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B.L. Sharma Vs. Omperkash Malhotra - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCivil Miscellaneous (Main) Appeal No. 208 of 1974
Judge
Reported in[1979]49CompCas402(Delhi); 14(1978)DLT18C; 1978RLR567
ActsCompanies Act, 1956 - Sections 454
AppellantB.L. Sharma
RespondentOmperkash Malhotra
Excerpt:
.....one of the joint liquidator appointed by shareholders cannot file a complaint of non-filing of the statement of affairs by other liquidator -in such cases, it was held that the complaint would be filed by both the liquidators - - (9) the scheme of the companies act is that when a winding up order has been passed a statement of affairs has to be given to the official liquidator and failure to make such a statement by the persons mentioned in section 454 is a penal offence created by section 454(5) which is punishable and has to be tried by the court which passed the winding up order. 85 of 1974 on 13th november, 1975, and as the complaint had been filed some time in 1974, although i am not able to find out the exact date, but was clearly filed long before the supervision order was..........jurisdiction of the magistrate have been challenged in the petition, (3) a counter-affidavit was filed by shri o.p. malhotra and some certified copies of the orders passed by magistrate have also been filed. i may mention that the magistrate has held that there is substance in the complaint and it should be proceeded with. (4) there are really four points for decision in this case (1) whether the magistrate has jurisdiction to proceed with the complaint, (2) whether the proper accused have been joined in the complaint, (3) whether there are any subsequent events justifying the quashing of the complaint, and lastly, whether the complaint has to be quashed because it it not filed by the proper person, (5) for the decision of these points, it is not necessary to deal with the factual.....
Judgment:

Dalip K. Kapur, J.

(1) This is a petition u/s 482 of the Cr. PC. read with Article 227 of the Constitution of India, which is concerned with a criminal case filed by Shri O.P. Malhotra, respondent No. 1 u/s 454(5) of the Companies Act, 1956, in relation to M/s. Youngmen Benefit Chit Fund (P) Ltd., which is a company in the process of being wound up in a creditors voluntary winding up. The winding up commenced on 27th April, 1973, by means of a special resolution. The resolution passed by the share-holders appointed the said Shri 0. P. Malhotra as joint liquidator along with Shri B.L. Sharma, who is one of the petitioners in this case. The date of the share-holders resolution is 27th April, 1973 and it seems to have been passed by the creditors on the same date. According to the application, there were six directors on that date & Shri O.P. Malhotra, respondent No. 1 was removed by the creditors at a meeting held on 11th August, 1973. I may here mention that in separate proceedings, I have since removed both Shri O.P. Malhotra and Shri B. L. Sharma and appointed the Official Liquidator and the company is being wound up under the supervision of the Court.

(2) The objection of the petitioners is that Shri O.P. Malhotra has filed a false complaint u/s 454(5) of the Companies Act, 1956, in the Court of Shri R.N. Jindal, Magistrate 1st Class, Delhi. A copy of that complaint has also been filed. The validity of the complaint and the jurisdiction of the Magistrate have been challenged in the petition,

(3) A counter-affidavit was filed by Shri O.P. Malhotra and some certified copies of the orders passed by Magistrate have also been filed. I may mention that the Magistrate has held that there is substance in the complaint and it should be proceeded with.

(4) There are really four points for decision in this case (1) Whether the Magistrate has jurisdiction to proceed with the complaint, (2) whether the proper accused have been joined in the complaint, (3) whether there are any subsequent events justifying the quashing of the complaint, and lastly, whether the complaint has to be quashed because it it not filed by the proper person,

(5) For the decision of these points, it is not necessary to deal with the factual allegations and counter allegations made in the petition in the reply, nor is it indeed necessary to refer to the fact that the petition has been amended twice. It is sufficient to deal with the purely legal questions that arise in the case.

(6) There is an objection that the petition is not maintainable under Article 227 of the Constitution which was the from in which it was originally filed, but as a prayer has been added u/s 482 of the Cr. P.C. by means of the amendment, perhaps this objection can wait till I have dealt with the merits of the legal points raised stated earlier.

(7) I first take up the question whether the Magistrate has jurisdiction to proceed with the complaint. It is stated in Section 454(5A) of the Companies Act, 1956, that the Court by which the winding up order is made or the Provisional Liquidator is appointed may take cognizance of an offence u/s 454(5). Normally, the Court which is competent to take jurisdiction is the High Court, because the High Court acts as the Court for the purposes of passing up orders. It is, thereforee, submitted that the Magistrate cannot take cognizance. However, in the case of a voluntary liquidation, there is no order for winding up and, hence the question arises which is the Court which has jurisdiction to take cognizance of the offence. In this connection, it is necessary to refer to section 622 of the Act which states :

'NOCourt inferior to that of a Presidency Magistrate or a Magistrate of a first class shall try any offence against this Act'.

