TMI Blog1992 (3) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... restraining respondents Nos. 5, 6 and 8 to 11 therein from exercising their voting rights in V. R. Textiles Limited to the extent of 7,000 equity shares issued to them on September 21, 1991, by V. R. Textiles Limited. Company Application No. 2261 of 1991, was filed by them to declare that the alleged meeting of the board of V. R. Textiles Limited dated September 21, 1991, is not a meeting of the board of V. R. Textiles Limited held in accordance with the provisions of the Companies Act, 1956, and consequently declare all the resolutions passed in that meeting including the allotment of 7,000 equity shares to respondents Nos. 5, 6 and 8 to 11 as null and void. To appreciate the facts leading to the filing of the said applications, we may take notice of the following facts: Company Petition No. 30 of 1981, was filed for winding up of Ramakrishna Industrials Private Limited. In Company Application No. 843 of 1991, the learned company judge appointed the official liquidator as the provisional liquidator of Rama-krishna Industrials Private Limited. The shareholding pattern of Rama-krishna Industrials Private Limited indicates that it is a company belonging to the family members of Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Avanashi Spinning Mills (P.) Limited. 7.Madras Aluminium Limited. Radhakrishna Mills Limited and Oceanic Delicacies Limited have been ordered to be wound up by order of this court dated July 3, 1987, in C'.P. No. 17 of 1984, and February 20, 1984, in C.P. No. 44 of 1983, respectively, and the official liquidator has become the liquidator of these companies. The official liquidator has been appointed as the provisional liquidator of Jayalakshmi Mills Private Limited by order dated August 23, 1991, in Company Application No. 138 of 1988, in Company Petition No. 14 of 1988. In the case of Ramakrishna Industrials Private Limited, the winding-up petition was presented by Shri P.R. Ramakrishnan and others for reason of some disputes between himself and his brother, R. Venkataswamy Naidu. This company petition is still pending, but the official liquidator has been appointed as provisional liquidator, and thus this company is in his hands. V. R. Textiles Limited (one of the appellants before us), as on March 31, 1990, had the issuance of such subscribed capital of Rs. 7,69,000 divided into 7,690 equity shares of Rs. 100 each. Out of the issued and paid-up capital of 7,690 equity shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ramakrishna Industrials Private Limited has been holding shares equivalent to 30.89% of the share capital of V.R. Textiles Limited, which has been the largest shareholder of V.R. Textiles Limited, which owns and runs the business of a textile spinning mills with a capacity of 18,750 spindles with a requisite infrastructure of land, building, plant, machinery and other installations. The value of the assets of V.R. Textiles Limited is more than Rs. 5 crores. The shareholding in favour of V. Radhakrishnan and his group of directors was only 925, and as against the above, the shareholdings of the two life directors and other members of the family excluding the shares held by the first respondent-company and the family trust was 2,554 equity shares. According to them, V. Radhakrishnan and his group of directors, respondents Nos. 4, 5 and 8 to 11 abused their position to falsify the records of V. R. Textiles Limited as well as the register of members to show the following transactions as having taken place: ( a )A meeting of the board of directors of V. R. Textiles Limited is alleged to have been taken place on September 21, 1991. This meeting has been attended by the directors wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the company under liquidation (Ramakrishna Industrials Private Limited) and that of the majority shareholders. Before we take into account the relevant provisions of the law and the contentions of the parties and refer to some further facts as and when relevant, we may here state that the disputed meeting on September 21, 1991, of the board of directors of V. R. Textiles Limited (one of the appellants), transacted the business of issuing 7,000 equity shares and allotting the same to the existing shareholders who held before September 21, 1991, only minority shares. The chart prepared at the Bar, and not in dispute, showing the paid-up capital divided into equity shares of Rs. 100 each before September 21, 1991, and after September 21,. 1991, in the hands of different shareholders depicts as follows: V. R. Textiles Ltd. NALLUR, PUNJAI PULLAMPATTI-638 459, SATHY TALUK, ERODE DISTRICT Shareholding pattern before and after the impugned allotment of shares on September 21, 1991 Before 21-9-1991 After 21-9-1991 (Paid-up capital Rs. 7,69,000 divided (Including the shares allotted on 21-9-91) into 7,600 equity shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Mr. S. R. K. Prasad 941 12.23 941 6.40 5.83 (-) (director) 14. Mr. Nalini S. Prasad 10 0.13 10 0.06 0.07(-) 15. Mr. R.Venkataswamy 1,649 21.44 1,649 11.22 10.22 (-) Naidu, managingtrus- tee, V. Rangaswamy Naidu Educational Trust Total of 7 to 15 4,193 54.51 4,193 28.50 26.01(-) 16. Ramakrishna Indust- trials Pvt. Ltd. (Com- pany under Provisio- nal Liquidator in C.P. No. 30 of 1981, High Court, Madras) 2,376 30.89 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y being a deemed public company, as per the provisions of section 81(1)( a ) and ( b ) of the Companies Act, 1956, V. R. Textiles should have offered 7,000 equity shares if at all it was necessary, in proportion to the holding of the existing shareholders and letters of rights should have been issued specifying the number of shares offered and granted not less than 15 days for acceptance of the offer. According to the petitioners-respondents, however, none of the existing shareholders received any such letter of rights from V. R. Textiles Limited. No such letter of rights was issued to the official liquidator. (This fact is not in dispute). The petitioners-respondents approached the official liquidator and informed him about the information which they had gathered after inspection of the minutes book of the board's proceedings and the register of members after the extraordinary general body meeting held on October 19, 1991, and requested him to take immediate action in the matter to safeguard the interest of Ramakrishna Industrials Limited (company under liquidation). The official liquidator, however, on October 23, 1991, informed them that it was not possible for him to initiate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h rule 9 of the Companies (Court) Rules, 1959, have no relevance to the applications and as such the applications are liable to be dismissed. Even assuming that the applications are maintainable, yet the applicants are not entitled to maintain these applications independently without the sanction or leave of this court for filing these applications. ( c )The bankers of the seventh respondent have issued a letter negativing the claim made by V. R. Textiles Ltd., for financial assistance on the ground that sufficient funds belonging to the directors or the shareholders are not available in the company and only the money advanced by the bank is available and as such the request for consideration of their application was not favoured. Funds were urgently needed to increase the equity ratio under these circumstances, the meeting of the board of directors was called after due notice to the other directors on September 21, 1991. Since the situation was grave, an urgent decision has been taken by the board to issue 7 lakhs rights shares and to allot the same to those who offered to take them on that day. As the applicant and his group did not even care to attend the board meeting, the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration receipt Nos. 2158 and 2211. Receipt No. 2158, dated September 16, 1991, was received on September 19, 1991, and receipt No. 2211, dated September 17, 1991, was received on September 18, 1991. In both the letters, the minutes of the proceedings dated September 11, 1991, was sent. He, however, pointed out that it is on the record, according to the case of the contesting respondents-appellants that the notices were issued on September 13, 1991, for the board meeting dated September 21, 1991, but in his case, obviously, no notice was issued, and the receipt No. 2158, dated September 19, 1991, related only to the postal acknowledgment dated September 17, 1991. The case, it appears, was contested tooth and nail before the learned company judge, who noted various arguments and facts to record his finding that the allotment of shares being illegal, if the same is given effect to, Ramakrishna Industrials Limited would be deprived of half of the value of assets in V.R. Textiles and the value of its 30.89% shareholding, which is about one crore of rupees by reason of the fresh issue of the capital has come down to Rs. 75 lakhs. This finding may not be accurate, but is almost a rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded with, against the company, except by leave of the court and subject to such terms as the court may impose. (2) The court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction, to entertain, or dispose of ( a )any suit or proceeding by or against the company.; ( b )any claim made by or against the company (including claims by or against any of its branches in India); ( c )any application made under section 391 by or in respect of the company; ( d )any question of priorities or any other question whatso ever, whether of law or fact, which may relate to or arise in course of the winding-up of the company; whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding-up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960, (3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding-up of the company is proceeding may, notwithstanding anything conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the sanction of the court, ( a )to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company; ( b )to carry on the business of the company so far as may be necessary for the beneficial winding-up of the company; ( c )to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels; ( d )to raise on the security of the assets of the company any money requisite; ( e )to do all such other things as may be necessary for winding- up the affairs of the company and distributing its assets. (2) The liquidator in a winding-up by the court shall have power ( i )to do all acts to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the company's sale; ( ia )to inspect the records and returns of the company on the file of the Registrar without payment of any fee; ( ii )to prove, rank and claim in the insolvency of any contributory, for any balance against his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as the case may be, may, by