Rajindar Karamsingh Walia vs Official Liquidator of Patel Synthetics

A.M. Khanwilkar, J.—All these applications shall stand disposed of by this common order, as the issues raised are over-lapping. In all fourteen applications were listed before me claiming similar relief against the Official Liquidator. Out of the said fourteen applications, two applications, being Company Application Nos. 645 of 2007 and 1008 of 2007, have been disposed of by separate orders passed on 3 -3-2008 and 5-3-2008 respectively as not pressed. In other words, the present common order will dispose of remaining twelve applications on board.

In each of these twelve applications, the applicant asserts that the applicant security agency was appointed under the instructions of the Official Liquidator to provide security arrangement in respect of immovable and movable assets of the concerned company in liquidation or in relation to those companies where for the Official Liquidator was appointed as Provisional Liquidator. According to each of these applicants they have provided security arrangement for sufficiently long time, which was duly approved by the Official Liquidator and also ratified by the Company Court. However, the charges payable for the said services have either remained unpaid in full or only paltry payment has been made; as a result, substantial amount is unpaid and is outstanding, payable by the Official Liquidator. The applicants have, therefore, approached the Company Court for a direction against the Official Liquidator to disburse the outstanding dues payable to them.

The principal reason cited for non-payment of the dues is on account of unavailability of funds in the account of the concerned company for whom the security services have been provided by the applicant. According to the applicants, merely because no funds are available for disbursal or payment of security charges, that cannot be a legitimate ground to delay the payment especially when the Official Liquidator has requisitioned the security services and in fact has availed the same. On the other hand, the applicants were obliged to pay the wages and salaries of the security personnel employed by them for providing such security services to preserve the properties in question. According to the applicants, the Official Liquidator is obliged to pay the security charges on month to month basis or periodically to the applicants for the services rendered in that behalf. One of the suggestion made by the applicants is that the Official Liquidator can release their payment from and out of the Common Fund available with the Official Liquidator.

As the issue raised in the present set of applications was overlapping and recurring one, I thought it appropriate to hear all the applications together so as to understand the gravity of the overall situation in the office of the Official Liquidator. In terms of orders passed from time to time, the Official Liquidator was called upon to furnish requisite information. That information has now been compiled by the Official Liquidator and placed on record along with his affidavit dated 26-2-2008.

It is seen that the Official Liquidator has framed a panel of security agencies. Until 20-1-2003, six security agencies were empanelled - whose services were availed from time to time by the Official Liquidator for different assignments. The panel was expanded on 20-1-2003 by including 15 additional security agencies, and by subsequent report dated 28-1 -2007 further three security agencies have been empanelled. In other words, as of now, in all 24 security agencies are empanelled, whose services are availed by the Official Liquidator from time to time for different assignments. It is also noticed that besides the applications filed before this Court, there are around 90 other applications pending before the Official Liquidator for similar relief preferred by different security agencies. Significantly, from the tabular chart which has been placed on record, it appears that to provide security arrangement in respect of 104 different assignments, the Official Liquidator has utilised the services of only ten security agencies. Out of the said ten agencies, Reliable Industrial Services, CD. Securities Network Limited, Garuda Keepers (India)(P.) Ltd. and Bhagwati Allied Services are concerned, they have been engaged in 20 or more assignments respectively, unlike other six security agencies who have been engaged in far lesser number of assignments. In that, Crack Detectives (P.) Ltd. is engaged in respect of eight assignments; whereas Sadguru Security and Consultancy Services in five; Mahalaxmi Security Services in three, Guardian Facilities Management (Nagpur)(P.) Ltd. in two; Industrial Security and Fire Services Bombay (P.) Ltd. in one and Seven Star Security Services India (P.) Ltd. in one. To ascertain as to whether the security agencies are controlled by common persons in different names, during the course of hearing, counsel appearing for the parties were called upon to furnish information regarding the names of Directors/Proprietors/Partners of the respective security agencies. Pursuant thereto following information has been placed on record:

5A. From the tabular chart made available to the Court which is placed on record, it is also noticed that the outstanding dues claimed in the present set of applications is in the aggregate amount of Rs. 2,60,05,090; and similar claim pending before the Official Liquidator in relation to other assignments in 90 applications, is to the extent of Rs. 9,53,91,499. In other words, the aggregate amount payable by the Official Liquidator to ten different security agencies is almost over Rs. 12.50 crores.

Notably, four security agencies have been engaged, in around 80 assignments out of 104 assignments by the Official Liquidator. The total outstanding amount receivable by those four agencies would far exceed over Rs. 11 crores.

