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V. Rajaraman, Liquidator, Globe United Engineering and Foundry Co. Ltd. Vs. Registrar of Companies - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCompany Appeal No. 8 of 1972
Judge
Reported in[1974]44CompCas330(Delhi); ILR1973Delhi870b
ActsCompanies Act, 1956 - Sections 490(2), 524, 525, 526(2) and 527; Companies (Court) Rules, 1959 - Rule 291
AppellantV. Rajaraman, Liquidator, Globe United Engineering and Foundry Co. Ltd.
RespondentRegistrar of Companies
Appellant Advocate N.S.K. Rao, Adv
Respondent Advocate A.B. Saharya, ; K.K. Soni, and ; S. Sampat, Advs.
DispositionAppeal dismissed
Excerpt:
company - remuneration of liquidator - section 490 of companies act, 1956 - whether remuneration of liquidator fixed at time of appointment in voluntary winding up be increased under any circumstances after winding up had been brought under supervision of court - winding up remains voluntary winding up inspire of being under supervision by court - under section 490 (2) remuneration once fixed by company cannot be increased in any circumstances with or without sanction of court. - .....of voluntary liquidators to office of liquidators.--where an order has been made for winding up a company subject to supervision, and an order is afterwards made for winding up by the court, the court may, by the last-mentioned or any subsequent order, appoint any person or persons who are then liquidators, either provisionally or permanently, to be liquidator or liquidators in the winding up by the court in addition to, and subject to the control of, the official liquidator.' 6. section 524, thus, gives to the court power when making an order of supervision to appoint or remove any additional liquidator or liquidators, or to fill up any vacancy of liquidator, which may be caused by removal, death or resignation. section 525 provides that the liquidator so appointed by the court under.....
Judgment:

Khanna, J.

1. The only question which this company appeal has raised is : Can the remuneration of a liquidator fixed at the time of his appointment in a voluntary winding-up be increased under any circumstances, after the said voluntary winding-up has been brought under the supervision of the court

2. The company (Globe United Engineering & Foundry Co. Ltd.), on December 28, 1968, passed a special resolution for its winding up voluntarily. Shri V. Rajaraman, the appellant before us, was appointed the liquidator and his remuneration was fixed at Rs. 3,000 only. Therewas a challenge to this resolution from another company, Messrs. Globe Motors Ltd., through a petition, No. C. P. 8 of 1909. As a result of a compromise the learned company judge ordered voluntary winding-up to continue, subject to the supervision of the court. The appellant-liquidator, because of an alleged increase in his work, applied for a revision of his remuneration, so as to bring it at par with that of the official liquidator. The Registrar of Companies opposed the prayer on the basis of Section 490 of the Companies Act, 1956, herein called ' the Act '. The learned judge accepted the objection of the Registrar and dismissed the application.

3. Mr. N. S. K. Rao, the learned counsel appearing before us on behalf of the appellant, has relied on certain passages from Palmer's Company Law, but has admitted that the same are based on the interpretation of the English Companies Act, which does not have any provision analogous to Sub-section (2) of Section 490 of the Act. Section 490 of the Companies Act, 1956, reads as follows :

' 490. Power of company to appoint and fix remuneration of liquidators. --(1) The company in general meeting shall-

(a) appoint one or more liquidators for the purpose of winding-up the affairs and distributing the assets of the company, and

(b) fix the remuneration, if any, to be paid to the liquidator or liquidators.

(2) Any remuneration so fixed shall not be increased in any circumstances whatever, whether with or without the sanction of the court.

(3) Before the remuneration of the liquidator or liquidators is fixed as aforesaid, the liquidator or any of the liquidators, as the case may be, shall not take charge of his office.'

4. The English authorities and the commentary based thereon, according to which an increase in the remuneration of a liquidator is permitted, can be of no assistance to us for the purpose of interpreting Sub-section (2) of Section 490, which specifically prohibits such an increase.

5. Mr. Rao submitted that on liquidation being brought under the supervision of the court, it ceased to be a voluntary winding-up and came out of the scope of Section 490. But this submission is without any basis. Provisions for winding up subject to supervision of the court are contained in Chapter IV of Part 7 of the Companies Act (Sections 522 to 527). Section 522 of the Act, which gives power to the court to order winding-up subject to its supervision, comes into play only after the company has passed a resolution for voluntary winding up. Under this provision, the court does not terminate the voluntary winding up, nor does it substitute any other form of winding-up in place of voluntary winding up. The section, on the other hand, requires the court to make an order ' that the voluntary winding up shall continue, but subject to such supervision of thecourt, and with such liberty for creditors, contributories or others to apply to the court, and generally on such terms and conditions, as the court thinks just '. Voluntary winding up, thereforee, is kept intact. As such, it does not free itself from the limits of Section 490, which, according to Section 489, is applicable to a voluntary winding-up. The powers of the court during the course of its supervision have been mentioned in Sections 524 and 526(2). The position of the liquidator who may be appointed by the court under Section 524 is given in Section 525. The only other section, which may be noticed in this connection is Section 527. All these sections, i.e., Sections 524, 525, 526(2) and 527 are reproduced hereunder :

'524. Power of court to appoint or remove liquidators.--(1) Where an order is made for a winding-up subject to supervision, the court may, by that or any subsequent order, appoint an additional liquidator or liquidators.

