2025 (9) TMI 1003 - HC - Companies Law

Official Liquidator authorized to pay secured creditors Rs.13,99,230 and Rs.17,50,770; company dissolved under s.481, s.530

Official Liquidator of M/s. Purvi Electronics Pvt. Ltd. (IN LIQN) Versus Gujarat State Financial Corporation Ltd. & Anr.

HC permitted the Official Liquidator to disburse Rs. 13,99,230 and Rs. 17,50,770 by RTGS as full and final payments to two secured creditors under section ... Request for disbursement of available liquidation funds - dissolution of a company in liquidation under section 481 of the Companies Act, 1956 - HELD THAT:- The Official Liquidator is permitted to pay an amount of Rs. 13,99,230/- in favour of Gujarat State Finance Corporation and also Rs. 17,50,770/- in favour of Integrated Finance Company Ltd. through RTGS mode as full and final amount under section 530 of the Companies Act, 1956. Upon the respondents filing an undertaking and the Official Liquidator transferring the amounts as above to the respondents, the M/s. Purvi Electronics Pvt. Ltd. is directed to be dissolved under Section 481 of Companies Act, 1956 and the Official Liquidator attached to this Court stands discharged and is relieved as liquidation of M/s. Purvi Electronics Pvt. Ltd. (In Liquidation). The report is allowed and disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the Official Liquidator may disburse the available liquidation funds pro rata to creditors whose charges were not registered with the Registrar of Companies, under section 530 of the Companies Act, 1956. 2. Whether the Court may order dissolution of a company in liquidation under section 481 of the Companies Act, 1956 where the liquidator cannot proceed further for want of funds after partial distribution, and on what terms. 3. Whether the Court may permit payment of small professional fees from the company's liquidation account. 4. Whether recipients of provisional distributions must give undertakings to refund excess or future-adjusted payments and the scope of liberty to reopen or revive dissolution under section 559 of the Companies Act, 1956. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Authority to disburse available funds to creditors under section 530 where charges are unregistered Legal framework: Section 530 of the Companies Act, 1956 governs claims in winding up where creditors' charges are not registered with the Registrar of Companies and treats such claims as ordinary unsecured debts in the liquidation. Precedent treatment: No judicial precedents were cited in the report; the Court proceeded on statutory text and the Official Liquidator's adjudication by empaneled Chartered Accountants. Interpretation and reasoning: The Official Liquidator received claims from creditors asserting sums due as on the winding up date. The adjudicator (CA) found the creditors' charges were not registered with the ROC and thus classified their claims under section 530. Available liquidation funds were limited (Rs. 31,92,269/- as on stated date with bank/FDR balances noted). The Official Liquidator proposed a pro rata distribution of the available corpus (Rs. 31,50,000/-) between the two claimants in the ratio determined by the adjudicated amounts up to the date of winding up, yielding the stated percentages and amounts. The Court accepted the Official Liquidator's statutory power to disburse as 'full and final amount under section 530' subject to protective undertakings. Ratio vs. Obiter: Ratio - The Court's approval that where charges are unregistered and funds are insufficient, the Official Liquidator may disburse available funds pro rata under section 530, subject to undertakings to refund any excess if later adjustments occur. No broader obiter principles were propounded. Conclusions: The Court authorized payment of specified pro rata amounts as full and final payments under section 530, conditional on undertakings to refund any subsequently discovered excess, thereby validating the Official Liquidator's proposed distribution mechanism in the circumstances. Issue 2 - Dissolution under section 481 when winding up is complete or cannot proceed for want of funds Legal framework: Section 481(1) of the Companies Act, 1956 empowers the Court to order dissolution when affairs have been completely wound up and the liquidator cannot proceed for want of funds or other reasons, if it is just and reasonable to do so. Precedent treatment: The report does not cite case law; the Court applied the statutory test factually to the record of asset realization, claims adjudication, and residual funds. Interpretation and reasoning: The record showed assets realized long prior, claims invited (with initial advertisement producing no timely claims), subsequent claims lodged and adjudicated, and only limited funds remaining for distribution. ROC provided NOC to dissolution; Income Tax Department had not responded to intimation. The Official Liquidator represented that no further material information was available. The Court found that after the proposed disbursements and compliance with protective undertakings, the liquidation process could not meaningfully continue and the statutory threshold for dissolution under section 481 was satisfied. The Court further preserved procedural safeguards by requiring undertakings and expressly retaining the mechanism under section 559 to void dissolution within two years on application if required in the interests of justice. Ratio vs. Obiter: Ratio - Where the affairs have been wound up and insufficient assets remain to continue liquidation, the Court may dissolve the company under section 481 after ensuring distributions and protective conditions are met; the dissolution may be subject to revival under section 559. Obiter - Observations on prior advertisement and administrative communications (ROC/Income Tax) are factual and not elevated to general legal propositions. Conclusions: The Court ordered dissolution under section 481 to take effect upon completion of directed disbursements and filings, discharged the Official Liquidator, and preserved the right to apply under section 559 to void the dissolution within statutory time if exigencies arise. Issue 3 - Payment of professional fees from liquidation funds Legal framework: Liquidators may pay reasonable liquidation expenses, including professional fees, from the company's funds as part of winding up administration. Precedent treatment: No cases were cited; the Court addressed the matter on reasonableness and administrative need. Interpretation and reasoning: A modest professional fee (Rs. 1,500/-) for preparation of the auditor's certificate was claimed and supported by an invoice. Given the necessity of the certificate for verifying balances and enabling distribution, the Court permitted payment from the company's liquidation account. Ratio vs. Obiter: Ratio - The Court affirmed that reasonable professional fees necessary for completion of liquidation formalities may be paid from available liquidation funds. Obiter - The Court did not lay down limits or criteria beyond the reasonableness of the specific fee allowed. Conclusions: Payment of the specified professional fee from liquidation funds was authorized. Issue 4 - Undertakings, protective conditions, and liberty to revive or review Legal framework: The winding up provisions permit the Court to impose terms when authorizing distributions and dissolution; section 559 permits voiding a dissolution within two years on appropriate application. Precedent treatment: No specific precedents relied upon; the Court imposed undertakings as prudent protective conditions. Interpretation and reasoning: To safeguard against later-discovered superior claims or misadjudication, the Court required recipients of distribution to file undertakings to refund whole or part of amounts if ordered subsequently. The Court also reserved liberty to parties to revive applications or seek review in case of difficulty and pointed to section 559 as the statutory remedy to declare dissolution void within two years if needed. The Court clarified that any residual ancillary amounts discovered later should be transferred to the Official Liquidator's common pool. Ratio vs. Obiter: Ratio - Conditional distributions subject to undertakings and the availability of section 559 relief are valid mechanisms to balance finality of dissolution with protection against future adjustments. Obiter - The Court's administrative directions about transfer to common pool are pragmatic statements tailored to the record. Conclusions: Granting conditional distributions with mandatory undertakings and preserving statutory revival/review mechanisms was upheld as appropriate; the Court set procedures for compliance and future remediation.