TMI Blog2013 (1) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... l Liquidator appointed a special arguing counsel whose name was not on panel of advocates without taking prior permission of Company Court, said action of Official Liquidator could not be subsequently ratified by Company Court - Official Liquidator Report Nos. 39 of 2006 & 294 of 2011 - - - Dated:- 19-7-2012 - Smt. Abhilasha Kumari, J. JUDGMENT 1. The Official Liquidator has filed the present Report dated 27-12-2011, making the following prayers: "(a) This Hon'ble Court may be pleased to ratify the action taken by the Official Liquidator in entrusting the briefs to Shri Roshan Desai, Advocate as Special Arguing Counsel in the cases mentioned in para 22 above on such fees as may be agreed to and approved by the Hon'ble Court; (b) Such other and further orders and directions as this Hon'ble Court may deem fit and proper in the matter, may also be passed." 2. It is stated in the Report that the Official Liquidator is presently having 462 Companies (in liquidation). By order dated 03-05-2006 passed in Official Liquidator's Report No.39 of 2006, the Court granted permission to engage certain advocates who have been on the Panel of the Office of the Official Liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Official Liquidator that over and above the matters that are already entrusted to the concerned advocate, he also appears as Special Arguing Counsel. In paragraph 16 of the Report, it is stated that in the case of Mardia Steel Ltd. (In Liquidation), the case of the Official Liquidator was not presented properly, which resulted in certain consequences. It is further stated that a petition was filed which was also entrusted to an advocate but was not handled properly and in these circumstances, the Official Liquidator entrusted the brief to the concerned advocate. It is further stated in paragraph 19 that the advocate appointed by the Official Liquidator at Mumbai also did not handle the case properly, therefore, concerned advocate had to be entrusted with the brief to protect the interest of the Official Liquidator. In paragraph 21 of the Report, the number of briefs entrusted to the concerned advocate have been enumerated as below: (a) Mardia Steel Ltd. (b) Mardia Chemicals Ltd. (c) Alps BPO Services Ltd. (d) Amruta Mills Ltd. (e) Mahendra Mills Ltd., (f) Revival Scheme in respect of Prasad Mills Ltd., Vania Silk Mills, Aryodaya Spinning Weaving Mills Co. Ltd. e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices and before determining the terms of engaging such advocate/s. 5. Even in present report, the details of the terms on which advocate/s is/are engaged in different matters, whose names are not on the sanctioned panel, have not been mentioned. 6. Likewise, the reason as to why such decision was taken and implemented by the OL without prior sanction from the Court in all such cases is also not mentioned with required clarity and details. 7. The OL has also not stated as to whether there are any other cases (i.e. other than those which are mentioned in para-21) in which any other advocate/s and if there are any, then, why details are not mentioned who are not on the sanctioned panel has/have been engaged or not. 8. As mentioned above, the terms and conditions on which the services of the advocate/s whose names are not on the sanctioned panel are also not mentioned in present report and the details of past/concluded cases wherein the advocate/s except from the sanctioned panel was/were engaged and fees have been paid, are also not mentioned. 9. Without mentioning such relevant details, the OL expects the Court to ratify the action and has requested that his action of eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced hereinbelow: "2. It may be stated that as per the scheme sanctioned by the Hon'ble Court vide order dated 25th August, 2009 passed in Official Liquidator's Report No. 93 of 2009, a reference is made for appointment of "Special Arguing Counsel". The said clause is reproduced in the report for reference of the Hon'ble Court. 3. The reading and interpretation of the Official Liquidator to the said clause is that in highly contested matters, wherein complicated question of Law are involved and such other like matters, other than the company law/ Liquidation matter at the discretion of the Court, the Official Liquidator may engage Senior/Senior designated advocate. Approval and permission of the Hon'ble Court is not required for entrustment of matters to Special Arguing Counsel since as per the scheme, the Official Liquidator is authorised without permission of the Hon'ble Court. 4. It is submitted that in view of these understanding and reading of the clause by the Official Liquidator, the matters are entrusted to "Special Arguing Counsel". It is submitted that on oral observation made by the Hon'ble Court, the Official Liquidator feels that understanding and reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been raised. 6. Until now the Official Liquidator has not cared to even seek ratification, what to say about convenient failure in taking prior approval in not one but various cases while appointing advocate/s on behalf of the office of the Official Liquidator. 7. Therefore, as a last chance time until 24/02/2012 is granted to the Official Liquidator to place on record satisfactory justification in respect of each of the cases where any advocate, (whose name is not contained and/or at the relevant time i.e. when the appointment was made was not contained in the panel approved by the Court), was appointed or has been appointed without prior approval/sanction of the Court. 8. The Official Liquidator shall also place on record all details of each of the cases in which appointment/s have been made without court's sanction/approval and explain satisfactorily the reason why prior sanction/approval of the Court was not taken and why until now any steps to inform such intentional default-rather defiance were not taken and even the action of getting such decision ratified was also not taken. 9. In the first instance the Official Liquidator shall satisfactorily explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout obtaining permission of the Hon'ble Court. 