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The Registrar of Companies, Delhi Vs. Ur. Iiardit Singh Giani, Liquidator - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberLetter Patent Appeal No. 61 of 1968
Judge
Reported in[1978]48CompCas152(Delhi); ILR1976Delhi164
ActsCompanies Act, 1956 - Sections 515; Code of Civil Procedure (CPC), 1908 - Sections 107
AppellantThe Registrar of Companies, Delhi
RespondentUr. Iiardit Singh Giani, Liquidator
Advocates: Harish Chandra,; Anil Bhatnagar,; G.S. Vohra and;
Cases ReferredIn Wazir Sundar Singh v. Musammat Farida Khanam and
Excerpt:
(i) companies act (1956) - sections 515 & 524 -- extent of court's power to remove liquidator of a company in voluntarily winding up subject to the court's supervision.; a private company, subsequently converted in to a public one, resolved to wind up voluntarily and appointed the respondent as liquidator. the winding up was subsequently brought under court supervision, and the respondent was continued as liquidator. within thirteen months thereafter he settled the list of contributories; and a few months later he concluded the examination of the managing director; and he also filed petitions for recovery of amounts due from the contributories. further proceedings by him were delayed, first, by the district court which, after the companies act (1956) came into force,erroneously sent.....t.v.r. tatachari, j.(1) this letters patent appeal has been filed by the registrar of companies, delhi, against the judgment of hardayal hardy j. (as his lordship then was) dated november 6, 1967, in f.a.o. no. 47-d of 1966, whereby the learned judge allowed the appeal, set aside an order of the district judge, dated december 21, 1966, removing dr. hardit singh giani, liquidator, and associated one other person, shri v. s. juneja, as additional liquidator with shri hardit singh giani.(2) the facts which have led up to this letters patent appeal are the following. m/s national planners limited was incorporated on february 23, 1946, as a private company limited by shares under the indian companies act, 1913. it was converted into a public company by a special resolution passed on june 5,.....
Judgment:

T.V.R. Tatachari, J.

(1) This Letters Patent Appeal has been filed by the Registrar of Companies, Delhi, against the judgment of Hardayal Hardy J. (as his Lordship then was) dated November 6, 1967, in F.A.O. No. 47-D of 1966, whereby the learned Judge allowed the appeal, set aside an order of the District Judge, dated December 21, 1966, removing Dr. Hardit Singh Giani, Liquidator, and associated one other person, Shri V. S. Juneja, as Additional Liquidator with Shri Hardit Singh Giani.

(2) The facts which have led up to this Letters Patent Appeal are the following. M/s National Planners Limited was incorporated on February 23, 1946, as a private company limited by shares under the Indian Companies Act, 1913. It was converted into a public company by a special resolution passed on June 5, 1946. Its nominal capital was Rs. 20,00,000.00 divided into 1,00,000 preference shares of Rs. 10.00 each and 2,00,000 ordinary shares of Rs. 5.00 each. Its paid up capital, as on June 30, 1949, was Rs. 96,394.50 One Roshan Lal (since deceased) was its Managing Director, while his brother Kundan Lal was one of its Directors.

(3) The company was established with the main object of carrying on the business of land development and colonising at Ghaziabad in the State of Uttar Pradesh. It appears that in the course of its dealing with the public, criminal prosecutions were launched in the State of Uttar Pradesh against all the Directors of the company on charges of cheating, etc. On October 26, 1953, a General Meeting of the shareholders of the company was held, and it was resolved to wind up the company voluntarily. Dr. Hardit Singh Giani was appointed as a Liquidator. The winding up was subsequently brought under the supervision of the Court by an order passed by the then District Judge, Delhi, on March 26, 1954, and Dr. Hardit Singh Giani continued to act as Liquidator. He settled the list of contributories on April 25, 1955, and concluded the examination of the Managing Director on November 4, 1955. He also filed about 25 petitions in the Court of the District Judge, Delhi, for recovery of amounts due from the contributories.

(4) On April 1, 1956, the Companies Act, 1956, came into force, and the District Judge forwarded the record to the High Court of Punjab in the belief that the. High Court alone had jurisdiction to deal with the winding up proceedings. But, by an order, dated November 20, 1957, the High Court directed the record to be sent back to the District Judge, Delhi. It appears that the record was not received in the Court of the District Judge till August, 1958. On an application filed by Shri Roshan Lal, the Managing Director, in the Court of a Magistrate at Aligarh where he was being prosecuted, the record was summoned by the said Magistrate which resulted in a statemate.

