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V.P. Nanda Vs. the Registrar of Companies, Delhi - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCompany Petition No. 98 of 1977
Judge
Reported in[1978]48CompCas552(Delhi); 15(1979)DLT160
ActsCompanies Act, 1956 - Sections 633
AppellantV.P. Nanda
RespondentThe Registrar of Companies, Delhi
Advocates: Satish Chander and; V.P. Singh, Advs
Cases ReferredParkash Khaitan v. Shree Keshariya Investment Ltd.
Excerpt:
.....the case dealt with a petition filed under section 633 of the companies act, 1956, by the voluntary liquidator of a company, seeking to be relieved from the default in filing the statement of account - it was ruled that the relief would be granted to the voluntary liquidator, who may with regard to section 633 of the act, treated as an officer of the company - - (5) this legal position being pointed out to the petitioner, it clearly appears that he was unaware that he had to follow this course. as clearly appears on the reading or the section, relief may be granted to officers of a company. (7) in the present case, it is note-worthy that the company is a very small one, the assets are also -extremely small compared to the usual amount available in companies and, a passage of..........under section 633(2) of the companies act) 1956 has been moved by shri v.p. nanda, who became a voluntary liquidator of m/s shri chatarsal films finance limited in january, 1958, when that company went into voluntary winding up as a result of a petition a resolution of the members of the company. as the winding up was not completed within three years, this later had to be treated as a creditors winding up. the fact of the matter is that winding up is even now not complete though precious little remains to be done would be clear from the facts appearing below, as per the statements in the present petition, the liabilities of the company were about at the commencement of the winding up and the assets were about rs. 3,300.00 . the losses accounted to rs. 87,000.00 approximately. it is.....
Judgment:

D.K. Kapur, J.

(1) The present petition under Section 633(2) of the companies Act) 1956 has been moved by Shri V.P. Nanda, who became a voluntary liquidator of M/s Shri Chatarsal Films Finance Limited in January, 1958, when that company went into voluntary winding up as a result of a petition a resolution of the members of the company. As the winding up was not completed within three years, this later had to be treated as a creditors winding up. The fact of the matter is that winding up is even now not complete though precious little remains to be done would be clear from the facts appearing below, as per the statements in the present petition, the liabilities of the company were about at the commencement of the winding up and the assets were about Rs. 3,300.00 . The losses accounted to Rs. 87,000.00 approximately. It is said that out of the assets, machinery worth Rs. 2,900.00 was attached by the landlord of the Novelty Cinema. Khurja against rent and later this as, set was sold. There were thus no assets for all practical purposes except that Rs. 3,425.00 were available as uncalled capital. The voluntary liquidator filed some statements of accounts; but they were mainly defective and treated as such by a Registrar of companies. The petitioner was prosecuted and has been fined a sum of Rs. 900.00 in various prosecutions. Now, a number of prosecutions are still pending regarding subsequent defaults in filing the statement of accounts.

(2) The legal position of a voluntary Liquidator regarding the obligation to file statement of accounts is contained in section 551 of the companies Act, 1956. The provisions of this Section have been varied to some extent by Rule 327 of the Companies (Court) Rules 1959, which prescribes the period for which a Liquidator has to file account. He has to file accounts after one year and thereafter has to file accounts at six monthly intervals. If he defaults in filing these accounts, he is liable to be prosecuted under Section 551(4) of the Act. The fine may extend to Rs. 500.00 for every day during which the default continues. As is apparent from the facts of this case, this was almost a defunct company, but still the petitioner was voluntary Liquidator, has defaulted in filing the statement of accounts and he is facing prosecutions for this.

(3) It is now necessary to see what is the Explanationn of the petitioner for the defaults. According to him, no assets and no money and in fact no documents of the company came into his hands. No claim was made to him for the return of any amount owed by the company and the only creditor, M/s. Columbia Films Finance Limited has itself gone into liquidation, but it has not made any claim on the Liquidator, being entirely without funds, the voluntary Liquidator has been unable to have any accounts prepared. In fact, there is nothing for which accounts had to be prepared as there is no account, other than the account which originally existed. It is stressed by the petitioner that this obligation to go on filing accounts is an unending matter and he cannot voluntarily bring this dissolution to an end, because he has no material on which to proceed.

