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TMI Blog1976 (12) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... sought for by the official liquidator. On 4th August, 1967, the company was directed to be wound up by this court under the provisions of the Companies Act, 1956. On 4th July, 1972, the official liquidator took out a misfeasance summons against former directors and officers of the company under section 543 of the Companies Act, 1956. The said misfeasance summons is pending in this court. By an Ordinance promulgated by the President, of India on 23rd December, 1972, being Ordinance No. 17 of 1972, the management of textile companies designated as sick textile undertakings was taken over and transferred to the Central Government. The said Ordinance, viz ., "The Sick Textile Undertakings (Taking Over of Management) Ordinance, 1972" took within its sweep management of a sick textile undertaking "which is being wound up whether voluntarily or by or under the supervision of any court". Thus, the said Ordinance applied to the company which was being wound up under the supervision of this court. In fact, the company is listed as one of the sick textile undertakings set out in the First Schedule to the said Ordinance. It is mentioned as item No. 12 in the said Schedule. Section 3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. The provisions of the 1972 Act are in pari materia with the corresponding provisions of the 1972 Ordinance. The said provisions need not be noticed. It may, however, be emphasised that the provisions of sections 4 and 8 of the Ordinance correspond to the provisions of sections 4 and 8 of the 1972 Act. The taking over of the management as it turned out was a precursor to the nationalisation of the sick textile undertakings. The President promulgated on 21st September, 1974, the Sick Textile Undertakings (Nationalisation) Ordinance, 1974. Under the said Ordinance, the rights of the owners in respect of sick textile undertakings were abrogated with effect from the appointed day which was the 1st April, 1974. The "owner" as defined in the said Ordinance in section 2( g ) thereof includes a liquidator of a sick textile undertaking. Section 3 of the Ordinance transfers and vests in the Central Government absolutely the right, title and interest of an owner in relation to every sick textile undertaking as and from the appointed day. Section 4 of the Ordinance by sub-section (1) thereof provides for general effect of vesting and, inter alia , ordains that not only the assets, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act in so far as they are material for the purpose of the present directions are in pari materia with the provisions of the Ordinance. All the provisions need not, therefore, be noticed. Suffice it to observe that the material provisions contained in sections 4, 8, 10 and 35 of the 1974 Ordinance, and the Sick Textile Undertakings (Nationalisation) Act, 1974, are basically identical. Section 4 of the 1974 Act reiterates the deeming inclusion of all other rights and interests in or. arising out of such property as constituting a part of the sick textile undertakings nationalised under the said Act. Sub-section (6) of section 4, however, makes a modification in respect of pending suits, appeals and other proceedings. It restricts the larger area covered by the corresponding provisions of the 1974 Ordinance and provides by the material provisions thereof as follows : "4. (6) If, on the appointed day, any suit, appeal or other proceeding of whatever nature in relation to any matter specified in sub-section (2) of section 5 in respect of the sick textile undertaking, instituted or preferred by or against the textile company, is pending, the same shall not abate, be discontinued or be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p, possession, power or control of the owner of the sick textile undertaking, whether within or outside India, and all books of account, registers and all other documents of whatever nature relating thereto and shall also be deemed to include the liabilities and obligations specified in sub-section (2) of section 5." It cannot be disputed nor has it been disputed that all assets, rights, powers, authorities and privileges, all properties, movable or immovable, including lands, buildings, workshops, stores, instruments, machinery, equipment, cash balances, cash on hand, reserve funds, investments and book debts belonging to the sick textile undertaking of the company vest in the Central Government by virtue of the combined effect of the provisions of sections 3 and 4 of the 1974 Act. If that be so, "other rights and interests in, or arising out of, such property as were immediately before the appointed day in power or possession or control of the owner of the company" would also fall within the ambit of the deeming provisions of sub-section (1) and would be deemed to be the sick textile undertaking for the purposes of section 3 of the.1974 Act. This inference is not seriously disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forced in a proceeding under section 543 of necessity is the enforcement of a right for and on behalf of the company. This is the true effect of the provisions of the material sections of the Companies Act, 1956, which sections deal with appointment of the liquidators and their powers, functions and duties. Section 448 of the Companies Act, 1956, provides for the appointment of an official liquidator. Section 449 provides for the appointment of an official liquidator as a liquidator of the company on a winding up of the