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TMI Blog2012 (9) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator. 3. The respondent company was aggrieved by the order dated 02.03.2009. It had preferred an appeal before the Division Bench. The Division Bench had inter-alia recorded the following order:- "6. After hearing the learned counsel for the parties, we are not inclined to interfere with the impugned order dated 2nd March 2009 insofar as it admits the company petition. Suffice it to state that the learned Company Judge has taken into consideration various aspects of the matter and concluded therefrom that the debt is due and payable by the appellant to the respondent and the appellant is unable to pay the said debt. No doubt, the decree is passed by the Supreme Court of New York which is not a reciprocal territory. The only bar would be that such a decree is not executable under Section 44A of the Code of Civil Procedure. However, such a decree which is passed by a competent Court of law, albeit, of a foreign jurisdiction, can be utilized as a mere corroboration of the respondent's principal plea that the appellant is unable to pay its debt and justify the order of the High Court. It is also not in dispute that on the basis of such a decree a suit can be filed and the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1956 read with Rule 106 of the Companies (Court) Rules, 1959 was not kept in view by the learned Judge. These provisions read as under:- Section 450 of the Companies Act, 1956 "Appointment and powers of provisional liquidator:- (1) At any time after the presentation of a winding up petition and before the making of a winding up order the (Tribunal) may appoint the Official Liquidator to be liquidator provisionally. (2) Before appointing a provisional Liquidator, the (Tribunal) shall give notice to the company and give a reasonable opportunity to it to make the representation, if any, unless for special reasons to be recorded in writing, the (Tribunal) thinks fit to dispense with such notice. Rule 106 of the Companies (Court) Rules 1959- "Appointment of Provisional Liquidator" (1) After the admission of a petition for the winding-up of a company by the Court, upon the application of a creditor, or a contributory, or of the Company, and upon proof by affidavit of sufficient ground for the appointment of a Provisional Liquidator, the Court, if it thinks fit, and upon such terms as in the opinion of the Court shall be just and necessary, may appoint the official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons to dispense with such notice. 15. Appeal is partly allowed in the aforesaid terms without any orders as to costs." 4. As is evident from this order, the Division Bench was not inclined to interfere with the order dated 02.03.2009 insofar as it had admitted the company petition. It had also granted liberty to the petitioner company to move an appropriate application for the appointment of the provisional liquidator which application is now the subject matter of this present decision. 5. Notice of this application had been issued to the respondents. Replies have been filed. 6. The averments made in this application are largely detailed in para 8 onwards. In para 12 it has been pointed out that the Directors' Report dated 21.06.2002 relating to the 'Performance Review' of the company reflected that the company had incurred a loss of Rs. 5,039 lacs against a loss of Rs. 7,579 lacs in the previous year; the company did not have any substantial source of income during that year; the balance-sheet and accounts of the company also disclosed an unfortunate state of affairs; it shows that the company is unable to pay of its debts. The application further avers that the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the respondent) which has been decreed in April, 2004; the petitioner has a remedy which is to execute the said decree; this petition is being pressed for only for the reason that he has a legal hurdle to cross before the said foreign decree can be executed. In the rejoinder affidavit filed by the petitioner it has been disclosed that pursuant to decree obtained by him (for US$ 2 million-approximately Rs. 8,32,00,000) the execution proceedings had been prosecuted in the US Court and a sum of Rs. 4,13,71,193/- (approximately USD 949,970) has since been recovered in garnishee proceedings; the balance amount of Rs. 3,86,29,207/- is yet due and payable by the respondent. 10. The submission of the respondent on this score being that admittedly this amount has been recovered by the petitioner and as such inability of the company to repay its debts is even otherwise not founded as part payment has already been effected by the petitioner. 11. This argument of the learned counsel for the respondent has no force. Admittedly this part recovery has been effected in garnishee proceedings; the petitioner had to necessarily to resort to coercive steps to recover the said amount; the admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the appointment of a provisional liquidator; Section 450 (2) necessitates that before a provisional liquidator is appointed, notice must be given to the company and gives a reasonable opportunity to it to make its representation; unless there are special circumstances for dispensing with this notice. The Court ordering the appointment of a provisional liquidator may also limit and restrict the powers of the provisional liquidator. The object of the appointment of a provisional liquidator is to protect and preserve the assets of the company pending an order of winding up; in the converse, if the liabilities are dissipated for one reason or the other, such an order may not be made. This power is a discretionary power available to the Company Judge which has to be exercised carefully and judicially; the Court has to watch the interest of all shareholders in the company including the public interest. 17. In the instant case, the respondent company has admitted its liability to the petitioner in the statement of account for the year ending 31.03.2002 in the sum of Rs. 8,00,04,000/. This was first admitted in the balance-sheet for the year ending 31.03.2001 (page 48 of the paper boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the health of the company has improved over this period of 10 years; there is not a whisper in this reply that the financial condition of the company has either improved or is improving; no document i.e. no balance-sheet/statement of account of any year after 2002 has been filed to substantiate an argument which is now being pitched that the company has in fact gained a momentum; this submission is wholly un-substantiated. 23. Learned counsel for the petitioner has also drawn attention of this Court to the conduct of the respondent; admittedly after the date of the appointment of the provisional liquidator on 02.03.2009 certain sums of money had been withdrawn by the Ex-director of the company; contention of the petitioner creditor is that a sum of Rs. 1,09,48,886/- has been withdrawn. Vide order dated 23.09.2011 this Court had directed the Ex-director K.K. Modi to deposit the sum of money in the Court; the submission of the learned counsel for the non-applicant (K.K. Modi, Ex-director of the company) on this score is that the figure of Rs. 1,09,48,886/- is not correct; only a sum of Rs. 14 lacs has been withdrawn by the respondent and this was in the ordinary course of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CL 705 (Delhi) is misplaced; this judgment lays down the ratio that the advertisement of a winding up petition is mandatory; discretion vests in the Court only on the time limit for the advertisement. Compliance of this direction has been effected. 28. Keeping in view the aforesaid facts, this Court is of the opinion that there is danger of the properties of the respondent-company being transferred/alienated. It would thus be expedient to appoint a provisional liquidator to protect the assets of the company which appear to be in a jeopardy. Consequently, this Court appoints the Official Liquidator attached to this Court as the Provisional Liquidator of the respondent-company. 29. This court has been informed that part record of the company is already lying with the Official Liquidator. The Official Liquidator shall take forthwith charge of the remaining complete record and the assets of the company and thereafter proceed in accordance with law. For this purpose, Official Liquidator would be entitled to obtain police aid and the local police is directed to render all assistance to the Official Liquidator. 30. In the meantime, respondent-company, its directors, officers, employers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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