Karnataka High Court
Official Liquidator Of M/S United ... vs M/S Mysore Fruit Products Pvt Ltd on 12 June, 2024
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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NC: 2024:KHC:20996
CA No. 280 of 2023 In
COP No.57 of 2012
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF JUNE, 2024
BEFORE R
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
COMPANY APPLICATION NO. 280 OF 2023
IN
COMPANY PETITION NO. 57 OF 2012
BETWEEN
OFFICIAL LIQUIDATOR OF
M/S UNITED BREWERIES (HOLDING) LTD (IN LIQN)
ATTACHED TO HIGH COURT OF KARNATAKA,
"CORPORATE BHAVAN", NO 26-27, 12TH FLOOR,
RAHEJA TOWERS, M G ROAD,
BENGALURU 560001
...APPLICANT
(BY SMT. KRUTIKA RAGHAVAN, ADVOCATE FOR O.L.)
AND
1. M/S MYSORE FRUIT PRODUCTS PVT LTD
Digitally signed
by NO 17, SANKEY ROAD
NARAYANAPPA BENGALURU 560020,
LAKSHMAMMA REPRESENTED BY ITS DIRECTOR
Location: HIGH MS D A THEJASHWARI
COURT OF
KARNATAKA
2. SRI KRISHNAPPA MUNIVENKATASWAMAPPA
SRINIVASAMURTHY, DIRECTOR,
NO 5/25, 10TH MAIN, 3RD CROSS,
1ST BLOCK, JAYANAGAR,
BENGALURU 560011
3. M/S DALAVOI AUDIKESAVULU THEJASHWARI,
DIRECTOR
NO 5/25, 10TH MAIN, 13TH CROSS,
NEAR ASHOKA PILLAR, 1ST BLOCK, JAYANAGAR,
BENGALURU 560011
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NC: 2024:KHC:20996
CA No. 280 of 2023 In
COP No.57 of 2012
...RESPONDENTS
(BY SRI. PERIKAL K. ARJUN., ADVOCATE)
THIS COMPANY APPLICATION IS FILED UNDER SECTION
446(2) (b) OF THE COMPANIES ACT, 1956 AND READ WITH RULE 9
OF THE COMPANIES (COURT) RULES, 1959 PRAYING TO DIRECT THE
RESPONDENT NO.1 TO 3 TO PAY A SUM OF RS.20,01,43,101/- AND
RS. 23,64,86,895/- AS INTEREST @ 18% FROM 07.02.2017 TO
31.08.2023, TOTAL AMOUNTING TO RS. 43,66,29,996/- AND
FUTURE INTEREST AT 18% FROM 01.09.2023 TILL THE DATE OF
PAYMENT AND ETC.
THIS COMPANY APPLICATION COMING ON FOR ORDERS AND
HAVING BEEN RESERVED FOR ORDERS ON 25.04.2024, THIS DAY,
THE COURT PRONOUNCED THE FOLLOWING:
ORDER
1. CA No.280/2023 has been filed seeking for the following reliefs;
a) To direct the respondent No. 1 to 3 pay a sum of Rs.20,01,43,101/- and Rs.23,64,86,895/- as interest @ 18% from 07.02.2017 to 31.08.2023, total amounting to Rs.43,66,9,996/- and future interest at 18% from 01.09.2023 till the date of payment.
b) To pass such other order or orders as may be deemed fit and proper in the Circumstances of the case.
2. In the above matter, the company in liquidation viz., M/s United Breweries (Holdings) Ltd., having been wound up by an order dated 7.02.2017 in Company Petition No.57/2012, the Official Liquidator attached -3- NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 to this Court has been appointed as a liquidator of the company in terms of Section 449 of the Companies Act, 1956 ['Act' for short]. The Official Liquidator has filed the above application under Section 446(2)(b) seeking for the above reliefs.
3. Smt.Kruthika Raghavan, learned counsel appearing for the Official Liquidator would submit that, 3.1. The Company in liquidation having been ordered to be wound up by order dated 7.02.2017, the company petition having been filed in the year 2012, the statement of affairs was filed by some of the directors on 3.12.2020 indicating the indebtedness of the respondent herein and it is on that basis that the above application is filed for recovery of monies owed by the respondent.
3.2. She submits that in terms of the statement of affairs filed by the ex-directors, respondent No.1 -company is indebted in a sum of -4- NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 Rs.20,01,43,101/- as on 7.02.2017, the said amount having been advanced by the company in liquidation to respondent No.1. consequent to the winding up order and filing of statement of affairs, a demand notice was issued on 5.02.2021 to respondent No.1, calling upon respondent No.1 to make payment of the aforesaid amount within 15 days. Respondent No.1, in its reply, though accepted the fact of aforesaid payment having been done by the company in liquidation, it contended that the said amount was an advance for the purpose of using the manufacturing facility of respondent No.1. The company in liquidation not having used the said facility and the facility having been kept idle to meet the requirements of the company in liquidation, respondent No.1 suffered losses and as such, the amount advanced was adjusted towards said losses. There is no amount required to be paid. -5-
NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 3.3. It is further contended that the claim of the Official Liquidator is hopelessly barred by law of limitation. Respondent No.1 had, as far back as 16.11.2015 corresponded with the officers of the company in liquidation that the advance amount received would be adjusted towards losses; the officers of the company in liquidation had then informed respondent No.1 that the same would be placed before the Board of directors and it was contended that on the basis of the request of reply of respondent No.1, the amount advanced by the company in liquidation to respondent No.1 has been treated as doubtful in the balance sheet of the company in liquidation. This amount, having been advanced after the filing of the winding up petition, could not have been so treated by the company in liquidation; the transaction is a sham transaction.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 3.4. The company being ordered to be liquidated, the interest of the company has not been taken care of. Thus, the interest of the creditors is likely to suffer. Insofar as the contention that the claim of the Official Liquidator is barred by limitation, she relies upon the decision of the Hon'ble Apex Court in the case of Karnataka Steel & Wire Products and others -v- Kohinoor Rolling Shutters & Engineering Works and others1 and submits that the calculation of limitation period as regards the application pertaining to recovery of amount by the company in liquidation, the period from filing of the winding of petition till the order of winding up is to be excluded, thereafter one year period has to be given and in terms of Section 458-A r/w Article 137 of the Limitation Act, an application under Section 456(2) can be 1 (2003)1 SCC 76 -7- NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 made within a period of four years from the date of winding up order.