Naturally, the question is why should these agencies suffer such hegemony of the Official Liquidator who was not paying the colossal amount for the period ranging from" 1995" onwards, as can be discerned from the chart compiled by the Official Liquidator placed on record. At the outset, I would think it appropriate to append the information furnished by the Official Liquidator in tabular chart to this order, which be treated as part and parcel hereof. I have chosen to annex the said chart to the order for two reasons. Firstly, to make it as part of this order as the same is self eloquent and at the same time not to increase the length of this order. At the cost of repetition I may observe that the bare perusal of the said chart would highlight the gravity of the matter under consideration. The said chart is marked "X".

As aforesaid, the facts disclosed in the abovesaid compiled chart furnished by the Official Liquidator, are so telling and self eloquent that no elaboration thereof is necessary. From those facts the inevitable conclusion is that there is amiss in the office of the Official Liquidator either on account of act of commission or omission with purpose or otherwise. Whether it is a case of laxity of the officials in the office of Official Liquidator or collusion by some of the officials to benefit selected security agencies, is not only a matter of serious concern but also requires deeper enquiry at the appropriate level.

Indubitably, the Official Liquidator is appointed to protect and preserve the properties of the company in liquidation for the benefit of the stake holders in that company. The role discharged by the Official Liquidator is similar to one of parens Patriae and in any case that of a trustee appointed under the orders of the Court for and on behalf of the stakeholders in the concerned company. The provisions of Companies Act, abundantly make it clear about the role and duty of the Official Liquidator, which he is expected to discharge, after being appointed by the Court in respect of the property of company in liquidation. Indeed, while discharging that role, the Official Liquidator has to avail of logistical support from different agencies, such as Chartered Accountants, Valuers and in particular security agencies to preserve and protect the assets of the company and to dispose of the same by realising its fair value for being distributed amongst the stakeholders in the company in liquidation in accordance with the provisions of Companies Act. The Official Liquidator is obliged to dispose of the assets of the company in liquidation at the earliest opportunity so that the same are not wasted in any manner and would realize best price to be disbursed amongst the stakeholders in the company in liquidation. Indeed, in a given case, the Official Liquidator may be handicapped on account of some other legal proceedings pending and/or stay orders passed by Court of competent jurisdiction or the superior Court. However, if no such impediment operates, there can be no tangible reason to justify the inaction on the part of the Official Liquidator in not disposing all the assets of the company in liquidation in right earnest and expeditiously. As long as the assets, movable or immovable as the case may be, are not disposed of, naturally, for preserving the same, the Official Liquidator is required to depend on the services of the security agency, which services are availed for consideration. Suffice it to observe that the delay in disposal of the assets of the company in liquidation would necessarily result in causing loss to the stakeholders in the company in liquidation, and at the same time result in distributing largesse to the security agencies for prolonged period, avoidable though.

Thus understood, and keeping in mind the facts and figures now revealed in the tabular chart furnished by the Official Liquidator, it would inevitably raise serious doubt about some unholy nexus with the operating security agencies engaged by the Official Liquidator. The suspicion is strengthened as it is incomprehensible that those agencies mutely continued to offer their services without receiving any consideration "for several years". The fact that the concerned agencies may have pursued the matter with the Official Liquidator for payment, does not take the matter any further. I do not think it necessary to elaborate on these aspects in detail as those are matters to be enquired into by the competent authority. My endeavour is to only highlight the gravity of the situation with a hope that some remedial and corrective action would be taken by the appropriate authority. The issues that may have to be considered during such enquiry, amongst others, ought to be:

I. Whether the number of security personnel deployed in the respective assignments was appropriate, having regard to the nature of assets (movable and immovable)? (It has been noticed in some cases that even in respect of insignificant assets of the company in liquidation, the number of security personnel engaged by the concerned security agency-purportedly under instructions of the Official Liquidator, appear to be disproportionately large.)

II. Whether there was any justification for not expediting the process of sale of assets in question of the concerned company?

III. Whether the assets which were available for sale, on account of long passage of time, have been siphoned off? This issue would arise in some of the cases where the creditors or other stakeholders have alleged theft or siphoning away of the assets inspite of security arrangement provided by the Official Liquidator.

IV. Whether there is dispute about the fact that although the security agency has claimed charges for having deployed particular number of security personnel on the site, but in fact none or less number of security personnel were found patrolling the site. (Such grievance has been made in some of the cases by the stakeholders in the company in liquidation)?

