TaxTMI 
TaxTMI 
2025 (7) TMI 1012
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....upreme Court held that employees engaged by the Official Liquidator under court-sanctioned rules, specifically through employment sanctioned under Rule 308 of the Rules of 1959, do so on a purely temporary basis with full knowledge of the non-permanent nature of their employment. The Court further held that such employees cannot claim a right to regularization, absorption, or benefits equivalent to permanent government employees solely based on their long service or the similarity of duties performed. The Supreme Court further held that the company paid staff constitute a separate and distinct class and from the inception of their employment, they are paid from the fund created for disposal of the assets of the companies in liquidation. As against, not only the appointment is made in breach of spirit of Rule 308 but these employees are treated at par with government employees. 3. It will be appropriate here to first refer to Rule 308 and 309 of the Rules of 1959, which read as under : "308. Employment of additional or special staff. - Where the Official Liquidator is of opinion that the employment of any special or additional staff is necessary in any liquidation, he shall apply....
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....cklog or to augment the Office of Official Liquidator. Once such appointment is made in one liquidation, the Official Liquidator, by filing application, made a request to allow their services in all pending liquidations and accordingly, the services are continued for years together. 6. In fact these appointments are made in a very strategic manner where approval of the Court is obtained, the same, however, is done without really disclosing the necessity of appointment/continuity of service in a particular liquidation. The following reasons, in my view, will justify use of words 'strategic manner' in such appointments'. 7. The company petitions are treated disposed of upon passing order of winding up under Section 443 of the Companies Act, 1956 (for short 'the Act of 1956'). As such, by the order of winding up, the process of dissolution commences. It is first step in liquidation. The Official Liquidator is then appointed. The statement of affairs of the company is looked into. The claims of creditors are then solicited and adjudicated. The assets of the company are sold. The payment of creditors is then made and other necessary measures are taken and finally, the order of dissolu....
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....dation or have intentionally not discharged duties in order to get continuation in employment. In one such liquidation, which is in the case of Akola Oil Industries Limited (Company Petition No. 5/2001), the winding up order was passed on 23-4-2004 and Official Liquidator was appointed, who for the first time in the year 2019 filed a report stating therein that company's quarters are occupied by erstwhile employees. Neither the Official Liquidator nor the so called special/additional staff has ever pointed out to the Court such status and/or steps taken by them to protect the company's assets and/or to get the premises vacant. This Court was required to pass multiple orders to get the premises vacated. 12. In the same proceedings, other immovable properties of the company were neither protected nor put to auction immediately. The end result of such delay was an encroachment made by one Bhalchandra Kulkarni, who constructed temple sometimes in the year 2009 and started residing by the side of the temple. He encroached upon an area admeasuring about 10000 sq.ft. The Official Liquidator published advertisement to auction the property without demarcating the boundaries and without inf....
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....dditional staff. 16. I need not further comment upon the manner in which the special/additional staff is appointed and utilized in the Office of Official Liquidator, because various orders have been passed in this regard. In fact the Under Secretary, Ministry of Corporate Affairs, Government of India was called upon to file report as to how does he propose to address the issue. The report was so called because the services of some of company paid staffs at Nagpur continued since the year 1999. The issue, however, remained unaddressed. 17. In so far as Mr. Jitendra Mangre is concerned, he was appointed in the year 2007. Mr. Mangre was not appointed in any liquidation but his salary and allowances as also the salary and allowances of the company paid staff is being paid from common pool funds, which is yet another illegality committed and continued for decades. I will comment on it little later. 18. Considering various lapses, vide order dated 20-12-2024, the Court expected the concerned Ministry to issue appropriate circular/notification for appointing additional/special staff, strictly in terms of Rules 308 and 309 of the Rules of 1959. It was highlighted that for such appointme....
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....uidator submitted OLRs/ applications stating therein that claims of creditors were not called for want of funds. This act, as such, is contrary to the provisions of the Act of 1956, which in such cases provide for directions to the petitioner concerned to deposit the amount, however, Official Liquidator has suggested to open common pool funds account, in which the funds available on the dissolution of other company is deposited. Further, the common pool fund is utilized for payment of special/ additional staff. 23. One may argue here that this all has been done with approval of Court. The question now is once the illegality/lapses were discovered and highlighted by this Court and attention of Official Liquidator and Ministry was drawn, the legitimate expectation will be that, corrective measures will be taken. The stand of concerned Ministry was however, hostile. Considering the situation, following observations were made in order dated 7-2-2025 in the present petition. "5. In the circumstance, least that was expected from the Ministry of Corporate Affairs was to sensitize the Official Liquidators and to ensure that corrective steps will be taken to seek appropriate directions f....
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....uidator will apply his mind while pursuing the request for appointment of company paid staff, time is granted. The Official Liquidator shall also justify continuation of company paid staff in other proceedings, considering the scope of Rule 308 of Rules of 1959. It is worth mentioning here that only few company petitions are left to be disposed of. Further, there is hardly any requirement that would justify continuation of the company paid staff in the pending liquidation. In fact, for all these years, there had been hardly any progress in the liquidation proceedings to, first appointing company paid staff and secondly to continue such staff that too with payment at par with the Central Government employees." Thus, it was expected from the present Official Liquidator that he will apply his mind for pursuing the request for appointment of company paid staff and further shall justify continuation of company paid staff in other proceedings. It was also highlighted that only few company petitions are now pending and there is hardly any requirement that would justify continuation of company paid staff. 27. In response, the report has been filed stating therein as to how the company pa....