Gujarat High Court
O vs Respondent(S) on 27 December, 2011
Author: Abhilasha Kumari
Bench: Abhilasha Kumari
OLR/294/2011 46/ 46 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD OFFICIAL LIQUDATOR REPORT No. 294 of 2011 In OFFICIAL LIQUDATOR REPORT No. 39 of 2006 For Approval and Signature: HON'BLE SMT. JUSTICE ABHILASHA KUMARI ===================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? Yes 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? No 5 Whether it is to be circulated to the civil judge ? No ===================================================== O L OF VARIOUS COMPANIES (IN LIQUIDATION) - Applicant(s) Versus . - Respondent(s) ===================================================== Appearance : OFFICIAL LIQUIDATOR for Applicant(s) : 1, None for Respondent(s) : 1, ===================================================== CORAM : HON'BLE SMT. JUSTICE ABHILASHA KUMARI Date : 18/07/2012 19/07/2012 ORAL JUDGMENT
1. The Official Liquidator has filed the present Report dated 27-12-2011, making the following prayers:
"a) This Hon'ble Court may be pleased to ratify the action taken by the Official Liquidator in entrusting the briefs to Shri Roshan Desai, Advocate as Special Arguing Counsel in the cases mentioned in para 22 above on such fees as may be agreed to and approved by the Hon'ble Court;
b) Such other and further orders and directions as this Hon'ble Court may deem fit and proper in the matter, may also be passed."
2. It is stated in the Report that the Official Liquidator is presently having 462 Companies (in liquidation). By order dated 03-05-2006 passed in Official Liquidator's Report No.39 of 2006, the Court granted permission to engage certain advocates who have been on the Panel of the Office of the Official Liquidator, and who have been named in paragraph 2 thereof, at a monthly retainership prescribed in the said order. It is submitted that certain advocates tendered their resignations from the Panel of Advocates and at present, there are only four panel advocates defending all cases on behalf of the Official Liquidator, out of which one advocate is looking after cases pending before the Labour Court, Small Causes Court and other Courts. It is stated in the Report that in the year 1997-98 matters of Amruta Mills Ltd. (in liquidation) were listed for hearing. Several matters were pending in respect of the leased deeds executed in favour of the Companies (in Liquidation), more particularly Textile Mills. The Official Liquidator has, in paragraph 8 of the Report, referred to an oral direction given by a Single Judge (Coram: H.L.Gokhale,J -as His Lordship then was) to entrust the matter to Mr. Roshan Desai (hence-forth referred as "the concerned advocate") who was appearing for several Banks and was well conversant with land transaction matters. It is stated that in view of the aforesaid, these matters were entrusted to the concerned advocate. It is further stated in the Report that in the case of Vitta Mazda Ltd. (in Liquidation) the issue involved is legally complicated, therefore, the brief was entrusted to the concerned advocate. The case of Piramal Financial Services Ltd. (In Liquidation) has also been referred to and it is stated that this court (Coram: K.M.Mehta,J) appointed the concerned advocate as advocate of the Official Liquidator to attend civil and criminal matters.
3. The clause regarding "Special Arguing Counsel" in the Scheme approved by this court has been reproduced by the Official Liquidator. It is stated in paragraph 14 of the Report that as per the said Clause the Official Liquidator is authorised to appoint a "Special Arguing Counsel" in highly contested matters wherein complicated questions of law are involved "and such alike matters other than the company law/liquidation matter at the discretion of the Hon'ble Court on such fees as may be determined and sanctioned by the Hon'ble Company Court." The Official Liquidator has further stated in paragraph 14 as below:
"In view of the same,the Official Liquidator is of the opinion that he is authorized to entrust the brief to Sr.Advocate as Special Arguing Counsel."
4. It is stated by the Official Liquidator that over and above the matters that are already entrusted to the concerned advocate, he also appears as Special Arguing Counsel. In paragraph 16 of the Report, it is stated that in the case of Mardia Steel Ltd.(In Liquidation), the case of the Official Liquidator was not presented properly, which resulted in certain consequences. It is further stated that a petition was filed which was also entrusted to an advocate but was not handled properly and in these circumstances, the Official Liquidator entrusted the brief to the concerned advocate. It is further stated in paragraph 19 that the advocate appointed by the Official Liquidator at Mumbai also did not handle the case properly, therefore, concerned advocate had to be entrusted with the brief to protect the interest of the Official Liquidator. In paragraph 21 of the Report, the number of briefs entrusted to the concerned advocate have been enumerated as below:
(a) Mardia Steel Ltd.
(b) Mardia Chemicals Ltd.
(c) Alps BPO Services Ltd.
(d) Amruta Mills Ltd.
(e) Mahendra Mills Ltd.,
(f) Revival Scheme in respect of Prasad Mills Ltd., Vania Silk Mils,Aryodaya Spinning & Weaving Mills Co.Ltd. etc.
(g) Commercial Ahmedabad Mills Co.Ltd. & Vijaya Mills Co.Ltd. ULC matters.
(h) The Ahemdabad Manufacturing & Calico Mills Co.Ltd.
5. The Official Liquidator has stated in paragraph 22 of the Report, that an objection was raised regarding the appearance of concerned advocate in the matter of Mardia Steel Ltd. (In Liquidation), therefore, this Report is filed for ratifying the action taken by the Official Liquidator in entrusting the briefs to the concerned advocate as Special Arguing Counsel. In paragraph 23 it is mentioned that if the Court so directs, the Official Liquidator, will obtain prior approval before any brief is entrusted to the Special Arguing Counsel, and in case the brief is entrusted 'immediately', looking to the urgency of the matter, the Official Liquidator will seek ratification of the action of entrusting the brief.