13. Paragraph 2 of the Report reads thus: "2. It is in view of the aforesaid, the Official Liquidator has not obtained permission as envished (sic) under Rule 307 of Companies (Court) Rules, 1959. In view of the objection raised by Shri Rasiklal S. Mardia in Company Application No.90 of 2010 issue has arisen about obtaining permission under the aforesaid rules. It is submitted that in the belief that interpretation of the Special Arguing Clause may not be correct then permission is required. It is in this circumstances, the Official Liquidator submits that if the Hon'ble Court do not accept the interpretation of the Official Liquidator in that event permission under Rule 307 of the Companies (Court) Rules, 1959 will be necessary." (emphasis supplied) 14. In paragraph 3, the Official Liquidator has stated that he is of the opinion that the Official Liquidator is authorised to entrust any brief to a Senior Advocate. It is stated in paragraph 5 that the concerned advocate, who was briefed in O.J. Appeal No.8 of 2009 in the case of Mardia Steel Ltd., successfully opposed the Scheme as per the instructions of the Official Liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning as to why, without waiting for the sanction and approval of the Court and without even making any application seeking sanction and approval of the Court such hasty decisions were unilaterally and arbitrarily taken by the O.L. in defiance of the Court. 2. However, today also the detail reasons explaining the aforesaid aspects in respect of each of the cases are not placed on record. The statement containing the case numbers and total number of matters wherein such appointments have been made are also not placed on record. 3. Therefore, time until 09.03.2012 is granted to the Official Liquidator to place on record the complete details, including the copies of correspondence instructing the concerned advocate to appear in the matters and explaining, in the report, as to whether Official Liquidator has, on his own, without permission and sanction from the Court fixed the professional fees and made payment of professional fees or not and also the details as to the amounts paid by the O.L. towards professional fees in all such cases, shall also be placed on record. 4. Furthermore, it is noticed that the Official Liquidator has very conveniently misconstrued, the clause i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usurp the power and authority to engage advocate of his own choice and fixing the professional fees without even informing the Court. In view of such actions of Official Liquidator and misuse of said provision, though on plain and true construction of the said clause it is not required, however due to Official Liquidator's actions it has become necessary, to make appropriate and requisite clarification in the said clause, so as to avoid such misconstruction or misuse of the provision in future and to avoid misuse of powers by the O.L. Hence, in the said clause following words are directed to be included after the words '......at the discretion of the Hon'ble Court '. "and only with the prior sanction, approval and permission of the Court" 12. Furthermore, at the end of the said clause following words shall be added: "In any case Official Liquidator shall not engage any Advocate, in any category, even as Special Arguing Counsel, without prior sanction, permission and approval of the Court, unless his/her name is mentioned in the panel approved by the Court." 13. The aforesaid clarificatory addition shall be deemed to have been included in the relevant clause as if they alwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther alike matters other than the company law/liquidation matter, at the discretion of the Hon'ble Court, the Official Liquidator may engage senior/senior designated advocates/senior law officers as special arguing counsel from case to case basis on such fee as are applicable to the Central Govt. Counsel/Senior Law Officers or as may be determined and sanctioned by the Hon'ble Company Court in such individual case." 19. It is noteworthy that this clause has been clarified by making an addition by the above quoted order dated 06-03-2012, to read as below: "Special Arguing Counsel- Notwithstanding anything contained hereinabove, for highly contested matters wherein complicated questions of law are involved and such other alike matters other than the company law/liquidation matter, at the discretion of the Court and only with the prior sanction, approval and permission of the Court, the Official Liquidator may engage senior/senior designated advocates/senior law officers as special arguing counsel from case to case basis on such fee as are applicable to the Central Govt. Counsel/Senior Law Officers or as may be determined and sanctioned by the Company Court in individual case. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o today i.e. 09/03/2012. 3. Today Official Liquidator is not present in the Court. Instead Mr. P.P. Rawat, Assistant Official Liquidator is present. 4. He submitted that the Official Liquidator could not collect the details and therefore, further time is required. 5. On earlier occasion it was made clear to the Official Liquidator that if any further time is requested for, then the Official Liquidator will be visited with direction to pay cost. 6. In certain other matters, because of similar defaults and delay on part of the Official Liquidator the Court has been constrained to make observations about the casual manner in which the Official Liquidator is taking the order/s by the Court and in those matters also the Court had to clarify that in the event of delay and default in complying the directions issued by the Court, the office of the Official Liquidator may be visited with cost which should be paid to the legal aid committee. 7. In present report, earlier this Court has passed order dated 01/02/2012 and in para-6 and 7 of the said order this Court has observed as under: "6. Until now the Official Liquidator has not cared to even seek ratification, what t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s approval of this Hon'ble Court. However, in future, the Official Liquidator will take utmost care to seek prior permission of this Hon'ble Court under rule 307 of the Companies (Court) Rules, 1959 before assigning any matter to the advocate other than the panel advocates." 