Provisional liquidator jurisdiction can arise before admission of winding-up petition where assets and minority interests appear at risk.

Section 450(1) of the Companies Act, 1956 is noted as empowering the company court to appoint a provisional liquidator at any time after presentation of a winding-up petition, and Rule 106 of the Companies (Court) Rules, 1959 is described as procedural only. The commentary records that where the materials show prima facie lack of probity, suspicious dealings with company assets, and prejudice to minority shareholders, the court may invoke the just and equitable principle to preserve the company's assets pending final decision. It also notes that, on such facts, a mere injunction may be inadequate and appointment of a provisional liquidator may be considered necessary.

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Issues: (i) Whether an application for appointment of a provisional liquidator was maintainable before admission of the winding-up petition. (ii) Whether the petitioner had made out a strong prima facie case for appointment of a provisional liquidator on the grounds of lack of probity, manipulation of company assets, and just and equitable winding up. (iii) Whether the petition lacked bona fides and whether an injunction would be sufficient in place of appointment of a provisional liquidator.

Issue (i): Whether an application for appointment of a provisional liquidator was maintainable before admission of the winding-up petition.

Analysis: Section 450(1) of the Companies Act, 1956 confers power on the company court to appoint a provisional liquidator at any time after presentation of a winding-up petition. Rule 106 of the Companies (Court) Rules, 1959 is procedural and cannot curtail the substantive jurisdiction created by the Act. The discretionary power is to be exercised judicially on the facts of the case and is not confined to a narrow pre-admission stage restriction.

Conclusion: The application was maintainable and could be decided on merits.

Issue (ii): Whether the petitioner had made out a strong prima facie case for appointment of a provisional liquidator on the grounds of lack of probity, manipulation of company assets, and just and equitable winding up.

Analysis: The record disclosed transactions prima facie showing control of the company by the majority group in a manner prejudicial to the company and minority shareholders, including purported transfers and leases of company premises to related concerns at undervalue or on suspicious terms. The Court treated these dealings as indicative of lack of probity, subterfuge, and jeopardy to the company's assets. In such circumstances, the just and equitable principle could be invoked, and the court was justified in acting to preserve the assets pending final decision.

Conclusion: A strong prima facie case was made out for appointment of a provisional liquidator.

Issue (iii): Whether the petition lacked bona fides and whether an injunction would be sufficient in place of appointment of a provisional liquidator.

Analysis: The suggested purchase offers and the alternative request for an injunction did not dispel the Court's concern that the majority group was attempting to deal with the company's assets for its own benefit. The Court found the petition bona fide and considered that mere injunction relief would not adequately safeguard the company's property and records in view of the prima facie misconduct found against the management.

Conclusion: The petition was bona fide and appointment of a provisional liquidator was necessary instead of a bare injunction.

Final Conclusion: The company court exercised its discretion to protect the company's assets and minority interests by appointing the Official Liquidator as provisional liquidator with consequential protective directions.

Ratio Decidendi: Section 450(1) of the Companies Act, 1956 authorises appointment of a provisional liquidator at any time after presentation of a winding-up petition, and where a strong prima facie case of lack of probity or asset jeopardy is shown, the court may grant that relief in the exercise of judicial discretion even before admission of the petition.

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