Interim preservation of company funds may be ordered in winding up despite a claimed lien over the disputed cash.
In winding-up proceedings, the Court may order interim preservation of company funds held by managing agents who are officers of the company, even where they assert a lien. Section 185 of the Indian Companies Act permits summary relief where the property in the holder's hands appears prima facie to belong to the company and preservation is just and convenient. A claimed lien does not bar protective relief pending final adjudication of entitlement. On the admitted facts, the fund was shown in the company books as company cash in the agents' hands, so deposit into Court was justified to secure the disputed amount pending determination of the lien claim.
Issues: Whether, in proceedings for winding up, the Court could require managing agents who were officers of the company and who claimed a lien over company funds to deposit the money in Court by way of interim preservation under section 185 of the Indian Companies Act.
Analysis: Section 185 empowers the Court to act summarily where the person concerned is an officer or other specified person and the property in his hands prima facie belongs to the company, if it is just and convenient to secure its preservation. The existence of a claimed lien does not create an absolute bar to such interim relief. On the admitted facts, the money was shown in the company books as company cash in the agents' hands, the agents were officers of the company, and the Court was entitled to protect the fund pending adjudication of the lien claim. The Court also recognised the broader power to preserve the subject-matter in dispute pendente lite.
Conclusion: The interim direction to secure the disputed amount was justified, but the order was modified so that the sum was to be deposited in Court to await adjudication of the lien claim, rather than paid out to the Official Liquidator immediately.
Ratio Decidendi: A court winding up a company may, under its summary and inherent powers, order interim deposit or preservation of company funds in the hands of an officer notwithstanding a claimed lien, where the money is prima facie company property and such protection is just and convenient pending final determination of entitlement.
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