6. Upon the present Report dated 27-12-2011, this Court (Coram:
K.M.Thaker,J) passed an order on 29-12-2011, which is reproduced hereinbelow:
"The applicant - Official Liquidator has taken out present report dated 27.12.2011 seeking below mentioned direction:-
"24
a) This Hon'ble Court may be pleased to ratify the action taken by the Official Liquidator in entrusting the briefs to Shri Roshan Desai, Advocate as special Arguing Counsel in the cases mentioned in para 22 above on such fees as may be agreed to and approved by the Hon'ble Court;"
2. On perusal of the relief sought for and the other details mentioned in the report, it emerges that the OL has taken out present application requesting the Court to ratify the action already taken by him viz. engaging advocates, who are not on the panel sanctioned under the scheme i.e. sanctioned panel.
3 From the details mentioned in the report, it appears that before engaging services of the advocate/s who are not on the sanctioned panel in different matters, any sanction of the Court was not taken and therefore, now the OL has sought ratification at interim stage of the proceedings. In present application, request for ratification is made in connection with eight cases and the advocate engaged in the said cases the details whereof are mentioned in para-21 of the report.
4. However, the OL has even not mentioned the reason or justification as regards his decision and action of engaging advocate/s who is/are not on the sanctioned panel before engaging the services and before determining the terms of engaging such advocate/s.
5. Even in present report, the details of the terms on which advocate/s is/are engaged in different matters, whose names are not on the sanctioned panel, have not been mentioned.
6. Likewise, the reason as to why such decision was taken and implemented by the OL without prior sanction from the Court in all such cases is also not mentioned with required clarity and details.
7. The OL has also not stated as to whether there are any other cases (i.e. other than those which are mentioned in para-21) in which any other advocate/s and if there are any, then, why details are not mentioned who are not on the sanctioned panel has/have been engaged or not.
8. As mentioned above, the terms and conditions on which the services of the advocate/s whose names are not on the sanctioned panel are also not mentioned in present report and the details of past/concluded cases wherein the advocate/s except from the sanctioned panel was/were engaged and fees have been paid, are also not mentioned.
9. Without mentioning such relevant details, the OL expects the Court to ratify the action and has requested that his action of engaging advocate/s, whose names are not in the sanctioned panel, be ratified.
10. Unless and until the complete details of all the matters in which services of advocate/s has/have been engaged in such manner, i.e. except from the sanctioned panel, and unless the details of the terms and conditions on which the services have been engaged are set out in the application, the request cannot be considered.
11. It is beyond comprehension as to why the OL should not have mentioned such relevant details in present report.
12. It is also beyond comprehension as to why the decision was taken without informing the Court and without seeking sanction from the Court at the time when the services of advocate/s, whose names are not mentioned in the sanctioned panel, was/were being engaged.
13. Since now such facts have come to the notice of the Court and since it prima-facie appears that the action are contrary to and in breach of the applicable Rules and also the Scheme, the Court considers it appropriate to direct the OL to place on record all details of all such matters where advocates/s has/have been engaged by the OL, without sanction of the Court, by fixing terms directly and not from the sanctioned panel.
14. It appears that there could be several other applications and/or various reports which might have been disposed of wherein the OL might have engaged advocate/s, whose names are not on the panel sanctioned under the scheme, and even the professional fees might have been paid by the OL in such cases. However, those details have also not been mentioned in the present report.
15. In absence of such details, it is not possible, at this stage, to ratify the action taken by the OL.
16. Under the circumstances, the OL is directed to file a supplementary report giving all the relevant details including the details illustratively mentioned hereinabove. Three weeks' time for the said purpose is granted to the OL. The OL shall place such details on record of present report on or before 19.1.2012.
The registry shall place present report for further consideration on 20.1.2012."
7. Pursuant to the above-mentioned order,the Official Liquidator filed another clarificatory Report dated 12-01-2012, wherein he has sought to render an explanation for the action taken, in terms of the above-mentioned order of the Court. Certain relevant paragraphs of the Report are reproduced hereinbelow:
"2.
It may be stated that as per the scheme sanctioned by the Hon'ble Court vide order dated 25th August, 2009 passed in Official Liquidator's Report No.93 of 2009, a reference is made for appointment of "Special Arguing Counsel".
The said clause is reproduced in the report for reference of the Hon'ble Court.
3. The reading and interpretation of the Official Liquidator to the said clause is that in highly contested matters, wherein complicated question of Law are involved and such other like matters, other than the company law/ Liquidation matter at the discretion of the Court, the Official Liquidator may engage Senior/ Senior designated advocate. Approval and permission of the Hon'ble Court is not required for entrustment of matters to Special Arguing Counsel since as per the scheme, the Official Liquidator is authorised without permission of the Hon'ble Court.
4. It is submitted that in view of these understanding and reading of the clause by the Official Liquidator, the matters are entrusted to "Special Arguing Counsel". It is submitted that on oral observation made by the Hon'ble Court, the Official Liquidator feels that understanding and reading of the said clause by the Official Liquidator is incorrect and permission and approval of the Hon'ble Court in the matter relating to Company Law and Liquidation approval and permission of the Hon'ble Court is mandatory."