All such issues and other related matters may have bearing on ascertaining as to whether it is a case of act of commission and omission of any official(s) in the office of the Official Liquidator in connivance with the concerned security agency. If it is so, it would be imperative to identify such officials (of the Official Liquidator) dealing with the respective cases and to suitably proceed against them by way of departmental action including to recover the amount of loss or damage and for criminal action, if necessary, indeed, if it is a case of criminal conspiracy, then all concerned including the managers and authorised officers of the security agencies, should also be proceeded with.

Be that as it may, from the materials on record, I have no hesitation in taking the view that the relief claimed by the applicants is not innocuous and innocent. There is much more than what meets the eyes. Nevertheless, I will have to consider the claim of the applicants.

The question is whether the claim of the security agency will have to be accepted as it is or placed under the scanner in the context of the consistent trend emerging from the record about the act of commission and omission of the Official Liquidator in not ensuring that only proper number security guards are deployed on the site where the security agency has been appointed; and that no plausible explanation is forthcoming for not expediting the sale of the assets of the company for unduly long time resulting in continued deployment of security services. All these aspects will have to be considered by the Competent Authority. Nevertheless, I shall revert to the claims of individual applicant.

Re.: Company Application No. 748 of 2007

(a) Insofar as Company Application No. 748 of 2007 is concerned, the same pertains to M/s. Reliable Industrial Services appointed as security agency to preserve the assets of M/s. Megaware Computers Limited (in Liquidation). Admittedly, winding-up order in respect of the said company was passed on 17-7-1998. The Official Liquidator took over the possession of the assets and properties of the said company on 7-12-1998. At the time of taking possession of the properties, an inventory was drawn, which gives description of the movable properties lying in the disputed premises in four different rooms as follows:

(b) The Official Liquidator claims to have taken possession of premises at Plot No. 38/C, Piparia Industrial Estate, Amli Village, Silvasa purportedly owned and possessed by the company in liquidation admeasuring 800 square metres. The fact that the company was in possession of 800 sq. mtrs. of the said premises is debatable. This is so because the owner of the property M/s. Indra Optical Company has appeared before this Court and has filed Company Application No. 1040 of 2007 wherein it is asserted that the said firm is the owner of the immovable property and had put the company in liquidation in possession only to the extent of four rooms admeasuring 400 sq. mtrs.

(c) It is also matter of record that after taking over possession of said immovable and movable properties of the company in liquidation, the Official Liquidator proceeded to appoint the applicant security agency to guard the property. Indeed, the Official Liquidator has taken approval of the Company Court for appointment of three guards per shift and two supervisors in all three shifts. The question is whether the recommendation to appoint such large number of security guards in relation to the property of the company in liquidation as referred to above was warranted? I will advert to this aspect a little later.

(d) It is not in dispute that the movable properties referred to in the inventory belonging to the company in liquidation have been sold in Decern ber 2003. Thereafter the strength of security guards deployed at the site has been reduced to only one security guard per shift. Insofar as arrangement provided after December 2003 is concerned, there can be no difficulty in accepting the claim of the applicant in that behalf.

(e) The question is, whether it was appropriate to permit deployment of three security guards per shift and additionally two supervisors for all the three shifts for the earlier period, having regard to the nature of property which was required to be protected. Significantly, when the movable were disposed of in December 2003, the value realised by the Official Liquidator is stated to be only Rs. 55,000. The claim of the applicant towards security charges far exceeds the value of the movables, i.e., above Rs. 16 lakhs. For protecting goods of such insignificant value, no prudent person would venture to engage security agency to the extent of three guards per shift and two supervisors for all the three shifts. That is incomprehensible. Notably, such heavy security arrangement was continued for almost five years from 1998 till December 2003.1 have no hesitation in taking the view that the dispensation provided for protecting the movable and immovable assets of the company in liquidation was far excessive and unwarranted. As a matter of fact, the deployment of one security guard per shift would have been more than sufficient in the fact situation of this case. That is so because, the nature of movable items were such that all the items could have been arranged in one room t to be kept under lock and key. Indisputably, the property in question is situated in a well developed and busy industrial estate. It is not as if the property was situated in remote part for which heavy security of the kind was necessary.

