1935 (12) TMI 16 - HC - Companies Law

Summary

Issues Involved:
1. Removal of Official Liquidators
2. Failure to Open Bank Account
3. Misuse of Borrowed Funds
4. Maintenance of Suspense Account
5. Execution of Power of Attorney
6. Unauthorised Travelling Allowance and Halting Charges
7. Transfer of Winding-Up Proceedings to District Court of Pabna

Issue-Wise Detailed Analysis:

1. Removal of Official Liquidators:
The applicant, a creditor of the company in liquidation, sought the removal of the Official Liquidators and the appointment of competent persons in their place. The court referred to the principles set out in the case "In re Adam Eyton Ld., Ex parte Charlesworth," emphasizing that removal should be considered if it is against the interest of the liquidation. The court concluded that while the liquidators had been negligent, their removal was not in the "real, substantial, honest interest of the liquidation" due to their extensive knowledge and experience with the company's assets.

2. Failure to Open Bank Account:
The liquidators admitted to collecting approximately Rs. 1,40,000 without opening a bank account, contrary to the court's orders and the rules under the Indian Companies Act. The court highlighted the importance of maintaining a banking account as an essential part of liquidation. The liquidators' failure was attributed to the immediate payment of dues and the absence of opposition during the passing of accounts. The court directed that a banking account be opened immediately with the Imperial Bank of India.

3. Misuse of Borrowed Funds:
The petitioners alleged that the liquidators failed to use borrowed funds for their sanctioned purposes. The liquidators contended that the funds were used for various expenses, including government revenue and legal charges. The court found discrepancies in the liquidators' statements regarding the amounts borrowed and their purposes. However, it acknowledged that the institution of mortgage suits was only a small part of the expenses and that the liquidators might have used the funds for other sanctioned purposes.

4. Maintenance of Suspense Account:
The petitioners objected to the large sums maintained in the Suspense Account. The liquidators argued that these sums were pending adjustment for various claims. The court noted the necessity of scrutinizing these accounts to ensure proper adjustments and directed the liquidators to notify the petitioners of the filing of accounts for scrutiny.

5. Execution of Power of Attorney:
One liquidator executed a power-of-attorney in favor of the other and spent most of his time in Calcutta, allegedly neglecting the company's affairs. The liquidator justified his actions by citing illness and the cost of travel to Pabna. The court recognized the need for one liquidator to be in Calcutta due to ongoing litigation but emphasized the importance of proper management.

6. Unauthorised Travelling Allowance and Halting Charges:
The liquidators charged travelling and halting allowances without court sanction. They relied on a judgment allowing such expenses, but no copy was produced. The court noted that these charges should not be made without prior sanction and directed compliance with this requirement.

7. Transfer of Winding-Up Proceedings to District Court of Pabna:
The applicant requested the transfer of winding-up proceedings to the District Court of Pabna. The court found no good purpose would be served by such an order and denied the request.

Conclusion:
The court directed the liquidators to open a banking account immediately and notify the petitioners of the filing of accounts for scrutiny. The petitioners were awarded costs from the company's assets, while the liquidators were to bear their own costs. The supporting creditor was to bear his own costs.