1939 (10) TMI 5 - HC - Companies Law

Winding up - Powers of liquidator and Liquidator to exercise certain powers subject to sanction

Issues Involved: Power to revoke sanction, validity of the District Judge's order on merits, necessity of notice, prior sanction of the Sub Court, suppression of facts, and finality of the Liquidator's actions.

1. Power to Revoke Sanction
The learned Advocate General contended that the District Judge had no power to revoke the sanction granted on 23rd January 1939 for the sale of properties and the compromise of suits. The High Court agreed, stating, "It appears to me a very extraordinary suggestion that the District Court...should be able, by passing an order purporting to revoke its own sanction, to nullify the contract of sale and to render void the decrees passed by the Sub Court in the two suits." The Court emphasized that the District Judge could have revoked his sanction before the Official Liquidator acted upon it, but not after the compromises were made and decrees obtained.

2. Validity of the District Judge's Order on Merits
The High Court found the District Judge's order to be wrong on its merits. The District Judge revoked the sanction due to lack of notice to "the persons interested," absence of prior sanction from the Sub Court, Guntur, and suppression of an important fact. The High Court dismissed these grounds, stating, "Mr. Rajah Ayyar has not been able to satisfy us that any notice to anybody was necessary in this case." The Official Liquidator had general authority to sell the property, and all parties were aware of this. The lack of prior sanction from the Sub Court was irrelevant as the Official Liquidator had the power under section 179 of the Companies Act. The alleged suppression of an offer of Rs. 96,000 was dismissed as the offer was not bona fide and was made without a deposit of earnest money.

3. Necessity of Notice
The High Court found that notice was not necessary after the Official Liquidator entered into the contract of sale. "Technically therefore it cannot be said that any notice to any body was necessary after the Official Liquidator had entered into the contract of sale and before the District Court approved of it."

4. Prior Sanction of the Sub Court
The High Court dismissed the need for prior sanction from the Sub Court, Guntur. "It is clear that when an Official Liquidator is appointed, he has power to dispose of the properties of the Company under section 179 of the Companies Act and his power in this case was not limited by the fact that he had had no sanction in his capacity as Receiver in O.S. No. 21 of 1924."

5. Suppression of Facts
The High Court found that the alleged suppression of an offer of Rs. 96,000 was not a valid ground for revoking the sanction. The Official Liquidator was justified in ignoring the offer as it was not accompanied by earnest money and was not bona fide. "I do not think that the District Court would have been justified in refusing sanction to the Official Liquidator for the sale and the compromises even if the fact of that offer had been brought to the notice of the learned District Judge."

6. Finality of the Liquidator's Actions
The High Court emphasized the need for finality in the Liquidator's actions. "If the Liquidator's proceedings are merely provisional and subject to the subsequent confirmation of the Court he will not be able to dispose of the property to the best advantage." The Court concluded that once the Liquidator had obtained the Court's sanction, he was free to dispose of the property without further approval.

Conclusion
The High Court allowed the appeals, setting aside the orders of the District Judge and dismissing the applications I.A. No. 73 of 1939 and 85 of 1939 with costs. "These appeals should therefore in my opinion be allowed and the applications I.A. No. 73 of 1939 and 85 of 1939 dismissed with costs." The judgment underscores the importance of finality in the actions of the Official Liquidator and the limitations on the power of the District Judge to revoke previously granted sanctions.

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