3.5. The Official Liquidator had issued several correspondences to the respondent-company to make payment of the due amounts. The company has accepted the receipt and not having paid the amounts would amount to acceptance of the debt and therefore, filing of the present petition is within time inasmuch as correspondence was issued on 11.11.2021 to respondent No.1. Respondent No.1 appeared before the Official Liquidator, sought for time to submit the agreement between the company in liquidation and respondent No.1, the agreement was not furnished, time was sought for. Again, a notice was issued on 6.05.2022, and a demand was also made that respondent No.1 did not submit the document directed to be submitted to the Official Liquidator. Subsequently, when a meeting was called for, -8- NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 neither the representative nor the director of respondent No.1 appeared before the Official Liquidator. Another letter came to be issued on 4.08.2023 despite which payment was not made. The respondent company is taking advantage of its own wrongs. Respondent No.1, not having furnished the document and not having placed anything on record, cannot now contend that the claim on behalf of the company in liquidation by the Official Liquidator is beyond the limitation period. The respondent No.1-company is due in all a sum of Rs.43,66,29,996/- inclusive of interest as on 31.08.2023 and further interest thereon, which she submits is required to be ordered to be paid by respondent No.1-company.
3.6. Insofar as respondents No.2 and 4-Directors of respondent No.1-company, she submits that they have been formally made as a party to the proceedings they being directors of respondent -9- NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 No.1-company, there is no personal liability on their part insofar as the present transaction is concerned and that the relief sought for is only against respondent No.1-company. 3.7. On the basis of the above contentions she submits that the Company Application is required to be allowed.
4. Sri.Perikal K.Arjun, learned counsel appearing for respondents, submits that, 4.1. In the year 2013, the company in liquidation approached respondent No.1 company for the purpose of using the manufacturing facility of respondent No.1 company to manufacture mango pulp for export of the same by the company in liquidation through its export division viz., UB Global.
4.2. The said amount was paid as an advance rental for the use of premises, and the amount was to be used for improving and upgrading the
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 premises of respondent No.1 in order to meet the requirements of the company in liquidation. The company in liquidation did not use the manufacturing facility, and as such, the capacity of 35 MT per day remained idle and unutilised.
4.3. It is in that background the amount advanced was adjusted in the year 2015 itself by respondent No.1-company towards losses suffered. The company in liquidation has acknowledged the letter dated 23.11.2015 of respondent No.1 company and has not raised any objections thereto. The company in liquidation treated the amount as doubtful debt, which would indicate that the same is not available to be received by the company in liquidation.
4.4. That an application under Section 446(2) is required to be filed within a period of four years
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 from the date of winding up order, in the present case, the winding up order having been passed on 7.02.2017, any application for recovery ought to have been made by 6.02.2021, the present application having been made on 13.09.2023, it is beyond the extended period of limitation permitted under Section 458-A and as such, is hopelessly barred by limitation.
4.5. In this regard, he relies upon the decision of the Hon'ble Apex Court in the case of Karnataka Steel & Wire Products and others (supra1), more particularly para 4 thereof, which is reproduced hereunder for easy reference:
4. On a plain reading of the provisions contained in Section 458-A of the Companies Act, it is crystal clear that the aforesaid provision merely excludes the period during which a company was being wound up by the court from the date of the commencement of the winding up till the order of winding up is made and an additional period of one year immediately following the date of the winding up. In other words, in respect of a legally enforceable claim, which claim could have been made by the company on the date on which the application for winding up is made, could be filed by the official liquidator by taking the benefit of Section 458-A of the
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 Companies Act and getting the period of four years to be excluded from the period of three years, as provided under Article 137 of the Limitation Act. The legislature, by way of an amendment, brought into force the provisions of Section 458-A, so that an official liquidator, who is supposed to be in custody of the assets and liabilities of the company, would be able to file a claim on behalf of the company, which was legally enforceable on the date of the winding up, after excluding the period, indicated under Section 458-A of the Companies Act, so that the company or its shareholders will not suffer any loss. But by no stretch of imagination, the said provisions contained in Section 458-A can be construed to mean that even a barred date (sic debt) or a claim which was not enforceable on the date of the winding up, would stand revived, once a winding-up application is filed and order is made by virtue of Section 458-A of the Companies Act. We, therefore, affirm the view taken by the Karnataka High Court under the impugned judgment and dismiss these appeals. There will be no orders as to costs.
4.6. The decision of the Delhi High Court in the case of Re-dimension Investment & Securities Ltd2, more particularly para 4 and 9 thereof, which are reproduced hereunder for easy reference:
4. On behalf of the applicant/OL, it has been submitted that although a notice was served upon the respondent/debtor company on 12.07.2012, and thereafter, on 01.06.2017 to pay the amount of Rs.
80,00,000/-, the debtor M/s Grandeur Interiors (P) Ltd. has failed to do the needful and has neglected to refund the said sum to the applicant company.
9. On a careful perusal of Section 458A of the Act, subsequent to the Provisional Liquidator being appointed and taking over the charge, the period of limitation for 2 2023 SCC Online Delhi 8039
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 claiming the recovery of such amount commenced on 03.06.2011 and extended by another year, eventually, by all means expired on 03.06.2015. It is also borne out from the record that the present application by the OL has been filed on 26.10.2017.
4.7. Another decision of Delhi High Court in the case of M/s R.C.Abrol and Co. (Pvt.) Ltd. -v- M/s A.R.Chadha and Company3, more particularly para 8 and 15 thereof, which are reproduced hereunder for easy reference:
8. The claim petition was filed, inter alia, against the respondent (respondent No. 1 in the Company Application) for the recovery of Rs. 1078.10 on the basis of open and current account in the books of the Company in liquidation on the basis that the last entry in the said account is of April 10, 1965.