(5) The trial of the said criminal case pending against the Managing Director and other Directors of the company ended sometime in 1960. They were convicted and sentences of imprisonment were imposed upon them. Appeals filed by them were disposed of by the High Court of Allahabad in 1961. On October 26, 1961, the Liquidator, Dr. Hardit Singh Giani, applied for the return of the books and started liquidation proceedings. It appears that he had to prosecute or defend about 347 cases in various courts in and outside Delhi, out of which about 105 cases were seriously contested. The company owned 74,000 square yards of land in Ghaziabad and about 7,00,000 square yards of land in Meerut. Due to the mismanagement on the part of the Directors of the company, the land at Ghaziabad was trespassed upon by strangers, and the Liquidator had to take action Section 456(1) of the Companies Act and eventually succeeded in obtaining possession of 74,000 square yards of land on May 31, 1962. As regards the land in Meerut, the Liquidator could not obtain possession of it as the persons in possession thereof claimed rights of ownership therein under the U. P Abolition of Zamindari Act. The proceedings started by him regarding the recovery of the said land were pending even in 1967.

(6) In April, 1963, the Liquidator, with the permission of the District Judge, Delhi, agreed to sell 68.000 square yards, of the land of the company at Ghaziabad to one Prem Parkash Bhutani at the rate of Rs. 3.12 per square yard and received a sum of Rs. 1,00,000.00 as earnest money from the purchaser. According to the Liquidator, the sale transaction could not be completed on account of obstruction created by Shri Roshan Lal, the Managing Director, who had unauthorisedly sold 27,000 square yards out of the said land at the rate of ten annas per square yard. Shri Prem Parkash Bhutani, thereforee, moved the Court of the District Judge for refund of his money on the ground that the company was not in a position to convey a valid and subsisting title in respect of the land agreed to be sold to him. By an order, dated March 12, 1965, the District Judge directed that out of the amount received from Shri Bhutani, the Liquidator, should return Rs. 90,000 to him in two Installments. According to the Liquidator, the said amount had since been returned to Shri Bhutani. It appears that the Liquidator filed two applications in the Court of the District Judge, Delhi, against the persons to whom the land had unauthorisedly been transferred by Shri Roshan Lal for restoration of possession to him, and that the District Judge passed an order on March 8, 1966, ordering restoration of possession of the said land to the Liquidator and also directed the initiation of proceedings for contempt against Shri Roshan Lal. Against the said order, the transferees preferred appeals, F. A. O. Nos. 67-D of 1966 and 102-D of 1966, to this court and obtained orders of stay in those appeals. According 'to the Liquidator, as a result of the examination of Shri Roshan Lal, several cases of criminal breach of trust were filed against him, and he was convicted in five of those cases and sentenced to varying terms of imprisonment and fine, while several others were still pending when he died.

(7) Although Shri Roshan Lal died, proceedings for misfeasance continued against his brother, Shri Kundan Lal. According to the Liquidator, Shri Roshan Lal and Kundan Lal resented the various steps taken by him and, thereforee, started making attempts to get him removed from the office of the Liquidator. The first attempt was -in 1954 when Shri Kundan Lal and his nephew Sudershan Kumar filed an application in the Court of the District Judge. Delhi, for the removel of the Liquidator. That application was dismissed by Shri S. B. Capoor, who was then the District Jduge, Delhi by his order, dated August 20, 1954. The second attempt was by an application filed by Shri Roshan Lal in 1958 before Shri H. R. Khanna, who was then the District Judge, Delhi, and the same was subsequently dismissed on June 3, 1960. Again, an application was filed by Shri Kundan Lal and his associate Shri Kanti Prashad, but the same was again dismissed by Shri H. R. Khanna on July 22. 1960. Another application was again filed by one Lakshman Uppal along with Shri Roshan Lal and Kundan Lal, but that also was dismissed on January 6, 1961. Again, an application was filed by one Maya Ram for the removal of the Liquidator, and that also was dismissed by Shri P. P. R. Sawhney, District Judge, Delhi, on January 31, 1963. Two more applications were then filed by Shri Kundan Lal and others, but both of them were dismissed on February 21, 1963, and May 9, 1963, respectively.

