INDIAN BANK Vs. BENGAL POTTERIES LTD

JUDGEMENT

(1.) This is an application under Section 155 of the Companies Act, 1956, for rectification of the share register of the company in respect of 38,000 equity shares mentioned in para. 8 of the petition in favour of the petitioner and for consequential orders.

(2.) The admitted facts are that by an order dated the 9th of February, 1976, the company, Bengal Potteries Ltd., was wound up and subsequently with the leave of the court a notification under Section 18FA dated the 15th of September, 1976, was issued read with Section 80AA of the Industries (Development & Regulation) Act, 1951. The industrial undertaking being the entire undertaking of the respondent-company, Bengal Potteries Ltd., was taken over by the Central Govt. without investigation under the circumstances mentioned in the notification and the Industrial Reconstruction Corporation of India Ltd. was appointed the authorised person under the said notification. It follows, therefore, that under the provisions of Section 18FA, Sub-sections (3), (4), (5) and (10), which are as follows : 18FA. (3) Where an order has been made by the High Court under Sub-section (2) the High Court shall direct the Official Liquidator or any other person having, for the time being, charge of the management or control of the industrial undertaking, whether by or under the orders of any court, or any contract or instrument or otherwise, to make over the management of such undertaking or the concerned part, as the case may be, to the authorised person and thereupon the authorised person shall be deemed to be the Official Liquidator in respect of the industrial undertaking or the concerned part, as the case may be. (4) Before making over the possession of the industrial undertaking or the concerned part to the authorised person, the Official Liquidator shall make a complete inventory of all the assets and liabilities of the industrial undertaking or the concerned part, as the case may be, in the manner specified in Section 18FG and deliver a copy of such inventory to the authorised person, who shall, after verifying the correctness thereof, sign on the duplicate copy thereof as evidence of the receipt of the inventory by him. (5) On taking over the management of the industrial undertaking, or on the commencement of the exercise of functions of control in relation to the concerned part, the authorised person shall take immediate steps to so run the industrial undertaking or the concerned part as to ensure the maintenance of production. (10) The proceedings in the winding up of the company in so far as they relate to- (a) the industrial undertaking, the management of which has been taken over by the authorised person under this section, or (b) the concerned part in relation to which any function of control is exercised by the authorised person under this section, shall, during the period of such management or control, remain stayed, and, in computing the period of limitation for the enforcement of any right, privilege, obligation or liability in relation to such undertaking or the concerned part, the period during which such proceedings remained stayed shall be excluded." It is also provided under Section 18FB of the said Industries (Development & Regulation) Act, 1951, as follows :

(3.) It is also relevant to set out the provisions of Section 18FG of the said Act, which runs as follows : 18FG. For the purposes of this Act, the authorised person shall, as soon as may be, after taking over the management of the industrial under taking of a company under Section 18A or Section 18AA or Section 18FA,-- (a) prepare a complete inventory of- (i) all properties, movable and immovable, including lands, buildings, works, workshops, stores, instruments, plant, machinery, automobiles and other vehicles, stocks of materials in the course of production, storage or transit, raw materials, cash balances, cash in hand, deposits in bank or with any other person or body or on loan, reserve funds, investments and book debts and all other rights and interests arising out of such property as were immediately before the date of taking over of the industrial undertaking in the ownership, possession, power or control, of the company, whether within or without India and all books of accounts, registers, maps, plants, Sections, drawings, records, documents or titles of owner-ship of property, and all other documents of whatever nature relating thereto ; and (ii) all borrowings, liabilities and obligations of whatever kind of the company including liability on account of terminal benefits to its employees subsisting immediately before the said date ; (b) prepare separately a list of members and a list of creditors of such-company as on the date of taking over of the management of the industrial undertaking showing separately in the list of creditors, the secured creditors and the unsecured creditors : Provided that where the management of the industrial undertaking of a company has been taken over under the said Section 18A before the commencement of the Industries (Development and Regulation) Amendment Act, 1971, the aforesaid function shall be performed by the authorised person within six months from such commencement." Mr. Bimalesh Chatterjee, appearing for the petitioner, Indian Bank, submitted after drawing my attention to various provisions of the said Industries (Development and Regulation) Act, 1951, particularly Sections 18E(1)(a), (b) and (2), 18AA(3),(5), 18FA(2), (3), (4) and (10), 18FB(1)(b) and 18FH and submitted that by the operation of the said provisions it is quite clear that the provisions of the Companies Act, 1956, are not suspended and he particularly referred to Section 18E(2) and submitted that save and except the provisions mentioned therein, all the other provisions of the Indian Companies Act continue to apply to the undertaking in the same manner as it applied thereto before the notification under Section 18A. In my view, the said contention is not correct as the reference to Section 18A under Chap. III-A which, from a plain reading of the said section, contemplates the taking over of an industrial undertaking which is not wound up. Therefore, in my view, when there are specific provisions for the management and control of an industrial undertaking owned by companies (in liquidation) under Chap. III-AA which has been introduced in the Act by an amendment, being Act No. 72 of 1971, making specific provisions in respect of a company (in liquidation) the management and control of which is taken over, after obtaining the permission of the High Court by making an application by the Government there cannot be any question of the application of any other provision. Therefore, there being specific provisions for the management of companies (in liquidation) being taken over by the Central Govt., Section 18E cannot have any application and Chap. III-AA, containing the provisions of Section 18FA, which appears to be a complete code in respect of taking over the management and control of a company (in liquidation) after the Central Govt. forms the opinion that there are possibilities of re-starting an industrial undertaking and that such undertaking should be run or re-started, as the case may be, for maintaining or increasing the production, supply or distribution of the articles or class of articles relatable to a scheduled industry needed by the general public, and it has been made specifically clear in Sub-section (3) of Section 18FA that the authorised person will replace the official liquidator and take over possession from him after making an inventory in accordance with Section 18FG, the said authorised person will thereafter be deemed to be the official liquidator and Sub-section (10) of Section 18FA, which I have set out before, makes it abundantly clear that the winding-up proceeding would be stayed and enforcement of any right, privilege, obligation or law in relation to such an industrial undertaking would remain stayed during the period the Central Govt. takes over the management and control of such undertaking being the company (in liquidation). It is further made clear by Sub-section (1)(b) of Section 18FB that the operation of all or any contract, etc., shall remain suspended or shall be enforceable with such adaptation and in such manner as may be specified in the notified order and all rights of the parties including the shareholder of the company (in liquidation) remain suspended and, in my view, the power to enforce the right of transfer of shares by rectification of the register of members is also a right of a shareholder of a company to transfer and correspondingly the transferee's right to get his name rectified in place of the transferor remains suspended. It makes no difference whether such right to become the shareholder is declared by a decree of the court as in the present case, because that would be rectification of the share register of the respondent-company in the course of winding-up pursuant to the decree of the court and such execution remains stayed within the meaning of Section 18FA(10) during the period the management and control of the said company (in liquidation) is with the Central Govt. under the said Act.