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Introduction
In Ajanta Lucky Scheme case Company Petition No. 25 of 1982 was filed by the petitioner under Section 440 and 515 of the Companies Act, 1956 for the right to present winding up petition where company is being wound up voluntarily and power of the court to remove the liquidator in voluntary winding up. Further, Company Petition No. 94 of 1991 was filed and the court asked the respondent No. 3 to hand over the assets to the petitioner. In this case, the official liquidator alleged that the respondent No. 1 and 2 be tried and convicted under 538 of Companies Act, 1956 and that the possession of assets and relevant documents should be delivered to official liquidator if they are in possession. Once the resolution for voluntary winding up is passed the liquidator collects the assets to distribute among creditors and contributors. A resolution for voluntary winding up operates as notice of discharge of the employees of the company and cessation of powers of the director.
Facts of the Case
In the present case, M/s Ajanta Lucky Scheme and Investment Private Limited filed the case through its official liquidator who is the petitioner and the two directors Dharam Bir Bhalla and Arvind Bhalla are respondent No. 1 and 2 respectively whereas Mr. Sushil Kumar is the respondent No. 3. The petitioner company was decided to voluntarily wind up through a special resolution passed on 27th September, 1980 and was to be brought under the creditors. Mr. Sushil Kumar was appointed as the voluntary liquidator. The official liquidator filed a company petition under Section 440 and Section 515 of Companies Act, 1956 in the year 1982 for the removal of the voluntary liquidator and for the official winding up of the company. The company liquidator through a separate petition demanded to hand over the assets and records of the company with the statement of affairs under Section 454 and Section 511-A of the Companies Act, 1956 to him. Respondent No. 1 and 2 have stated that they are not in possession of the assets and records of the company with the statement of affairs and they have already handed over that to the voluntary liquidator who is the respondent No. 3. Dharam Bir Bhalla also mentioned that he had receipt of transfer of assets and statement of affairs evidencing that he had handed over the books to Mr. Sushil Kumar. The official liquidator wrote a letter to respondent No. 1, 2 and 3 to hand over the possession of assets and statement of affairs to the official liquidator on 23rd October, 1993. Respondent No. 1 in reply wrote him back a letter dated 21st November, 1994 that he had already transferred all the assets and relevant documents to the voluntary liquidator and enclosed the receipt along with it. During all this while, the voluntary liquidator and respondent No. 3 was missing, therefore, official liquidator wrote a letter to Superintendent of Police, Jalandhar City, to ascertain the whereabouts of Sushil Kumar. The present company petition was filed by the official liquidator that Dharam Bir Bhalla and Arvind Bhalla should be tried and convicted under section 538 of Companies Act, 1956. Further, a company application was filed by the official liquidator under section 477 of Companies Act, 1956 that respondent No. 1 and 2 may be summoned, examined and directed to give full particulars of the official liquidator.
Issues
- Whether Dharam Bir Bhalla and Arvind Bhalla are liable under Section 538 of the Companies Act, 1956?
- Whether respondent No. 1 and 2 are in possession of the assets and statement of affairs of the company?
- Whether respondent No. 1 and 2 are aware about the whereabouts of the voluntary liquidator or respondent No. 3?
- Whether voluntary liquidator should be removed or not and voluntary winding up can be done if it is in interest of the creditors?
Arguments from both the sides
Petitioner
- The learned counsel for the petitioner in Ajanta Lucky Scheme case contended that respondent No. 1 and 2 are in possession of the assets and all other relevant documents of the company.
- The counsel further contended if they are not aware of the possession of assets they are surely aware of the whereabouts of the respondent No. 3, Mr. Sushil Kumar.
- The counsel prayed to the court for the removal of the voluntary liquidator and to hand over the winding-up process in his hands.
Respondent
- The learned counsel for the respondent No. 1 and 2 contended that they have handed over the possession of assets and statement of affairs of the company to the voluntary liquidator who is the respondent No. 3 for the voluntary winding up of the company and in return he has received a receipt dated 27th September, 1980.
Summary of the Judgement
The court in the company petition No. 25 of 1982 ordered for the removal of the voluntary liquidator and passed formal order for winding up of M/s Ajanta Lucky Scheme and Investment Private Limited. The voluntary liquidator was additionally directed to hand over the possession of the assets and statement of affairs to the official liquidator. The company petition 94 of 1991 was disposed of in which respondent No. 1 and 2 affirmed that they are not in possession of the assets and statement of affairs of the company and they have been already delivered by them to voluntary liquidator Sushil Kumar, who is not present. The court in Ajanta Lucky Scheme case further opined that respondent No. 1 and 2 had made statements in their oath that the assets and books have been delivered by them to the voluntary liquidator. Dharam Bir Bhalla presented before the court, the receipt received from the voluntary liquidator for transferring the possession of assets and relevant documents. The court in the present petition reached the conclusion that respondent No. 1 and 2 are not in the possession of the assets and statement of affairs and it was already delivered by them to Mr. Sushil Kumar at the time when the special resolution was passed. The court also opined that respondent No. 1 and 2 are duly summoned and examined and they are not aware of the whereabouts of the respondent No. 3, Mr. Sushil Kumar. The court reached a conclusion that respondent No. 1 and 2 are not liable under Section 538 of Companies Act, 1956 whereas it is the duty of the voluntary liquidator to hand over all the assets and statements of affairs of the company to the official liquidator. The petitioner despite his several efforts is not able to trace the whereabouts of a voluntary liquidator for the past 16 years. Therefore, the company application filed by Dharam Bir Bhalla stands allowed and the company application by official liquidator has been dismissed.
Analysis
The honorable court in Ajanta Lucky Scheme case was justified in delivering its judgment; the process of voluntary winding up through special resolution involves the collection of all the assets and relevant documents of the company for the distribution among the creditors of the company. It is the duty of the directors to hand over the possession of assets and financial statements to the liquidator and in this case, the directors fulfilled their obligation by transferring it to the voluntary liquidator however it was voluntary liquidator whose whereabouts are known neither to the directors nor to the official liquidator of the company. Moreover, once the voluntary liquidator had been appointed the directors cease to function and the liquidator acts as an agent on their behalf and takes all the necessary and relevant decisions. The decision given by the Punjab and Haryana High Court is in uniformity with several other precedents laid down. The honorable court adequately justified its decision by mentioning all relevant sections and by citing all applicable provisions. All the issues raised by the petitioners are appropriately settled by the court with appropriate reasoning. Dharam Bir Bhalla and Arvind Bhalla acted in good faith and on time while delivering the assets to the voluntary liquidator through a receipt therefore, the court did justification by not making them liable under Section 538 of Companies Act, 1956.
In this case, the directors found that they were not in possession of the records required by the official liquidator and the case was filed but the court in the earlier petition arrived at a conclusion that the assets and records have already been transferred to the voluntary liquidator by the directors but now the voluntary liquidator is not traceable for more than 16 years. Finally, the court held that in the absence of sufficient material to establish the accused’s guilt, the proceedings against the directors must be dropped.