(8) Then, in 1966, Shri Kundan Lal addressed a complaint to the Chairman, Company Law Board, and sent copies thereof to the Registrar of Companies, the Superintendent of Police, C.I.D., and the District Magistrate, Delhi. Thereupon, on May 28, 1966, the Registrar of Companies filed an application in the Court of the District Judge, Delhi, under Sections 515(2) and 524(4) of the Companies Act, 1956, read with Sections 213(2) and 234(3) of the Indian Companies Act, 1913, praying for the removal of Dr. Hardit Singh Giani as Liquidator, and for the appointment of the Official Liquidator attached to the High Court as Liquidator in his place. The Liquidator was the sole respondent in the said application, and he filed a reply to the application. The said application was beared by Shri Jagjit Singh, the then District Judge, Delhi, who by his judgment, dated December 21. 1966, held, relying upon the decision of Malins V. C. in re Marseilles Extension Railway and Land Company, (1867) 4 Equity Cases 692(1). that it was not necessary to take any evidence with regard to the allegations of misappropriation and misconduct on the part of the Liquidator, as there were sufficient grounds for removing the Liquidator, and that the undisputed facts go to show that the continuance of Dr. Hardit Singh Giani as Liquidator was not desirable and in the interest of the creditors and the contributories of the company. The learned District Judge made it clear that the removal of the Liquidator did not imply that any allegation of misconduct, misappropriation or unfitness had been established against him, and that the same would be a matter for determination in other appropriate proceedings.

(9) Against that order, Dr. Hardit Singh Giani filed an appeal, F.A.O. No. 47 of 1966, in this Court. The said appeal was heard by Hardyal Hardy, J. (as his Lordship then was), who, by his judgment, dated November 6, 1967, held as follows :

'AFTER giving my anxious consideration to both these aspects and weighing carefully the points made for and against the appellant, I am of the view that the learned District Judge has not shown towards the appellant that amount of fair-play to which he was legitimately entitled. The appellant, in spite of severe handicaps, has been carrying on an extremely arduous job. He has had to face tremendous opposition, animosity and stubborn resistance at the hands of those whom he considered to be responsible for mismanaging the affairs of the company. It in the pursuit of his object of bringing the offenders to book and at the same time Realizing the assets of the company, he was compelled to embark on a career of litigation, the responsibility for that cannot be laid on his alone and may equally be apportioned to the circumstances under which he was working. In the discharge of his duties he may have made some mistakes : in fact, he did make some mistakes; but it cannot be held that he was actuated by malice or self-interest alone and had sacrificed the real, substantial and honest interest of liquidation. On the other hand, it is equally true to say that he has allowed the winding up proceedings to drag on for all these years without making any substantial progress. Neither the creditors nor the contributories have so far been paid anything. Whatever money has been realised has been spent by him on litigation, office, entertainment and conveyance. This cannot by any means be considered to be a wholly satisfactory state of affairs. He has certainly made some mistakes. It is also apparent that the accounts maintained by him are not up to the standard required of him, but in spite of this it is too much to say that he is either unfit or that the interest of Liquidation is likely to suffer if he is allowed to continue in office. At the same time, he cannot be allowed to go on in his own way and to convert the business of winding up into a life long occupation for himself.'

In, that view. the learned Judge allowed the appeal, set aside the order of the learned District Judge removing the Liquidator, associated Mr. V. S. Juneja, Official Liquidator of this Court as Additional liquidator with Dr. Hardit Singh Giani, and directed that the two of them between themselves should endeavor to conclude the winding up proceedings without any avoidable delay.

