Provisional liquidator control does not defeat a company suit where authority is later cured before hearing.
Appointment of a provisional liquidator under the Indian Companies Act, 1913 places the company's assets and claims under the liquidator's control and suspends the directors' powers for that period, so proceedings concerning company property should ordinarily be brought by the liquidator with court sanction. If the provisional liquidator is no longer in office when the suit is heard, the suit is not rendered demurrable merely because a director lacked authority when the plaint was verified. Any objection while the liquidator remains operative should be raised by seeking to strike the company off the record, not as a merits defence. The suit was held maintainable and the preliminary objection failed.
Issues: Whether a suit instituted in the name of a company by a director is maintainable when a provisional liquidator had earlier been appointed, and whether the objection to the director's authority could be raised as a defence at the hearing.
Analysis: Under the Indian Companies Act, 1913, the appointment of a provisional liquidator places the company's property, effects, and actionable claims under the custody and control of the court through the liquidator, and the directors' powers remain suspended for the time being. During that period, the liquidator alone may institute proceedings concerning company assets with the court's sanction. However, where the provisional liquidator is no longer in charge when the suit is heard, the suit in form is not demurrable merely because the director who verified the plaint had lacked authority at the time of institution. The proper course, while the liquidator remains operative, is an application to strike the company off the record rather than a defence on the merits.
Conclusion: The suit was held to be maintainable, and the defendants' preliminary objection failed.
TaxTMI 
AI Drafter ✕
TaxTMI 
