9911796707
TMI Blog2012 (9) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... ient ground to order the appointment of a provisional liquidator, he has qualified this submission by stating that the health of the company is changing day to day, however, this reply is totally silent as to how 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 - In this factual scenario submission of the petitioner that there is every possibility that the assets of the company will frittered away and the same may be alienated/transferred which will affect not only the interest of the petitioner creditor but the interest of the other creditors at large is also a submission not without force, thus 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court. It is also not in dispute that on the basis of such a decree a suit can be filed and the question as to whether such a decree is to be acted upon or not, is to be decided on the touchstone of the provisions of the conditions stipulated in Section 13 of the Code of Civil Procedure. We find that plea to this effect has been taken by the appellant. Learned counsel for the appellant had pointed out certain purported irregularities/defects in the proceedings which culminated into the said decree and it appears that on that basis it was sought to be argued that this decree would not be enforceable since the company petition is only admitted and these arguments would be available to the appellant, before the Court proceeds further and decides winding up of the appellant company, orders are to be passed or not, such issues can be thrashed out at that stage. 7. We may only note that by relying on the aforesaid decree, the learned Company Judge had taken into consideration some alleged admissions made by the appellant company of the debt, in certain communications as well as the balance sheet. The learned Company Judge has also taken into consideration of the fact that no repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and upon such terms as in the opinion of the Court shall be just and necessary, may appoint the official liquidator to be Provisional Liquidator of the company pending final orders on the winding-up petition. Where the company is not the applicant, notice of the application for appointment of Provisional Liquidator shall be given to the company unless the Court, for special reasons to be recorded in writing, dispenses with notice." 10. It is clear from the reading of sub-section (2) of Section 450 of the Act that before the order is made appointing a provisional liquidator, it is mandatory to give notice to the company and also to give reasonable opportunity to the company to make the representation, if any. This requirement can be dispensed with only by giving special reasons which are to be recorded in writing. To the same effect is the Rule 106 of the Companies (Court) Rules which makes a provision for appointment of provisional liquidator "after the admission of a petition for a winding-up of a company by the Court" and stipulates the requirement of giving notice before making such an order. 11. In the present case there was no application moved by the respondent for appo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of affairs; it shows that the company is unable to pay of its debts. The application further avers that the petitioner apprehends that the company may alienate/transfer its assets/properties which would be detrimental to the interest of the petitioning creditor as also to its other creditors; the company could become completely defunct and thus would be successful in its design of defeating the claims of the petitioner as also of the other creditors. In para 14 it has been pointed out that after the date of the appointment of the provisional liquidator (dated 02.03.2009) a sum of Rs. 1,09,48,886/- had been withdrawn by the respondent i.e. during the pendency of this petition; under the directions of this Court dated 23.09.2011, this amount has been directed to be re-deposited in this Court which also again reflects upon the conduct of the respondent; it has been submitted that every attempt is being made to siphon off the funds of the company. The prayer for appointment of the provisional liquidator was accordingly made. 7. Reply filed by respondent No. 1 to this application denies these submissions; learned counsel for the respondent has pointed out that the appointment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en effected in garnishee proceedings; the petitioner had to necessarily to resort to coercive steps to recover the said amount; the admitted liability of the respondent company in terms of the accounts reflected in the balance-sheet as on 31.03.2004 being Rs. 8,00,04,000/- and even as on date i.e. one decade later, a sum of more than Rs. 3,86,00,000 still due and payable by the respondent which inspite of its clear and unequivocal admission has not been paid clearly supports the submission of the petitioner that the respondent is unable to liquidate its debts. 12. Relevant would it be to also state that in this reply filed by respondent No. 1 there is no specific denial to the averments made in para 12 of the application qua the Directors' Report dated 21.06.2002 i.e. about the 'Performance Review' of the company or even about the losses incurred by the company was reflected in the balance-sheet for the year ending 31.03.2002; submission only being reiterated that the financial ill-health of the company is not by itself a ground to appoint a provisional liquidator. 13. Official Liquidator has also filed his reply dated 22.03.2012; he has supported the stand of the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 book) and thereafter reaffirmed in the balance-sheet for the year ending 31.03.2002 (page 61 of the paper book); the admission reads as under:- "Consequently, no accounting entries have been made for the claims made by the company and against the company pending decision except for an amount of Rs. 800.04 lacs considered as liability in the previous year in accordance with terms of the contract. The company does not foresee any further liability and hence no provision is considered necessary at this stage." 18. Admission in balance-sheet is per-se an admission of liability and it is not equivalent to an entry in the books of account as has been sought to be argued by the learned senior counsel appearing on behalf of the respondent. 19. A coordinate Bench of this Court in Bhajan Singh Samra v. Wimpy International Ltd. [2012] 111 SCL 1/[2011] 16 taxmann.com 329 has held that admission of debt either in the balance sheet or in the form of a letter/communication would amount to an acknowledgement extending the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny) 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 business. 24. Whether this amount is more than Rs. One crore or whether it is Rs. 14 lacs may not be relevant for the decision of this application as admittedly after the date of the appointment of the provisional liquidator (whether the order was rightly or wrongly passed), the Ex-management of the company has chosen to act on behalf of the company and made transactions in the account of the company which he was admittedly not permitted to do. 25. In this factual scenario submission of the learned counsel for the petitioner that there is every possibility that the assets of the company will frittered away and the same may be alienated/transferred which will affect not only the interest of the petitioner creditor but the interest of the other creditors at large is also a submission not without force. 26. A last argument has been pitched forthwith by the learned counsel for the respondent that the petition has not been advertized in terms of Rule 99 of the Companies (Court) Rules, 1959; form 48 spe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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