Limitation on provisional liquidator powers: court restricts sealing and preserves company use while remitting winding-up citation for reconsideration.

A citation for winding up was refused pending detailed examination because disputed account figures and no admitted undisputed liability precluded a prima facie finding of inability to pay; the order directing citation is set aside and the matter remitted to the learned single judge for fresh consideration of available and any further material. The provisional liquidator remains appointed but his powers are curtailed to avoid crippling the company: premises to remain in court custody but need not be sealed for use on director undertakings; books and assets to be inventoried and sealed; recoveries to be pursued; alienation restrained; quarterly accounts required.

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Issues: (i) Whether a citation for winding up should be directed to be issued against the appellant company; (ii) Whether the appointment and interim powers of the provisional liquidator, including sealing and custody of premises and books, should continue pending further adjudication.

Issue (i): Whether a citation for winding up should be directed to be issued against the appellant company.

Analysis: The parties disputed the quantum and correctness of accounts and remittances, with materially different figures advanced and no single admitted undisputed liability. In such circumstances issuance of a citation, which risks precipitating liquidation, requires clearer and more detailed examination of the accounts and liabilities before a prima facie conclusion of inability to pay debts or extinction of substratum is reached. The matter was remitted for fresh consideration by the learned single judge with directions to examine the additional material and any further material he may require.

Conclusion: Citation for winding up shall not be directed at this stage; the order directing issue of citation is set aside and the matter is remitted to the learned single judge for fresh decision.

Issue (ii): Whether the appointment and interim powers of the provisional liquidator, including sealing and custody of premises and books, should continue pending further adjudication.

Analysis: Continuation of measures that effectively prevent the company from carrying on business (such as continued sealing of premises) risks causing irreversible prejudice and may frustrate rehabilitation. It is appropriate to limit the provisional liquidator's operational restrictions while safeguarding the respondents' interests by vesting custody in the court, permitting the company limited use of premises subject to director undertakings, restraining alienation of assets, directing inventory and sealing of books, and vesting recovery powers and receipts with the provisional liquidator. Authority to limit the provisional liquidator's powers is available under Section 45 of the Companies Act, 1956.

Conclusion: The appointment of the provisional liquidator is continued but his powers are restricted: premises need not remain sealed though they remain in court custody; premises may be permitted for use by the company on undertakings by directors; the provisional liquidator must inventory and seal books and assets and pursue recoveries; the company is restrained from alienating assets and from recovering listed debts; quarterly accounts to be filed; other protective measures as directed shall continue.

Final Conclusion: The order directing issue of citation is set aside and the matter remitted to the learned single judge for fresh consideration on the material placed before the court and any further material he may require; interim appointment of the provisional liquidator is continued with specified limitations and safeguards to balance the prospects of company rehabilitation against protection of creditors' interests.

Ratio Decidendi: A citation for winding up should not be ordered on disputed or uncertain account figures; issuance of citation requires a clear or admitted liability or undisputed evidence of inability to pay debts, and interim powers of a provisional liquidator may be limited by the court under Section 45 of the Companies Act, 1956 to prevent undue prejudice to a company pending fresh adjudication.

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