(emphasis supplied)
8. In paragraph 10 of the report, it is stated thus:-
"10. So far as Lease matters in respect of land are concerned, the details is given under what circumstances the matters were entrusted to Mr. R.M. Desai, Advocate. In support thereof, the Official Liquidator begs to annex copies of the letter dated 9th March, 1999 and 18th November, 1999 at Annexure "B", which clearly indicates that as per the orders of the Hon'ble Court, Shri R.M. Desai, Advocate was authorized to appear and conduct the matter for and on behalf of the Official Liquidator."
9. No other explanation has been rendered in support of the prayer for ratifying the action of the Official Liquidator, appointing the concerned advocate as Special Arguing Counsel.
10. This Court was not satisfied by the explanation given by the Official Liquidator in the above-mentioned Report, which led to passing of the order dated 01-02-2012, (Coram: K.M.Thaker, J.) that is reproduced hereinbelow:
"1. Despite the opportunity, until now, the Official Liquidator has not mentioned any satisfactory explanation as to why permission/sanction of the Court were not taken before making appointment/s, in number of cases, of any advocate/s whose name/s are not contained in the panel of advocates approved by the Court.
2. The Official Liquidator has taken out present report seeking "ratification of the action taken".
3. Thus, the action has already been taken and now ratification of the action already taken is requested for.
4. However, as mentioned above, any reason as to why/ for which reason/s the Official Liquidator did not take permission at the relevant time (i.e. before making such appointment/s ) is not satisfactorily explained.
5. What were the circumstances-particularly what were the compelling circumstances and what was such great urgency of taking unilateral decision without even informing the Court, not to mention the need to seek sanction/approval of the Court, that the Official Liquidator made the appointment/s without sanction/approval and now after such long time ratification is sought for, particularly only when in certain cases objections have been raised.
6. Until now the Official Liquidator has not cared to even seek ratification, what to say about convenient failure in taking prior approval in not one but various cases while appointing advocate/s on behalf of the office of the Official Liquidator.
7. Therefore, as a last chance time until 24/02/2012 is granted to the Official Liquidator to place on record satisfactory justification in respect of each of the cases where any advocate, (whose name is not contained and/or at the relevant time i.e. when the appointment was made was not contained in the panel approved by the Court), was appointed or has been appointed without prior approval/sanction of the Court.
8. The Official Liquidator shall also place on record all details of each of the cases in which appointment/s have been made without court's sanction/approval and explain satisfactorily the reason why prior sanction/approval of the Court was not taken and why until now any steps to inform such intentional default-rather defiance were not taken and even the action of getting such decision ratified was also not taken.
9. In the first instance the Official Liquidator shall satisfactorily explain the reasons why the appointment/s was/were made at the relevant time without prior approval/sanction.
10. Further more, the details of each of the case numbers i.e. OLR numbers and/or numbers of OJCA and/or numbers of the company application and/or numbers of company petition etc. in which appointment/s in such manner are made shall be mentioned.
11. The date on which the appointment was made shall also be mentioned and the reason why in each of the cases appointment/s was/were made without approval or sanction shall also be mentioned (case wise) and the delay in taking out the application to inform the court and to place on record the justification for such decision/appointment and explaining the circumstances which required such appointment on urgent basis without prior approval or sanction and also the reason explaining delay shall also be placed on record.
12. The names of the advocates who are appointed in such manner i.e. without prior sanction and approval of the Court in each of the cases shall also be mentioned.
13. S. O. to 27/02/2012."
11. Consequently, the Official Liquidator filed another Report dated 23-02-2012, reiterating the stand taken in the earlier Reports. The relevant extracts of the Report are reproduced as below:
"1.It is respectfully submitted that the issue raised in the Official Liquidator's Report No.294 of 2011, which is required to be considered by the Hon'ble Court is that while assigning the matter to an Advocate as a Arguing Counsel on behalf of the the Official Liquidator,whether permission of the Hon'ble Court is required to be obtained by the Official Liquidator. It is a view point of the Official Liquidator that on interpretation of the clause "Special Arguing Counsel" in the scheme approved by the Hon'ble Court in Official Liquidator Report No.93 of 2009 vide order dated 25.8.2009, for entrusting brief in a company law/liquidation matter permission is deemed to have been granted and the permission is required only for highly contested matters wherein complicated questions of Law are involved."
(emphasis supplied)
12. Thereafter, the clause relating to "Special Arguing Counsel" has been reproduced and it is stated that "In the view of this understanding, opinion and interpretation of the said clause, the Official Liquidator entrusted the briefs to Advocate for appearing on behalf of the Official Liquidator without obtaining permission of the Hon'ble Court.
13. Paragraph 2 of the Report reads thus:
"2.
It is in view of the aforesaid, the Official Liquidator has not obtained permission as envished (sic) under Rule 307 of Companies (Court) Rules, 1959. In view of the objection raised by Shri Rasiklal S.Mardia in Company Application No.90 of 2010 issue has arisen about obtaining permission under the aforesaid rules. It is submitted that in the belief that interpretation of the Special Arguing Clause may not be correct then permission is required. It is in this circumstances, the Official Liquidator submits that if the Hon'ble Court do not accept the interpretation of the Official Liquidator in that event permission under Rule 307 of the Companies(Court) Rules, 1959 will be necessary."
(emphasis supplied)
14. In paragraph 3, the Official Liquidator has stated that he is of the opinion that the Official Liquidator is authorised to entrust any brief to a Senior Advocate. It is stated in paragraph 5 that the concerned advocate, who was briefed in O.J. Appeal No.8 of 2009 in the case of Mardia Steel Ltd., successfully opposed the Scheme as per the instructions of the Official Liquidator, therefore, the approval of this court for entrustment of the Scheme matters to the concerned advocate, is sought for.
