1971 (11) TMI 89 - HC - Companies Law

Winding up - Transfer of winding up proceedings to district court, Books to be kept by liquidator, Custody of company s property, Winding up - Enforcement of duty of liquidator to make returns, etc.

Issues Involved:
1. Preliminary objection regarding the appeals being barred by limitation.
2. Appellant's status as a contributory and the maintainability of the application under Section 556 of the Companies Act.
3. Right to inspect the account books of the liquidator under Section 461(2) of the Companies Act.
4. Return of gas cylinders alleged to belong to the appellant.

Detailed Analysis:

1. Preliminary Objection Regarding the Appeals Being Barred by Limitation:
The learned counsel for the official liquidator raised a preliminary objection, arguing that the appeals were barred by limitation. The contention was based on the fact that after the winding-up order, subsequent proceedings were transferred to the Additional District Judge, Delhi, under Section 435 of the Companies Act. This section makes the court of the Additional District Judge "the court" within the meaning of the Companies Act, and thus, the orders passed by the Additional District Judge should be deemed as orders passed by a single judge of the High Court. Under Article 117 of the Limitation Act, 1963, the period of limitation for filing appeals from an order of a High Court to the same court is thirty days. Since the appeals were filed beyond that period, it was argued that they should be dismissed.

The court, however, disagreed with this proposition. It clarified that while Section 435 of the Companies Act allows the High Court to transfer subsequent proceedings to a District Court, this does not elevate the status of the District Judge to that of a single judge of the High Court. The jurisdiction and powers conferred on the District Court are for the purpose of handling specific transferred matters and do not convert the District Judge into a High Court judge. Therefore, the preliminary objection was dismissed.

2. Appellant's Status as a Contributory and the Maintainability of the Application Under Section 556 of the Companies Act:
The appellant, a director of the company in liquidation and a holder of fully paid-up shares, made an application under Section 556 of the Companies Act for directions to the official liquidator to rectify defaults. The application was contested on the ground of maintainability, with the Additional District Judge concluding that the appellant was not a contributory within the definition given in Section 428 of the Companies Act, as he had not been listed as a contributory by the official liquidator. Additionally, the application was dismissed due to the absence of the required notice under Section 556.

The court found that the appellant, as a holder of fully paid-up shares, fits within the definition of "contributory" under Section 428 of the Companies Act. The court held that the appellant had the right to make the application and the lower court erred in holding that the appellant had no locus standi. However, since no prior notice was given to the official liquidator before the application was made, and considering the significant time lapse, the court decided not to allow the appellant to benefit from the notice served six years ago. Thus, the appeal was dismissed.

3. Right to Inspect the Account Books of the Liquidator Under Section 461(2) of the Companies Act:
The appellant sought to inspect the account books of the liquidator maintained under Section 461(2) of the Companies Act. The application was contested on the ground of maintainability. Section 461(2) allows any creditor or contributory to inspect the books maintained by the liquidator, which include entries or minutes of proceedings at meetings and other prescribed matters.

The court clarified that the books referred to in Section 461 are minute books related to the proceedings of meetings and not account books. The Additional District Judge correctly held that the appellant was not entitled to inspect the account books, and the appeal was dismissed.

4. Return of Gas Cylinders Alleged to Belong to the Appellant:
The appellant sought the return of 786 gas cylinders, alleging that they were placed at the disposal of the company on a rental basis. The application was contested by the official liquidator on various grounds. The Additional District Judge dismissed the application without completing the evidence, holding that the appellant was not entitled to unilaterally cancel the contract and thus not entitled to the return of the cylinders.

The court noted that the circumstances under which the appellant hired his gas cylinders to the company could only be decided after allowing the parties to lead their respective evidence. The learned Additional District Judge erred in deciding the petition without completing the evidence. Therefore, the appeal was allowed, the impugned order was set aside, and the case was remanded to the Additional District Judge for a decision after recording the evidence.

Conclusion:
The appeals were decided as follows:
- Preliminary objection regarding limitation was dismissed.
- Appeal regarding the appellant's status as a contributory and maintainability under Section 556 was dismissed.
- Appeal regarding the right to inspect account books under Section 461(2) was dismissed.
- Appeal regarding the return of gas cylinders was allowed, and the case was remanded for further evidence.
- F.A.O. No. 85 of 1967 was dismissed as not pressed.

No order as to costs in these appeals.

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