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TMI Blog1975 (10) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... imited company by a special resolution passed on June 5, 1946. Its nominal capital was Rs. 20,00,000 divided into 1,00,000 preference shares of Rs. 10 each and 2,00,000 ordinary shares of Rs. 5 each. Its paid up capital, as on June 30, 1949, was Rs. 96,394.50. One Roshan Lal (since deceased) was its managing director, while his brother, Kundan Lal, was one of its directors. The company was establised with the main object of carrying on the business of land development and colonising at Ghaziabad in the State of Uttar Pradesh. It appears that in the course of its dealing with the public, criminal prosecutions were launched in the State of Uttar Pradesh against all the directors of the company on charges of cheating, etc. On October 26, 1953, a general meeting of the shareholders of the company was held, and it was resolved to wind up the company voluntarily. Dr. Hardit Singh Giani was appointed as a liquidator. The winding up was subsequently brought under the supervision of the court by an order passed by the then District Judge, Delhi, on March 26, 1954, and Dr. Hardit Singh Giani continued to act as liquidator. He settled the list of contributories on April 25, 1955, and conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,00,000 as earnest money from the purchaser. According to the liquidator, the sale transaction could not be completed on account of obstruction created by Shri Roshan Lal, the managing director, who had unauthorisedly sold 27,000 square yards out of the said land at the rate of ten annas per square yard. Shri Prem Parkash Bhutani, therefore, moved the court of the District Judge for refund of his money on the ground that the company was not in a position to convey a valid and subsisting title in respect of the land agreed to be sold to him. By an order dated March 12, 1965, the District Judge directed that out of the amount received from Shri Bhutani, the liquidator should return Rs. 90,000 to him in two instalments. According to the liquidator, the said amount had since been returned to Shri Bhutani. It appears that the liquidator filed two applications in the court of the District Judge, Delhi, against the persons to whom the land had unauthorisedly been transferred by Shri Roshan Lal for restoration of possession to him, and that the District Judge passed an order on March 8, 1966, ordering restoration of possession of the said land to the liquidator and also directed the initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and 234(3) of the Indian Companies Act, 1913, praying for the removal of Dr. Hardit Singh Giani as liquidator and for the appointment of the official liquidator attached to the High Court as liquidator in his place. The liquidator was the sole respondent in the said application, and he filed a reply to the application. The said application was heard by Shri Jagjit Singh, the then District Judge, Delhi, who by his judgment dated December 21, 1966, held, relying upon the decision of Malins V.C. in In re Marseilles Extension Railway and Land Company [1867] 4 Eq Cas 692, that it was not necessary to take any evidence with regard to the allegations of misappropriation and misconduct on the part of the liquidator, as there were sufficient grounds for removing the liquidator, and that the undisputed facts go to show that the continuance of Dr. Hardit Singh Giani as liquidator was not desirable and in the interest of the creditors and the contributories of the company. The learned District Judge made it clear that the removal of the liquidator did not imply that any allegation of misconduct, misappropriation or unfitness had been established against him, and that the same would be a matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the liquidator, associated Mr. V.S. Juneja, official liquidator of this court, as additional liquidator with Dr. Hardit Singh Giani, and directed that the two of them between themselves should endeavour to conclude the winding-up proceedings without any avoidable delay. It is against that judgment that the present Letters Patent Appeal No. 61 of 1968 has been filed by the Registrar of Companies, Delhi, without obtaining a certificate from the learned single judge. The appeal came up originally before V.S. Deshpande and S. Rangarajan JJ. The respondent, Dr. Hardit Singh Giani, raised an objection that the Letters Patent Appeal was not maintainable relying upon the decisions of the Division Bench of this court in Sri Ram v. Bulakidas, in L.P.A. No. 369 of 1971, decided on March 16, 1972, reported in ILR [1972] 2 Delhi 530, in which it was held that the appeal did not lie under clause 10 of the Letters Patent without a certificate from the learned single judge who decided the appeal under section 483 of the Companies Act against an order of the District Judge exercising jurisdiction under a notification under section 10 of the Companies Act. In view of the importance of the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for determination in other appropriate proceedings. Thus, misconduct, misappropriation or unfitness was not the ground for the removal of Dr. Hardit Singh Giani as liquidator by the learned District Judge. The grounds for the said removal were stated by the learned District Judge in his order as under : "Irrespective of the merits of the allegations there can be no doubt regarding the following facts : (a)Majority of the creditors of the company in a meeting held on March 30, 1963, made very serious allegations against the liquidator which amounted to their having no faith in him. (b)The winding-up proceedings have dragged on for over 12 years without the creditors or the contributories being paid anything ; (c)One of the alleged creditors of the company was appointed as his clerk by the liquidator, which appointment was, to say the least, inadvisable ; and (d)the assets so far realised have been spent on litigation, office, travelling and conveyance expenses. It seems to me that that these are sufficient causes for removing the liquidator." In the appeal, Hardayal Hardy J. pointed out in his judgment that the view expressed by Sir R. Malins V.C. in In re Marseilles Extensi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Act, as amended in 1960, provides that where the proceedings in winding up are pending at the commencement of the Act, sections 463, 502, 515 and 524 shall, as far as may be, also apply in relation to such proceedings, and that since the company had been ordered to be wound up subject to supervision of the court, the provisions of section 524 were attracted. The learned judge observed that unlike section 515, under which the court can remove the liquidator in voluntary winding up on cause being shown, section 524 confers plenary power of appointment and removal of a liquidator