(2) The court may remove any liquidator so appointed or any liquidator continued under the supervision order, and fill any vacancy occasioned by the removal, or by death or resignation.

(3) The court may appoint the official liquidator as a liquidator under Sub-section (1) or to fill any vacancy occasioned under Sub-section (2).

(4) The court may also appoint or remove a liquidator on an application made by the Registrar in this behalf.525. Powers and obligations of liquidator appointed by court.--A liquidator appointed by the court under Section 524 shall have the same powers, be subject to the same obligations, and in all respects stand in the same position, as if he had been duly appointed in accordance with the provisions of this Act with respect to the appointment of liquidators in a voluntary winding up.

526. (2) Except as provided in Sub-section (1), any order made by the court for a winding-up subject to the supervision of the court, shall for all purposes, including the staying of suits and other proceedings, be deemed to be an order of the court for winding up the company by the court, and shall confer full authority on the court to make calls or to enforce calls made by the liquidators, and to exercise all other powers which it might have exercised if an order had been made for winding up the company altogether by the court.

527. Appointment in certain cases of voluntary liquidators to office of liquidators.--Where an order has been made for winding up a company subject to supervision, and an order is afterwards made for winding up by the court, the court may, by the last-mentioned or any subsequent order, appoint any person or persons who are then liquidators, either provisionally or permanently, to be liquidator or liquidators in the winding up by the court in addition to, and subject to the control of, the official liquidator.'

6. Section 524, thus, gives to the court power when making an order of supervision to appoint or remove any additional liquidator or liquidators, or to fill up any vacancy of liquidator, which may be caused by removal, death or resignation. Section 525 provides that the liquidator so appointed by the court under Section 524 will be subject to the same obligations and in all respects stand in the same position, as if he had been duly appointed in accordance with the provisions relating to liquidator in a voluntary winding up. The position of the voluntary liquidator is thus not improved under these provisions. Section 527 deals with a case when the court itself ultimately makes an order for winding up. Even then, the court may appoint the person, who has already been appointed as a liquidator, to be the liquidator in the winding up by the court in addition and subject to the control of the official liquidator. This section also does not give any power to the court to increase the remuneration of the liquidator. None of these sections, thereforee, assist the appellant.

7. Mr. Rao contended that Section 526(2) makes the winding up subject to the court's supervision, as if it was a compulsory winding up by the order of the court. The court, according to him, can exercise all other powers which it might exercise in the case of a compulsory order. But this contention, too, leads Mr. Rao nowhere. Compulsory winding up is dealt with in Chapter II of Part 7 of the Act, which is comprised of Section 433 to Section 483. On a winding-up order being made, the official liquidator, by virtue of his office, becomes the liquidator under Section 449. None of the sections gives any power to the court to fix or vary his remuneration, which are fixed by Rule 291 of the Companies (Court) Rules. The court, thereforee, cannot increase the liquidator's remuneration under any section dealing with compulsory winding up, nor can it do so when winding up is under its supervision.

8. It is, thus, clear that winding up, even when brought under the supervision of the court, remains voluntary winding up. The only provision dealing with the remuneration of the liquidator is Section 490 ; and there is no escape from the rigour of its Sub-section (2), which in mandatory terms provides that the remuneration once fixed by the company cannot be increased 'in any circumstances whatever, whether with or without the sanction of the court'. The court may, in a suitable case, reduce the remuneration, but under no circumstances can there be an increase. Sub-section (3) of Section 490 further makes it clear that the liquidator is not to take charge of his office, unless his remuneration has been fixed. This enables the liquidator to weigh the pros and cons of his proposed appointment. If he does not consider the remuneration fixed to be adequate, he is free not to accept the office. But, once he accepts it, the deal is closed and under no circumstances can the remuneration be increased.

9. Mr. Rao contended that it was a very hard case, especially as the liquidator has been working since 1969. The total assets of the company to be realised amount to Rs. 27 lakhs. The liquidator has already filed three suits on the original side of this court for the recovery of a sum of more than Rs. 10 lakhs. The liquidation proceedings are likely to continue for a considerable time. It was, thereforee, a fit case, said Mr. Rao, for the grant of an increase in the remuneration. But, as has already been observed, there is a complete and absolute bar against an increase in the liquidator's remuneration, even in a genuine case. It may be a case of casus omissus, but the court is not privileged to add to or to vary the language of an enactment. We agree with the learned company judge in giving an answer in the negative to the question first above mentioned.

10. The appeal, accordingly, has no merit and is dismissed, but withoutany order as to costs.


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