TMI Blog1961 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court informing him of Mr. Chaudhuri's contentions. The Assistant Registrar has complied with my directions but, I am told, there is no response from the Registrar of the Supreme Court. I would at the outset express my deep gratitude to Mr. Gouri Nath Mitter and his learned junior, Mr. Panja, for the assistance they have given me to determine the questions involved. The facts are that every official liquidator, upon his appointment as such, files statements of accounts every six months during the continuance of his acting as such liquidator. Upon the filing of each of these statements, the Registrar of this court issues a notice to the official liquidator to call on him to enable him to nominate an auditor from the panel of auditors maintained by this court, to fix his remuneration and to make over the statement to the auditor concerned. The liquidator instead of attending personally writes to the Registrar suggesting the remuneration of the auditor. The Registrar thereafter appoints the auditor, fixes his remuneration upon reference to the relevant accounts and rules of this court and issues a letter of appointment to the auditor and a copy thereof is sent to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to secured creditors not being debenture holders... per cent. 2. Where the audit is by the Examiner of Local Funds Accounts, audit fees calculated on the above scale shall be paid into the public account of India in the Reserve Bank of India to the credit of the State Government concerned." In the above matters, the official liquidator has suggested remuneration of the auditor upon calculation not in accordance with rule 304. By letter dated May 4, 1960, this court informed the official liquidator that the remuneration suggested by him was not in accordance with the rule. The official liquidator by his reply dated June 18/20, 1960, states that in calculating the audit fees in accordance with rule 304, it is observed that in some cases, the audit fees so calculated become much higher than what were allowed previously and that this anomaly has, therefore, been referred to the Department of Company Law Administration, New Delhi, for instructions and that upon hearing from this department, the exact amount of remuneration to be paid to the auditors concerned would be intimated. The official liquidator submits further that rule 304 has no application till the secured credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 304 should be read as "amounts payable by the official liquidator to the secured creditors". Learned counsel submits that in liquidation proceedings a secured creditor can do one of three things, ( i ) he can either rely on his security and ignore the liquidation proceedings, or ( ii ) he can value his security and prove for the balance or ( iii ) he can surrender his security and prove for his whole debt. If the secured creditor chooses the first course, he stands outside the liquidation proceedings. The secured properties are not held by the liquidator and rule 304 or any other rule relating to liquidation would not apply to these properties at all. Where, however, the secured creditor chooses the second or the third course the rule is applicable to him. In this context the provision in rule 304 that the audit fees would be calculated after deducting, inter alia , "the amounts paid by the official liquidator to secured creditors" means the amounts actually paid and not to be paid or payable. The factum of payment is the criterion for deduction. It is true that rule 304 prescribes that auditors are entitled to percent, on disbursements, "other than payments to secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 338. There is considerable force in these contentions of learned counsel for the Central Government and the official liquidator and they certainly deserve serious consideration; but having regard to his main argument that rules 301 to 304 of the Companies (Courts) Rules, 1959, are ultra vires the Companies Act, 1956, it is unnecessary for me to go into these questions. Incidentally, Mr. Chaudhuri has also urged that rule 304 is inequitable. He has placed before me a chart of accounts already audited. I find from this chart, for instance, that the accounts of the Fire and General Insurance Co. of India Ltd., (in liquidation) for the period May 28, 1957, to November 27, 1957, have been audited. The total realisation and disbursement of this company is Rs. 4,43,000. The audit fee calculated at the old rate comes to Rs. 20 only. But if it has to be worked out in accordance with the method laid down in rule 304, the auditor is entitled to receive Rs. 221. In this case there has been no realisation out of the assets of the secured creditors. Similarly in the case of Barasat Bashirhat Light Railway Co. Ltd., (in liquidation) the period of the accounts is from 28th May, 1958, to 27t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he holding and conducting of meetings to ascertain the wishes of creditors and contributories; ( b ) the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets; ( c ) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator ; ( d ) the making of calls; and ( e ) the fixing of a time within which debts and claims shall be proved; to be exercised or performed by the official liquidator or any other liquidator as an officer of the court, and subject to the control of the court: Provided that the liquidator shall not, without the special leave of the