(10) It is against that judgment that the present Letters Patent Appeal No. 61 of 1968 has been filed by the Registrar of Companies, Delhi, without obtaining a certificate from the learned single Judge. The appeal came up originally before V, S. Deshpande and S. Rangarajan, JJ. The respondent Dr. Hardit Singh Giani, raised an objection that the Letters Patent appeal was not maintainable relying upon the decisions of the Division Bench of this court in Shri Ram and others v. M/s. Bulbhdass and others, in L. P. A. No. 369 of 1971 decided on March 16, 1972,(2) in which it was held that the appeal did not lie under Clause X of the Letters Patent Without a certificate from the learned single Judge who decided the appeal under Section 483 of the Companies Act against an order of the District Judge exercising jurisdiction under a notification issued under Section 10 of the Companies Act. In view of the importance of the question, the learned Judges, by their order, dated April 26, 1972, referred the said question to a larger Bench. The matter then came up before a Full Bench consisting of one of us (T.V.R. Tatachari, C. J.), V. S. Deshpande and Yogeshwar Dayal. JJ. and by its judgment dated March 14, 1975, the Full Bench held that the Letters Patent Appeal was maintainable without the reed of a certificate from the learned single Judge who passed the order appealed against, and directed the appeal to be placed again before the Division Bench for disposal on the merits according to law. That is how, the Letters Patent Appeal has come up before us now for final disposal on the merits.

(11) The question for consideration is as to whether the learned single Judge was justified in setting aside the order of the learned District Judge and allowing Dr. Hardit Singh Giani to continue as Liquidator in association with the then Official Liquidator of this Court.

(12) As stated earlier, the learned District Judge, relying on certain observations in the case in re Marseilles Extension Railway and Land Company (supra), observed that

'EVEN where no actual misconduct or misappropriation may be proved against a liquidator, the power to remove him can be exercised if on taking into consideration all the circumstances the court comes to the conclusion that, on the whole, it would be desirable and in the interest of the creditors and contributories of the company to remove him and the removal may help in speeding up the winding up proceedings,'

and that

'IF the majority creditors of the company are also against the continuation in office of the liquidator that would be in importance factor to be taken into consideration.'

In that view, the learned District Judge held that there were sufficient causes for removing the Liquidator and it was not necessary to take evidence regarding any alleged act of misconduct or personal unfitness of the Liquidator, and that the undisputed facts showed that the continuance of Dr. Hardit Singh Giani as Liquidator was not desirable and in the interest of the creditors and the contributories of the company. The learned District Judge added that he would like to make it clear that the removal of the Liquidator was not to imply that any allegation of misconduct, misappropriation or unfitness had been established against him, and that the same would be a matter for determination in other appropriate proceedings.

(13) Thus, misconduct, misappropriation or unfitness was not the ground for the removal of Dr. Hardit Singh Giani as Liquidator by the learned district Judge. The grounds for the said removal were stated by the learned District Judge in his order as under :

'IRRESPECTIVE of the merits of the allegations there can be no doubt regarding the following facts :

(A) Majority of the creditors of the company in a meeting held on March 30, 1963, made very serious allegations against the Liquidator which amounted to their having no faith in him ;

(B) The winding up proceedings have dragged on for over 12 years without the creditors or the contributories being paid anything;

(C) One of the alleged creditors of the company was appointed as his clerk by the Liquidator, which appointment was to say the least, inadvisable, and

(D) The assets so far realised have been spent on litigation office traveling and conveyance expenses. It seems to me that these are sufficient causes for removing the Liquidator.'

(14) In the appeal, Hardayal Tardy, J. pointed out in his judgment that the view expressed by Sir R. Malins V. C. in re Marseilles Extension Railway and Land Company (supra) that a court may remove a Liquidator If on taking all the circumstances into consideration it finds that it is, upon the whole, desirable that the Liquidator should be removed, was retiterated by the learned Vice-Chancellor in re British National Life Assurance Association, (1872) 14 Equity Cases 472(3), The learned Judge further pointed out that the said view of Malins V. C. was, however, challenged before the Court of Appeal in England in re Sir John Moore Gold Mining Company, (1974) 12 Ch. D. 325, where Sir George Jessel M. R. observed the words 'on due cause shown' in sectiton 141 of the Companies Act, 1862, are not the same as the words 'if the Court shall think fit', and that the former words, as a general rule, point to some unfitness of the person, either from persnoal character or from his connection with other parties or from circumstances in which he is mixed up some unfitness in a wide sense of the term. The learned single Judge referred to the decision in ex parte Shcard. in re Pooley (1880) 16 Ch. D 107(4), in which Jessel M. R. dealing with the question of removal of a trustee in bankruptsy, which office had been likened by Malins V. C. to the office of Liquidator in voluntary winding up, observed that it must be for good cause shown. Again in Adam Evton Limited, ex parte Charlesworth, (1887) 36 Ch. D. 299(5), Bowen L. J. observed that unfitness in the Liquidator is not the sole ground under the statute for which a Liquidator can be removed, that in order to define 'due cause shown' one should look wider a field and see what is the purpose for which the Liquidator has been appointed, and that due cause is to be measured by reference to the real, substantial, honest interests of the liquidation and to the purpose for which the Liquidator is appointed. This case was followed by Me. Nair. J. of the Calcutta High Court in re Pabna Dhanabhandar Co. Ltd., 1936 Comp Cas 424(6), when dealing with the removal of an Official Liquidator under Section 176 of the Indian Companies Act, 1913, and by a Division Bench of the High Court of Bombay in Kaikhushne Musservani Chandabhoy v. Tata Industrial Bank Ltd., Air 1924 Bom 339.

