BAIJNATH PRASAD Vs. JAIMANGAL LIMITED

JUDGEMENT

(1.) Jaimangal Limited, the company in question, was wound up by order dated December 5, 1997. The official liquidator was appointed as the liquidator of the company and directed to take charge of its assets, and further to take necessary steps in accordance with the provisions of the Companies Act. An application (flag '11') was, thereafter, filed on behalf of opposite party No. 5, Bihar State Credit and Investment Corporation Ltd. (BISCICO) on January 28, 1998, seeking modification of the aforementioned part of the order by which the official liquidator had been directed to take charge of the assets of the company. Both the company--the petitioner and opposite party Nos. 1 and 2--have filed counter-affidavits objecting to the prayer. The official liquidator in his reports has also taken a similar stand. The matter was heard at length.

(2.) Mr. Pawan Kumar, learned counsel for the BISCICO appearing in support of the application, submitted that the BISCICO had taken charge of the assets of the company in exercise of its statutory powers under Section 29 of the State Financial Corporations Act, 1951 ("SFC Act", for short), after long contest on October 15, 1996, that is, much prior to the winding up order. Although in terms of Section 456 of the Companies Act, where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator is empowered to take into his custody or under his control, all the property, effects and actionable claims of the company, the said provisions as well as other relevant provisions of the said Act have to be read in derogation to the provisions of the State Financial Corporations Act, in view of the non obstante clause contained in Section 46B of that Act. In other words, notwithstanding the winding up order, the BISCICO, as a financial institution established under Section 3 of the State Financial Corporations Act, 1951, is entitled to take over the management of an industrial concern under Section 29 of the Act and also entitled to take steps for the sale of its assets for realisation of its dues. However, in the present case, BISCICO has no objection to working in tandem with the official liquidator, as directed by this court in its order dated December 5, 1997, which order is in consonance with the order of the Supreme Court in S.L.P. (Civil) No. 7338 of 1984. Apart from the provisions of the SFC Act, if BISCICO is compelled to hand over the custody of the assets to the official liquidator, it may adversely affect the prospective sale of the assets, for, that may act as a deterrent to the prospective buyers.

(3.) Mr. Umesh Prasad Singh, learned counsel for opposite parties Nos. 1 and 2, submitted that BISCICO is only one of the secured creditors and if it is allowed to retain the possession and custody of the assets and go ahead with sale, it is not expected that it will also look after the interest of other seeured creditors, contributories, debenture-holders--whose interests have also to be looked after, and that is possible only when the official liquidator is allowed to take charge of the assets. Pointed reference in this connection was made to the provisions of Section 529A of the Companies Act. He further submitted that in terms of Section 441(2) of the Companies Act, the winding up proceeding is deemed to commence from the date of filing of the winding up petition and, therefore, in the present case the winding up petition having been filed on August 22, 1996, BISCICO could not have taken possession of the assets on October 15, 1996. In view of the provisions of Section 477(1) and (6) of the Companies Act, this court is competent to direct any person in possession of any property of the company to deliver the same to the liquidator "in such manner and on such terms as to the court may seem just". Mr. Singh also attempted to go into the circumstances in which BISCICO had taken possession, "forcibly"--as he put it--of the assets. He further contended that BISCICO has misappropriated the assets of the company. In this connection he pointed out that it has been appropriating a sum of Rs. 50 thousand per month from the rental alone, without giving any account thereof to this court. He submitted that every creditor, contributory, shareholder, etc., has a charge over the assets and its income, Counsel further submitted that unless the full charge of the assets and records are handed over to the official liquidator, he cannot file any statement of affairs under Section 454 of the Companies Act, nor can he get the accounts audited nor discharge his obligations under various statutes, such as, the Income-tax Act. He pointed out in this connection that neither income-tax returns have been filed for the intervening periods nor the municipal taxes have been paid to the Patna Municipal Corporation endangering the interests of all creditors, shareholders, etc. He suggested that this court may consider appointing a committee to look after the management of the company associating the official liquidator, secured creditors, etc., for properly looking after the interests of all concerned.