15. Under Art. 137 of the Limitation Act, the period of limitation prescribed for an application is three years from the date when the right to apply accrues. Even after giving the benefit of S. 458-A of the Act and taking into account the period of limitation prescribed by Article 137 of the Limitation Act, 1963, the limitation would have expired, even according to the case of the Official Liquidator that the claim is based on open and current account, on 19-9-1969.
4.8. Relying on all three Judgments, he submits that the total period of time which is available to the Official Liquidator to file proceedings under 3 1977 SCC OnLine Del 135
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 Section 446 is four years and nothing more than that.
4.9. He relies upon the decision of the Bombay High Court in the case of Orkay Industries Ltd. And others -v- State of Maharashtra and others4 more particularly para 48 thereof which is reproduced hereunder for easy reference:
48. For the above reasons, it will have to be held that merely on the presentation of a Petition for winding up the affairs of a Company do not come to an absolute standstill. It will have to be held that merely on the presentation of a Petition for winding up, the Directors of the Company do not cease to be in charge of and responsible to the Company for the conduct of the business of the Company. If the proposition as canvassed by the Petitioners is to be accepted then merely on the presentation of a Petition for winding up, all affairs of the concerned Company would come to a standstill. In that case on a strict construction even wages and salaries of the employees and Directors could not be paid, no statutory payments/contributions could be made, no payment could be made for goods or raw materials required by the Company for its survival, no monies could be raised even though it may be required for the purposes of running the Company. The effect would be that merely on presentation of a Petition for winding up the Company would get completely paralyzed. The law never contemplated or envisaged such a drastic result merely on the presentation of a Petition for winding up. It is clear that for the purpose of carrying on commercial activities of the Company payments can be made, goods can be purchased and the normal activities of the Company can be carried on. Of course if and only when a winding up 4 1998 SCC OnLine Bom 248
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 order is passed then at that stage there may be risk that payments which have been made would become void unless the Court otherwise directs. The risk is that the creditors may be directed to bring back the amounts or the goods or the property. We are not holding that all the creditors will be so directed. It is possible that the Company Court may come to the conclusion that the payment or disposition was in good faith for the benefit of the Company and its creditors and was necessary for the purpose of keeping the Company running. We are unable to accept submission that the Directors may be called upon to personally bring in the amounts paid. Such a direction would only be passed if payments are improper. No such Order would be passed for genuine payments made in good faith for legitimate dues of the Company. It is therefore clear that there is no absolute prohibition or bar preventing the Company or its Directors from making payment or even making disposition for the purpose of running the business of the Company in the ordinary course. It will thus have to be held that if after notice under section 138 of the Negotiable Instruments Act, payments have not been made merely on the ground that Petition for winding up has been presented, there would be a "failure to make payment" under section 138 of the Negotiable Instruments Act.
4.10. Relying on the above, he submits with the filing of a company petition for winding up; the operation of the company does not come to a standstill; the company continues its operations as was being done in the present case. The correspondence between the company in liquidation and respondent No.1 has gone on, the communication/request/demand of respondent No.1 has been accepted by the
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 company in liquidation, and the amount advanced by the company in liquidation has been treated as a doubtful debt while the company was functioning before the company was ordered to be wound up. Thus, the Official Liquidator cannot now seek to claim the amount that has already been declared to be bad debt and written off by the company in liquidation. 4.11. He relies upon the decision of the Delhi High Court in the case of Rakman Industries Limited -v- Sumaja Electro Infra Private Ltd.5 more particularly para 17 thereof which is reproduced hereunder for easy reference:
17. It is settled law that mere demand for the repayment of does not extend the period of limitation. It is also equally well settled that merely sending a legal notice to repay the amount does not assist the plaintiff for the purpose of calculation of the period of limitation. Even if it is to be presumed that a statement made in the plaint is correct as a matter of evidence, the same would still be beyond the period of limitation. The plaintiff pleaded that he had communicated with the defendant in July, 2019, and the defendant had admitted the pending amount.
The said month of July, 2019, is after five years of placing the order for supply which is, 23.04.2014. The last invoice placed by the plaintiff on record is dated 18.11.2015. Thus, even if we take the averment that the 5 2022 SCC OnLine Del 3719
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 defendant had called the plaintiff in July, 2019, and had admitted its liability to pay the pending amount, the same would not extend the period of limitation for claiming the outstanding amount as the said acknowledgement, if any, is beyond the period of three years from the cause of action which, in the present case, would be the date when the goods ought to have been delivered. The plaintiff has also pleaded that cause of action also arose on various dates when the plaintiff requested the defendant to repay the entire amount. The said averment, however, will not extend the period of limitation since making a demand does not extend the period of limitation, which commence on a date in terms of the provisions of Limitation Act. Further, it is not the case of the plaintiff that the goods were to be supplied over the period of next few years and, therefore, the cause of action would start after the expiry of the said period.
4.12. He relies upon the decision of the Hon'ble Apex Court in the case Geo Miller and Company Private Limited -v- Chairman, Rajasthan Vidyut Utpadan Nigam Limited6 more particularly para 21 thereof, which is reproduced hereunder for easy reference:
21. Applying the aforementioned principles to the present case, we find ourselves in agreement with the finding of the High Court that the appellant's cause of action in respect of Arbitration Applications Nos.
25/2003 and 27/2003, relating to the work orders dated 7-10-1979 and 4-4-1980 arose on 8-2-1983, which is when the final bill handed over to the respondent became due. Mere correspondence of the appellant by way of writing letters/reminders to the respondent subsequent to this date would not extend the time of 6 (2020)14 SCC 643
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 limitation. Hence the maximum period during which this Court could have allowed the appellant's application for appointment of an arbitrator is 3 years from the date on which cause of action arose i.e. 8-2-1986. Similarly, with respect to Arbitration Application No. 28/2003 relating to the work order dated 3-5-1985, the respondent has stated that final bill was handed over and became due on 10-8-1989. This has not been disputed by the appellant. Hence the limitation period ended on 10-8-1992. Since the appellant served notice for appointment of arbitrator in 2002, and requested the appointment of an arbitrator before a court only by the end of 2003, his claim is clearly barred by limitation. 4.13. He relies upon the decision of the Hon'ble Apex Court in the case of BSNL -v- Nortel Networks India Private Limited7 more particularly para 51 thereof which is reproduced hereunder for easy reference:
51. The period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters, [S.S. Rathore v. State of M.P., (1989) 4 SCC 582 : 1990 SCC (L&S) 50; Union of India v. Har Dayal, (2010) 1 SCC 394; CLP (India) (P) Ltd. v. Gujarat Urja Vikas Nigam Ltd., (2020) 5 SCC 185] or mere settlement discussions, where a final bill is rejected by making deductions or otherwise. Sections 5 to 20 of the Limitation Act do not exclude the time taken on account of settlement discussions. Section 9 of the Limitation Act makes it clear that:"where once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it." There must be a clear notice invoking arbitration setting out the "particular dispute" [ Section 21 of the Arbitration and Conciliation 7 (2021)5 SCC 738
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 Act, 1996.] (including claims/amounts) which must be received by the other party within a period of 3 years from the rejection of a final bill, failing which, the time bar would prevail.