15. In paragraphs 8,9,10,11,12,13,14,15 and 16, the briefs entrusted by the Official Liquidator and the manner in which the cases have been defended by the concerned advocate have been elaborated upon. The stand taken by the Official Liquidator in the Report is that, he has not obtained permission under Rule 307 of the Companies (Court) Rules, 1959 from the Court before engaging the concerned advocate and, in his view, such permission is not required, as the clause regarding "Arguing Counsel" in the Scheme is such that the Official Liquidator can entrust the brief to an advocate of his choice without obtaining permission of the Court.
16. On 27-02-2012 this Court (Coram: K.M.Thaker,J) passed an order indicating that the Official Liquidator has not filed the Report mentioning the details which were called for vide order dated 01-02-2012.
17. In none of the above-mentioned Reports filed by the Official Liquidator have the specific queries of the Court been addressed in proper perspective. Nor have the requisite details sought by the Court time and again, especially under order dated 01-02-2012, been supplied. The Official Liquidator has stuck to his stand that though permission has not been taken from this Court before engaging the concerned advocate to argue as "Special Arguing Counsel", however, in the wisdom and understanding of the Official Liquidator,such permission is not required, as he is entitled to engage an advocate on his own. This stance on the part of the Official Liquidator led the Court (Coram: K.M.Thaker, J.) to pass a detailed order dated 06-03-2012, which, being relevant, is reproduced hereinbelow:
"1. Though, this Court has since last three occasions specifically directed the Official Liquidator to place on record the entire list of the matters in which a particular Advocate has been engaged, without seeking permission or sanction of the Court and/or without even informing the Court by the office of Official Liquidator and to also mention the total number of such matters and individual case numbers i.e. OJCA No., O.L.R. No., Company Application No., Company Petition No. wherein the said Advocate has been engaged without prior permission and sanction of the Court and also to mention the reasons explaining as to why, without waiting for the sanction and approval of the Court and without even making any application seeking sanction and approval of the Court such hasty decisions were unilaterally and arbitrarily taken by the O.L. in defiance of the Court.
2. However, today also the detail reasons explaining the aforesaid aspects in respect of each of the cases are not placed on record. The statement containing the case numbers and total number of matters wherein such appointments have been made are also not placed on record.
3. Therefore, time until 09.03.2012 is granted to the Official Liquidator to place on record the complete details, including the copies of correspondence instructing the concerned advocate to appear in the matters and explaining, in the report, as to whether Official Liquidator has, on his own, without permission and sanction from the Court fixed the professional fees and made payment of professional fees or not and also the details as to the amounts paid by the O.L. towards professional fees in all such cases, shall also be placed on record.
4. Furthermore, it is noticed that the Official Liquidator has very conveniently misconstrued, the clause in the scheme, which as the O.L. claims, is approved by the Court, which makes provision for engaging 'Special Arguing Counsel'.
5. It is noticed that by misconstruing the said clause the O.L. has continued to engage certain Advocate in various cases, without sanction and permission from the Court and the O.L. has conveniently ignored to take sanction and permission of the Court.
6. This action of the O.L. amounts to defiance of and undermining the Court.
7. Therefore, at appropriate stage necessary orders including orders imposing cost may be passed by the Court against such conduct of O.L.
8. In the meanwhile, on account of the conduct of the O.L. of misconstruing or conveniently construing the clause making provision for engaging 'Special Arguing Counsel', it has become necessary to make appropriate clarification/modification in the said clause.
9. It is pertinent to note that the said clause, which is reproduced at page 24 in the report dated 23rd February 2012, obliges the O.L. to engage even 'special engaging counsel' only after ascertaining the 'discretion of the Court'.
10. Though the said clause contains the words 'at the discretion of the Hon'ble Court' which imposes obligation on Official Liquidator to verify before engaging an Advocate as 'special arguing counsel' and fixing the professional fees from the Court - the Court's discretion, the O.L. has conveniently construed the said clause to mean that Official Liquidator can engage Special Arguing Counsel on his own and once he selects particular Advocate and engages him to appear in all matters as Special Arguing Counsel then the permission is deemed to have been granted and then, on the basis of 'his view' - such view - he has in so many cases on his own and unilaterally engaged advocate without Court's permission and sanction and that too only a particular advocate in all cases, and never bothered to inform the Court.
10. The O.L. has mentioned in the report that:
"It is a view point of the Official Liquidator that on interpretation of the clause "Special Arguing Counsel" in the scheme approved by the Hon'ble Court in Official Liquidator Report No.93 of 2009 vide order dated 25.08.2009, for entrusting brief in a company law/liquidation matter permission is deemed to have been granted............"
11. Time and again the O.L. has thus misconstrued the clause to usurp the power and authority to engage advocate of his own choice and fixing the professional fees without even informing the Court. In view of such actions of Official Liquidator and misuse of said provision, though on plain and true construction of the said clause it is not required, however due to Official Liquidator's actions it has become necessary, to make appropriate and requisite clarification in the said clause, so as to avoid such misconstruction or misuse of the provision in future and to avoid misuse of powers by the O.L. Hence, in the said clause following words are directed to be included after the words '.......at the discretion of the Hon'ble Court'.
"and only with the prior sanction, approval and permission of the Court"
12. Furthermore, at the end of the said clause following words shall be added:
"In any case Official Liquidator shall not engage any Advocate, in any category, even as Special Arguing Counsel, without prior sanction, permission and approval of the Court, unless his/her name is mentioned in the panel approved by the Court."
