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TMI Blog2013 (10) TMI 1590X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the company (in liquidation) were sold by the State Bank of Indore which had by then merged with State Bank of India (SBI), in terms of the SARFAESI Act, 2002. This Court had passed certain orders in the aforesaid application filed by the Official Liquidator on various dates seeking details relating to the properties, the manner in which they were sold etc. and had also directed notice to be issued to the purchasers of the properties. While the application was pending, a status report No.64/2013 was filed by the provisional liquidator. One of the prayers in the status report was for an order to be passed by this Court directing the Official Liquidator to invite claims and after the claims, if any, having been received, direct the SBI, M-77, Greater Kailash-II, New Delhi to make the payment of the sale consideration of the properties lying with it to the Official Liquidator. By order dated 2nd August, 2013 this Court took the report on record and directed the Official Liquidator to invite claims as prayed for subject to the expenses being met by the SBI. By the same order, both the company petition No.36 of 2003 and CA No.1713/2009 were directed to be listed on 30th October, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appointed as yet. In this situation, he contends, the provisional liquidator cannot exercise the power of inviting the claims from the creditors etc. 4. Section 443(1)(b) permits the company court hearing a winding up petition to make an order for winding up a company with or without costs, or any other order that it thinks fit. Section 449 states that on a winding up order being made in respect of the company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company. Section 450 provides for the appointment and powers of the provisional liquidator. It states that at any time after the presentation of a winding up and before the making of a winding up order, the Court may appoint the Official Liquidator to be the provisional liquidator. This can be done only after giving notice to the company and an opportunity to it to make its representations. Section 451 makes general provisions as to liquidators. Sub-section (1) says that the official liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the Court may impose. Sub- section (3) of section 450 says that where the provisional liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lease while only provisional liquidator does not mater, since his motivation was controlled by the fact that he was only provisional liquidator. But if it were necessary for me to express an opinion, it would be in favour of Mr. Wheeler's submission, because the word "provisional" in this context seems to me to imply a qualification not of the liquidator's powers, but of the tenure of his office; he is a liquidator but his appointment is temporary. It is perhaps significant that in the Companies Act, 1862, a provisional liquidator is spoken of as a liquidator provisionally appointed. How far it is expedient for a provisional liquidator to exercise his powers is, of course, a different question which must depend on the circumstances of the case." The aforesaid observations of Plowman, J suggest that the powers of the provisional liquidator are the same as those of the liquidator. His judgment however has come in for criticism in Palmer's Company Law, 25th Edition. In volume 2 at page 15.308 it has been stated by Palmer (with reference to Plowman, J's observations) as follows: "This latter proposition must, however, be regarded as doubtful since Re Dry Docks Corporation of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ator of the company. In Sri Chamundi Theatre Mysore Talkies Ltd. v. S. Chandrasekara Rao (1975) 45 Company Cases 60, Ramaprasada Rao, J (as he then was) speaking for a Division Bench of the Madras High Court compared the powers of the provisional liquidator with those of the Official Liquidator in the following words:- "Whatever may be said of the rights of the official liquidator after an order for winding up is made and which is also circumscribed by the various and strict provisions under the Companies Act, these do not apply, as a matter of course, to the office of the provisional liquidator. It is always controlled by the instrument which appoints him and he is equated for technical purposes with the official liquidator. His office is not an equation to that of an official liquidator but he is an officer of court who has to take directions of court in the matter of exercise of his powers attached to his office and he cannot assume the role of an official liquidator and invoke the provisions of the Companies Act and the Rules made thereunder and claim that he is a receiver and in physical, juridical and sole custody and control of the properties of the company and that no one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d single judge of this Court (Dalip K. Kapur, J) referred to the provisions of section 446(2) and noted that it is under this provision that the jurisdiction of the company court arises concurrently with other courts in respect of suits or proceedings by or against the company. In that case, proceedings which were initiated before the company court were not a proceeding by or against the company, but was a proceeding wherein the petitioner sought to have the winding up of the company declared invalid. Rejecting the petition, the learned judge noted that there must be a winding up proceeding before the court gets any jurisdiction under section 446(2) and such a winding up may be achieved in several ways. He noted that there could be a winding up order under section 439 read with section 443 of the Act or there could be an order of winding up under section 522 of the Act, under the supervision of the court. The observations of the learned single judge, are as below. "This provision shows that the court's jurisdiction arises concurrently with other courts in respect of suits or proceedings by or against the company. The present proceeding is not a proceeding by or against the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Cas. 432. The