4.14. Relying on the above three Judgments, he submits that mere correspondence by the Official Liquidator with respondent No.1 would not extend the period of limitation. Limitation, once set in motion, would continue running and would not stop. The period of four years having commenced from the date of the winding up order, it was required for the Official Liquidator to have initiated proceedings for recovery; not having done so within the timeframe, the Official Liquidator has lost his right to initiate any proceedings.
4.15. From the date of winding up, the Official Liquidator is deemed to be in possession of all documents and assets of the company in liquidation, and in this regard, he relies upon
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 Section 456 of the Companies Act which is reproduced hereunder for easy reference:
456. CUSTODY OF COMPANY'S PROPERTY (1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator or the provisional liquidator, as the case may be, shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled. Page 196 of 332 (1A) For the purpose of enabling the liquidator or the provisional liquidator, as the case may be, to take into his custody or under his control, any property, effects or actionable claims to which the company is or appears to be entitled, the liquidator or the provisional liquidator, as the case may be, may by writing request the Chief Presidency Magistrate or the District Magistrate within whose jurisdiction such property, effects or actionable claims or any books of account or other documents of the company may be found, to take possession thereof, and the Chief Presidency Magistrate or the District Magistrate may thereupon after such notice as he may think fit to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator. (1B) For the purpose of securing compliance with the provisions of sub-section (1A), the Chief Presidency Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary. (2) All the property and effects of the company shall be deemed to be in the custody of the 1 [Tribunal] as from the date of the order for the winding up of the company.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 4.16. By referring to the above provision, he submits that the liquidator or provisional liquidator, as appointed, shall take into custody or under his control all the property, effects and actionable claims to which the company is or appears to be entitled. Thus, it is for the Official Liquidator to conduct due diligence, ascertain the amounts due, and initiate proceedings. The Official Liquidator, not having done so within the time prescribed under Section 458-A, the Official Liquidator has lost his right to seek such recovery.
5. In reply, Ms Kruthika Raghavan, learned counsel for the Official Liquidator, would submit that, 5.1. The Official Liquidator received the winding-up order on 27.02.2017. The company's assets situated at the registered office were taken symbolic possession of on 28.02.2017 and 2.03.2017.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 5.2. Since the statement of affairs had not been filed within time, notice was issued to the ex- directors on 9.03.2017 under Section 454 of the Act. Notices were issued on 20.03.2017 directing ex-directors to submit books, records and assets. The ex-directors on 15.03.2017 and 25.03.2017, had replied, stating that the Central Bureau of Investigation [CBI] had seized the books and records.
5.3. In the meantime, the order of winding up was challenged in OSA No.5/2017, wherein the Division Bench of this Court vide order dated 25.04.2017 directed the Official Liquidator not to precipitate the matter. OSA No.5/2017 came to be finally dismissed on 6.03.2020; pursuant thereto, the Official Liquidator sent a notice dated 19.06.2020 under Section 454 of the Act directing the ex-directors to file a statement of affairs along with another notice under Section
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 456/468 calling upon the ex-directors to handover the books and records.
5.4. The ex-directors, vide reply dated 31.07.2020, informed the Official Liquidator that they had filed an application in M.A. No.705/2020 requesting a direction to the CBI to hand over the books and records seized by them. 5.5. In the meanwhile, the management of the company in liquidation had filed a Special Leave Petition (Civil) No.13579/2020 challenging the order of the Division Bench of this Court in OSA No.5/2017 which came to be dismissed by the Hon'ble Apex Court on 26.10.2020. 5.6. Pursuant thereto, the Official Liquidator had filed a complaint under Section 454 of the Act in C.A. No.236/2020 on 20.08.2020, as also a complaint under Section 456/468 of the Act in CA No.235/2020, which are pending before this Court.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 5.7. During the pendency of the said proceedings, the ex-directors filed a statement of affairs on 3.12.2020, which was found defective. The defects had been communicated to the ex- directors on 5.01.2021 and 16.2.2022, but their reply and/or rectification thereto is still awaited. 5.8. The Official Liquidator, having waited for the records, filed M.A. No.371/2021 in CBI Special case No.6/2017 for the handover of documents. The said court vide order dated 23.08.2021 allowed the same and few documents have been handed over on 26.10.2021. It is on that basis, the above application has been filed. Therefore, she submits that the application is well within the limitation period under Section 458-A and cannot be said that it is barred by limitation at this stage.
6. Heard Ms.Krutika Raghavan, learned counsel on behalf of Official Liquidator and Sri.Perikal K.Arjun,
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 learned counsel for the respondents. Perused papers.
7. The points that would arise for consideration are:
i) When would the limitation period commence in terms of Section 458-A of the Companies Act, 1956, for the Official Liquidator to take action against the company's creditors?
ii) Would the limitation period stand extended if an appeal is filed challenging the winding up order and the winding up order is stayed? If so, from when would the limitation period have to be calculated?
iii) Is the Official Liquidator expected to conduct an investigation, ascertain the creditors, and initiate action against such creditors on his own?
iv) In the present matter, can the application filed by the Official Liquidator under Section 446(2) of the Act be said to be barred by law of limitation and dismissed in limine at this stage?
v) What order?
