Skip to content


Sushil Prasad Vs. the Official Liquidator of Vinod Motors (Pvt.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCompany Application No. 40 of 1976
Judge
Reported in[1978]48CompCas462(Delhi); 15(1979)DLT250
ActsCompanies Act, 1956 - Sections 446; Companies (Court) Rules, 1957 - Rule 164
AppellantSushil Prasad
RespondentThe Official Liquidator of Vinod Motors (Pvt.) Ltd.
Excerpt:
- - the result is that both the material as well as the conclusions are incomplete and also liable to be unsound. the present case involves a very substantial amount and i would not like to decide a claim of this type in this manner. it may be recalled that the official liquidator has many rights such as the right to challenge preferential payments or charges created otherwise than for good consideration as provided in sections 531, 531a and 532 and other sections. the claim being that he is a secured creditor at at the same time, the court can adjudicate a claim by the official liquidator that this claim is bad because it is not registered......is such that the debt has to be proved before the official liquidator who also represents the indebted company. the decision of the official liquidator, thereforee, amounts to a decision in his own favor, because he acts not only as the representive of the company in liquidation, but also acts as a court whose decision is subjest to appeal to this court. (i feel that) in such a case it is difficult for the rights of the parties to be properly worked out, because one party appears before the other party. the result is that both the material as well as the conclusions are incomplete and also liable to be unsound. this court sitting in appeal under rule 164 is limited by the record with the official liquidator. the present case involves a very substantial amount and i would not like to.....
Judgment:

D.K. Kapur, J.

(1) This is an appeal under Rule 164 of the Companies (Court) Rules, 1959, against the decision recorded by the Official Liquidator que the appellant's claim as a creditor of M/s. Vinod Motors (Private) Ltd. The Official Liquidator per decision dated 9th September, 1976, has held that he admits Rs. 1,48,045.56 as due, but does not admit the fact that it is a secured claim. In fact, the official Liquidator has used other language in the order, but this is the sum and substance and effect of the order. The present appeal is not concerned with the quantum of the claim, but with the nature of the claim. In other words, the appellant wants to be treated as a secured creditor having a preferential right over other creditors. The appellant relies on an agreement dated 19th December, 1967, entered into with the company which is reproduced in the grounds of appeal. It is also stated that this agreement created a mortgage/charge which was registered under section 132 of the Companies Act, 1956. The winding up order was passed on 18 Nov., 1968, which means that the agreement was entered into within one year from the date of the winding up order.

(2) There are no reasons given in the order of the Official Liquidator other than a statement that there are no registered document. The contention of the learned counsel for the appellant is that no registered document is required in this case, because the charge is coupled with possession and he relies on certain provisions of the Registration Act. He also states that this point cannot be taken advantage of by the Official Liquidator when dealing with the matter himself.

(3) I have given this matter some careful consideration. The scheme of the Companies Act is that debts have to be proved under section 528 of the Act. The procedure for dealing with these matters is set out in the Companies (Court) Rules, 1959. Unfortunately, the procedure is such that the debt has to be proved before the Official Liquidator who also represents the indebted company. The decision of the Official Liquidator, thereforee, amounts to a decision in his own favor, because he acts not only as the representive of the company in liquidation, but also acts as a court whose decision is subjest to appeal to this Court. (I feel that) in such a case it is difficult for the rights of the parties to be properly worked out, because one party appears before the other party. The result is that both the material as well as the conclusions are incomplete and also liable to be unsound. This Court sitting in appeal under Rule 164 is limited by the record with the Official Liquidator. The present case involves a very substantial amount and I would not like to decide a claim of this type in this manner.

(4) The next question is ; Can the appellant avail of any other remedy or is he to be left to a chance decision recorded one way or the other on the present material At the same time? it may be recalled that the Official Liquidator has many rights such as the right to challenge preferential payments or charges created otherwise than for good consideration as provided in sections 531, 531A and 532 and other sections. It would be most unsatisfactory if the Official Liquidator were to be deprived of his right to challenge a voluntary transfer under Section 531-A merely because he has to decide the case himself. In fact. on taking into consideration the difficult questions that may arise in a case of this type and which indeed do arise in this case. I feel that this is not a proper way in which such a case can be decided.

(5) I now come to consider what is the procedure provided by the Act to deal with cases of this type. For this purpose, it is necessary to refer to section 446(2) of the Act which is in the following terms :--

'(2)The Court which is winding up the company 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 the company (including claims by or against any of its branches in India); (e) any application made under section 391 by or in respect of the company; (d) any question or priorities or any question whatsoever, whether of law or fact, which my 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 had arisen or arises 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.'

This Section which seems to be all embracing, separately covers also the claim of the present appellant and the counter-claim of the Official Liquidator. Firstly, it covers any suit or against the company. Hence, by mere application, the Court can adjudicate a claim by the present appellant against the company; the claim being that he is a secured creditor at at the same time, the Court can adjudicate a claim by the official Liquidator that this claim is bad because it is not registered. It is had only in the sense that it does not lead to any preference. At the same, it can be said that the charge or mortgage is void under Sec. 531-A or any other provision that the official Liquidator may be able to point out. Then he Court can deal under sub-clause (d) with any question of priority or any question whatsoever whether of law or fact which arises in the course of the winding up of the company. Here is a case where a question of priority has arisen and the only difficulty is that neither party has led any evidence or in fact is able to lead evidence in the present proceedings.

(6) Keeping in view the provisions I have just referred to, I would decide this case in a different manner from that which would apply to ordinary appeals under the Code of Civil procedure. I would come to the conclusion that this is not a suitable case to be decided in this manner and, prima facie. Rule 164 is meant to cover disputes realting to the quantum of the debt rather than the nature of the debt. The present case really one in which the dispute relates not to the amount of the debt, but to its interse priority or preferential nature in relation to other creditors of the company. This is a question which has to be decided under section 445(2) of the Act. (It also appears to me) that in order to enable such a claim to be brought) the Court has to first give leave under Section 446(1). To meet this difficulty, I would give leave to the appellant to move an application under section 446(2) to have the amount of the debt in question treated as a preferential debt. The amount of the debt is not disputed by either side and will be taken as being proved and now the only question which will have to be decided in this way will be the preferential nature of the claim in case the appellant moves the Court. No question of limitation is probably involved for moving an application under Section 446(2), because in this case the dispute does not relate to the debt, but to the nature of debt. (The quantum of the debt being admitted, the appellant is tree to move such an application, if so advised.) To make the matters clear, I would say that the effect of this order subject to any application that may be filed under Section 446(2) would be that the debt stands proved as found by the Official Liquidator which would be treated as an ordinary debt unless found to be preferential debt by the Court when dealing with an application under Section 446(2) of the Act. I may also say that I would myself have decided this question of priority in these proceedings if I could fairly have done so, but I feel that it cannot be done in a proper manner on the present record. This appeal is decided leaving the parties to bear their own costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //