up order.

2. Status and Compliance with BIFR's Order:
The BIFR had rejected reference No. 185/2002, declaring it non-maintainable under the Sick Industrial Companies (Special Provisions) Act, 1985. This development was not communicated to the Company Court or the Official Liquidator, as mandated by the court's order. The court emphasized the necessity for the non-applicants to update the court on the current status of any appeals or proceedings related to the BIFR's decision to facilitate further actions in the winding-up proceedings.

3. Allegations Against the Official Liquidator:
The non-applicants accused the Official Liquidator of failing to protect the company's assets, alleging theft and mismanagement of materials at the company's premises. They demanded detailed inventories and inspection reports from the Official Liquidator. However, the court found these allegations vague and unsupported by specific evidence. The court noted the absence of any prior complaints or applications regarding asset mismanagement, suggesting that the non-applicants were using these claims to avoid fulfilling their financial obligations.

4. Legal Obligations Following the Recall of the Winding-up Order:
The court clarified that the recall of the winding-up order did not absolve the non-applicants of their obligation to reimburse the Official Liquidator for security expenses. The recall order was conditional, requiring the non-applicants to bear these costs until the BIFR concluded the revival reference. The court highlighted the non-applicants' attempt to evade this obligation as an obstruction of justice, stressing the importance of adhering to court orders.

5. Contempt of Court for Non-compliance with Court Orders:
The court noted the non-applicants' non-compliance with the order dated 5.8.2010 as constituting contempt of court. It issued a notice to the non-applicants to explain why they should not be punished for contempt, given their failure to make the required payments and their apparent disregard for the court's directives. The court scheduled a hearing for 19.12.2014, requiring the non-applicants' personal presence to address this issue.

In conclusion, the court upheld the Official Liquidator's application, directing the non-applicants to pay the outstanding security expenses with interest and addressing the potential contempt of court due to their non-compliance with the order dated 5.8.2010.

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