8. I answer the above points as under.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012
9. ANSWER TO POINT NO.1: When would the limitation period commence in terms of Section 458-A of the Companies Act, 1956, for the Official Liquidator to take action against the company's creditors?
9.1. A company is ordered to be wound up under the provisions of Section 433 if any of the conditions thereunder are satisfied. One such condition is the company's inability to pay its debts, which is the case in the present matter. 9.2. On the winding up order being passed, the Official Liquidator is appointed as the liquidator of the company in liquidation to carry out all the required processes and procedures for winding up the company, including taking over the assets and liabilities of the company, the books and inventory of the company, receive and/or recover monies from the creditors of the company, adjudicate the claims made against the company by third parties and with the
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 permission of the court seized of the winding up proceedings, make payment of such amounts to such claims including the workmen. For these purposes, the Official Liquidator is also authorised to get the valuation of the property done, bring the property for sale by way of auction, sell the same with the permission of the court and use the money received for the payments to be made.
9.3. From all the above, it is clear that it is only after a winding-up order is passed that the official liquidator takes over the company, its assets, liabilities, books, etc. Before such winding up, the official liquidator would not have any knowledge of the company's affairs. It is for this reason that Section 458A was introduced by way of amendment in the year 1960 to provide for an extended period of time, the Parent Act having come into force in the
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 year 1956 to provide for an extension of time or methodology of computing the period of limitation and in that view the period from the date of commencement of winding up of the company to the date on which the winding up order was made, both inclusive are excluded. So also, is a period of one year immediately following from the date of winding up order excluded.
9.4. As held by the Hon'ble Apex Court in Karnataka Steel and Wire products case (supra) as also by the Hon'ble Delhi High Court in Dimension and Investment Securities Limited's case and R.C.Abrol and Company (P) Ltd's case, the period of limitation prescribed is three years from the date when the right to sue accrues. 9.5. If the right to sue accrued more than three years prior to the date of filing of the winding
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 up petition, Article 137 of the Limitation Act would apply and the limitation period would have lapsed even as on the date of filing of the winding up petition, and as such, the official liquidator would not have a right to initiate any proceedings. The company in liquidation not having initiated any proceedings during that time, when there was no winding up petition pending.
9.6. If the limitation period commenced less than 3 years prior to the filing of the winding up petition, the time period from the date on which the limitation accrued till the date of filing of the winding up petition would have to be taken into consideration. In terms of Section 458A i.e., the time period from the time of filing of winding up petition till the date of order of winding up, the limitation period is excluded. A further period of one year from the date on
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 which the winding-up was ordered would be excluded, and a period of three years would be calculated thereafter; that is to say, from the date of the winding-up order, the limitation period available to the official liquidator would be four years. Section 458-A of the Act is reproduced hereunder for easy reference:
458A. EXCLUSION OF CERTAIN TIME IN COMPUTING PERIODS OF LIMITATION-
Notwithstanding anything in the Indian Limitation Act, 1908 (9 of 1908) or in any other law for the time being in force, in computing the period of limitation prescribed for any suit or application in the name and on behalf of a company which is being wound up by the Tribunal, the period from the date of commencement of the winding up of the company to the date on which the winding up order is made (both inclusive) and a period of one year immediately following the date of the winding up order shall be excluded.
9.7. If the limitation period commences after the winding-up petition was filed, then Article 137 would apply in terms of Section 458A, i.e., from the time of filing of the winding-up petition till the date of order of winding-up, the limitation period is excluded. A further period of one year
- 31 -
NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 after the date on which the winding-up was ordered would be excluded, and a period of three years would commence thereafter; that is to say, from the date of the winding-up order, the limitation period available to the official liquidator would be four years.
9.8. The above being the three permutations and combinations of the time when the limitation period starts, these would have to be taken into consideration by the official liquidator and applied by this court.
9.9. The one-year period is excluded under Section 458A because the official liquidator is not aware of the goings-on in the company in liquidation. This one-year period is made available to the official liquidator to get to know the details and thereafter take necessary action depending on the aforementioned three permutations and combinations.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 9.10. In terms of Section 444, the said order must be communicated to the official liquidator and the Registrar of Companies within two weeks of making the order. Section 444 of the Act is reproduced hereunder for easy reference:
444. ORDER FOR WINDING UP TO BE COMMUNICATED TO OFFICIAL LIQUIDATOR AND REGISTRAR Where the Tribunal makes an order for the winding up of a company, the Tribunal, shall within a period not exceeding two weeks from the date of passing of the order, cause intimation thereof to be sent to the Official Liquidator and the Registrar.
9.11. Any suits filed against the company in liquidation would stand stayed in terms of Section 446(1) of the Companies Act. In terms of Section 446A, the director and other officers of the company shall ensure that the company's books of accounts are completed and audited up to the date of the winding-up order and submitted to the liquidator at the cost of the
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 company. Section 446 is reproduced hereunder for easy reference:
446. SUITS STAYED ON WINDING UP ORDER- (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose.
(2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force,have jurisdiction to entertain, or dispose of -
(a) any suit or proceeding by or against the company ;
(b) any claim made by or against the company (including claims by or against any of its branches in India);
(c) any application made under section 391 by or in respect of the company ;
(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960. (3) 3[***] (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a high Court.
9.12. The ex-directors of the company in terms of Section 454 are required to file the statement
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 of affairs. The said Section 454 is reproduced hereunder for easy reference:
454. STATEMENT OF AFFAIRS TO BE MADE TO OFFICIAL LIQUIDATOR(1) Where the Tribunal has made a winding up order or appointed the Official Liquidator as provisional liquidator, unless the Tribunal in its discretion otherwise orders, there shall be made out and submitted to the Official Liquidator a statement as to the affairs of the company in the prescribed form, verified by an affidavit, and containing the following particulars, namely : -
(a) the assets of the company, stating separately the cash balance in hand and at the bank, if any, and negotiable securities, if any, held by the company ;
(b) its debts and liabilities ;
(c) the names, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts ; and in the case of secured debts, particulars of the securities given, whether by the company or an officer thereof, their value and the dates on which they were given ;
(d) the debts due to the company and the names, residences and occupations of the persons from whom they are due and the amount likely to be realised on account thereof ;
(e) such further or other information as may be prescribed, or as the Official Liquidator may require.
