Liquidation expense claims allowed only for authorised post-possession costs; unauthorised pre-possession and government-dues claims were rejected.

Only expenses specifically authorised by the winding-up court or necessarily incurred after the official liquidator took possession were admissible as liquidation expenses. Travelling, lodging, manning, port charges and salary-related claims for earlier or unauthorised periods were not recoverable, because they were either outside the approved liquidation-cost framework or fell within the statutory priority scheme for workmen and government dues. The official liquidator's partial rejection of the balance claim was therefore consistent with the earlier orders and the priority structure under the winding-up regime, and no infirmity was found in the report.

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Issues: (i) Whether the applicant was entitled to reimbursement of the balance claimed towards expenses incurred for manning, maintenance, travel, lodging, port charges, salary remittance and supply of food in relation to the vessels/tugs sold during liquidation as liquidation expenses. (ii) Whether the official liquidator's partial rejection of the applicant's claim suffered from any infirmity, particularly in relation to charges incurred before possession was taken by the official liquidator and port dues or salary-related claims.

Issue (i): Whether the applicant was entitled to reimbursement of the balance claimed towards expenses incurred for manning, maintenance, travel, lodging, port charges, salary remittance and supply of food in relation to the vessels/tugs sold during liquidation as liquidation expenses.

Analysis: The claim was examined against the prior orders passed in the liquidation proceedings, which had permitted reimbursement only of those expenses that were specifically authorised or that necessarily arose after possession was taken by the official liquidator and in connection with the court-sanctioned sale. Travelling and lodging expenses were not shown to have been approved in advance or to fall within the costs directed to be borne by the estate. Manning and management expenses were allowed only up to the point at which the official liquidator took possession, and the balance attributable to earlier or unauthorised periods was not treated as liquidation expense. Port charges incurred for earlier periods, and salary-related claims, were also considered outside the permissible liquidation-cost framework or within the statutory priority scheme for workmen and government dues.

Conclusion: The applicant was not entitled to reimbursement of the rejected balance amounts as liquidation expenses.

Issue (ii): Whether the official liquidator's partial rejection of the applicant's claim suffered from any infirmity, particularly in relation to charges incurred before possession was taken by the official liquidator and port dues or salary-related claims.

Analysis: The Court found that the official liquidator's report was consistent with the earlier directions of the Court and with the statutory priority structure under the winding-up regime. Claims for expenses incurred without prior approval or without prior intimation to the official liquidator, including port dues and certain salary remittances, could not be elevated into liquidation expenses. The official liquidator had already admitted the amounts that properly matched the authorised period and the approved sale-related expenses, and there was no basis to interfere with the rejection of the rest. Port dues were treated as government dues falling under the statutory priority provisions and therefore not recoverable ahead of secured creditors and workmen.

Conclusion: The official liquidator's partial rejection of the claim was upheld and no infirmity was found in the report.

Final Conclusion: The liquidation expense claim was allowed only to the extent previously admitted, and the balance claim for reimbursement was rejected in accordance with the statutory priority regime and the earlier orders governing the sale and preservation of the vessels.

Ratio Decidendi: Only those expenses that are specifically authorised by the winding-up court's directions or that arise after lawful possession by the official liquidator and are properly referable to the liquidation process can be admitted as liquidation expenses; unauthorised pre-possession costs and government-dues type claims cannot displace the statutory priority scheme.

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