13. The aforesaid clarificatory addition shall be deemed to have been included in the relevant clause as if they always were there and the said scheme shall, to the aforesaid extent, stand clarified and shall be deemed to have been framed with the said words. Consequently the relevant clause in the said scheme shall now read as follows:
"Special Arguing Counsel- Notwithstanding anything contained hereinabove, for highly contested matters wherein complicated questions of law are involved and such other alike matters other than the company law/liquidation matter, at the discretion of the Court and only with the prior sanction, approval and permission of the Court, the Official Liquidator may engage senior/senior designated advocates/senior law officers as special arguing counsel from case to case basis on such fee as are applicable to the Central Govt. Counsel/Senior Law Officers or as may be determined and sanction by the Company Court in individual case. In any case Official Liquidator shall not engage any Advocate, in any category, even as Special Arguing Counsel, without prior sanction, permission and approval of the Court unless his/her name is mentioned in the panel approved by the Court.
14. The Official Liquidator is directed to appropriately incorporate the clause in the Scheme in aforesaid terms and all actions shall be taken by the O.L. in accordance with the clause and whenever in any matter the Scheme is required to be placed before the Court for seeking any orders, the Scheme with aforesaid clause shall be placed before the Court and all actions shall be taken accordingly. Any lapse on this count shall be treated as defiance by the O.L. It is clarified that O.L. shall never engage any advocate (except from the settled/approved panel) in any category without Court's approval, permission and sanction.
15. For the present, present application is adjourned to 9th March 2012. The O.L. shall place the above mentioned details and the statement on record of present application. S.O. to 09.03.2012."
18. A Scheme for engagement of Special Arguing Counsel in the Office of Official Liquidator,High Court of Gujarat, Ahmedabad dated 10-09-2009, sanctioned by order dated 25.08.2009 passed in Official Liquidator's Report No.93 of 2009, has a clause regarding Special Arguing Counsel which reads thus:
"f) Special Arguing Counsel - Notwithstanding anything contained hereinabove for highly contested matters wherein complicated questions of Law are involved and such other alike matters other than the company law/liquidation matter,at the discretion of the Hon'ble Court, the Official Liquidator may engage senior/senior designated advocates/senior law officers as special arguing counsel from case to case basis on such fee as are applicable to the Central Govt. Counsel/Senior Law Officers or as may be determined and sanctioned by the Hon'ble Company Court in such individual case."
19. It is noteworthy that this clause has been clarified by making an addition by the above quoted order dated 06-03-2012, to read as below:
"Special Arguing Counsel- Notwithstanding anything contained hereinabove, for highly contested matters wherein complicated questions of law are involved and such other alike matters other than the company law/liquidation matter, at the discretion of the Court and only with the prior sanction, approval and permission of the Court, the Official Liquidator may engage senior/senior designated advocates/senior law officers as special arguing counsel from case to case basis on such fee as are applicable to the Central Govt. Counsel/Senior Law Officers or as may be determined and sanctioned by the Company Court in individual case. In any case Official Liquidator shall not engage any Advocate, in any category, even as Special Arguing Counsel, without prior sanction, permission and approval of the Court unless his/her name is mentioned in the panel approved by the Court."
(emphasis supplied)
20. It has been specifically mentioned in paragraph 14 of the above-mentioned order that the Official Liquidator is directed to appropriately incorporate the clarificatory addition, as mentioned in the Scheme, in the aforesaid terms, and all actions taken by the Official Liquidator shall be in accordance with the said clarificatory addition. It has further been stated that in any matter whenever the Scheme is required to be placed before the court for seeking orders, the Scheme with aforesaid clarificatory addition shall be placed before the Court and all actions shall be taken accordingly. The Court gone on to say that "Any lapse on this count shall be treated as defiance by the O.L." It is further clarified that the Official Liquidator shall never engage any advocate (except from the settled/approved panel) in any category without the court's approval,permission and sanction. In spite of the above categorical directions, the Official Liquidator has placed on record, a copy of the Scheme without the clarificatory addition to the clause regarding the Special Arguing Counsel.
21. On 09-03-2012, this Court (Coram: K.M.Thaker, J.) was again constrained to pass the following order:
"1. On 27/02/2012, this Court has passed order and made certain observations because Official Liquidator has once again not complied with the direction passed in the order dated 01/02/2012. The said order dated 27/02/2012 reads thus:
"The Official Liquidator has not filed the report mentioning the details which were called for by the Court vide order dated 1st February 2012. Therefore, time until 5th March 2012 is granted to enable the O.L. to place on record relevant details. The Official Liquidator shall also place on record the details and the fees paid to the learned Advocate who has been engaged by the O.L. not from the panel maintained by the Official Liquidator and approved by the Court, in all such cases."
2. On 6/3/2012 another order was required to be passed, taking note of the failure of the Official Liquidator to comply with the directions and considering the request, the proceedings were adjourned to today i.e. 09/03/2012.
3. Today Official Liquidator is not present in the Court. Instead Mr.P.P.Rawat, Assistant Official Liquidator is present.
4. He submitted that the Official Liquidator could not collect the details and therefore, further time is required.
5. On earlier occasion it was made clear to the Official Liquidator that if any further time is requested for, then the Official Liquidator will be visited with direction to pay cost.
6. In certain other matters, because of similar defaults and delay on part of the Official Liquidator the Court has been constrained to make observations about the casual manner in which the Official Liquidator is taking the order/s by the Court and in those matters also the Court had to clarify that in the event of delay and default in complying the directions issued by the Court, the office of the Official Liquidator may be visited with cost which should be paid to the legal aid committee.