(15) Hardayal Hardy, J. then pointed out that in the present case, the winding up of the company admittedly commenced before the commencement of the Companies Act, 1956, that Section 647 of the said Act, as amended in 1960, provides that where the proceedings in a winding up are pending at the commencement of the Act, Sections 463, 502, 515 and 524 shall, as far as may be, also apply in relation to such proceedings, and that since the company had been ordered to be wound up subject to supervision of the Court, the provisions of Section 524 were attracted. The learned Judge observed that unlike Section 515 under which the Court can remove the Liquidator in voluntary winding up on cause being shown, Section 526 confers plenary power of appointment and removal of a Liquidator on the Court in the case of winding up subject to its supervision, and that although the extent of the Court's power is not delimited by the section it seemed to him to be implicit in the section that an order of 175 removal of a Liquidator can only be passed or at any rate should be passed only for good cause shown and not in an arbitrary manner and without justifiable reasons. The learned Judge pointed out that it is in the light of the above principles that the question relating to the removal of Dr. Hardit Singh Giani had to be approached. Neither of the learned counsel for the parties questioned before us the aforesaid legal position enunciated by the learned single Judge.

(16) Coming now to the grounds mentioned by the learned District Judge, the first of them was that a majority of the creditors of the Company, in a meeting held on March 30, 1963, made very serious allegations against the Liquidator which amounted to their having no faith in him. This ground was contested by the learned counsel for the Liquidator before the learned single Judge as being factually incorrect. According to the minutes of the proceedings of the meeting of the creditors held on March 30, 1963, under the chairmanship of the Official Liquidator, as recorded at pages 63 to 79 of the Official liquidator's Minutes Book, the meeting was attended by nine creditors of the company including the Liquidator, Dr. Hardit Singh Giani. An objection was raised at the meeting that three out of the nine, viz. Shri Amar Singh Bhalla, Shri Sher Singh Yadav and Dr. Hardit Singh Giani were not really creditors of the company, and their names were wrongly entered in the list of creditors. The objection was raised by one of the remaining six creditors, and was supported by the other five creditors. The Chairman ruled that the question as to whether a particular person was or was not a creditor could not be gone into by him as the list of creditors was final and binding so far as he was concerned, and the remedy of the objecting creditors was to take appropriate proceedings in a court of law.

(17) The accounts placed before the meeting were supported by four of the creditors including Dr. Hardit Singh Giani, and were opposed by four creditors out of the remaining five creditors who alleged that they had been fabricated and falsified in order to diminish . the assets of the company, and that large sums of money had been taken away by the Liquidator and misappropriated by him under the cloak of expenses. It is not clear what stand was taken by the fifth creditor (Shri Sahib Dayal Kapur). Further, it appears that according to the schedule of creditors, two out of the four creditors, who opposed the accounts, were creditors to the extent of Rs. 800 and Rs. 750 respectively, while three out of the four creditors (excluding Dr. Hardit Singh Giani) were creditors to the extent of Rs. 3,048/9.00 , Rs. 3,942/15/9 and Rs. 5,260 respectively. On those facts, it was contended before the learned single Judge on behalf of Dr. Hardit. Singh Giani that it was not correct to say that a majority of the creditors of the company made the allegations against the Liquidator which amounted 'to having no faith in him, and that it was only a few creditors whose claims were small in value that made allegations against the Liquidator and expressed a lack of faith in him. There appears to be some force in the said contention.