resolution, direct, or when ever requested in writing to do so by not less than one-tenth in value of the creditors or contributories, as the case may be. (4) The liquidator may apply to the court in the manner prescribed, if any, for directions in relation to any particular matter arising in the winding-up. (5) Subject to the provisions of this Act, the liquidator shall use his own discretion in the administration of the assets of the company and in the distribution thereof among the creditors. (6) Any person aggrieved by any act or decision of the liquidator may apply to the court; and the court may confirm, reverse or modify the act or decision complained of, and make such further order as it thinks just in the circumstances". Learned counsel for the appellants has launched his attack on the impugned order by placing reliance upon a judgment of the Court of Appeal in Singer and Co. ( Hat Manufacturers ) Ltd., In re [1945] 13 Comp Cas 175 (CA), in which it has been held that the winding-up court has no jurisdiction to settle disputes between parties who, are, for the purpose of the dispute, outside the winding-up. He has contended that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e attached shares were sold and the claimant withdrew the sale proceeds. The company under liquidation was ordered to be wound up. The official liquidator, having become aware of the proceedings leading to the decree, took a summons for declaration that the sale of 186 shares was void as the sale was held after the commencement of the winding up proceedings. The court held that the sale of the property of the company in liquidation took place after the commencement of the winding-up proceedings, and this attracted section 537 of the Companies Act, 1956, which rendered the sale of the shares void. Since the plaintiff had taken benefit under a void transaction, it was obligatory on him to return it and the one entitled to reclaim it was the official liquidator of the company under liquidation. Speaking particularly as to the role sections 457(1) and 446(2) of the Companies Act, 1956, played in this matter, the learned judge delivering the judgment, said (at page 141): "Section 446 which I have set out in extenso provides that the court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to enterta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence in the performance of duty. Therefore, while performing this duty if he comes across any sale of property of the company which would be void under any of the provisions of the Companies Act or any other law for the time being in force and which would not be binding on him as liquidator of the company, it would be equally his duty to take action to collect that asset. If this is the duty cast on the liquidator, simultaneously power was conferred upon him under section 457(1) to institute or defend any legal proceedings. If he has power to institute or defend legal proceedings and if in the performance of his duty he comes across a transaction which is void against him, the transaction becoming void because of the winding-up proceedings, it would be a question of fact arising in the course of winding up of the company and this court will have jurisdiction to decide that question. This appears to me to be the scope and ambit of jurisdiction conferred upon the High Court under section 446(2). It is necessary to put a liberal construction on section 446(2) so as to widen the jurisdiction of the High Court in dealing with all questions arising in-winding up. Under the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -up proceedings, it is not necessary that specific provision should be made that an application for certain relief could be made to the court. It would be implicit in the provisions casting duty on the liquidator along with the provisions by which jurisdiction is conferred on the High Court that proceedings of a certain nature in a winding up can be taken up before the High Court and that exactly has been done in this case". The above view, we find, is more in consonance with the principles underlying the grant of special jurisdiction to the company judge and power to the liquidator to move the company judge in matters like the one which has got a good deal of similarity with the facts in the instant case. The only difference is that the shares of the company in liquidation in another company had already been sold in the case cited above, whereas in the instant case, it was sought to be devalued or brought down in value. A learned single judge of the Bombay High Court in Commercial Art Engravers P. Ltd. v. Indian and Eastern Newspapers Society [1978] 48 Comp Cas 36 has, however, dealt with the scope of section 457(3), with which provision we shall deal with particularly, la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is relevant for our purpose is that section 45B was wide and, therefore, the Supreme Court observed that even with regard to the recovery of property, movable or immovable, summary proceedings by way of applications could be resorted to by the liquidator. Even there, the learned judges have definitely stated that the procedure must be taken to be one left to the judgment and discretion of the court having regard to the nature of the claim and the questions therein involved". If we have to understand that the Bench pronounced that if it is. a claim with respect to shares in a company, although it is a property, a suit alone is the recourse, we are afraid it will be in the teeth