2006 (5) TMI 206 - HC - Companies Law

Official liquidator granted authority over assets in winding-up case, precedence of Companies Act over Customs Act

The court upheld the appointment of the official liquidator as the provisional liquidator of M/s. Punjab Wireless System Ltd., granting authority to ... Winding up – Custody of company’s property, Preferential payments Issues Involved:1. Appointment and authority of the provisional liquidator.2. Ownership and custody of imported goods detained by the Customs Department.3. Applicability of the Customs Act vs. Companies Act.4. Preferential payments and recovery of dues by the Customs Department and Central Warehousing Corporation (CWC).5. Rights and obligations of the official liquidator.Detailed Analysis:1. Appointment and Authority of the Provisional Liquidator:The court ordered the winding up of M/s. Punjab Wireless System Ltd., appointing the official liquidator attached to the court as the provisional liquidator. The liquidator was directed to take charge of the company's assets and affairs immediately. The liquidator's authority was challenged by the Customs Department and CWC, but the court upheld the liquidator's authority to manage and take possession of the company's assets.2. Ownership and Custody of Imported Goods:The company in liquidation had imported 10,564 pagers, which were detained by the customs authority due to non-payment of customs duty. The goods were stored with CWC since July 1998. The liquidator requested the release of these goods, asserting that the assets of the company, including the detained goods, vested in the winding-up court upon the winding-up order. The court agreed with the liquidator, directing the Customs Department and CWC to hand over the goods to the liquidator.3. Applicability of the Customs Act vs. Companies Act:The Customs Department argued that the Customs Act, being a subsequent special legislation, should prevail over the Companies Act. They contended that the detained goods could only be released upon payment of customs duty and warehouse charges. The court, however, held that the winding-up order vested the company's assets, including the detained goods, in the court. The Customs Department's powers under the Customs Act did not supersede the liquidator's authority under the Companies Act.4. Preferential Payments and Recovery of Dues:The Customs Department and CWC claimed priority over other creditors for the recovery of dues. The court clarified that under sections 529A and 530 of the Companies Act, workmen's dues and secured creditors have priority over other debts. Government dues, including customs duty, are to be treated as preferential payments but do not supersede the liquidator's authority to take custody of the company's assets. The court emphasized that the liquidator must settle all claims, including those of the Customs Department and CWC, in accordance with the Companies Act.5. Rights and Obligations of the Official Liquidator:The court reaffirmed that the liquidator holds the custody of the company's property on behalf of the winding-up court. The liquidator is responsible for protecting and managing the assets until the company is dissolved. The liquidator must deal with claims from creditors, including secured, preferential, and unsecured creditors, as per the Companies Act and the Companies (Court) Rules, 1959. The court found no merit in the appeals by the Customs Department and CWC, affirming the liquidator's right to take possession of the detained goods.Conclusion:The court upheld the hon'ble company judge's decision, affirming the liquidator's authority to take possession of the company's assets, including the detained goods. The Customs Department and CWC's appeals were dismissed, and the liquidator was directed to manage the assets in accordance with the Companies Act. The court emphasized the liquidator's duty to settle all claims, including those of the Customs Department and CWC, as per the statutory provisions.