(f) The argument of the applicant that the applicant cannot be blamed for having deployed such heavy security - as that was the requirement specified by the Official Liquidator himself, does not commend to me. As observed earlier in this order, the overall situation in the office of the Official Liquidator during the relevant period itself is under scanner. The fact that no valuation of assets was done by the Official Liquidator at the relevant time or that the Official Liquidator in the reply filed to this application admitted the liability to pay the amount, does not preclude the Company Court to enquire into the specific issue in the context of the overall situation prevailing in the office of the Official Liquidator during the relevant period which has been unraveled now. In my opinion, until proper enquiry is conducted and the larger questions enquired, the security charges from 7-12-1998 onwards at best can be disbursed to the applicant on the assumption that the agency had deployed only one security guard per shift on the site. The Official Liquidator shall then adjudicate the claim of the applicant on the basis of the observations made herein to determine the amount payable to the applicant in respect of the. subject-matter in this application. That amount will be obviously payable from the sale proceeds of the immovable property of the company in liquidation, if any. In the event the company in liquidation has no funds, the Court may have to issue directions to the Secured Creditors to take over the liability for having provided the security to protect the property in question. At any rate, it is not possible to direct the Official Liquidator to pay the amount from the consolidated fund, which is the one of the request made on behalf of the applicant.

(g) It is made clear that I am not expressing any opinion in respect of the claim of the M/s. Indra Optical Company who has taken out Company Application No. 1040 of 2007 for relief of possession of the selfsame immovable property, which application will have to be decided on its own merits in accordance with law.

Re: Company Application No. 738 of 2007

(a) Insofar as the claim of the applicant in Company Application No. 738 of 2007, the winding up order in respect of respondent company was passed on 23-11-1998. The Official Liquidator took possession of the assets and properties of the respondent company (in liquidation) on 28-4-1999. The Official Liquidator took possession of the immovable property situated at Phool Baug, LP. Patel Road, Goregaon (East), Mumbai - 400 063 which is approximately 817 square yards. The, movable assets have been inventorised by the Official Liquidator in the report which reads thus:

The immovable property was handed back to the owner after the movable assets were sold on 4-6-2003. The sale proceeds from the movable assets is only a sum of Rs. 3,02,000, whereas the claim of the applicant towards security charges is in the aggregate sum of Rs. 12,18,938.67 ps.

(b) The applicant claims to have appointed three security guards per shift and one supervisor round the clock. Indeed, the Official Liquidator has taken approval of the Company Court for deploying three guards per shift and one supervisor for all the three shifts. The question is whether the recommendation of appointment of heavy security in relation to the property of the company in liquidation as referred to above was warranted? I will advert to this aspect a little later.

(c) It is not in dispute that the movable properties referred to in the inventory belonging to the company in liquidation have been sold on 4-6-2003. The question is whether it was necessary for the Official Liquidator to permit deployment of three security guards per shift and one supervisor for all the three shifts for the nature of property which was required to be protected. Significantly, when the movables were disposed of in June 2003, the value realised by the Official Liquidator is stated to be only Rs. 3,02,000. No prudent person would venture to engage security agency to the extent of three guards per shift and one supervisor for all the three shifts to preserve movables of such insignificant value. That is incomprehensible. I have no hesitation in taking the view that the dispensation provided for protecting the movable and immovable assets of the company in liquidation was excessive and unwarranted. As a matter of fact, the deployment of one security guard per shift would have been more than sufficient in the fact situation of this case. That is so because, the movable items were such that it could have been arranged at one place to be kept under lock and key. Moreover, the property in question is situated in a well developed and busy industrial estate. It is not as if the property was situated in remote part for which heavy security of the kind was necessary.

(d) Even in this case, the argument of the applicant that the applicant cannot be blamed for having provided such security as that was the requirement specified by the Official Liquidator himself, does not commend to me. As observed in the earlier part of the order, taking the totality of the situation prevailing in the office of the Official Liquidator during the relevant period, it was totally amiss. The fact that no valuation of assets was done by the Official Liquidator at the relevant time or that the Official Liquidator in the reply filed to this application admitted the liability to pay the amount, does not preclude the Company Judge to enquire into the specific issue in the backdrop of the larger issue regarding the questionable conduct of the Officials at the relevant time. In my opinion, until proper enquiry is conducted and larger issues enquired, security charges from 23-11-1998 onwards may be disbursed to the applicant on the assumption that the agency had deployed only one security guard per shift on the site. The Official Liquidator shall then adjudicate the claim of the applicant on the basis of the observations made herein.