on the court in the case of winding up subject to its supervision, and that although the extent of the court's power is not delimited by the section it seemed to him to be implicit in the section that an order of removal of a liquidator can only be passed or at any rate should be passed only for good cause shown and not in an arbitrary manner and without justifiable reasons. The learned judge pointed out that it was in the light of the above principles that the question relating to the removal of Dr. Hardit Singh Giani had to be approached. Neither of the learned counsel for the parties questioned before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Dr. Hardit Singh Giani that it was not correct to say that a majority of the creditors of the company made the allegations against the liquidator which amounted to having no faith in him, and that it was only a few creditors whose claims were small in value that made allegations against the liquidator and expressed a lack of faith in him. There appears to be some force in the said contention. The second and further grounds mentioned by the learned District Judge were that the winding-up proceedings had dragged on for over 12 years by the date of his impugned order without the creditors and contributories being paid anything, and that the assets so far realised had been spent on litigation, office, travelling and conveyance expenses. It was contended before the learned single judge on behalf of Dr. Hardit Singh Giani that although it was true that the winding up proceedings had remained pending for over 12 years, it should be noted that the liquidator had done everything in his power to make recoveries and to bring the persons responsible for mismanagement of the affairs of the company to book, that he had also striven hard to take under his control the property of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Yadav as a clerk was, in itself and without anything more, undesirable. It was urged before the learned single judge that the four grounds on which the impugned order of the learned District Judge had been based were, to say the least, shaky, that the order removing the liquidator did grave injustice to him who had honestly and sincerely devoted 14 years of his life to the job of winding up of the company, that when the opposition of his enemies to his efforts to complete the proceedings was almost on its last legs, inasmuch as Shri Roshan Lal had died and his brother, Kundan Lal, had been involved in misfeasance proceedings, it was iniquitous to remove the liquidator and thereby subject him to the stigma and ignominy of removal from office, besides depriving him of the remuneration to which he would be justly entitled under the law. As against the said contentions and submissions on behalf of the liquidator, the circumstances against him, as pointed out on behalf of the Registrar of Companies, were the fact that the winding-up proceedings which commenced about 14 years ago had not neared their end, and the fact that whatever amount had been realised, the whole of it had been e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the exercise of discretionary power or authority is not ordinarily reviewable on appeal except to correct a clear and manifest abuse of justice, that in the present case the learned District Judge had exercised his discretion and passed the order removing the liquidator, and that the same ought not to have been set aside by the learned single judge. As stated earlier, even under section 524 of the Companies Act, 1956, it is implicit in it that an order of removal of a liquidator can only be passed or, any rate, should be passed only for good cause shown and not in an arbitrary manner and without justifiable reasons. The District Judge has no doubt to exercise his discretion, but the said discretion has to be exercised in a judicial manner. The decisions referred to by the learned counsel do not lay down anything to the contrary. In Bipan Lal Kuthiala v. Commissioner of Income-tax [1957] 32 ITR 361, 364; AIR 1957 Punj. 312, Bhandari C.J. and Chopra J. observed in paragraph 10 of the judgment that: "The action of a court which is invested with the exercise of discretionary power or authority is not ordinarily reviewable on appeal except to correct a clear and manifest abuse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned to say that the learned counsel for the appellant have not satisfied them that the judgment of the Chief Court was wrong, and accordingly that they are unable to dissent from the finding of that court." In the present case, as pointed out earlier, the grounds given by the learned District Judge for removing the liquidator were shaky and the order removing the liquidator was iniquitous and did injustice to him. The learned single judge was, therefore, quite within his power to interfere with the order of the learned District Judge in the appeal, F.A.O. No. 47-D of 1966, filed under section 483 of the Companies Act, and he had given good reasons for his interference. Mr. Harish Chandra next pointed out that even after the order of the learned single judge, not a single pie has been paid to the creditors or the contributories up to this date. Mr. Gian Singh Vohra, learned counsel for Dr. Hardit Singh Giani, submitted in reply that the liquidator had been unable to do anything during the pendency of the Letters Patent Appeal on account of various orders passed by courts. The learned counsel pointed out that after the admission of the Letters Patent Appeal, the appellant filed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id ground for interfering with the order made by the learned single judge. We are informed by Mr. Harish Chandra that after the appointment of the then official liquidator, Mr. V.S. Juneja, as additional liquidator, he had been transferred and his successor, Mr. S.C. Mittal, in his capacity as official liquidator, filed an application, C.M. No. 1828 of 1974, on November 6, 1974, for a direction to the liquidator to act jointly with the applicant in conformity with the wording of the order of Hardayal Hardy J. and that the said application was disposed of by B.C. Misra J. on April 22, 1975, observing that since the relief claimed in the CM. can appropriately be granted by the Bench hearing the appeal, i.e., L.P.A. No. 61 of 1968, it was not necessary to pass any orders on the CM. Mr. Gian Singh Vohra, learned counsel for the liquidator, stated before us that the liquidator does not raise any objection to the appointment of the official liquidator, Mr. S.C. Mittal, as additional liquidator, in the place of Mr. V.S. Juneja. He also stated that he does not press the cross-objections, CM. (M) 2 of 1969, filed by Dr. Hardit Singh Giani against the order of Hardayal Hardy J. We had alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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