(2) The statement shall be submitted and verified by one or more of the persons who are at the relevant date the directors and by the person who is at that date the manager, secretary or other chief officer of the company, or by such of the persons hereinafter in this sub-section mentioned, as the Official Liquidator, subject to the direction of the Tribunal, may require to submit and verify the statement, that is to say, persons
-
(a) who are or have been officers of the company ;
(b) who have taken part in the formation of the company at any time within one year before the relevant date ;
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012
(c) who are in the employment of the company, or have been in the employment of the company within the said year, and are, in the opinion of the Official Liquidator, capable of giving the information required ;
(d) who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates.
(3) The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding three months from that date as the Official Liquidator or the Tribunal may, for special reasons, appoint.
(4) Any person making, or concurring in making, the statement and affidavit required by this section shall be allowed, and shall be paid by the Official Liquidator or provisional liquidator, as the case may be, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the Official Liquidator may consider reasonable, subject to an appeal to the Tribunal.
(5) If any person, without reasonable excuse, makes default in complying with any of the requirements of this section, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to one thousand] rupees for every day during which the default continues, or with both. (5A) The Tribunal by which the winding up order is made or the provisional liquidator is appointed, may take cognisance of an offence under sub-section (5) upon receiving a complaint of facts constituting such an offence and trying the offence itself in accordance with the procedure laid down in the Code of Criminal Procedure, 1898 (5 of 1898), for the trial of summons cases by magistrates.
(6) Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this section, and to a copy thereof or extract therefrom. (7) Any person untruthfully so stating himself to be a creditor or contributory shall be guilty of an offence under section 182 of the Indian Penal Code (45 of
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 1860) ; and shall, on the application of the Official Liquidator, be punishable accordingly. (8) In this section, the expression "the relevant date"
means, in a case where a provisional liquidator is appointed, the date of his appointment, and in a case where no such appointment is made, the date of the winding up order.
9.13. Thus, there is an obligation on the part of the ex-directors to submit details of all the debts owed to the company, which shall be filed within a period of 21 days in terms of Sub-
section (3) Section 454. In terms of Section 455, the official liquidator is required to submit a report as soon as practical after the receipt of the statement submitted under Section 454 regarding the matter contained under Section
455. Section 455 is reproduced hereunder for easy reference:
455. REPORT BY OFFICIAL LIQUIDATOR (1) In a case where a winding up order is made, the Official Liquidator shall, as soon as practicable after receipt of the statement to be submitted under section 454 and not later than six months from the date of the order or such extended period as may be allowed by the Tribunal, or in a case where the Tribunal orders that no statement need be submitted, as soon as practicable after the date of the order, submit a preliminary report to the Tribunal -
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012
(a) as to the amount of capital issued, subscribed, and paid-up, and the estimated amount of assets and liabilities, giving separately, under the heading of assets, particulars of (i) cash and negotiable securities; (ii) debts due from contributories; (iii) debts due to the company and securities, if any, available in respect thereof; (iv) movable and immovable properties belonging to the company ; and (v) unpaid calls ;
(b) if the company has failed, as to the causes of the failure ; and
(c) whether, in his opinion, further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of the business thereof.
(2) The Official Liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any officer of the company in relation to the company since the formation thereof, and any other matters which, in his opinion, it is desirable to bring to the notice of the Tribunal.
(3) If the Official Liquidator states in any such further report that in his opinion a fraud has been committed as aforesaid, the Tribunal shall have the further powers provided in section 478.
9.14. In terms of Section 456, the official liquidator shall take into his custody or under his control all the property effects and actionable claims to which the company is or appears to be entitled. Section 456 is reproduced hereunder for easy reference:
456. CUSTODY OF COMPANY'S PROPERTY
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 (1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator or the provisional liquidator, as the case may be, shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled. (1A) For the purpose of enabling the liquidator or the provisional liquidator, as the case may be, to take into his custody or under his control, any property, effects or actionable claims to which the company is or appears to be entitled, the liquidator or the provisional liquidator, as the case may be, may by writing request the Chief Presidency Magistrate or the District Magistrate within whose jurisdiction such property, effects or actionable claims or any books of account or other documents of the company may be found, to take possession thereof, and the Chief Presidency Magistrate or the District Magistrate may thereupon after such notice as he may think fit to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator. (1B) For the purpose of securing compliance with the provisions of sub-section (1A), the Chief Presidency Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary. (2) All the property and effects of the company shall be deemed to be in the custody of the 1[Tribunal] as from the date of the order for the winding up of the company. 9.15. In this regard, by way of amendment in the year 1960, Sub-sections 1(a) and 1(b) were introduced whereunder the official liquidator was permitted to send a request to the Chief Presidency Magistrate or District Magistrate for taking such possession. Vide sub-section (2) of
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 Section 456, it is made clear that the property and effects of the company shall be deemed to be in the custody of the Tribunal/Court from the date of the order of the winding up. 9.16. Reading of all the above provisions together would give the reason why a period of one year is excluded from the date of winding up, in the sense that the order of winding up is required to be communicated to the official liquidator within two weeks of the order of winding up. The statement of affairs has to be submitted within a period of 21 days from the relevant date or within such extended time not exceeding three months from the date as the official liquidator may appoint. The report of the official liquidator is to be filed within six months after the filing of the statement of affairs, which would all have to be completed within the aforesaid period of one year.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 9.17. In my considered opinion, Section 458-A has been enacted under the presumption of the company in liquidation and/or its ex-directors complying with the requirements of the Companies Act and filing their statement of affairs within the prescribed time not exceeding three months.
9.18. The purpose of passing an order of winding up is to ensure not only the petitioner in the winding up petition gets its debts due but also to ascertain who are all the other persons who are required to be paid and, for doing so, to recover the monies due on behalf of the company and make the said amounts available for payment to all the persons to whom the company owes money. Thus, both the company's credits and debits come into play. The official liquidator not only has to pay the amounts due by the company but is also
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 entitled to recover the amounts due to the company from and out of which the above amounts have to be paid.