(e) Significantly, the applicant has already received Rs. 3,18,010 by now towards outstanding bills. After giving adjustment of that amount, the Official Liquidator may take steps to pay the balance on the above basis, if any, to the applicant by recovering the same from the secured creditors in terms of order dated 22-6-2001 in the event of any shortfall. The secured creditors will be free to contest the said demand, if that is open to them in spite of order dated 22-6-2001. The Official Liquidator while considering the claim of the applicant in terms of this order shall give opportunity to the secured creditor to establish the position that during the relevant period in fact no security guards were deployed on the site. That aspect will be considered on its own merits. In the event the case made out by the creditors is established, it would necessarily follow that the applicant will not be entitled to any payment during such period. In that case, the Official Liquidator will have to pass consequential order for recovery of commensurate amount from the applicant, if any.

Re.: Company Application No. 861 of 2007

(a) The company in liquidation was ordered to be wound up in terms of order dated 25-11-1998. The Official Liquidator took over possession of the immovable and movable assets of the company in liquidation on 15-6-1999. It is also seen that the applicant security agency was appointed to safeguard the assets of the company in liquidation which were taken over by the Official Liquidator on the same day ue. on 15-6-1999. The immovable property is a freehold land being a plot admeasuring 5257.81 sq. mts. in Village Oshiwara, South Salsette bearing CTS Nos. 14, H. No. 6(P) and H. No. 7(P), located at about 1.5 to 2.00 kms. from Jogeshwari Railway Station, which is abutting the 80 ft. S.V. Road, which is a busy road. In other words, the immovable property of the company in liquidation is located in a prime locality of Jogeshwari, Mumbai. It is seen that while taking possession of the immovable and movable assets, the Official Liquidator did not prepare contemporaneous inventory. However, the inventory of immovable as well as movable assets was drawn at the time of valuation of the assets of the company in liquidation, some time in February 2003. The description of the movable assets has been specified in the valuation report, which reads thus:

(b) The valuation report in respect of immovable property clearly mentions that the plot is bounded by compound wall viz., R.R. Masonary of 7''ht. On front side and B.M. Wall of 4'' ht. on other sides. There is asphalt road within the compound. Suffice it to observe that the property of the company in liquidation was well safeguarded and enclosed.

(c) Be that as it may, applicant security agency claims to have deployed seven security guards for first shift and second shift and eight security guards in the night shift (i.e., Twenty two guards) and one supervisor in each shift (Le., three supervisors) to protect the assets of the company in liquidation. Significantly, after the process of valuation was completed and report received, the movable assets of the company in liquidation were sold on 27-8-2003, only for a sum of Rs. 16.50 lakhs. Whereas, the applicant claims security charges from 15-6-1999 till December 2007 in the sum of around Rs. 64 lakhs. Out of the said demand, the Official Liquidator has already paid a sum of Rs. 16,50,843 to the applicant. Thereby the balance amount payable to the applicant is Rs. 46,58,297.46 ps. As aforesaid, the Official Liquidator could sell the movable assets of the company in liquidation only for Rs. 16.50 lakh and the sale proceeds so received have been made over to the applicant towards part payment. There is no other amount lying with the Official Liquidator. The fund in relation to the company in liquidation available with the Official Liquidator is only Rs. 21,858. As a result, the Official Liquidator is unable to pay the balance amount claimed by the applicant.

(d) As in other cases, the question that needs to be addressed in this application is whether it was essential to provide such heavy security to protect the stated movable and immovable assets of the company in liquidation. From the valuation report as referred to above, it is obvious that the movables were lying in enclosed structure and not exposed to outsiders as such. Besides, it is seen that the entire property was bounded by compound wall. As a result, access to the property was obviously not so easy. To protect such property, even if it was spread out to the extent of about four acres, having regard to the location of the property and the surrounding circumstances, obviously it cannot be said that it was imperative to deploy seven security guards for first and second shifts and eight security guards in the night shift with one supervisor in each shift. As aforesaid, the value of movables that are sold could fetch only Rs. 16.50 lakhs whereas the security charges claimed by the applicant is to the extent of Rs. 63 lakhs and above up to December 2007 since the date of appointment on 15-6-1999. In my opinion, the Official Liquidator will have to adjudicate the claim of the applicant agency afresh keeping in mind all the attending circumstances and the larger questions referred to hereto.

(e) There is yet another aspect which in my opinion is significant for considering the claim of the applicant. Indisputably, the movable assets were sold on 27-8-2003 and the same were delivered to the purchaser in April 2004. On and from April 2004 what was required to be protected was only immovable property, which was well protected by compound wall. For such type of property, by no stretch of imagination, any prudent person would employ services of seven security guards or eight guards with one supervisor for each shift. In other words, there can be no justification for paying the charges to the applicant since April 2004 on the same basis as was required to preserve the movable assets along with immovable assets of the company in liquidation during the anterior period.

