Provisions applicable to every mode of winding up ‑ Default committed by liquidator under the section ‑ Process as to how payment of dues from delinquent liquidator can be enforced - Companies Law - No. 23 of 1972,

Circular : No. 23 of 1972, dated 20 ‑ 7 ‑ 1972. Subject:- Provisions applicable to every mode of winding up ‑ Default committed by liquidator under the section ‑ Process as to how payment of dues from delinquent liquidator can be enforced The process as to how the payment of the dues from a delinquent liquidator of a company in liquidation can be enforced has been considered. It has been held that any moneys due from a liquidator in terms of provisions in sub‑sections (1) and (2) and also as interest and penalty in terms of sub‑section (9) of section 555 are to be treated as assets of the company concerned in liquidation. If the said moneys are not paid by the liquidator into the Companies Liquidation Account as required in terms of sub‑sections (1) and (2) of section 555, he may be prosecuted under section 629A for the defaults. This prosecution may, however, sometime result in imposition of some penalty only by the court and the recovery of the original dues from the liquidator may not still be achieved. In the above context, the following alternative process has been considered more effective. The Registrar of Companies concerned should initiate action for default under section 555(3) read with section 556(1) and pray to the court for an order on the liquidator to file the statement under section 555(3) rendering account of the moneys with him. The Registrars are continued to be officers appointed by the Central Government in this behalf in terms of the provisions of section 555(3) on the basis of the Notification No. 24(49) Tr. (CL)38(ii), dated 5‑4‑1941 which is continuing to be in force on the strength of provisions in section 645. In order to comply with the order issued by the court under section 556(1) referred to above, the liquidator will be required to make payment of all the moneys due from him into the Companies Liquidation Account so as to submit the statement to the Registrar in Form No. 159 prescribed in Companies (Court) Rules, 1959. This will indirectly result in the recovery of the moneys due from the liquidator. It is also to be noted that there is no scope for any appeal to the court against the decision of the Registrar levying penalties under section 555(9). This should be considered sufficiently frightening to the liquidator, if explained properly. It may be mentioned here that the provisions in section 555(9) are not new in the 1956 Act. Similar provisions were there in the 1913 Act in section 214B(7). The rate of interest was 20 per cent in the 1913 Act but the Registrar had no power therein to levy any additional penalty. In the 1956 Act the rate of interest has been reduced to 12 per cent but an unrestricted power has been given to the Registrar to levy additional penalty which is not justiciable. This is sufficiently deterrent and should be suitably explained to the delinquent liquidator when necessary.