1964 (2) TMI 30 - HC - Companies Law

Summary

Issues:
- Validity of power to refer disputes to arbitration by liquidator in a winding-up
- Exorbitant remuneration of voluntary liquidator
- Validity of resolutions passed by the board of directors
- Necessity of a supervision order under section 522 of the Companies Act, 1956
- Removal or reduction of remuneration of the voluntary liquidator
- Validity of the resolution authorizing reference of disputes to arbitration

Analysis:

The petition in this case raised multiple issues related to the winding-up process under the Companies Act, 1956. The petitioners challenged the power of the liquidator to refer disputes to arbitration, the exorbitant remuneration of the voluntary liquidator, and the validity of certain resolutions passed by the board of directors. The primary question before the court was whether a supervision order under section 522 of the Act was necessary in this scenario.

The court considered the concerns raised by the petitioners regarding the potential jeopardy of their interests in the winding-up process. While acknowledging that the voluntary liquidator was discharging duties properly, the court noted the apprehension of the petitioners regarding the compensation awarded in disputes. The court highlighted the wide powers granted under section 522 of the Act, allowing for the court to order supervision of the winding-up process as deemed fit and just.

In the judgment, the court directed that the voluntary winding-up should continue but under the supervision of the court. This decision aimed to provide creditors, contributories, and others the liberty to approach the court for any matters arising during the winding-up process. The court found no grounds for the removal or reduction of the voluntary liquidator's remuneration, dismissing those prayers.

Regarding the validity of the resolution authorizing the reference of disputes to arbitration, the court noted that the liquidator, independently, lacked the power to refer disputes to arbitration. However, the court found the resolution of May 14, 1963, valid in the context of expediency. The court emphasized that under the supervision order, the liquidator would need court sanction before implementing the resolution.

Ultimately, the court accepted the petition to the extent indicated but made no order as to costs. The judgment provided a comprehensive analysis of the issues raised, clarifying the powers and limitations within the winding-up process under the Companies Act, 1956.