(f) To get over this position the argument of the petitioner, is that, it is the Official Liquidator who insisted for deploying seven guards and it was not the choice of the applicant as such. It is submitted that the Official Liquidator never instructed the applicant to reduce the security strength. Besides, to justify the necessity of continuing the same security arrangement of at least seven guards per shift with one supervisor, the counsel for the applicant pressed into service Official Liquidator''s report which refers to the letter sent by the applicant dated 29-9-2001 placing on record the need for engagement of security on the Eastern side. None of these arguments commend me. For, in the earlier part of this order I have already adverted to the pattern which flows from each assignment. The inescapable conclusion is, it is an act of commission and omission of the officials in the office of the Official Liquidator with purpose, completely disregarding the interest of the stakeholders of the company in liquidation for whom the Official Liquidator was expected to act as Custodia Legis. Suffice it to observe that the claim of the applicant cannot be straightway accepted merely because of the communication from the Official Liquidator to arrange for seven guards for the first and second shifts and eight guards in night shift with one supervisor for each shift. Instead, all the aspects will have to be considered by the Official Liquidator while readjudicating the claim of the applicant. While doing so, the Official Liquidator shall permit the other stakeholders to participate in the proceedings who would be free to place on record the irregularities committed by the security agency as is alleged by them, amongst others, by the Workers Union, in their letter dated 2-2-2008. Besides the workers union, the Official Liquidator will also permit the secured creditors of the company in liquidation as also the ex-director to take a stand as to the justification and necessity of the arrangement provided by the applicant as is claimed by the applicant.

Re.: Company Application No. 483 of 2005

(a) The winding up order was passed on 10-4-2007. However, much earlier to that, by order dated 18-7-1998, the Provisional Liquidator was appointed to take over possession of assets and properties of the company in liquidation. The Official Liquidator, accordingly, took over possession of the immovable and movable assets of the company in liquidation on 24-8-1998. On the same day, the Official Liquidator appointed the applicant as security agency to safeguard the assets of the company in liquidation. The applicant deployed three security guards per shift (i.e., Nine per day). The inventory report discloses the nature of movable properties of the company in liquidation which reads thus:

(b) Insofar as immovable assets of the company in liquidation are concerned, the same is a Plot bearing No. A-2 /1204, Panoli Industrial Area, GIDC, Ankleshwar, Gujarat State admeasuring about 1920 sq. mtrs.. The said plot is located near Mumbai-Ankleshwar Highway at a distance of 8 kms. from Ankleshwar where small and medium industries are located. The material on record also indicates that all amenities like electricity, road, water etc., were available and access to the industrial area was found to be easy. Be that as it may, the movable assets of the company in liquidation were eventually sold only on 14-2-2008. Obviously, therefore, the security arrangement was required to be continued for all these years from 1998. Significantly, the number of security guards were reduced by the applicant to only three guards i.e., one guard per shift with effect from 1-10-2005. Indeed, one of the consideration for doing so was non-payment of the bills raised from time to time. The fact remains that since October 2005 the applicant has been able to protect both, the movable as well as immovable assets of the company in liquidation by providing only one guard per shift basis. No tangible reason is forthcoming as to why the applicant insisted for providing three security guards per shift (ie., Nine guards per day) for the same property. Thus understood, the claim of the applicant for charges of three security guards per shift basis is unacceptable. Significantly, the movable assets which have been sold on 14-2-2008 have fetched only Rs. 14.50 lakhs, as against the outstanding claim of the applicant which has mounted to Rs. 28 lakh and odd with effect from 24-8-1998.

(c) The justification given by the counsel for the applicant is that nine security guards were deployed on the insistence of the Official Liquidator. Besides, the plot in question was not provided with boundary wall. Both these submissions will have to be stated to be rejected, insofar as the argument of non-existence of boundary wall is concerned, if the applicant could manage the situation with one security guard per shift since October 2005 till recently, there is no reason to accept the plea that higher number of security guards were required to be deployed at the site for the earlier period, which was obviously avoidable.

(d) In the circumstances, until the larger issues are enquired into, the Official Liquidator may pay the applicant on the assumption that the applicant had deployed only one security guard per shift basis with effect from 24-8-1998. The Official Liquidator may be free to disburse the amount available in account of the company in liquidation out of the sale proceeds as and when available to the Official Liquidator.

