Gujarat High Court
Official vs Rajesh on 20 December, 2011
Author: K.M.Thaker
Bench: K.M.Thaker
OLR/292/2011 6/ 6 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD OFFICIAL LIQUDATOR REPORT No. 292 of 2011 ========================================================= OFFICIAL LIQUIDATOR - Applicant(s) Versus RAJESH SHAH & ASSOCIATES - CHARTERED ACCOUNTANT - Respondent(s) ========================================================= Appearance : OFFICIAL LIQUIDATOR for Applicant(s) : 1,MS AMEE YAJNIK for Applicant(s) : 1, None for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE K.M.THAKER Date : 16/01/2012 ORAL ORDER
1. Heard Ms. Yajnik, learned advocate for the applicant - OL.
2. The OL has taken out present report dated 20.12.2011, which is registered as OLR No.292 of 2011, seeking below mentioned relief/s:-
"7(a) The Hon'ble Court may be pleased to direct Rajesh Shah and Associates Chartered Accountant, voluntary liquidators to submit books of accounts and other records of the company (in members' Vol. Liqn.) as required by the office of the official liquidator mentioned in paragraph No.3 of this report.
(b) The Hon'ble Court may direct the voluntary liquidators to pay cost of Rs.10,000/- to this office towards cost to the office of official liquidator in requesting them for submission of books of accounts and other statutory records, and
(c) Pass such other appropriate order / orders as this Hon'ble Court may deem fit and proper in the interest of Justice."
3. Ms. Yajnik, learned advocate appearing for the applicant has submitted that despite repeated requests - reminders voluntary liquidators appointed for process of voluntary liquidation of the company have not submitted books of accounts and other records of the company, though required to do so as per the obligation imposed by virtue of Section 497 of the Companies Act, 1956 (hereinafter referred to as the 'Act'). She submitted that in view of the delay on part of the voluntary liquidators in submitting books of accounts and the record, the OL has taken out present report and prayed for above mentioned relief/s.
4. It appears from the submission made by the learned advocate for OL and the details mentioned in the report that in response to the request made by OL to submit books of accounts and other records, the voluntary liquidators have given the reply vide letter dated 2.5.2011 of which reference has been made in para 2 of present report. The said para 2 of the report reads thus:-
"2.
That, in response to the same the official liquidator has written the letter dated 25.9.2007 to the voluntary liquidator to submit relevant records and details as per section 497 of the Companies Act, 1956. Further, 3 reminder were sent to the voluntary liquidator vide letter dated 7.3.2008, 4.6.2008 and 15.3.2011. In response to the same the voluntary liquidator had filed with this office on 2.5.2011 the records which are mentioned in above para No.1 and along with the copy of annual balance sheet from 31.3.1999 to 31.3.2003. The voluntary liquidator has further stated in its letter dated 2.5.2011 that due to unprecedented and devastating floods hitting Surat city badly some of the records were destroyed. They have also stated in its letter dated 2.5.2011 that they could further make efforts to find some more records and if so, would be submitted as and when traced / reconstructed, but till today they have not submitted the other more records which are necessary and required by the official liquidator for scrutiny as per section 497(6) of the Companies Act, 1956 for dissolution of the company. Copies of letter dated 25.9.2007, 7.3.2008, 4.6.2008, 15.3.2011 and 2.5.2011 are annexed hereto and marked as Annexure "B" (Colly)"
5. Despite the said reply by the voluntary liquidators, the OL has, in present report submitted that the voluntary liquidators are required to submit details, documents, report etc., as mentioned in paragraph 3 of the report which have not been supplied despite the request.
6. Having regard to the submission made by the learned advocate for OL and considering the provisions contained under Section 497 of the Act, it appears that there is neither need nor scope for passing such direction as prayed for in present report by the OL.
7. So as to consider the scope of the application it is necessary to take into account the provisions contained under Section 497 of the Act which reads thus:-
"497.
Final meeting and dissolution.(1)
Subject to the provisions of section 498, as soon as the and affairs of the company are fully wound up, the liquidator shall-
(a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and
(b) call a general meeting of the company for the purpose of laying the account before it, and giving any explanation thereof.(2)
The meeting shall be called by advertisement-
(a) specifying the time, place and object of the meeting; and
(b) published not less than one month before the meeting in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate, (3) Within one week after the meeting, the liquidator shall send to the 1[Registrar and the Official liquidator a copy each of the account and shall make a return to each of them] of the holding of the meeting and of the date thereof.
If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.
(4)If a quorum is not present at the meeting aforesaid, the liquidator shall, in lieu of the return referred to in sub-section (3) make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall be deemed to have been complied with, (5) The Registrar, on receiving the account and either the return mentioned in sub-section (3) or the return mentioned in sub- section (4), shall forthwith register them.
(6)The Official Liquidator, on receiving the account and either the return mentioned in sub-section (3) or the return mentioned in sub-section (4), shall, as soon as may be, make, and the liquidator and all officers, past or present, of the company shall give the Official Liquidator all reasonable facilities to make, a scrutiny of the books and papers of the company and if on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest, then, from the date of the submission of the report to the Court the company shall be deemed to be dissolved.
(6A) If on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have been conducted in a manner prejudicial as aforesaid, the Court shall by order direct the Official Liquidator to make a further investigation of the affairs of the company and for that purpose shall invest him with all such powers as the Court may deem fit.
(6B) On the receipt of the report of the Official Liquidator on such further investigation the Court may either make an order that the company shall stand dissolved with effect from the date to be specified by the Court therein or make such other order as the circum- stances of the case brought out in the report permit.] (7)If the liquidator fails to call a general meeting of the com- pany as required by this section, he shall be punishable with fine which may extend to five hundred rupees."
8. It can be seen from the Subsections (1) and (2) of Section 497 of the Act that the prescribed procedure is required to be followed by the voluntary liquidator appointed for the purpose of liquidation / dissolution of the company. The Subsection (3)of Section 497 of the Act prescribes period of limitation within which the voluntary liquidator shall have to submit necessary report, books of accounts, returns etc. to the OL. The Subsection (6) of the Section 497 of the Act prescribes the duty of the OL which shall have to be followed - complied by the OL on receipt of the report from the voluntary liquidator.
9. Then Subsection (7) of Section 497 of the Act takes care of the situation wherein the voluntary liquidator commits default in discharging its duty.
10. Furthermore, the provisions contained under Subsection (3) of Section 497 of the Act itself contains provision which prescribes the consequences in the event the liquidator i.e. voluntary liquidator cause delay in submitting or causes default in submitting report, books of account etc., within time prescribed by virtue of Subsection (3) of Section 497 of the Act.
11. Under the circumstances, if the liquidators i.e. voluntary liquidators have not complied with the requirement contained under Subsection (1) and (2) of Section 497 of the Act and / or have committed any other default or delay then it is open to the OL to take appropriate action or take out appropriate proceedings in accordance with the provisions contained under Subsection (3) and/or (7) of Section 497 of the Act.
12. If the voluntary liquidators have not complied with their obligation and have committed delay or default then there is no need for the Court to issue any direction to the voluntary liquidator, at this stage, to submit books of accounts and / or other records etc. the OL is duly empowered to take necessary action. Before the stage contemplated under Section 497(3) and/or Section 497(7), the Court is not required to issue such directions at this stage.
13. Therefore it is clarified that in the event there is any delay or default on part of the voluntary liquidators in complying any of the obligation prescribed by the Act, then OL shall be at the liberty to take appropriate action and / or take out appropriate proceedings for such default or delay.
With the aforesaid clarifications the OLR stands disposed of accordingly.
(K.M.THAKER,J.) Suresh*