9911796707
TMI Blog1982 (2) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... ator therein. The State Bank of India (hereinafter referred to as "the bank") is one of the secured creditors of the company, the book debts of the company having been hypothecated, amongst others, therewith as security. The bank filed a suit being Suit No. 426 of 1973, against the official liquidator for recovery of its debts to the tune of Rs. 1,18,88,504 on April 24, 1973, with the leave of the court. At the instance of the bank, a receiver was appointed on May 4, 1973, with authority, amongst others, to recover these book debts. This order was, however, modified, firstly, on May 16, 1973, and finally with the consent of the liquidator, on July 11, 1973, excluding these books debts from his charge, presumably to enable the liquidator to enfore the recovery by recourse to his powers under the Act. This order appears to have been preceded by negotiations between the official liquidator and the bank. An understanding was reached between them under which the official liquidator was to initiate proceedings for the recovery of the book debts as such official liquidator and the bank was to bear the costs of the litigation and their Attorneys, M/s. Crawford Bayley Co., were to act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itation Act. It is not disputed that the claim would be within time on the date of judge's summons if limitation is computed by adding this period. The short question that arises for consideration is whether the recovery of the dues from the respondents by the judge's summons under the above understanding with the bank can be said to be "in the name and on behalf of the company" as contemplated under section 458A of the Act. That the claim in the name of the liquidator in these proceedings is a claim in the name of the company was and is not disputed by the respondents. The learned company judge found that the claim having been expressly made on behalf of the bank, section 458A of the Act cannot be attracted and the extended period of limitation cannot be availed of. In this view of the matter, the judge's summons was dismissed as being time-barred. Hence, these appeals. It will be convenient at the outset to find out what the rights, duties and powers of the liquidator are in regard to such debts claimable by any company under liquidation. Section 448 contemplates appointment of official liquidator when an order for winding-up of the company is made under section 447 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial liquidator who was also under an obligation to collect the assets including such debts of the company from its debtors and could, as the representative of the company, directly initiate recovery proceedings under section 457(1)( a ) of the Act. This explains why the receiver was relieved of the charge of these book debts by subsequent order dated July 11, 1973, with the consent of the official liquidator. By that time, the understanding between the official liquidator and the bank was already reached. As seen earlier, judge's summons' were taken out by the liquidator only after getting leave of the court to that effect on July 23, 1973, virtually permitting the liquidator to effectuate the understanding. The assumption, in the impugned order, of the official liquidator having initiated proceedings "on behalf of the State Bank" is thus ill-founded and totally incorrect. When the bank could not enforce recovery of the company's debts in its own right notwithstanding the hypothecation, it could not authorise the official liquidator to initiate the proceedings and the question of his having initiated proceedings on the bank's behalf could ever has arisen. The liquidator could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to act in this behalf. The Act does not contemplate his acting in the matter of such recoveries excepting as such official liquidator and excepting on behalf of the company. Mr. Andhyarujina, Mr. Chagla, Mr. Dalai and others, learned advocates appearing for the respondents-debtors, could not dispute the above legal position or the authority of the official liquidator to enforce recoveries of the debts on behalf of the company. They, however, contend that, in point of fact, recoveries in these cases have not been initiated on behalf of the company as the same are expressly indicated to be on behalf of the State Bank of India. Strong reliance is placed on certain indisputable facts. Thus, the debts are expressly claimed by the official liquidator, on behalf of the bank, ( a ) In the judge's summons taken out by the liquidator as a result of the understanding with the bank; ( b ) In the report dated July 20, 1973, made by the official liquidator to the company judge setting out the terms of understanding with the bank; ( c ) in the direction solicited from the company judge for initiating proceedings for such recovery; ( d ) in the notice of demand served on such debtors after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is facilitated by the assistance given by the bank has no bearing on the point. The law does not prevent such assistance on the understanding on the basis of which it is furnished. In fact, such assistance may facilitate the process of collection of assets and winding-up process. But for such assistance, collection of the assets may prove to be illusive and beyond the means of the liquidator. The circumstance that this process extends the limitation and saves the court-fees also is beside the point. It is always open to the litigant to mould their relief if possible, in such a way as to save the court-fees and bar of limitation. To our mind, the recoveries cannot but be held to be on behalf of the company notwithstanding misdescription thereof in several documents adverted to in the course of arguments before us by the learned advocates for the respondents. It was then argued that the liquidator is not competent to act for the benefit of and at the instance of any secured creditors such as the bank as the winding-up proceedings are primarily intended for the benefit of the unsecured creditors and not for the benefit of secured creditors who are outside the winding-up. Strong rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to therein in this behalf. Mr. Chagla drew our attention to the English judgment in Harrison v. Jackson [1877] 7 Ch 339 at p. 341 and Henry Pound Son and Hutchines, In re [1889] 42 Ch 402 at p. 418. It is sufficient to note that these were cases where the property was sought to be interfered with by their liquidator to the detriment of the secured creditors without their consent. It was held that a secured creditor cannot be compelled to give up his security and prevented from enforcing his security otherwise than by reference to the official liquidator. Ratio of these judgments can have no relevance to a case before us where the liquidator is dealing with secured debts not only with the consent of the secured creditors but in accordance with an understanding reached with them. Our attention was also drawn to Palmer's Company Precedents, Seventeenth Edition, Part II, winding-up, p. 316. The following state of law finds place under the heading "Secured creditor". "A secured creditor is prima facie entitled to proceed, his security not being part of the estate and effects of the company, and this being so, it would not be proper for the court to refuse liberty to proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors under sub-rules (3) and (4). We are unable to see any distinction of substance in these several acts. It cannot be held that the official liquidator acts as liquidator only when he takes steps contemplated under clause (2) of rule 291 and acts otherwise than as official liquidator when he realises property for the benefit of the debenture holders or secured creditors. To our mind, he has no role to play excepting as and when he deals with the property of the company in his custody and realises the same, in discharge of his duties of collecting the assets of the company for the benefit of those who are entitled thereto before the company's ultimate dissolution. The fact that this process benefits secured creditors and debenture holders along with unsecured creditors and shareholders cannot make the act otherwise than in discharge of his duties, or as such liquidator. It was also strongly urged that such an interpretation of section 458A will result in permitting two different periods of limitation for recovery of the identical debts from the debtors of the company depending on whether recovery proceedings are initiated by the liquidator or some other person. This conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly requires the litigant to maintain a separate account in the books of the company and not open any separate account in the Reserve Bank of India. Maintaining separate account for such collection in the books of account of the company is one thing and opening a separate account in the Reserve Bank and depositing the amount so received in the Reserve Bank of India is quite a different thing. Our attention was not drawn to any provision which prevents the liquidator from maintaining separate account in the books of company's account for earmarking the same for benefit of the secured creditors. Mr. Chagla drew our attention to rule 286 which enumerates the registers, which are required to be maintained by the official liquidator, suggesting as if the same do not admit of any such separate account. The said books include a general ledger in a particular form. Mr. Chagla could not demonstrate to us how maintenance of such separate account of the receipts is not admissible under the form of general ledger prescribed in this behalf. The impugned order of the company judge does not appear to us to be correct. We are unable to see why the extended period contemplated under section 458A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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