Re.: Company Application No. 993 of 2006

(a) Insofar as Company Application No. 993 of 2006 is concerned, the same pertains to security charges offered in relation to M/s. Mohan Carpets (I) Limited (Company in Liquidation). The said company was ordered to be wound up on 17-11-1998. Consequent thereto, the Official Liquidator took possession of the immovable and movable assets of the company in liquidation. It appears that the immovable assets is a plot bearing No. 39, Sector-H, Kandla Special Economic Zone, Gandhidham, Kutch (Gujarat), admeasuring about 4,070 square metres or thereabout. Insofar as the movable assets are concerned, which consist of plant and machinery, stock, finished goods etc. lying on the said plot, have been valued to the extent of Rs. 3.85 crores. Obviously, having regard to the substantial value of the movable assets of the company taken over by the Official Liquidator, the security agency was called upon to provide three security guards per shift (nine guards per day) with one supervisor. The applicant security agency was appointed on 1-11-2001 to protect the movable and immovable assets of the company in liquidation. The applicant security agency has offered services since then, however, no amount has been paid to the said agency. The outstanding amount is stated to be Rs. 20,63,615.85 ps.

(b) The counsel for the applicant would contend that by virtue of Section 457(2A) of the Companies Act, it is the duty of the Official Liquidator to appoint security guards to protect the property of the company whereof custody is taken and to record an inventory of the assets in consultation with secured creditors after giving them notice; appoint valuer, chartered surveyors or chartered accountant, as the case may be, to assess the value of the company''s assets within specified time and to take steps to invite bids for sale of the assets of the company within fifteen days from the date of receipt of valuation report. Relying on this provision it was argued that the security agency cannot be blamed for having engaged excess number of security guards to protect the property in question. According to the applicant, it is the prerogative of the Official Liquidator to suggest the number of security guards to be engaged to protect the property in question and the security agency is only required to abide by such directions. The Official Liquidator may indicate the number of security guards to be deployed in consultation with the secured creditors including the security agency itself, having regard to the exigencies to be provided for protecting the property of the company in liquidation. It is argued that the appointment of security agency is ratified by the Court and once that has been done, there is no reason to reopen the issue of appropriate number of security guards to be deployed by the security agency.

(c) It is then argued that the fact that the security agency continued to provide the security arrangement without receiving any amount from the Official Liquidator towards their contractual entitlement, that cannot be held against the security agency. It is argued that the security agency has no option but to continue to provide the security until contrary instructions are issued either by the Official Liquidator or order to be passed by the Company Court in that behalf. It is lastly contended that having regard to the over all situation, as is evident from the figures now made available by the Official Liquidator, it is appropriate to make a provision that the security agency would be free to discontinue the security arrangement for want of payment after giving sufficient notice to the Official Liquidator in that behalf. On the above arguments, it was contended that the relief as claimed in the present application ought to be granted.

(d) There can be no doubt that it is the primary responsibility of the Official Liquidator to appoint security guards as soon as possession of the assets of the company in liquidation is taken over by the Official Liquidator, in terms of Section 457(2A) of the Act. There can also be no doubt that once the dispensation recommended by the Official Liquidator is ratified by the Court, no further enquiry into that matter would be necessary. However, that course is necessitated in cases dealt with in this order as it is noticed that although the movable assets were of insignificant value, the security arrangement provided was far excessive and unwarranted. That arrangement was, perse, not commensurate with the value of the movable assets involved. In fact, the security charges have far exceeded the value of the movable assets received by way of sale proceeds, as is demonstrated in the chart which forms part of this order. Moreover, it cannot be overlooked that ordinarily the Company Court approves the recommendation made by the Official Liquidator, unless at the relevant time an objection is registered from any quarter. If it is a case of connivance of the officials in the office of the Official Liquidator, the fact that the Court has already over the arrangement, will make no difference as it will be a case of fraud played upon the Court. That is a matter which needs to be examined by the appropriate authority keeping in mind observations made in this decision.

(e) Insofar as present applicant is concerned, the claim of the applicant that deployment of three guards per shift was essential, will have to be accepted for the simple reason that the value of the movable assets has been notified as Rs. 3.85 crores. To preserve such valuable property, there can be no difficulty in accepting the arrangement already made by the Official Liquidator to be reasonable and necessary in the fact situation of this application. That, however, is not the position in every other case before me to which I have already adverted to at the appropriate place.