(4) The petitioner has also explained that shortly after he became a Voluntary Liquidator, he had done as much he could and he had called a final meeting. This happened in 1963. Unfortunately, no one came to attend that meeting. I may now refer to the material on record to show that this meeting was called. There is a copy of the Delhi Gazette dated 17th January, 1963, in which the notice of the Liquidator has been published. The meeting was called for 16th February, 1976, for considering the final accounts and passing a resolution forthe dissolution of the company. If this meeting had been held and the resolution passed; then the company would have been dissolved. In advertisement published in the newspaper India Weekly' has also been filed. In any event, the petitioner says that no one attended this meeting and hence due to lack of quorum he found himself helpless and has been forced to continue the liquidation in spite of having nothing to do for all these years. With regard to the Liquidator's position, Mr. Singhal, ex-officio Assistant Registrar, who represents the registrar of Companies has brought to my notice the provisions of Section 509, particularly sub-section (3) and sub-section (4) thereof, which refer to this question. The said provision reads i-

(3)Within one week afterthe date of the meetings, or if the meeting are not held on the same date, after the date of the later meetings the liquidator shall send to the Registrar and the Official Liquidator a copy each of the account and shall make a return to each of them of the holding of the meetings and of the date or dates on which they were held.

If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. (4)If a quorum (which for the purposes of this section shall be two persons) is not present at either of such meetings, the liquidator shall, in lieu of the return referred to in sub-section (3) make a return that the meeting was duly called and that no quorum was present the rest.

Upon such a return being made within one week after the date fixed for the meetings the provisions of sub-section (3) as to 'the making of the return shall, in respect of that meeting, be deemed to have been complied with.'

Under sub-Section (3), it would appear that when such a meeting is held, a return has to be sent regarding the holding of the meeting to the registrar. If the meeting had in fact been held, then the result would either been that the winding up is to continue or the company has to be dissolved. As in this case, no meeting was actually held, we have to turn to sub-section (4). That sub-section says that if the quorum is not present, then the return has to state that the meet in was duly called, but no quorum was present. It it then said that if such a return is made within one week) then the meeting shall be deemed to have been held. Then the next relevant part of the section is sub-section (6) which says that on a return being furnished either under sub-sec. (3) or sub-sec. (4) the Official Liquidator shall be given facility to scrutinise the books and papers of the company and if he makes a report to the court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest, then from the date of the submission of the return, the company shall be deemed to be dissolved. Hence, it is pointed out by Mr. Singhal that even if the quorum was not present, the filing or a return to the Registrar followed by an inspection by the Official liquidator and a subsequent report to the court would have resulted in this company being dissolved in 1963 or thereabout provided of course, that the report of the official liquidator was to the effect that the affairs of the company had not been conducted in a manner prejudicial to the interests of its members or creditors.

(5) This legal position being pointed out to the petitioner, it clearly appears that he was unaware that he had to follow this course. He has also admitted before me that the books of the company are not now available at all. It appears that the person who were keeping the books on behalf of the company did not actually hand the same over to the liquidator, because there was hardly anything in them. As explained to me, the company was even defunct in 1963, and now the liquidator states that after a period of 15 years, it will be impossible to show the books to the official liquidator for compliance with section 509(6) of the Act. Any way, this problem will have to be resolved by the Official Liquidator as and when that stage is reached, because we are now concerned with a much earlier stage, which is that in fact no return was sent under sub-section (4), and thereforee, the provisions of Section 509 have not become applicable. This means that strictly speaking, the liquidation was continuing and there had to be compliance with Section 551(4) read with Section 327 of the Companies Act. 1956.