As this Section is read along with the Criminal P.C., it would appear at first sight that a Magistrate is competent to take cognizance of an offence u/s 454(5) just as he has power to take cognizance of an offence under the Indian Penal Code and other criminal law generally.

(8) As against this point of view, it has now to be seen that there are certain other provisions of the Companies Act, 1956, which have also to be examined for finding out what happens when a company is in voluntary winding up as opposed to being wound up by the Court.

(9) The scheme of the Companies Act is that when a winding up order has been passed a statement of affairs has to be given to the Official Liquidator and failure to make such a statement by the persons mentioned in Section 454 is a penal offence created by Section 454(5) which is punishable and has to be tried by the Court which passed the winding up order. This in short is she effect of section 454 when applied to a winding up by the Court. When a company goes into voluntary winding up, this Section cannot be read in this way and has to be read in the light of Section 511-A of the Act, which changes the require- ments of Sections 454 when applied to a voluntary winding up. This section was added by section 56 of the Companies (Amendment) Act of 1956. The new Section reads :- (......) When this Section is read along with Section 454, it means (a) the 'Court' has to be omitted which means that in construing Section 454(5A) there is no Court which can take cognizance of the offence, and secondly, the statement of affairs has to be filed before the Liquidator and the date for purposes of construing the Sections is to be the date of commencement of the winding up. This means in fact that Section 454(5A) does not have effect and hence, the complaint can be filed before a Magistrate.

(10) This situation which I have just analysed holds true of a case where no supervision order has been passed but. when a supervision order is passed, then there is yet another change introduced into the construction of the Act by reason of Section 523 which reads :- (......) This Section means that as soon as an order is passed bringing the winding up of the company under the supervision of the Court, then the proceedings have to be treated exactly as a petition for winding up passed by the Court. The effect is further emphasised by Section 526(2) which reads :- (......) Any possibly means that for all purposes the winding up has to be deemed to be a winding up by the Court and the liquidator has to act in practically the same way. Although the point is a different one, my understanding of the effect of Sections 523 and 526(2) of the Act is that even for the purposes of Section 454, the company has to be deemed to be in compulsory winding up by the Court, and hence, the jurisdiction to try u/s 454(5) is transferred to the High Court which is the Court under whose supervision the winding up is to proceed.

(11) This brings me to examine the date on which the supervision order was passed, because in my view, the High Court's jurisdiction only starts after the supervision order is passed on the analysis I have just made. As it happens, the supervision order was passed in C.P. No. 85 of 1974 on 13th November, 1975, and as the complaint had been filed some time in 1974, although I am not able to find out the exact date, but was clearly filed long before the supervision order was passed. Hence I come to the conclusion that the Magistrate did have jurisdiction to proceed with the complaint and the present petition can not succeed on this ground.

(12) I now take up the second question which is whether the accused persons are the proper parties in the complaint. As appears from the complaint, the accused are Shri B. L. Sharma, Joint Liquidator and Shri Ram Rakha Chopra, ex-director along with Mukhi Radha Kishan, ex-Managing Director. The claim by the petitioners is that one of the voluntary liquidators cannot be asked by the other voluntary liquidator to file a statement of affairs, and hence, the complaint against the first petitioner is wrong. This raises an interesting situation, According to the first respondent the first petitioner although he was joint liquidator was an ex-Administrative Officer of the company, who had to file a statement of affairs before himself and Shri 0. P. Malhotra. I cannot but feel that such a construction of the Act by the first respondent is erroneous. The statement of affairs has to be filed by the persons mentioned in Section 454(2). Those persons are directors, manager, Secretary or Chief Officer of the Company and some other persons, who may be asked by the Official Liquidator under the directions of the Court to file the statement of affairs. As we are dealing now with a company which was at the relevant time in voluntary liquidation, Section 511-A shows that the statement of affairs can be filed by the directors or the manager. Secretary or Chief Officer of the company before the voluntary liquidator, and as the reference to the Court is omitted by reason of Section 511-A, the other persons may be asked by the Official Liquidator to submit a statement of affairs being the persons mentioned in the second part of Section 454(2) Clearly, the ex-Managing Director, Shri Mukhi Radha Kishan and the ex-director, Shri Ram Rakha Chopra were persons who had to file the statement of affairs, but I cannot see how Shri 0. P. Malhotra has called upon Shri B. L. Sharma, the joint liquidator to file the statement of affairs. thereforee, I have to accept this second submission of the petitioners, but only to the limited extent of holding that the complaint could not have been filed against Shri B. L. Sharma. Here, it would not be out of place to mention the contents of the complaint as for as Shri B. L. Sharma, Joint Liquidator is concerned. It is said that Shri 0. P. Malhotra wrote to him calling upon him to render the statement of affairs. Thus, reliance is placed not on the obligatory part of section 454(2), but on the power of the liquidator to ask an ex-officer to file the statement of affairs. Possibly, if Shri 0. P. Malhotra was the sole liquidator and Shri B. L, Sharma was not a joint liquidator, this direction might have been issued, but it cannot be issued by one liquidator to another, because no liquidator can be called upon to file a statement of affairs before himself. In fact, as Shri 0. P. Malhotra was only a joint liquidator, the statement of affairs could only be filed joint and even the demand u/s. 454(2) had to be met jointly by both liquidators. Hence, from every point of view, the complaint cannot proceed against Shri B. L. Sharma, because he is not the proper accused.