7. In present report, earlier this Court has passed order dated 01/02/2012 and in para-6 and 7 of the said order this Court has observed as under:
"6. Until now the Official Liquidator has not cared to even seek ratification, what to say about convenient failure in taking prior approval in not one but various cases while appointing advocate/s on behalf of the office of the Official Liquidator.
7. Therefore, as a last chance time until 24/02/2012 is granted to the Official Liquidator to place on record satisfactory justification in respect of each of the cases where any advocate, (whose name is not contained and/or at the relevant time i.e. when the appointment was made was not contained in the panel approved by the Court), was appointed or has been appointed without prior approval/sanction of the Court."
8. Despite such observations on earlier occasion in present matter and other similar matters involving delay and default on part of the Official Liquidator in complying the directions issued by the Court, today also request for adjournment is made on behalf of the Official Liquidator and the directions issued earlier are not complied with.
9. Therefore, on the condition that the Official Liquidator shall pay cost of Rs.1,000/- to State Legal Aid Committee, time until 19/03/2012 is granted. S. O. to 19/03/2012."
22. As noted in the above order, the details that had been sought by the court vide order dated 01-02-2012, have not been provided. Time was granted upto 19-03-2012, to comply with the directions of the Court, on payment of Rs.1000/- as costs to Gujarat State Legal Services Authority.
23. The Official Liquidator then filed a third Report dated 16-03-2012, wherein it is stated as under:
"2.
It is further most respectfully submitted that on disposal of the case, Shri R.M.Desai, Advocate submits in the office of the Official Liquidator professional fees bill for payment. The bill of Shri R.M. Desai, Advocate is placed before the Hon'ble High Court for approval and upon receipt of the approval from the Hon'ble High Court, the payment, of the amount as sanctioned by the Hon'ble High Court, is made to Shri R.M.Desai, Advocate. Hereto annexed and marked Annexure "B" (colly.) are copies of such orders dated 13.05.2005, 05.02.2010 and 30.08.2011.
3.This report is submitted in furtherance of the reports dated 12.01.2012 and 23.02.2012. It is most respectfully submitted that the requisite permission under Rule 307 of the Companies(Court) Rules, 1959 is not taken and for this inadvertance, the Official Liquidator's Report No.294 of 2011 is filed seeking ex-post facts approval of this Hon'ble Court. However, in future,the Official Liquidator will take utmost care to seek prior permission of this Hon'ble Court under rule 307 of the Companies (Court) Rules, 1959 before assigning any matter to the advocate other than the panel advocates."
24. The Official Liquidator has filed a fourth Report dated 24-03-2012. In spite of the categorical directions contained in the above-mentioned orders, the Official Liquidator has stuck to his original stand,which is reflected in paragraph 1 of the Report, reproduced hereinbelow:
"1. That, it is respectfully submitted that the issue raised in the Official Liquidator's Report No.294 of 2011, which is required to be considered by the Hon'ble Court is that while assigning the matter to an Advocate as a Arguing Counsel on behalf of the Official Liquidator, whether permission of the Hon'ble Court is required to be obtained by the Official Liquidator. It is a view point of the Official Liquidator that on interpretation of the clause "Special Arguing Counsel" in the scheme approved by the Hon'ble Court in Official Liquidator Report No.93 of 2009 vide order dated 25.8.2009, for entrusting brief in a company law/liquidation matter permission is deemed to have been granted and the permission is required only for highly contested matters wherein complicated questions of Law are involved. The Clause of Special Arguing Counsel is reproduced herein for ready reference:
Special Arguing Counsel - Notwithstanding anything contained hereinabove for highly contested matters wherein complicated questions of Law are involved and such other alike matters other than the company law/liquidation matter,at the discretion of the Hon'ble Court, the Official Liquidator may engage senior/senior designated advocates/senior law officers as special arguing counsel from case to case basis on such fee as are applicable to the Central Govt. Counsel/Senior Law Officers or as may be determined and sanctioned by the Hon'ble Company Court in such individual case."
25. Even though this Report has been filed after passing of the order dated 06.03.2012, the Official Liquidator has conveniently failed to reproduce the clause regarding Special Arguing Counsel with the clarificatory addition made by this Court. This amounts to misleading the Court.
26. The Official Liquidator further reiterates his earlier stand, as below:
"2.
That, it is in view of the aforesaid, the Official Liquidator has not obtained permission as envished (sic) under Rules 307 of Companies (Court) Rules, 1959. In view of the objection raised by Shri Rasiklal S.Mardia in Company Application No.90 of 2010 issue has arisen about obtaining permission under the aforesaid rules. It is submitted that in the belief that interpretation of the Special Arguing Clause may not be correct then permission is required. It is in this circumstances,the Official Liquidator submits that if the Hon'ble court do not accept the interpretation of the Official Liquidator in that event permission under Rule 307 of the Companies (Court) Rules, 1959 will be necessary.
3. That, in paragraph 14 of the Official Liquidator's Report it is stated that Official Liquidator is of the opinion that Official Liquidator is authorized to entrust brief to Sr.Advocate. It is further stated in paragraph 22 of the Official Liquidator's Report, Report is filed for ratifying the action of the Official Liquidator. In paragraph 23 it is stated that if the Hon'ble Court direct the Official Liquidator, the Official Liquidator will obtain prior permission before entrusting any brief as Special Arguing Counsel.
4.