of the judgment of the Supreme Court. Before we refer to the decision in Dhirendra Chandra Pal v. Associated Bank of Tripura Ltd. [1955] 25 Comp Cas 19 (SC), we may refer to a judgment of the Supreme Court in Sudarsan Chits ( I. ) Ltd. v. G. Sukumaran Pillai, AIR 1984 SC 1579; [1985] 58 Comp Cas 633 , wherein the provisions of section 446(2) of the Companies Act (1 of 1956), have been taken into consideration. The creditors of Sudarsan Chits (India) Ltd. moved three petitions under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision as well as its present setting. Section 171 of the Indian Companies Act, 1913, the predecessor of section 446(1) did not contain any provision similar or identical to that of section 446(2). Section 171 only provided for stay of suits and proceedings pending at the commencement of the winding up proceedings, and embargo against the commencement of any suit or other legal proceedings against the company except by the leave of the court. This provision with a little modification is re-enacted in section 446(1). There was no specific provision conferring jurisdiction on the court winding up the company analogous to the one conferred by section 446(2). Sub-section (2) was introduced to enlarge the jurisdiction of the court winding up the company so as to facilitate the disposal of winding up proceedings. The provision so enacted probably did not meet with the requirement with the result that the Committee appointed for examining comprehensive amendment to the Companies Act in its report recommended that 'a suit by or against a company in winding up should notwithstanding any provision in law for the time being be instituted in the court in which the winding up proceedings are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re thereunder prescribed could be availed of when the winding up order has been made or where the official liquidator is appointed as the provisional liquidator. Section 446(1) envisages two situations in which the court will have jurisdiction to make the order thereunder contemplated. These two situations are: where a winding up order has been made or where the official liquidator has been appointed as provisional liquidator. The first of the two situations envisages an order for winding up of the company having been made and which is subsisting. The second situation is where without making a winding up order, the court has appointed official liquidator to be the provisional liquidator. Section 450(1) of the Companies Act confers power on the company court to appoint the official liquidator to be provisional liquidator at any time after the presentation of the winding up petition and before making of the winding up order. The court before which a winding up petition is presented has power to appoint the official liquidator as provisional liquidator for of the Company even before making the winding up order. If ultimately winding up order is made, the official liquidator acts as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a ) to ( d ) of sub-section (2) of section 446. The apprehension of the High Court that if such jurisdiction is conferred on the court at a stage anterior to the winding up order being made but subsequent to the appointment of the official liquidator as provisional liquidator an anomalous situation would arise has left us unimpressed, If the winding up petition fails the proceedings pending in the court may have to be transferred to the court which can entertain the proceeding. But if the petition praying for winding up the company ends in a winding up order the proceedings initiated under sub-section (2) will have to be proceeded with till they are finally disposed of because the winding up order will relate back to the date of the presentation of the winding up petition. In this view of the matter, no anomalous situation can ever arise". The other question decided by the court was whether on the facts of that case, when the Appellate Bench froze the winding-up order by keeping the matter in abeyance, the winding-up proceedings were pending? The court answered the said question saying that it was a case in which it should be construed that the winding up proceeding was pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings against the official liquidators of the company. The Industrial Tribunal had also said that the compensation awarded to the workmen would be recoverable only out of the assets in their hands according to law. So far as the auction-purchaser was concerned, the award had proceeded to make further directions in these terms (at page 1189): "The auction-purchaser, it has already been noted, purchased the different sections of the business with the name 'The Great Indian Motor Works' free from encumbrances and all outgoings and liabilities (vide exhibits D and E), and the said purchase was confirmed on July 5, 1954. After the sale was confirmed and before possession was taken by the auction-purchaser, the liquidators terminated the employment of all the employees (save and except the accountant and one clerk) by a notice dated July 23,1954, with effect from July 24,1954. After such termination of employment, the auction-purchaser obtained possession on July 24, 1954. At that time no relationship of employer and employees subsisted. In the circumstances the dispute with the auction-purchaser cannot be considered to be an 'industrial dispute' as no relationship of employer and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al