company. It enjoins the official liquidator to perform such duties in reference to a company which is wound up as the court may impose in that behalf. Section 456 does not vest the property or rights, titles and interests of the company therein or pertaining thereto in the official liquidator but merely gives the official liquidator the custody of the property. Sub-section (1) in so far as it is material provides that where a winding-up order has been made or where a provisional liquidator has been appointed, the liquidator shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f things which subserve the said purpose. In my opinion, the actions that are taken or the rights and obligations of the official liquidator are all in his capacity as a statutory authority empowered to wind up the company subject to the supervision of the court. Under the provisions of law, the official liquidator is merely constituted a custodian of the properties, effects or actionable claims to which a company is entitled. Thus, the creation of new rights in favour of the official liquidator are more or less creation of a right in favour of the company which is being wound up. It would be anomalous to hold that the conferment of the power on the custodian of a company is not the conferment of the power on the owner of whom the custodian is merely a delegate or an agent by virtue of the provisions of law. It must, therefore, be held that the misfeasance proceedings are enforcement of the rights of a company in respect of the forms of misconduct which come within the pale or the purview of section 543 of the Companies Act, 1956. The rights upon the clear intendment of the 1974 Act fall within the ambit of section 4(1) thereof. Such rights, therefore, must be held to be rights hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5" of the Act. Section 5(2) of the Act deals with liabilities arising out of loans advanced by the Central Government, or a State Government, or both, to a sick textile undertaking after the management of such undertaking had been taken over by the Central Government, or amounts advanced to a sick textile undertaking (after the management of such undertaking had been taken over by the Central Government), by the National Textile Corporation or by a State Textile Corporation, or by both, together with interest due thereon, or wages, salaries and other dues of employees of the sick textile undertaking, in respect of any period after the management of such undertaking had been taken over by the Central Government. The misfeasance proceedings before me do not relate to any of the liabilities of the description mentioned in clause ( a ), ( b ) or ( c ) of sub-section (2) of section 5 of the 1974 Act. The misfeasance proceedings are,' therefore, outside the purview of and are not hit by the mischief of section 4(6) of the 1974 Act. In other words, the present misfeasance proceedings cannot be said to be misfeasance proceedings which have to be continued or prosecuted by the National Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for winding up or manner in which or limitations subject to which the right to present the petition can be exercised. Section 440 is ancillary to section 439 and provides for the right to present a winding-up petition where a company is being wound up voluntarily or subject to court's supervision. Section 441 is significant inasmuch as it clearly establishes the distinction between the pendency of a petition or the winding up of a company and the commencement of winding up of a company by court. The legal fiction pertaining to deemed commencement clearly establishes that the petition for the winding up of a company is not and cannot be equated with a proceeding in the winding up of a company. Section 445 is tale-telling. It casts an obligation, inter alia , on the petitioner in "winding up proceedings" to file with the Registrar a certified copy of the winding-up order. Section 457 confers powers and enjoins duties upon the official liquidator "in a winding up by the court". The acts of the liquidator in pursuance of section 457 are proceedings by him in the course of winding up. I have been shown nothing to come to the conclusion that the expression "for winding up" must be equat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not re-enacting sub-section (2) of section 8 into the 1974 Act the legislature intended to make a departure in respect of the contingency covered by sub-section (2) of section 8 of the 1972 Act. This underpins the connotation which is accorded by me to the expression "a proceeding for winding up" occurring in section 35 of the 1974 Act. I must, therefore, reject the contention that for the continuance of the misfeasance proceedings, which are outside the embargo contained in section 4(6) of the 1974 Act, the liquidator is required to obtain consent of the Central Government. In the result, I answer the directions sought by the liquidator in the report in prayer ( a ) in the negative. In my opinion, it is not necessary for the official liquidator to obtain the consent of the Central Government under section 35 of the 1974 Act. In so far as the direction in terms of prayer ( b ) is concerned, no directions are given at this stage, the official liquidator being at liberty to re-submit his report in that behalf for appropriate directions as and when he deems it necessary. With regard to the direction in terms of prayer ( c ), it must be observed that in the course of the hearing b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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