9.19. The official liquidator cannot presumed to be aware of all the creditors of the company nor of the debtors of the company. It is only when the creditors and debtors approach the official liquidator and or the details are made available to the official liquidator that the official liquidator would get to know apart from by way of examining the statement of affair and/or books of accounts.
9.20. In my considered opinion, the starting of the period of limitation and/or the exclusionary period of limitation, apart from what has been indicated above, would also have to take into account the date on which the ex-directors file their statement of affairs and or the date on
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 which the official liquidator got actual physical custody of the books of the company in liquidation. It is only when either of them is available that the official liquidator gets to know of the action to be taken and thereafter takes such action. If either of them is not available, then the official liquidator would not have any knowledge of the creditors of the company to initiate any proceedings.
9.21. It is trite law that the period of limitation is to be calculated from the date of knowledge; if the Official Liquidator has no knowledge of the Debtor, he cannot be expected to initiate proceedings. Looked at from another angle, the Law of Limitation is a fetter on a person initiating proceedings; if not done within the period of limitation, it does not wipe out the claim or obligation/debt; it only makes a person disentitled to a remedy through a court of law.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 For this reason, also, the period of limitation would have to be considered from the date the Official Liquidator came to know the amount due and the person from whom it is due. 9.22. In the present case, the statement of affairs by the ex-directors was filed only on 3.12.2020 and part of the books were handed over to the official liquidator only on 26.10.2021. The earlier of the two dates, being 3.12.2020, the exclusionary period under section 458 would have to be taken into calculation from the date on which the statement of affairs was filed and not on the date on which the order of winding up was passed since such a reading would give rise to an anomalous situation of imposing an obligation on the official liquidator to take action against the creditor without knowing the details of the creditors, without knowing the amounts due from the creditors, without
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 knowing the basis on which the amounts are due from such creditors.
9.23. There could also be a situation where the statement of affairs does not contain the details of a particular creditor; in such a situation, it is only after the statement of affairs is rectified, and these data are made available to the official liquidator that the time period of exclusion of one year would commence and books of accounts are made available for the official liquidator for the Official Liquidator to ascertain who the creditors are.
9.24. In that view of the matter, I answer point No.1 by holding that:
9.24.1. There is a presumption that the statement of affairs has been filed and/or books of accounts are available with the official liquidator
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 within the maximum period of three months prescribed under Sub-section (3) of 454 of the Act. In the event of the statement of affairs not being filed within that prescribed period and/or the books are not made available to the official liquidator, the exclusionary period of one year under Section 458-A would commence from the date of either the statement of affairs and/or books of accounts being handed over to the official liquidator.
9.24.2. In the event of there being any defects in the statement of affairs and books of accounts not being available, it is only on the defects being cleared and the dues by any creditor to the company are made known to the
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 official liquidator, the period of limitation insofar as that creditor is concerned will commence from the date on which the defects are cleared by the ex-directors and the details of the creditors made known to the official liquidator.
9.24.3. If the Books of account are available, the Official liquidator would have to get the same examined to determine the creditors and debtors of the Company in liquidation, the nature of debt/credit, the quantum of debt/credit, which process would have to be completed within one year of the books being available. The period of 4 years would have to be calculated from the date on which the books of accounts were made
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NC: 2024:KHC:20996
CA No. 280 of 2023 In
COP No.57 of 2012
available to the Liquidator,
irrespective of whether the statement of affairs has been filed or not.
10. ANSWER TO POINT NO.2: Would the limitation period stand extended if an appeal is filed challenging the winding up order and the winding up order is stayed? If so, from when would the limitation period have to be calculated?
10.1. An appeal is a continuation of the original proceedings. When an appeal is filed, there is a possibility of the order passed in the original proceeding being stayed or the appellate proceeding continuing without such a stay. Needless to say, when the order/judgment in original proceedings is stayed, the same cannot be implemented or executed. Furthermore, there is a possibility that the Appellate Court may vary or modify the order passed in the Original Proceedings by the Court of First
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 Instance. Thus, depending on what happens in the appellate proceedings, there could be a further impact on the limitation period of implementing the order/judgment passed in the appellate court.
10.2. In so far as winding proceedings are concerned, as dealt with in answer to point No.1, the limitation period under Section 458A is firstly extended by a period for one year from the date of the winding up order.
10.3. Firstly, if the winding-up order itself is stayed in the appellate forum, the winding-up order cannot be implemented, and consequently, the Official Liquidator cannot take any step in furtherance of the order of winding-up stayed by the Appellate court. Thus, until the order of stay in the Appellate court is vacated, the Official Liquidator cannot do anything; as such, naturally, the limitation period would have to
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 stand extended until the order of stay is vacated, the period between the date on which the Order of winding up is passed and the date on which the same was stayed would have to be excluded.
10.4. Secondly, in the event of the Appellate court not staying the original order/judgment, then the Official Liquidator would be free to take such action as is required, including that under Section 446 and other provisions of the Companies Act in furtherance of the order of winding up passed by the original court. Thus, in such a situation, there is no extension of limitation, which can be said to occur on the basis of filing an appeal where no order of stay is granted.
10.5. Thirdly, at the time of disposal of the appeal, the Appellate Court may vary or modify the order passed by the original court. In the event
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 of an interim order of stay having been granted by the Appellate Court and thereafter the Appellate Court varying/modifying the order/judgment of the original court, then as held supra, the Official Liquidator could not implement the order during the period of stay and would have to implement the order as modified by the Appellate Court. Thus, it is the modified order by the Appellate Court which would have to be implemented by the Official Liquidator.
10.6. The complication would arise in the event of no stay being granted by the Appellate Court but proceedings having been commenced by the Official Liquidator and, subsequently, the order passed by the original court being varied or modified by the Appellate Court. In such a situation, initially, the Official Liquidator would have to implement the order as passed, and if
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 varied or modified during such implementation, the Official Liquidator would have to implement the order as varied or modified by the Appellate Court.
10.7. Thus, insofar as the limitation period is concerned, I answer point No.2 by holding that 10.7.1. In the event of an appeal being filed challenging the winding up order and there is a stay granted by the Appellate Court, the extended period of limitation contemplated under Section 458A would only commence from the date on which the order of stay is vacated.
