GST Course
CA Final Online Classes
CA Classes

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Section 457 of Companies Act, 1956

LinkedIn


Court :
High Court

Brief :
Section 457 of the Companies Act, 1956 - Winding up - Powers of liquidator - Applicant-company had rented plant and machinery to ‘O’ in connection with a project - On completion of project, applicant demanded plant and machinery but ‘O’ went into liquidator and official liquidation had taken charge of entire properties of ‘O’ - Applicant filed an application seeking a direction to official liquidator to return its plant and machinery - Court allowed that application but it was found plant and machinery in question was taken away by ‘C’ bank, dismantled and sold as scrap to third parties - Applicant filed instant application seeking a direction to official liquidator to pay certain sum as compensation for wrongful and illegal removal of plant and machinery belonging to it - Application was opposed by official liquidator contending that complicated question of facts were raised by and between parties which should be decided by competent Court and that since applicant as well as ‘C’ bank were claiming to be owners, only after ownership of goods was determined an application could be made to quantify loss of concerned party - Whether since there was a dispute regarding ownership of goods, appropriate course would be to relegate applicant to take recourse to appropriate proceedings against all parties including those who had purchased dismantled goods as scrip from site - Held, yes - Whether, therefore, instant application was to be dismissed - Held, yes

Citation :
Al Quireshi Pipe Coating Terminal vs Mineral Sales Pvt. Ltd.( Company Applicaion No. 827 of 2006 & Company Petition No. 970 of 1997)

FACTS The applicant-company had rented to ‘O’ company, plant and machinery in connection with a project. On completion of that project the applicant demanded return of plant & machinery along with rentals. But it came to know that ‘O’ went into liquidation and the official liquidator had taken charge of entire properties of the ‘O’ including the plant and machinery belonging to the applicant. The applicant filed a company application seeking a direction to the official liquidator to return to the applicant its plant and machinery. The court allowed the application of the applicant and directed the official liquidator to return the plant and machinery claimed by the applicant. However, it was found that the plant and machinery claimed by the applicant was taken away by ‘C’ bank. The official liquidator filed his report and sought direction from the Court. That report came to be disposed of by the Court on 21-6-2004 in which the Court held that as there was dispute regarding ownership of the goods, and more so, it was not possible in instant summary proceedings to quantify the value of the lost goods or the goods removed from the site as also the goods which were left behind and rendered damaged or useless, the appropriate course, was to relegate applicant to take recourse to appropriate proceedings against ‘C’ bank or any other person who in turn, had purchased the dismantled goods as scrip from the site. The applicant field instant application seeking a direction to the official liquidator to pay certain sum as compensation for the wrongful and illegal removal of the plant and machinery belonging to the applicant from custody of the official liquidator. The official liquidator opposed the application contending that application as taken out by the applicant was misconceived and devoid of merits and not in compliance with the order dated 21-6-2004 and, therefore, was liable to be rejected and that complicated question of facts were raised by and between parties which should be decided by the civil court. The sum and substance of the objection of the O.L. was that the applicant as well as ‘C’ bank were claiming to be the owners of the missing items and since there was a dispute regarding ownership of goods which were allegedly missing, evidence would have to be led for arriving at the conclusion as to who was the owner of the goods and only after ownership of the goods was determined, an application would be made to quantify the loss of the concerned party. HELD The controversy was regarding the removal of the goods and the nature of the remedy that was to be pursued by the applicant was squarely raised before the Court. In the order dated 21-6-2004 the Judge had referred to an order dated 27-1-2003 passed in the civil suit instituted by ‘C’ Bank. Thereafter, there was a reference to order dated 10-4-2003. There was a specific finding in the order of 10-4-2003 in the said suit as to whether liquidator could claim the leased equipment. It was observed that the equipment leased to the ‘C’ bank was not and was never asset of the company in liquidation. It was pertinent to note that there was no bifurcation of the materials/movables in the orders. Considering all this, the Judge referred to the developments at site, the availability of the goods till 03-7-2003 and their movement from that day till 09-8-2003. In paragraph 11A the Judge referd to the report of security guards and whether the third parties were involved in the acts complained of by the instant applicant. A perusal of the entire order and more particularly para 12 left in no manner of doubt that the Judge had observed that both sides had claimed ownership with regard to some of the items which were then missing from the site. There was a dispute regarding ownership of the goods, the proceedings before the Judge were summary in nature and, therefore, the appropriate course would be to relegate the instant applicant to take recourse to appropriate proceedings against all parties including those who had purchased the dismantled goods as scrap from the site. The parties had to establish the ownership of the goods by adducing evidence with regard to actual loss caused to them if also a clear finding. [Para 40] Then, it was not open for the applicant to urge that instant application was maintainable on the premise that there was no dispute with regard to the title/ownership of the goods. They could not then say that the title and ownership was proved and only quantification of loss and damage remained. Once they had to lead evidence to establish ownership and title so also the loss and damage sustained by them, then, obviously the instant application was not the proceedings contemplated in the above order. Further, the applicant would have to explain as to what steps it took to claim 30 percent of the machinery at the site. It was stating on oath that 70 percent of the movables were removed by the ‘C’ bank Court receiver and third parties. The officer liquidator urged that the applicant did not take steps form February, 2003 till November, 2003. Further, it was alleged that the applicant was aware of the proceedings initiated by ‘C’ Bank and the order dated 10-4-2003 passed thereon. Thus, the applicant had notice of the fact that official liquidator had been directed to return the leased equipment of the bank. Reliance was placed by official liquidator on the letter dated 27-6-2003. All that material was placed before the Court when it passed an order dated 21-6-2004. Hence, the applicant would have to establish its case as set up in the affidavit-in-support by complete evidence. There was no question of the applicant being allowed to circumvent the order by piecemeal or part adjudication. If evidence had to be led by bringing in all parties and proving the case against each of them, then, obviously civil suit was the remedy. Even the instant application was summary remedy. Therefore, and when the applicant had itself impleaded all parties, then, the Court could not by-pass the competent Civil Court. More so, when some of the parties were not within the territorial jurisdiction of the Court. Hence, without entering into any larger controversy and considering the above observations and peculiar facts of the instant case, it could safely be concluded that the instant application was not maintainable. [Para 41]
 

CA Pawan Goswami
on 20 January 2009
Published in Corporate Law
Views : 5890
Report Abuse

LinkedIn







Trending Tags