That, the Official Liquidator most respectfully submits that the explanation submitted by the Official Liquidator in report dated 12.01.2012 and 23.02.2012 was not accepted by this Hon'ble Court and vide order dated 06.03.2012, the clause of "Special Arguing Counsel" in the scheme of Advocates was amended by this Hon'ble Court.
5. That, the Official Liquidator was further directed to appropriately incorporate the clause in the Scheme in aforesaid terms and all actions shall be taken by the Official Liquidator in accordance with the clause and whenever in any matter the Scheme is required to be placed before the Court for seeking any orders,the Scheme with aforesaid clause shall be placed before the Court and all actions shall be taken accordingly. Any lapse on this count shall be treated as defiance by the Official Liquidator. It was clarified that Official Liquidator shall never engage any advocate (except from the settled/approved panel) in any category without Court's approval, permission and sanction."
27. In paragraphs 6 to 8 discussion has been made regarding the Advocates' Panel of the Official Liquidator and details have been mentioned regarding the resignations of some of them, as has already been stated in earlier Report. Regarding the concerned advocate, it is stated thus:
"9.
That, the Official Liquidator further most respectfully submits that the matters assigned to Shri Roshan Desai, Advocate are of the nature wherein the question of Law are involved and are complicated in nature i.e. Land matter (ULC/Lease/tenancy), 391 to 394 of the Companies Act,1956 of the Companies under Liquidation, matter involved under section 531 and 536 of the Companies Act,1956, substitution matters, EPF Matters, inter-se transaction between the holding and subsidiary companies etc,which can set a principle in future of the Companies, under liquidation."
28. The Official Liquidator has filed a fifth Report dated 03-04-2012. A perusal of the same reveals that it substantially pertains to the selection of a new panel of advocates by a Committee consisting of the Registrar General of this Court and the Official Liquidator, along with one Nominee of the Registrar General. Separate prayers have been made in this Report. In the view of this court, the report dated 03-04-2012 could not have been filed in the present Official Liquidator's Report No.294 of 2011 where the prayers made are essentially for ratification of the action of the Official Liquidator in appointing the concerned advocate as Special Arguing Counsel.
29. At this stage, Mr. A.K.Chaturvedi, Official Liquidator, states that he may be permitted to withdraw the Report dated 03-04-2012. Permission to withdraw the Report dated 03-04-2012 from the compilation of Official Liquidator's Report No.294 of 2011 is granted, with liberty to file the Report afresh, insofar as it pertains to the selection of a new panel of advocates, pursuant to the Report of the Committee.
30. The Registrar General has submitted three sealed covers containing the Reports of the Committee, that have been retained by this Court. As and when the Official Liquidator re-files the Report regarding the selection of the new Panel of Advocates, these reports shall be taken into consideration.
31. The sixth Report filed by the Official Liquidator is dated 12-07-2012. This Report also contains separate prayers, mostly regarding the recommendation of the Selection Committee.
32. The Official Liquidator, prays for permission to withdraw the report dated 12-07-2012. Permission to withdraw the Report dated 12-07-2012 is granted.
33. This brings the Court to the crux of the matter, namely, ratification of the action of the Official Liquidator in entrusting certain briefs to the concerned advocate as "Special Arguing Counsel", in matters enumerated at paragraph 21 of the Report dated 27-12-2011, which is the main Report containing prayers. The other Reports, except those that have been permitted to be withdrawn, are explanatory in nature.
34. A Scheme for engagement of counsel/advocates for the Office of the Official Liquidator, High Court of Gujarat has been prepared on 10-09-2009. This Scheme contains clause (f) regarding "Special Arguing Counsel" that has been reproduced hereinabove. As is clear from the order dated 06-03-2012 reproduced hereinabove, a clarificatory addition has been made in the very same clause that has been fully reproduced in the said order. From perusal of the same, it is clear that the Official Liquidator is not empowered to engage any advocate as "Special Arguing Counsel", without prior permission and approval of the Court,unless his / her name is mentioned in the Panel approved by the Court.
35. It has been categorically stated in the order dated 06-03-2012 that the clarificatory addition to clause (f) regarding Special Arguing Counsel, shall be deemed to have been included in the original clause as if it was always there, and the Scheme shall, to the aforesaid extent, stand clarified and shall be deemed to have been framed with the said clause.
36. The tone and tenor of the Reports of the Official Liquidator mentioned hereinabove suggests that in spite of several orders of the Court as enumerated hereinabove, the Official Liquidator continues to assert his own views and opinion, that approval and permission of this Court is not required for entrustment of matters to a Special Arguing Counsel. It is the stand of the Official Liquidator that he is authorized to do so without permission of the Court. Even after passing of the order dated 06-03-2012 the same stand has been reiterated in the Report filed on 24-03-2012. Significantly, the clause pertaining to Special Arguing Counsel, as reproduced in the Report dated 24-03-2012, is without the clarificatory addition as made in the order dated 06-03-2012. The Official Liquidator has conveniently ignored the said clarificatory addition made by this Court, as though it does not exist at all. A casual reference to the order dated 06-03-2012 has been made in the Report dated 24-03-2012. The stand being taken by the Official Liquidator is clearly in contradiction to the above order of this Court.