court rectify the register of members or make any call " In the context of rules 301 to 304 set out earlier in this judgment, the portions of section 643 which I have underlined above appear to be relevant. In other words, the Supreme Court ( a ) shall make rules providing for all matters relating to the winding up of companies which, by the Companies Act, 1956, are to be prescribed and (b) may make rules providing for ail such matters as may be prescribed. The Supreme Court may also make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed has been left to the court having jurisdiction under the Act. The Supreme Court has no power to prescribe rules relating to the manner in which the court shall cause the liquidator's account to be audited. There is no doubt that rules 301 to 304 deal with the manner of auditing and the Supreme Court has in this respect pone beyond the powers conferred on it by section 643 of the Companies Act. Although under section 462(3) it is the court having jurisdiction which shall cause the liquidator's account to be audited in such manner as it thinks fit, rule 301 lays down that as soon as the accounts are filed, the Registrar shall forward to the auditor a copy thereof for purposes of audit with a requisition in Form No. 147 requesting that the accounts may be audited and a certificate of audit issued to the court not later than two months from the date of receipt of the copy of the account. First of all the scheme of section 462 is that the liquidator presents his account to the court and it is filed when it has been audited. It may be that in rule 301 by the word "filed" is meant "presented" to the court by the liquidator. Secondly, if the court is to cause the account to be audited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof, and shall forward another copy to the official liquidator. The Registrar shall file the original certificate with the records and forward the copy to the Registrar of Companies together with a copy, of the account to which it relates. Here again the framers of the rule have used the word "filed" and not "presented" as required by section 462(1). It is to be observed further that the requirements of sub-section (4) of section 462 and those of rule 303 are not the same. It is well known with regard to the effect of an enabling Act that if the legislature enables something to be done, it gives power at the same time, by necessary implication, to do everything which is indispensable for the purpose of carrying out the purpose in. view: Crates on Statute Law, fifth edition, page 239. The legislature in the instant case enables the court to cause the liquidator's account to be audited in such, manner as it thinks fit. It gives power to the court by necessary implication to do everything which is indispensable for the purpose of carrying out the object of the legislature. These implied powers of the court have been taken away by rules 301, , 302 and 303. And if these rules have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contradict express provisions in the Act from which they derive their authority. If the Act is plain, the rules must be interpreted so as to reconcile with it or, if it cannot be reconciled, the rule must give way to the plain terms of the Act." Rules made by the judiciary under statutory authority are subject to judicial examination in the same way and to the same extent as those made by the executive or administrative departments of State: Crates on Statute Law, fifth edition, page 293. To my mind rules 301 to 304 contradict express provisions in the Companies Act, 1956, and, as such, they are of no effect. Before I conclude I intend to compare the relevant provisions in the English Companies Act, 1948, and the rules made thereunder. Section 249 of the English Act is as follows: "(1) Every liquidator of a company which is being wound up by the court in England shall, at such times as may be prescribed but not less than twice in each year during his tenure of office, send to the Board of Trade, or as they direct, an account of his receipts and payments as liquidator. (2) The account shall be in a prescribed form, shall be made in duplicate, and shall be verified by a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is accounts to the Board of Trade, although the six months may not have expired. (3)The accounts sent in by the Liquidator shall be verified by him by affidavit. 176. (1) Where the Liquidator carries on the business of the Company, he shall keep a distinct account of the trading, and shall incorporate in the Cash Book the total weekly amounts of the receipts and payments on such trading account. (2) The trading account shall from time to time and not less than once in every month, be verified by affidavit, and the Liquidator shall thereupon submit such account to the Committee of Inspection (if any), or such member thereof as may be appointed by the Committee for that purpose, who shall examine and certify the same. 177. When the duplicate copy, bearing a like certificate, shall be filed with the Registrar, and that copy, together with a copy of the said account delivered to the court for filing in accordance with section 249 of the Act, shall be open to the inspection of any person on payment of the same fee as is payable with respect to the inspection of the file of proceedings under rule 19. 178. ( i ) The Liquidator shall prepare a summary of such accounts and shall, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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