1960 (8) TMI 42 - HC - Companies Law

Meeting and proceedings Proxies, Winding up - Liquidator to exercise certain powers subject to sanction

Summary

Issues Involved:
1. Jurisdiction to direct convening of shareholders' meeting.
2. Alleged irregularities in the conduct of the shareholders' meeting.
3. Competence of the liquidator to extend time for payment and appropriate sale proceeds.

Issue-wise Detailed Analysis:

1. Jurisdiction to Direct Convening of Shareholders' Meeting:

The appellants contended that the learned judge had no jurisdiction to direct the convening of a shareholders' meeting by the official liquidator to ascertain their wishes. The court dismissed this contention, noting that an appeal against the order directing the meeting had already been dismissed in O.S.A. No. 8 of 1959. Furthermore, section 557 of the Companies Act empowers the court to direct meetings of creditors or contributories to be called for ascertaining their wishes in matters relating to the winding up of a company. The court emphasized that the language of section 557 is comprehensive enough to include matters such as the realisation of the company's assets.

2. Alleged Irregularities in the Conduct of the Shareholders' Meeting:

The appellants argued that the official liquidator committed irregularities by not providing twenty-one clear days' notice and only allowing 73 hours for lodging proxies. The court found this argument unsubstantial, stating that the official liquidator had given twenty-three clear days' notice. Regarding proxies, the court noted that under the Companies Act, 1956, more than forty-eight hours need not be given for lodging proxies, and providing more than forty-eight hours does not render the meeting irregular. Additionally, the court highlighted that the appellants' counsel had previously stated no objection to the official liquidator's report, and no such contention was raised during the final hearing or in the grounds of appeal.

3. Competence of the Liquidator to Extend Time for Payment and Appropriate Sale Proceeds:

The appellants contended that the liquidator lacked the authority to extend the time for payment of the balance purchase price and to appropriate the amounts realised by the sale of the company's assets towards the purchase price. The court referred to section 546 of the Companies Act, which grants the liquidator the power to compromise any call, liability, debt, or claim affecting the assets or liabilities of the company. The court interpreted this clause broadly, concluding that it includes the power to extend time for payment to an auction purchaser. Additionally, the liquidator's actions were ratified by the general body of shareholders, further validating his authority.

Regarding the appropriation of sale proceeds, the court stated that if the assets and liabilities of the company were sold as a going concern, the liquidator could not realise them for the company's benefit. However, since the liquidator had collected the monies with the auction purchaser's consent for the benefit of the shareholders, he was justified in appropriating these amounts towards the purchase price. The court dismissed the appellants' argument that the liquidator should hold the realised sums in trust for the auction purchaser until the balance purchase price was paid, emphasizing that the liquidator's actions were in the shareholders' best interests.

Conclusion:

The court found all the contentions advanced by the appellants to be devoid of substance and dismissed the appeal with costs. The expenses related to convening the meeting by the official liquidator were to come out of the estate.