right of appeal. As, in the instant case, the court refused the necessary sanction to the liquidators to prefer the appeal, no appeal could have been filed on behalf of the company. Hence, in so far as the appeal purported to be on behalf of the company, through the managing director aforesaid, it was wholly incompetent. But the appeal was not only by the company as such, but also by the said K.D. Nundy as the creditor or contributory or auction-purchaser of the company. So far as this part of the appeal is concerned, it is clear that only a, party to the reference aggrieved by the award could be a party to the appeal. K.D. Nundy was not a party in his capacity as creditor of as contributory. He was impleaded, as already indicated, as a party to the reference in his capacity as the auction-purchaser of the business of the company. So far as that capacity is concerned, it is clear from the order of the Tribunal that no award was made against him as such. He could not, therefore, be said to be a party aggrieved by the award, having been exonerated from its terms". The distinction is obvious. It was a case wherein the award was passed against the liquidators. K.D. Nundy, as a cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies Act for ejectment of the appellant and obtained an ex parte decree against him. When the appellant applied for setting aside the ex parte decree, his application was dismissed. He, thereafter, filed a suit in the original side of the High Court, asking for a declaration that the ex parte decree against him was made without jurisdiction and was a nullity, and that he continued to be a tenant notwithstanding the said ex parte decree. In this judgment, the Supreme Court also said (at page 23): "It is to be remembered that section 45B is not confined to claims for recovery of money or recovery of property, movable or immovable, but comprehends all sorts of claims which relate to or arise in the course of winding up. Obviously, the normal proceeding that the section contemplated must be taken to be a summary proceeding by way of application". Having thus noticed the law, we may state how we understand the role that section 446 of the Companies Act plays in a case where a winding-up order is already made or pending proceedings to wind up the company the official liquidator is appointed provisional liquidator. Section 446(1) is a bar to any suit or other legal proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is winding up the company, competent to entertain any suit of proceeding by or against the company. Clause ( b ) says, "any claim made by or against the company"; This clause extends the jurisdiction of the court which is winding up the company to "claims" of any kind made by or against the company and includes in it claims made by or against any of the branches of Such company in India. The word "claim" in this clause must receive a wider meaning and must not be confined to matters for which a proceeding by or against the company or a suit by or against a company is ordinarily permissible. If a restricted meaning to the word "claim" is given and it is sought to be read to be confined to such claims only for which a suit or proceedings can ordinarily be instituted, clause ( b ) may not serve its purpose. Clause ( c ), with which we are not concerned, relates to applications under section 391 of the Companies Act by or in respect of the company. Cause ( d ) is a further illustration or enlargement of the jurisdiction, as what may not be found in clauses ( a ) and ( b ) may still be found in clause ( d ), for the words in this clause are "any question of priorities or any other quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring fact, and that is, the learned company judge has found that Ramakrishna Industrials Ltd., the company under liquidation, has got 2376 shares in V. R. Textiles. No one can say that its shares are not a property belonging to the company which is sought to be wound up and in which a provisional liquidator has been appointed. As provided under section 456, these shares are in the custody or under the control of the official liquidator (provisional liquidator). The official liquidator has got power to institute or defend any suit, prosecution, or other legal proceedings, civil or criminal, in the name and on behalf of the company, and to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets. In exercise of the power under section 457(1), it is conceded, and it seems there is no other view possible, that the liquidator can move the court where the winding up proceeding has been pending for necessary orders to avoid any loss of property of the company, Ramakrishna Industrials. It seems 2,376 shares of Ramakrishna Industrials in V. R. Textiles are neither decreased nor increased. But by allotting 7,000 shares without any off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be applicable to a deemed public company. Relying upon a judgment of the Supreme Court in the case of Needle Industries ( India ) Ltd. v. Needle Industries Newey ( India ) Holding Ltd. [1981] 51 Comp Cas 743 , the learned company judge has said: "Their Lordships of the Supreme Court, after referring to the rival contentions of counsel appearing for the parties in that case, had concluded that while section 81(1)( a ) and (1)( b ) would be applicable to deemed public companies .....In the instant case, admittedly we are not concerned with the applicability of either section 81(1)( c ) or 81(1A), but we