question arose in that case this way. The official liquidator filed a claim petition before the Additional District Judge, Delhi under section 446(2) of the Act seeking to recover a sum of Rs. 845.32 from another company called the Faridabad Cold Storage and Allied Industry. The Additional District Judge granted a decree for the recovery of Rs. 504/- from the company and the return of an empty cylinder; on failure of the debtor-company to return the cylinder the official liquidator was further held entitled to recover Rs. 340/-. An appeal was filed by Faridabad Cold Storage and Allied Industry before the High Court. A Division Bench of this Court referred the appeal to a Full Bench. Before the Full Bench, the only question which survived for decision was whether the claim petition filed by the official liquidator under section 446(2) was within the period of limitation. The view of the Additional District Judge was that the claim petition was not a suit and therefore the provisions of the Limitation Act had no application. It was the validity of this view that was canvassed before the Full Bench. It was in this connection argued before the Full Bench as to what was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on the date when the winding-up order is passed and, therefore, the period of limitation is three years from the date of the winding-up order after giving full benefit of section 458A of the Act." It has been held by the Full Bench that the right to avail of the remedy provided by clause (b) of section 446(2) will arise only after the passing of the winding up order and that so long as a winding up order is not passed, no claim can be preferred under this provision. The ratio of the Full Bench judgment in my humble understanding is that the right to file a claim petition against the company arises on the date on which the winding up order is passed and it is on the basis of this ratio that it was held that the period of limitation of three years under Article 137 of the limitation shall be reckoned from the date of the winding up order. Therefore, though the main question decided by the Full Bench of this court concerned the period of limitation for filing a claim by or against a company under section 446(2)(b) within the meaning of Article 137 of the Limitation Act, the basis or the ratio of the decision is that such a right accrues only on the passing of the winding up order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he winding-up proceedings were in fact pending and the court which made the winding up order would be the court which is winding up the company. In this view of the matter, it was held that the Appellate Bench of the High Court was in error in rejecting the application made on behalf of the company for directing the provisional liquidator to prefer claims on the materials furnished and expenses borne by the company. The second angle from which the question was looked at by the Supreme Court and which is relevant for the purpose of the present applications, in the words of the Supreme Court, is as below : "Sub-section (2) of s. 446 confers jurisdiction on the court which is winding-up the company to entertain and dispose of proceedings set out in cls. (a) to (d). The expression "court which is winding-up the company" will comprehend the court before which a winding-up petition is pending or which has made an order for winding-up of the company and further winding-up proceedings are continued under its directions. Undoubtedly, a look at the language of s. 446(1) and (2) and its setting in Part VII, which deals with winding-up proceedings, would clearly show that the jurisdiction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 446. The apprehension of the High Court that if such jurisdiction is conferred on the court at a stage anterior to the winding up order being made but subsequent to the appointment of official liquidator as provisional liquidator, an anomalous situation would arise, has left us unimpressed. If the winding up petition fails, the proceedings pending in the court may have to be transferred to the court which can entertain the proceeding. But if the petition praying for winding up the company ends in a winding up order, the proceedings initiated under sub- sec. (2) will have to be proceeded with till they are finally disposed of because winding up order will relate back to the date of the presentation of the winding up petition. In this view of the matter, no anomalous situation can ever arise." The aforesaid observations of the Supreme Court afford a full and complete answer to the question raised in the present applications. The real controversy in the present case is not whether the provisional liquidator is empowered to invite claims against the company in liquidation on the footing that his powers are the same as those of the Official Liquidator. The real question, as I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the claims of the workers and other creditors. Having regard to these circumstances, and on the basis of the judgment of the Supreme Court in Sudarsan Chits (I) Ltd. (supra), I do not think that there is any justification for modifying or recalling the order dated 2nd August, 2013 permitting the provisional liquidator to invite claims. If anything, I see some advantage as a result of the order, in the sense that some time may be saved if the claims are permitted to be invited at this stage itself, even though no winding-up order has been passed. 13. It was submitted by the applicants that the sale of the properties by SBI was itself under challenge at the behest of the provisional liquidator in CA 1713/2009 which is pending disposal and therefore no useful purpose would be served by permitting the provisional liquidator to invite claims. This however, is a matter not of any statutory prescription, but is one of discretion. It is true that the sale of the properties by the bank is under challenge which is pending before this Court and is listed for hearing on 30th October, 2013, but that cannot act as a legal bar or prohibition on this Court from permitting the provisional liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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