(6) This brings me to the question whether the petitioner is entitled to relief under Section 633 of the Companies Act, 1956, on account of having acted reasonably and also, there is a subsidiary question whether a Voluntary Liquidator can be granted relief under this provision. As clearly appears on the reading or the Section, relief may be granted to officers of a company. The definition of Officer as given in Section 2(30) on a plain reading does not include a liquidator? however, there are some decisions which are reported showing that relief has been granted to liquidators under this very section. I have been referred to 'In the matter of Mukusor Electric Supply Co., Ltd., (in liquidation' (1966) 36 Comp. Cas. 144, 0m Parkash Khaitan v. Shree Keshariya Investment Ltd. (1978) 48. Comp. Cas. 85, and Official Liquidators, Baroda Batteries Ltd., v. Registrar of Companies, Gujarat State (1978) 48 Comp. Cas. 120. As two of these cases have only been reported this year? and the point does not seem to have arisen earlier. I would be inclined to accept the fact that relief can be granted on the footing that though a liquidator is not strictly speaking on officer of the company because the definition is so framed that it applies to a running company rather than a company in winding up, still when a company has gone into liquidation, the Board of Directors is replaced by the Liquidator who acts as the manager and director and in fact complete-in-charge of the affairs of the company. There may be cases in which the company continues to work or carry on some sort of business even during the liquidation process and in such case. If not within the strict terms used in the Act, at least in common paralance, a Voluntary Liquidator must be considered to be an officer of the company. The Section (Section 633, appears to be a Section designed to give relief to persons who have acted honestly and reasonably and who in spite of this, on account of the circumstances of the case, are threatened with prosecution or other.

(7) In the present case, it is note-worthy that the company is a very small one, the assets are also -extremely small compared to the usual amount available in companies and, a passage of time amounting to almost twenty years has taken place without any creditor or debtor appearing nor have any share holders complained about the in-action of the Voluntary Liquidator, (I am calculating this period of twenty years from the date of the commencement of the winding up. At the same time; this liquidation could have been brought 'to an end either by the course just pointed out, or by getting this company dissolved in some other way. In fact, the learned counsel for the petitioner contends that the company could have been declared to be defunct under Section 560(4)- I agree with the counsel for the petitioner that could have been declarer as defunct, but at the same time, unless the Registrar of Companies is satisfied about the circumstances, he cannot waive the defaults of the Voluntary Liquidator. To read Section 560(4. as mandatory would mean that every time the Voluntary Liquidator fails to file the return, the company would merely be struck off the Registrar and this could lead to very serious malpractice and injustice to various share-holders and creditors. thereforee, possibly, the Registrar has acted correctly in not declaring the company defunct. Of course, if the facts now brought to my notice in this petition, had been brought to the notice of the Registrar of Companies, he might have been inclined to declare the company as defunct and than the Voluntary Liquidator would have been absolved of the difficulties that he now faces due to the peculiar facts of this case.

(8) Now turning to what relief can be granted to the petitioner. The question to be first analysed is whether the petitioner has acted reasonably and with due diligence, etc., i.e., has he complied with the necessary requirements entitling him to relief As at present advised, the only default that I can see is the failure by him to fully comprehend the meaning of Section 509 of the Act. As pointed out, till he advertised the holding of the final meeting, he had proceeded with the winding up as far as he could go : he then called a meeting to bring about dissolution. For some unknown reason, the members of the company did not choose to attend, so he was compelled by circumstances outside his control to continue the winding up, though he had nothing more to do. Of course, if he had followed the other course not pointed out to him, all this could have been avoided and possibly in that case the petitioner would not have been fined a sum of Rs. 900.00 in various prosecutions and would also not have had to suffer the inconvenience of resisting further prosecutions which are even now pending. In the circumstances, I think, the petitioner is entitled to get relief.

(9) There are a number of prosecutions still pending in respect of the defaults and the case of the Registrar of Companies is that the returns filed are invalid and not proper. They are not audited or they have not been filed at all. As these are pending prosecutions, the law is quite clear that this court cannot grant relief, but in the light of the facts narrated above, if the Registrar of Companies can be persuaded not to press these prosecutions. I think it would be very much in the interest of justice. One thing has struck me and that is I fail to understand why the petitioner did not resign during all this period, but the petitioner does not seem to have realised that he could resign. In any case, the registrar cannot be blamed the course followed by the petitioner and, thereforee. I would allow this petition and grant the petitioner relief in respect of the default for not filing the statement of account for the period ending 29th July, 1977 on payment of Rs. 100.00 , costs. The costs to be paid within one month.

(10) As the petitioner has been faced with a number of doubts as to how he should proceed now, I would indicate that he should now again call a final meeting to take steps to dissolve the company. The petitioner need not file any statement for the intervening period, because as is explained, nothing more has been done in the intervening period. This will of course, not affect the pending proceedings.


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