are concerned only with the applicability of section 81(1)( a ) and ( b ). It is clear from the report of the provisional liquidator that no offer, as contemplated in sections 81(1)( a ) was made to him. In fact, this is not disputed. But it was contended that such an offer was only an empty formality, since in any case the provisional liquidator would have no funds to exercise the option. This is an argument of desperation intended only to cover a patent illegality committed by the contesting respondents. The Act clearly contemplates that when it is proposed to increa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribute and to make available money to V. R. Textiles, so that the paid-up capital value of the shares of Ramakrishna Industrials Private Limited was/is not diminished. The learned company judge has called the argument that an Offer to the official liquidator would have been an empty formality as an argument of desperation intended only to c6ver a patent illegality. Since illegality is admitted, and the property of Ramakrishna Industrials Private Limited has been adversely affected by an illegal act, it is indeed an argument of desperation. No one could assume that notice to a shareholder would be an empty formality. The liquidator alone knew about the properties and assets of Ramakrishna Industrials. He is empowered under section 457(1)( d ) to raise on the security of the assets of the company any money requisite. He would have taken recourse to this power and sought sanction of the court for purchasing further shares offered to Ramakrishna Industrials Private Limited. The directors, who held a meeting, could not decide what the liquidator had to decide to exercise his power, and the court had to consider, while deciding, whether to sanction raising of any money on the security o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of section 457, however, is worded differently. It reads: "The exercise by the liquidator in a winding-up by the court of the powers conferred by this section shall be subject to the control of the court; and any creditor or contributory may apply to the court with respect to the exercise or proposed exercise of any of the powers conferred by this section". We have already noticed that the Supreme Court has found that on a petition by a contributory in the court in which a winding-up proceeding has been pending, a direction to the liquidator to exercise his power under section 457(1) of the Act could be given. The first part of sub-section (3) of section 457, "The exercise by the liquidator in a winding-up by the court of the powers conferred by this section shall be subject to the control of the court," is more or less a reaffirmation of the rule that the assets of a company in liquidation, although in the hands of the liquidator, are in effect under the control of the court, and read together with the requirement of sanction to institute or defend any suit, prosecution or other legal proceeding as provided under section 457(1), it is clear that the liquidator shall alway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of his not exercising or partial exercise of power, the creditor or contributory may be a person aggrieved, as this will be a matter relating to the administration of the assets of the company. However, section 457(1) has got another limitation. The liquidator can act only with the sanction of the court to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name and on behalf of the company. Even if the action that the liquidator is required to take would be in the court which is required to give sanction, the liquidator cannot without such sanction institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company. He thus cannot, without the sanction of the court, even though it may be necessary, for the administration of the assets of the company, to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, be compelled by the creditors or contributories to act. A creditor or contributory, none the less, may apply to the court and seek sanction. The court, on an application by a creditor or contributory, may exercise power and direct the liqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings to the assets of Ramakrishna Industrials Private Limited in the shape of 2,376 shares in V. R. Textiles and the validity of the meeting dated September 21, 1991, otherwise. It is the invalidity of the meeting dated September 21, 1991, and the procedure adopted to hold the said meeting and decision taken at that meeting to allot the shares without following the procedure prescribed by law and thus adversely affecting the interests of Ramakrishna Industrials, which is the subject matter of the action in court. The interests of Ramakrishna Industrials Private Limited thus cannot be protected without nullifying the meeting dated September 21, 1991. It will be a reiteration of the law that has been stated by the Supreme Court as noticed by us earlier and a repetition because, as we have said earlier, even a third party action can be impugned on behalf of the company under liquidation or in respect of the interests of the company under liquidation as also with respect to any question of priorities or any other question whatsoever, whether of law or fact, which may relate or arise in the course of the winding-up of the company. It cannot be argued that the question as to the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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