37. The order dated 06-03-2012 makes it mandatory for the Official Liquidator to seek prior sanction, permission and approval of the Court before engaging any advocate,in any category, even as Special Arguing Counsel,unless his/her name is mentioned in the panel approved by the Court. It is not disputed that the concerned advocate regarding whom ratification is sought in the prayers made in the Report dated 27-12-2011, is not on the panel of advocates. In all the reports filed by the Official Liquidator, no cogent or convincing reason has been given for entrusting the briefs to the concerned advocate without prior sanction, permission and approval of this court. It is pertinent to note that no orders of the court have been produced regarding the briefs enumerated in paragraph 21 of the report, granting permission to the Official Liquidator to engage the concerned advocate. In report dated 12-01-2012, a reference has been made in paragraph 10, to letters dated 09-03-1999 and 18-11-1999 which, according to the Official Liquidator, indicate that the concerned advocate has been authorized to appear and conduct matters for, and on behalf of, the Official Liquidator, as per orders of the Court. A perusal of the letter dated 09-03-1999 reveals that it is a communication addressed by the Official Liquidator to the concerned advocate wherein it is stated that since, as per the orders of the High Court "you have already been appointed in similar matters for appearing and conducting the matters for and on behalf of the Official Liquidator (In liquidation) may I request you to kindly cause your appearance in the aforesaid proceedings and attend the matter in the best interest of the Company (in liquidation)". Though a reference has been made to orders of the Court, however nothing specific has been mentioned. No orders have been produced on record by the Official Liquidator in any of the matters mentioned in Paragraph 21 of the Report. The letter dated 18-11-1999 has been written by the Official Liquidator to the concerned advocate stating as below:
"Since similar matters are already entrusted to you by this office, you are requested to kindly cause your appearance in the matter for and on behalf of the Official Liquidator in the best interest of the Company (In Liqn). Progress of the matter may be intimated to this Office from time to time."
38. This communication is also at the behest of the Official Liquidator and no order of the Court has been produced. As these letters are internal communications between the Official Liquidator and the concerned advocate the Court has nothing to do with them and they cannot be misconstrued as granting authorisation by the Court to the Official Liquidator to engage the concerned advocate, as is being misrepresented by the Official Liquidator.
39. At this stage, it would be relevant to refer to Rule 307 of the Companies (Court) Rules, 1959, which reads as below:
"307. The Official Liquidator shall, as far as possible, personally appear and conduct all proceedings before the Court in the liquidation, provided that the Official Liquidator may apply to the Court for sanction to employ an advocate or advocates to assist him, and the Court may, on such application, sanction such employment or pass such further or other orders as it may think fit."
(emphasis supplied)
40. It is clear from the above Rule that the Official Liquidator is required to apply to the Court for sanction to employ an advocate, or advocates, to assist him. Nowhere in the Rule is it mentioned that the sanction has to be granted after the appointment of an advocate by the Official Liquidator. The Rule envisages prior sanction of the court and not ex-post-facto sanction, as is conveniently being misread and misconstrued by the Official Liquidator. In view of the fact that the clause regarding Special Arguing Counsel has been clarified by this court vide order dated 06-03-2012, and the clarificatory addition is deemed to have been included as if it were always there, there is no doubt that the Official Liquidator cannot engage any advocate, in any category, even as "Special Arguing Counsel", without prior sanction, permission and approval of this Court, unless his/her name is mentioned in the panel approved by the Court. It is an admitted fact on the part of the Official Liquidator that prior permission and approval of the court for engagement of the concerned advocate has not been taken, and that the concerned advocate is not on the panel approved by the Court. In such circumstances, the action of the Official Liquidator in entrusting the briefs to the concerned advocate as Special Arguing Counsel in the cases mentioned in paragraph 21 of the report dated 27-12-2011 without prior permission of the court, cannot be ratified. The Official Liquidator has, in fact, deliberately tried to undermine the authority of the Court and has not even bothered to inform the Court, leave alone seek prior sanction, before engaging the concerned advocate. This amounts to defiance of the orders of the Court, even after passing of the order dated 06-03-2012, as the same stand is being reiterated, time and again.
41. This is, to say the least, a very unfortunate state of affairs. The Official Liquidator is enjoined to assist the court and carry out the functions assigned to him under the supervision and control of the Court. If the Official Liquidator takes a stand contrary to the court and functions at cross-purposes with the Court, it would seriously hamper the smooth working of the Court.
42. None of the explanations rendered by the Official Liquidator for not seeking the sanction of the court before engagement of the concerned advocate are adequate or satisfactory. The prayers made by the Official Liquidator in the Report dated 25-12-2011 are, therefore, unacceptable to this Court and hence, stand rejected.
43. At this stage, when the dictation of the order in the open Court is almost completed and only the operative part remains to be dictated, a request has been made by the concerned advocate to grant him an opportunity of hearing. As the Court is hearing a Report filed by the Official Liquidator for ratification of his actions, it is a matter solely between the Court and the Official Liquidator, therefore, it is not required that the concerned advocate be heard.
44. During the course of hearing, as the Official Liquidator could not assist the court properly even on factual aspects, the Court requested Dr.Amee Yajnik, learned advocate, who is on the panel of the Official Liquidator, and Mr.Ashok L.Shah, learned advocate, to assist the court on factual aspects to a limited extent. The Court acknowledges the assistance rendered by them.
45. Though the Official Liquidator is functionally under the control of this Court, administratively, he is under the control of the Central Government. This Court, therefore, considers it appropriate that a copy of this order be handed over to Shri P.S.Champaneri, learned Assistant Solicitor General of India for further communication to the Secretary, Ministry of Corporate Affairs, Government of India, New Delhi for information and further necessary action, as considered appropriate.
46. With these observations, the Report is rejected.
(Smt.Abhilasha Kumari,J) arg