(18) The second and fourth grounds mentioned by the learned District Judge were that the winding up proceedings had dragged on for over 12 years by the date of his impugned order without the creditors and contributories being paid anything, and that the assets so far realised had been spent on litigation office, traveling and conveyance expenses. It was contended before the learned single Judge on behalf of Dr. Hardit Singh Giani that although it was true that the winding up proceedings had remained pending for over 12 years, it should be noted that the Liquidator had done everthything in his power to make recoveries and to bring the persons responsible for mismanagement of the affairs of the company to book, that he had also striven hard to take under his control the property of the company and had taken steps to sell at a profitable price whatever land he was able to secure, that he was, however, faced with stubborn opposition at the hands of Shri Roshan Lal and his brother, Shri Kundan Lal, that whatever suits and proceedings had been filed by the Liquidator were filed with the permission of the District Judge and were prompted by a desire to advance the interest of the company, and that the legal proceedings necessarily entailed expenses and a great deal of traveling and moving about. It was pointed out that during the period October 26, 1953 to October 31, 1965, the net realisation of assets by the Liquidator was Rs. l,52,433/09.00 as against disbursement of Rs. 1,64,888.31 including the sum of Rs. 1,00,000 received by the Liquidator from Shri Prem Prakash Bhutani and returned by him under the orders of the District Judge, Delhi, and that it was in those circumstances that nothing had been paid to the creditors or contributories of the company. It was submitted that if the learned District Judge was inclined to hold that any of those expenses were unjustified, he should have gone into the matter and allowed the Liquidator to lead evidence in support of the expenses i ncurred by him. The various facts narrated earlier in this judgment to lend support to. the aforesaid contentions and submissions.

(19) The third ground mentioned by the learned District Judge was that one of the alleged creditors of the company, Shri Sher Singh Yadav, was appointed by the Liquidator as his clerk, which appointment was, to say the least, underisable. As regards this ground, it was contended before the learned single Judge on behalf of the Liquidator that Shri Sher SinghYadav had been the Manager of the company from Aprill, 1948, to April 25, 1952, that he was, thereforee, aware of the misdeeds of ' the Managing Director and his confederates and had helped the Liqudator in their prosecution, that Shri Sher Singh Yadav was 'previously getting Rs. 100 per month as his salary, but after the. company went into liquidation his salary was reduced to Rs. 50 P.M. plus one per cent commission on realisation of assets, and that the total commission earned by Shri Sher Singh Yadav during his long-period of 12 years come to a modest some of Rs. 1,000 only. If the facts mentioned in the said contentions were correct, it would be difficult to say that the appointment of Shri Sher Singh Yadav as a clerk was, in itself and without anything more, undesirable.

(20) It was. urgent before 'the learned single Judge that the four ground's on which. the impugned order of the learned District Judge had been based were, to say the least, shaky, that the order removing the Liquidator did grave injastice to, him who had honestly and sincerely . devoted. 14 years of his life to the job of winding up of the company, that when the opposition of his enemies to his efforts to complete the proceedings was almost on its last legs, in-as-much as Shri Roshan Lal had died and his brother Kundan Lal had been involved in misfeasance proceedings, it was iniquitous to remove the Liquidator and thereby subject him to the stigma and ignominy of removal from. office, besides depriving him of the remuneration to which he would be justly entitled under the law.

(21) As against .the said contentions and submissions on behalf of the Liquidator,. the circumstances against him, as pointed out on behalf of the Registrar of Companies, were the fact that the winding ..up. proceedings, which, commenced about 14 years ago had not neared their end, and the .fact, that whatever amount had been realised, the whole of it had been expended by the Liquidator towards litigation and other .expenses and neither the creditors nor the contributories had been paid anything out of the amount realised.

(22) On a Considedration of all the above aspects, and taking an over-all view of the matter and balancing the consideration .of fair play to the Liquidator and the real,. substantial and honest interest of the liquidation whis the purpose, for which the Liquidator was appointed, the learned single Judge expressed the view which has already been set out earlier in this judgment. As observed by the learned ed single Judge, the Liquidator had to carry on an arduous job facing considerable opposition and animosity and stubborn resistance at the hands of those whom he considered to be responsible for mismanaging the affairs of the company. He had to pursue the object of bringing the offenders to book and at the same time Realizing the assets of the company. It was in the course of the said pursuit that he had to commence litigatiton. In the circumstances, we agree with the view taken by the learned single Judge that the responsibility cannot be laid on the liquidator alone and may equally be apportioned to the circumstances u nder which he was working. We also agree with the view of the learned single Judge that it is not as if the Liquidator was completely free from blame, in-as-much as the fact remained that there was no substantial progress in the winding up proceedings, the creditors and the contributories had not been paid anything and whatever money had been realised had been expended on litigation, etc. In view of the same, the learned single Judge rightly held that the Liquidator could not be allowed to go on in his own way, and that in the interest of the liquidation one other person should also be associated with the Liquidator, in our view, the appointment of Mr. V. S. Juneja, Official Liquidator, as Additional Liquidator, was just and proper in the circumstances of the case, as it safeguards the interest of liquidation sufficiently.