10.7.2. In the event of no stay having been granted by the Appellate Court in the appellate proceedings, the extension of the limitation period as
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 contemplated under Section 458A would commence as per my answer to Point No.1.
11. ANSWER TO POINT NO.3: Is the Official Liquidator expected to conduct an investigation, ascertain the creditors, and initiate action against such creditors on his own?
11.1. Sri.Perikal Arjun, learned counsel for the respondents, has contended that there is a deeming fiction regarding all assets and liabilities, including all books of the company in liquidation, being vested with the Official Liquidator from and on the date of the winding up order. On that basis, his further submission is that the Official Liquidator, having deemed possession of all the above, is deemed to have knowledge of the dues from each and every creditor, requiring the Official Liquidator to take action against such creditors.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 11.2. His alternate submission is that the balance sheets, etc, being available with the Registrar of Companies whether statement of affairs are filed or not, whether the books of accounts are made available or not to the Official Liquidator, the Official Liquidator could verify the documents which are available in the public domain like that before the ROC and initiate action.
11.3. Though at first blush the argument seems to hold some water, I am unable to agree to the said submission and impose such an onerous duty on the Official Liquidator. 11.4. The ex-directors are required to file their statement of affairs. If the statement of affairs is not filed, the Official Liquidator is required to initiate proceedings before the court seized of the liquation proceedings in terms of Sub-
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 section (5) of Section 454, and it is for the concerned court to take action as is required. 11.5. In terms of Section 456, the documents and assets of the company are deemed to be in possession of the Official Liquidator, however, if the actual possession is not handed over, the Official Liquidator is required to take assistance of the Chief Presidency Magistrate or District Magistrate and if documents and records are not submitted, then file necessary proceedings before the court seized of the winding up proceedings under Section 468 of the Act. 11.6. The scheme of the Act and the manner in which the provisions have been enacted do not impose any requirement on the part of the Official Liquidator to investigate, ascertain the creditors or nature of creditors, nature of the transaction and initiate action against such creditors.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 11.7. As aforementioned, during the course of winding up it is required for the Official Liquidator to ascertain the money due to the company in liquidation and from whom, as also to ascertain the amount due by the company in liquidation and to whom. This is based on the documents filed before the Official Liquidator and it is on that basis the Official Liquidator has to ascertain the creditors and debtors of the company in liquidation.
11.8. Hence, I answer point No.3 by holding that the Official Liquidator is not expected to, on his own an investigation, ascertain the creditor and initiate action against such creditor, until and unless the books of account are made available to the official liquidator and/or the statement of affairs indicating the creditors and debtors of the company filed by the ex-directors. It is,
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 however, made clear that once the Books of accounts are made available to the liquidator and or the statement of affairs filed, a duty is cast on the liquidator to get the same examined and take necessary steps as answered by me to point No. 1 above.
12. ANSWER TO POINT NO.4: In the present matter, can the application filed by the Official Liquidator under Section 446(2) of the Act be said to be barred by law of limitation and dismissed in limine at this stage?
12.1. In the present matter, the Company Petition in COP No.57/2012 was filed on 26.03.2012 and the order of winding up was passed on 7.02.2017. 12.2. The transaction in question was entered into on 16.04.2013, and the transfer of monies by the company in liquidation to respondent No.1 was made on 16.04.2013. Thus, the transaction is during the pendency of the winding-up proceedings.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 12.3. There is no allegation made as regards fraud or fraudulent transfer, if the transaction is taken to be bonafide, the transaction having occurred during the pendency of the winding up proceedings, the time from that date till the date of winding up would stand excluded i.e. until 7.02.2017. In terms of Section 458A period of one year stands excluded from 7.02.2017; however, taking into account that the statement of affairs was filed on 3.12.2020, and few of the documents were handed over by the CBI to Official Liquidator on 26.06.2021, the time for filing statement of affairs being earlier, it is only from 3.12.2020 that the exclusion period of one year under Section 458A can be taken into consideration. The statement of affairs having been filed on 3.12.2020, the extension of period of limitation of 1 year being applicable until 2.12.2021 and the further period of three years under Article 137
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 being taken into consideration, the period of limitation would end on 2.12.2024. 12.4. Furthermore, in the appeal in OSA No.5/2017, which had been filed challenging the order dated 7.02.2017 passed in COP No.57/2012, the division bench of this Court had directed the Official Liquidator not to precipitate the matter, thus in effect staying the order of winding up, said order came to be vacated on 6.03.2020 when OSA No.5/2017 was dismissed. Though a further appeal was filed before the Hon'ble Supreme Court in SLP (Civil Diary) No.13579/2020, no stay was granted in the said proceedings, and the same was dismissed on 26.10.2020.
12.5. There being an order of stay as regards the order of winding up which was in force till 6.03.2020, further proceedings in pursuance of the winding up order could not be taken, thus the period of exclusion of limitation under Section 458A can
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 also be taken to be from 6.03.2020 which would end on 5.03.2021 and the further period of three years under Article 137 being taken into consideration, the period of limitation would end on 4.03.2024.
12.6. The present application under Section 446(2b) having been filed on 13.09.2023, the same in my considered opinion is within time. 12.7. Thus, I answer point No.4 by holding that in the present case, the application filed by the Official Liquidator under Section 446(2b) is not exfacie barred by limitation and is, therefore, not required to be dismissed in limine.
13. ANSWER TO POINT NO.5: What Order?
13.1. In view of my answers to the above, the registry is directed to place the above matter before the Central Process Coordinator for recordal of evidence.
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NC: 2024:KHC:20996 CA No. 280 of 2023 In COP No.57 of 2012 13.2. The Official Liquidator is directed to file his affidavit in lieu of evidence and documents on or before 04.07.2024.
13.3. The Central Process Coordinator is directed to record the evidence in chief and mark the documents on 11.07.2024 commencing from 3 p.m., thereafter conduct trial in the matter and place the same before this court.
14. In view of the submission made by Ms.Kruthika Raghavan, learned counsel on instructions of Official Liquidator, the claim petition against respondent No.2 and 3 stands dismissed Sd/-
JUDGE LN List No.: 2 Sl No.: 1