1978 (5) TMI 94 - HC - Companies Law

Winding up Statement of affairs to be made to official liquidator, Powers and duties of liquidator, Effect of supervision order

Issues Involved:
1. Jurisdiction of the Magistrate to proceed with the complaint.
2. Proper accused in the complaint.
3. Subsequent events justifying the quashing of the complaint.
4. Validity of the complaint based on the proper person filing it.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Magistrate to Proceed with the Complaint:
The question was whether the Magistrate had jurisdiction to take cognizance of the complaint under section 454(5) of the Companies Act, 1956. The court noted that section 454(5A) specifies that the court which made the winding-up order or appointed the provisional liquidator can take cognizance of an offence under section 454(5). Normally, this would be the High Court in cases of compulsory winding up. However, in voluntary winding up, section 511A modifies the application of section 454, omitting references to the court and allowing the liquidator to act. Additionally, section 622 allows a Presidency Magistrate or a Magistrate of the first class to try offences under the Act. Thus, in the absence of a supervision order, a Magistrate can take cognizance. However, when a supervision order is passed, sections 523 and 526(2) deem the voluntary winding up to be under court supervision, transferring jurisdiction to the High Court. Since the supervision order in this case was passed after the complaint was filed, the Magistrate had jurisdiction at the time of filing.

2. Proper Accused in the Complaint:
The complaint named Shri B. L. Sharma, joint liquidator, and two ex-directors as accused. The petitioners argued that one voluntary liquidator cannot compel another to file a statement of affairs. The court agreed, stating that under section 454(2), the statement of affairs must be filed by directors, managers, or chief officers before the liquidator. Since Shri B. L. Sharma was a joint liquidator, he could not be asked by Shri O.P. Malhotra, the other joint liquidator, to file the statement. Therefore, the complaint against Shri B. L. Sharma was invalid.

3. Subsequent Events Justifying the Quashing of the Complaint:
The petitioners contended that the supervision order rendered the complaint invalid. The court disagreed, stating that the supervision order allowed the High Court to transfer the complaint under section 446(3) but did not invalidate it. The complaint remained valid despite the supervision order.

4. Validity of the Complaint Based on the Proper Person Filing It:
The complaint's validity was challenged on the grounds that it was not filed by the proper person. Section 621 requires complaints under the Companies Act to be filed by the Registrar, a shareholder, or the Government. Section 621(2) allows a liquidator to file a complaint for offences under sections 425 to 560, but section 512(4) requires at least two liquidators to act jointly if there are multiple liquidators. Since the complaint was filed by only one joint liquidator, it was unauthorized. The court noted that no authority was given for one liquidator to act alone, and thus the complaint was improperly filed.

Conclusion:
The petition succeeded under section 482 of the Criminal Procedure Code. The court quashed the proceedings pending before the Magistrate on the grounds that the complaint was not filed by a proper person, rendering it incompetent.

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