(23) Mr. Harish Chandra, learned counsel for the Registrar of Companies, the appellant herein, contended that the appeal, F.A.O. No. 47 of 1966, filed against the impugned order of the learned District Judge, was on par with an appeal contemplated by Section 107 of the Code of Civil Procedure, that it has been held in some decisions that the action of a Court which is invested with the exercise of discretionary power or authority is not ordinarily reviewable on appeal except to correct a clear and manifest abuse of Justice, that in the present case the learned District Judge had exercised his discretion and passed the order removing the Liquidator, and that the same ought not to have been set aside by the learned single Judge. As stated earlier, even under Section 524 of the Companies Act, 1956, it is implicit in it that an order of remove of a Liquidator can only be passed or, at any rate, should be passed only for good cause shown and not in an arbitrary manner and without Justifiable reasons. The District Judge has no doubt to exercise his discretion, but the said discretion has to be exercised in a .Judicial manner. The decisions referred to by the learned counsel do not lay down anything to the contrary.

(24) In Bipin Lal Muthiala v. Commissioner of Income Tax, , Bhandari C. J. and Chopra J. observed in paragraph 10 of the judgment that

'THE action of a Court which is invested with the exercise of discretionary power or authority is not ordinarily reviewable on appeal except to correct a clear and manifest abuse of justice. The expression 'abuse of discretion'. . .. is merely a legal term which implies that the reasons given by the Court for its action are clearly untenable and unreasonable, that its action clearly amounts to denial of justice or is against conscience, reason and evidence. Discretion is abused when the judicial action is arbitrary, fanciful or imreasonable.'

(25) In Serajuddin and Co. v. Michael Golodetz and others : AIR1960Cal47 , P. N. Mookherjee and U. C. Law JJ. observed in paragraph 22 as under :

'WHERE the discretion has been exercised on a consideration of all relevant materials and circumstances and in accordance with sound judicial principles and no injustice has been done or is likely to result from the trial court's order, no question of interference arises even if the appellate court does not agree with the trial court's actual exercise of discretion or conclusion on the point and might have decided differently if the original discretion has lain with it. In other words, in such circumstances, the appellate court would not have been entitled to substitute for the trial court's exercise of discretion in the matter of its own exercise of the same. Where, however, the trial court has not considered all the relevant materials or has proceeded on assumptions not borne out or justified by the records or has applied wrong legal principles, leading to an unjust order, it is not only the right and in the powers of the appellate court, but clearly also its duty to interfere with the same and set matters right by undoing the mischief and injustice occasioned by the trial court's order. Otherwise, there will be no point in providing for an appeal in matters of discretion and such a provision would be wholly nugatory and its whole purpose would be frustrated. It is, undoubtedly, true that this power of interference should not be exercised lightly, or except for preventing gross mischief or miscarriage of justice, but, subject to that, the appellate court's power in this behalf is wide, ample and unrestricted and may and always should be exercised to relieve the aggrieved party.'

(26) In Wazir Sundar Singh v. Musammat Farida Khanam and others Air 1920 PC 132(10), the Privy Council held on the facts of the case before them that

'UPON the whole, while it is difficult to form a confident judgment as to the side on which the truth lies in this case, their Lordships feel themselves constrained to say that the learned counsel for the appellant have not satisfied them that the judgment of the Chief Court was wrong, and accordingly that they are unable to dissent from the finding of that Court.'

(27) In the present case, as pointed out earlier, the grounds given by the learned District Judge for removing the Liquidator were shaky, and the order removing the Liquidator was iniquitous and did injustice to him. The learned single Judge was. thereforee, quite within, his power to interfere with the order of the learned District Judge In the appeal. F.A.O. No. 47 of 1966, filed under Section 483 of the Companies Act, and he had given good reasons for his interference.