(13) It is then submitted that by reason of the supervision order, a subsequent event has intervened to make the main complaint invalid. I think, this submission is not justified. As stated earlier, there is a supervision order which means that this Court has now to deal with the winding up as if a winding up order has been passed by this Court. However, this only allows further proceedings being dealt with in this way. All previously pending petition's and cases do not become invalid. In my view, in the present case, this gives the power to this Court to transfer the complaint to this Court u/s 446(3), but it does not mean that the complaint becomes invalid.

(14) I now take up the last point which is perhaps the most important and that is that the complaint is challenged on the ground that it is not filed by the proper person. For analysing this point, reference has to be made to Section 621 which states that offences under the Companies Act are cognizable only on a complaint by the Registrar, or a share-holder or Government. This means that ordinarily in offences under the Companies Act, the complainant has either to be the Registrar or a share-holder of the Company or the complainant may be the Central Government through some authorised person. S. 621(2) says that it does not apply to an action taken by the liquidator in respect of an offence relating to the matters set out in Sections 425 to 560. Hence, where the offence is u/s 454, a liquidator can file the complaint. This is an exception normally given where only the Registrar, a share-holder or Government can file a complaint. However, if where are two liquidators, there is a further provision in Section 512(4) that where there are several liquidators, then at least two have to act. The exact language of The provision is : (...) When this provision is read with Section 621(2), it means that a liquidator who can file a complaint cannot act alone, because if there are more than one liquidator, then at least two have to act. This means that the complaint should have been filed jointly by Shri B. L. Sharma along with Shri 0. P. Malhotra. As the complaint has been filed by a single joint liquidator, it is unauthorised.

(15) The only exception to the two liquidators acting together is an authority given to one of them to act alone given at the time of their appointment. As a matter of fact, one of the features of this case is that the two joint liquidators could not fully act together so much so, that by resolution the creditors sought to remove Shri 0. P. Malhotra and after that Shri B. L. Sharma started acting alone as liqui- dator. As this case was a decision of the creditors, Shri B. L. Sharma might have stated that his appointment allowed him to act alone, but no such authority was ever given by any one to Shri 0. P. Malhotra. In any event, the difficulties faced by the joint liquidators who were disagreeing with each other were the subject-matter of some other proceedings, which led me to pass orders separately. I removed both of them and appointed the Official Liquidator as the sole liquidator to continue the voluntary winding up under the supervision of the Court, otherwise the liquidation could not proceed. This situation seems to have existed even in this case where a complaint by only one liquidator was filed. In my view, one liquidator could not file a complaint, because of the way Section 512(4) has to be read with Section 621(2) of the Act. In other words, the complaint has to be held to be improperly filed, and hence, is hit by Section 621' being a complaint not filed by a proper person. If Shri 0. P. Malhotra was a share-holder, perhaps, though I am a little doubtful whether a share-holder remains a share-holder after the winding up proceedings start, because then he becomes a contributory. I would like to leave this question open for decision in some other case. As it happens, Shri 0. P. Malhotra is not stated to be a shareholder, so he could not file a complaint.

(16) Accordingly, this petition has to succeed whether u/s 482 of the Cr. P. C. or u/Art. 227 of Constitution. There appears to be some doubt regarding the application of Article 227 because of the 42nd Constitutional amendment. I have referred to 43rd amendment but find that Article 227. is unaffected in any event relief can be granted under section 482 of the Cr. P. C, Petition allowed.


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