1985 (12) TMI 319 - HC - Companies Law

Court upholds liquidator's decision in favor of Company, dismisses collusion claims, deems challenges abusive.

Forwarding P. Ltd. Versus Trustees, Port of Vizagapatnam

The court found in favor of the official liquidator, ruling that the withdrawal of Company Application No. 78 of 1985 was legal and in the company's best ... Winding up - Suits stayed on winding-up order Issues Involved:1. Legality of the withdrawal of Company Application No. 78 of 1985 by the official liquidator.2. Allegations against the official liquidator for acting in collusion with Bank of India.3. The necessity for Port Authorities to obtain leave under section 446 of the Companies Act.4. The propriety of the Port Authorities' actions in arresting and selling the trawlers.5. The validity of Company Applications No. 282 of 1985 and No. 237 of 1985.Issue-wise Detailed Analysis:1. Legality of the Withdrawal of Company Application No. 78 of 1985:Mr. Viswanath argued that the withdrawal of Company Application No. 78 of 1985 by the official liquidator was illegal, arbitrary, and mala fide. He contended that the withdrawal led to the Port Authorities not needing to apply to the court for leave to sell the trawlers, thus bypassing several necessary inquiries. However, the court found that the official liquidator's actions were based on legal advice and in the best interest of the company. The prayers in Company Application No. 78 of 1985 were interim and could not be granted, making the application defective and misconceived.2. Allegations Against the Official Liquidator for Acting in Collusion with Bank of India:Mr. Viswanath alleged that the official liquidator deferred taking possession of the trawlers at the behest of Bank of India, a secured creditor, and withdrew Company Application No. 78 of 1985 to protect the bank's interests. The court examined the minutes of various meetings and found no evidence supporting these allegations. The official liquidator's actions, including the withdrawal of the application, were found to be conscientious and based on independent legal advice.3. Necessity for Port Authorities to Obtain Leave Under Section 446 of the Companies Act:The court clarified that the arrest and sale of the trawlers by the Port Authorities were under section 64 of the Major Port Trusts Act, 1963, which provides the power of arrest and sale emanating from the statute itself. There was no need for the Port Authorities to obtain leave under section 446 of the Companies Act as they were not commencing or continuing any legal proceedings against the company.4. Propriety of the Port Authorities' Actions in Arresting and Selling the Trawlers:The court found that the Port Authorities acted within their statutory rights under section 64 of the Major Port Trusts Act, 1963. The arguments presented by Mr. Viswanath regarding the Port Authorities' delay in selling the trawlers and their obligations as bailees were found to be without merit. The court noted that the official liquidator's withdrawal of Company Application No. 78 of 1985 was appropriate and not against the company's interests.5. Validity of Company Applications No. 282 of 1985 and No. 237 of 1985:Company Application No. 282 of 1985 was taken out questioning the propriety and legality of the official liquidator's withdrawal of Company Application No. 78 of 1985. The court found this application to be an abuse of the process of the court, aimed at reviving the subject matter of the withdrawn application. Consequently, Company Application No. 282 of 1985 was dismissed with costs awarded to the respondents. Similarly, Company Application No. 237 of 1985, which adopted the arguments of Company Application No. 282 of 1985, was also dismissed with costs.Conclusion:Both Company Applications No. 282 of 1985 and No. 237 of 1985 were dismissed. The official liquidator's actions, including the withdrawal of Company Application No. 78 of 1985, were found to be legally sound and in the best interest of the company. The allegations of collusion with Bank of India were unsubstantiated, and the Port Authorities' actions were within their statutory rights.