(28) Mr. Harish Chandra next pointed out that even after the order of the learned single Judge, not a single pie has been paid to the creditors or the contributories up to this date.

(29) Mr. Gian Singh Vohra, learned counsel for Dr. Hardit Singh Giani submitted in reply that the Liquidator had been unable to do anything during the pendency of the Letters Patent Appeal on account of various orders passed by courts. The learned counsel pointed out that after the admission of the Letters Patent Appeal, the appellant filed an application., C.M. No. 790 of 1971, praying for an injunction restraining the Liquidator from disposing of the lands in Ghaziabad and Meerut, and this Court issued an ex parte order on July 1, 1971 and the same was vacated by a Division Bench on July 22, 1971. It is stated that there was an order of stay passed by one of us (M.R.A, Ansari, J.) in F.A.O. Nos. 67-D of 1966 and 102-D of 1966, preferred by certain alleged transferees of some of the lands from Roshan Lal against orders of lower courts in favor of the Liquidator regarding the said lands, and the said F.A.Os. were allowed and the stay was vacted on January 28, 1972. Again, it is stated that in F.A.O. No. 85 of 1970, Prakash Narain, J. granted stay of the transfer of the entire land of Ghaziabad in favor of one Prem Prakash Bhutani, and the same was vacated subsequently on November 12, 1973. Thereafter, the Liquidator is stated to have made an arrangement for the sale of some lands in favor of two persons, Shri Jaspal and Shri Durga Dass, but an order was passed by the District Judge on April 23, 1974. in the liquidation proceedings directing the said lands not to be sold in favor of the aforesaid persons. Again, on November 8, 1974, in an application, C.M. 1715 of 1974, filed by the appellant in this Court, for an injunction restraining the Liquidator from alienating the company's assets and lands pending the disposal of the Letters Patent Appeal, and the Liquidator had to give an undertaking that he will not transfer, alienate or otherwise dispose of any of the assets of the company till further orders of this Court. The said undertaking continued to be in force, and on January 21. 1975. a Division Bench of this Court passed an order in the said C.M. rostra ning the Liquidator from making any alienation of any property of the company without the prior permission of the District Judge who would consider the matter only after notice to the Registrar of Companies. Mr. Vohra submitted that on account of the various orders mentioned above, the Liquidator has been findinig it difficult to arrange any transaction of sale as no one has been coming forward to purchase the lands. The facts stated by Mr. Vohra explain why the assets of the company could not be realised and why no payment was made to the creditors or the contributories.

(30) For the foregoing reasons, we are of the opinion that there is no valid ground for interfering with the order made by the learned single Judge.

(31) We are informed by Mr. Harish Chandra that after the appointment of the then Official Liquidator, Mr. V.S. Juneja. as Additional Liquidator, he had been transferred and his successor, Mr. S.C. Mittal, in his capacity as Official Liquidator, filed an application C.M. No. 1828 of 1974. on November 6, 1974. for a direction to the Liquidator to act jointly with the applicant in conformity with the wording of the order of Hardayal Hardy, J. and that the said application was disposed of by B.C. Misra, J. on April 22, 1975, observing that since the relief claimed in the C.M. can appropriately be granted by the Bench hearing the appeal, i.e. L.P.A. 61 of 1968, it was not necessary to pass any orders on the C.M. Mr. Gian Singh Vohra, learned counsel for the Liquidator, stated before us that the liquidator does not raise any objection to the appointment of the Official Liquidator, Mr. S.C. Mittal, as Additional Liquidator, in the place of Mr. V.S. Juneja. He also stated that he does not press the cross-objections, C.M. (M) 2 of 1969, filed by Dr. Hardit Singh Giani against the order of Hardayal Hardy, J. We had already passed an order on August 25, 1975, dismissing the said cross-objections as not pressed. We appoint the present Official Liquidator, Mr. S.C. Mittal, as Additional Liquidator in the place of Mr. V. S. Juneja, and direct the Liquidator and the Additional Liquidator to endeavor to complete the winding up proceedings without any avoidable delay.

(32) Subject to the above appointment and direction, the Letters of Patent Appeal No. 61 of 1968 is dismissed. In the circumstances of the case, we direct the parties to bear their own costs in this Letters Patent Appeal.


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