24. The Official Liquidator has filed a fourth Report dated 24-03-2012. In spite of the categorical directions contained in the above-mentioned orders, the Official Liquidator has stuck to his original stand, which is reflected in paragraph 1 of the Report, reproduced hereinbelow: "1. That, it is respectfully submitted that the issue raised in the Official Liquidator's Report No.294 of 2011, which is required to be considered by the Hon'ble Court is that while assigning the matter to an Advocate as a Arguing Counsel on behalf of the Official Liquidator, whether permission of the Hon'ble Court is required to be obtained by the Official Liquidator. It is a view point of the Official Liquidator that on interpretation of the clause "Special Arguing Counsel" in the scheme approved by the Hon'ble Court in Official Liquidator Report No.93 of 2009 vide order dated 25.8.2009, for entrusting brief in a company law/li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng any brief as Special Arguing Counsel. 4. That, the Official Liquidator most respectfully submits that the explanation submitted by the Official Liquidator in report dated 12.01.2012 and 23.02.2012 was not accepted by this Hon'ble Court and vide order dated 06.03.2012, the clause of "Special Arguing Counsel" in the scheme of Advocates was amended by this Hon'ble Court. 5. That, the Official Liquidator was further directed to appropriately incorporate the clause in the Scheme in aforesaid terms and all actions shall be taken by the Official Liquidator in accordance with the clause and whenever in any matter the Scheme is required to be placed before the Court for seeking any orders, the Scheme with aforesaid clause shall be placed before the Court and all actions shall be taken accordingly. Any lapse on this count shall be treated as defiance by the Official Liquidator. It was clarified that Official Liquidator shall never engage any advocate (except from the settled/approved panel) in any category without Court's approval, permission and sanction." 27. In paragraphs 6 to 8 discussion has been made regarding the Advocates' Panel of the Official Liquidator and details have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Permission to withdraw the Report dated 12-07-2012 is granted. 33. This brings the Court to the crux of the matter, namely, ratification of the action of the Official Liquidator in entrusting certain briefs to the concerned advocate as "Special Arguing Counsel", in matters enumerated at paragraph 21 of the Report dated 27-12-2011, which is the main Report containing prayers. The other Reports, except those that have been permitted to be withdrawn, are explanatory in nature. 34. A Scheme for engagement of counsel/advocates for the Office of the Official Liquidator, High Court of Gujarat has been prepared on 10-09-2009. This Scheme contains clause (f) regarding "Special Arguing Counsel" that has been reproduced hereinabove. As is clear from the order dated 06-03-2012 reproduced hereinabove, a clarificatory addition has been made in the very same clause that has been fully reproduced in the said order. From perusal of the same, it is clear that the Official Liquidator is not empowered to engage any advocate as "Special Arguing Counsel", without prior permission and approval of the Court, unless his / her name is mentioned in the Panel approved by the Court. 35. It has been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in paragraph 10, to letters dated 09-03-1999 and 18-11-1999 which, according to the Official Liquidator, indicate that the concerned advocate has been authorized to appear and conduct matters for, and on behalf of, the Official Liquidator, as per orders of the Court. A perusal of the letter dated 09-03-1999 reveals that it is a communication addressed by the Official Liquidator to the concerned advocate wherein it is stated that since, as per the orders of the High Court "you have already been appointed in similar matters for appearing and conducting the matters for and on behalf of the Official Liquidator (In liquidation) may I request you to kindly cause your appearance in the aforesaid proceedings and attend the matter in the best interest of the Company (in liquidation)". Though a reference has been made to orders of the Court, however nothing specific has been mentioned. No orders have been produced on record by the Official Liquidator in any of the matters mentioned in Paragraph 21 of the Report. The letter dated 18-11-1999 has been written by the Official Liquidator to the concerned advocate stating as below: "Since similar matters are already entrusted to you by this of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court. In such circumstances, the action of the Official Liquidator in entrusting the briefs to the concerned advocate as Special Arguing Counsel in the cases mentioned in paragraph 21 of the report dated 27-12-2011 without prior permission of the court, cannot be ratified. The Official Liquidator has, in fact, deliberately tried to undermine the authority of the Court and has not even bothered to inform the Court, leave alone seek prior sanction, before engaging the concerned advocate. This amounts to defiance of the orders of the Court, even after passing of the order dated 06-03-2012, as the same stand is being reiterated, time and again. 41. This is, to say the least, a very unfortunate state of affairs. The Official Liquidator is enjoined to assist the court and carry out the functions assigned to him under the supervision and control of the Court. If the Official Liquidator takes a stand contrary to the court and functions at cross-purposes with the Court, it would seriously hamper the smooth working of the Court. 42. None of the explanations rendered by the Official Liquidator for not seeking the sanction of the court before engagement of the concerned advocate are ade ..... X X X X Extracts X X X X X X X X Extracts X X X X
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