(f) The argument of the applicant that the security agency has no option but to continue to provide security arrangement irrespective of not receiving any payment from the Official Liquidator, however, does not commend to me. There is no reason for the security agency to wait for several years and then come and assert their right before the Official Liquidator in the first place and then before the Company Court to release their outstanding dues. From the figures which are available from the record it is noticed that insofar as M/s. Reliable Industrial Services is concerned, it has waited to receive a sum exceeding Rs. 2 crores in relation to about 23 assignments only. Obviously, the amount has been allowed to mount in some cases from 1998 onwards, as can be discerned from the chart made available to the Court. Same pattern emerges in respect of other security agencies. Insofar as M/s. CD. Security Services Network Limited is concerned, it has allowed the security charges to mount up to Rs. 2.50 crores in relation to 22 assignments only; whereas, M/s. Guruda Keepers (I)(P.) Ltd. have allowed the outstanding security dues to mount exceeding Rs. 3 crores. Similarly M/s. Bhagwati Allied Services allowed the service charges to mount over Rs. 4.50 crores in relation to 21 assignments only.

(g) Indeed, this amount has not piled up in one year''s time as outstanding dues, but allowed to get accumulated for several years without receiving any amount at all or part payment in respect of some assignment. It is inconceivable that the security agencies would continue to provide efficient and effective services by deploying adequate number of guards for all these years without receiving any payment at all. This does not stand to commercial wisdom of a prudent businessman. It is not necessary for me to burden this order with this aspect any further, except to observe, as has been found in the earlier part of this order that, if the totality of the situation prevailing in the office of the Official Liquidator is to be analysed, it gives an impression that all this was happening in connivance with the security agencies and the officials of the Official Liquidator. Those aspects will have to be addressed independently and taken to its logical end for which necessary directions are being issued in this order.

(h) Insofar as the agreement of the learned Counsel for the applicant that the security agency is given no option to discontinue the security arrangement - if no payment is received for substantial period is concerned, that only deserves to be stated to be rejected. This is so because there is not even a single instance placed before me to indicate that in spite of such request having been made by the security agency the concerned agency was denied such relief. On the other hand, atleast in couple of applications, I have permitted certain security agencies to discontinue the arrangement as soon as other suitable arrangement were to be provided by the Official Liquidator and which liberty has already been availed by this very applicant in respect of this very assignment. Suffice it to observe that if the security agencies were so willing, they could have moved the Court for appropriate directions with immediate dispatch. No plausible explanation is forthcoming as to what prevented the security agencies to wait for couple of years, in some cases almost nine years, to apply to the Court for suitable directions in spite of the fact that no payment was being received by them in respect of the stated services continuously offered by them to protect and preserve the assets of the company in liquidation.

(i) Needless to observe that the security agency would be free to walk out from the arrangement on the date notified to the Official Liquidator in the communication sent to him, provided, the Official Liquidator is able to make suitable arrangement of appointing another security agency. Indeed, to preserve the assets of the company in liquidation, the Official Liquidator is obliged to submit his report to seek necessary directions not only to permit the existing security agency to walk out of the security arrangement but at the same time to appoint new security agency in place of the existing security agency on appropriate terms. If the Official Liquidator fails to submit such report and seek directions of the Court within reasonable time, the concerned security agency is free to apply to the Court for appropriate directions in that behalf, which application can be decided by the Court on its own merits.

(h) As aforesaid, insofar as present application is concerned, there is no reason to overturn the recommendation of the Official Liquidator for appointing three security guards per shift with one common supervisor to ensure protection and preservation of the assets of the company in liquidation particularly because the movable assets were valued to the extent of around Rs. 3.85 crores. It is also seen that neither the movable nor the immovable assets of the company in question could be sold due to pending proceedings before the D.R.T. However, the amount which is payable to the applicant can be offered only from the sale proceeds. I am informed that the sale of the assets of the company in liquidation already notified for 17-3-2008 by the Debts Recovery Tribunal, Ahmedabad. In case the sale does not proceed further for some reason, the Official Liquidator shall forthwith submit report before this Court seeking direction to recover the outstanding dues payable to the applicant agency from the secured creditors in proportion to their claim amount.

Re.: Company Application No. 614 of 2007:

(a) Insofar as Company Application No. 614 of 2007 for recovery of outstanding dues in relation to security charges provided to preserve the assets of Rajesh Dying & Bleaching Works Ltd. (company in liquidation) is concerned, it transpires from the record that the winding up order came to be passed on 19-2-1999. Consequent thereto the Official Liquidator took over possession of movable and immovable assets of the company in liquidation on 24-5-1999. The immovable property of the company in liquidation is stated to be plot admeasuring 5,673.60 square meters situate at CTS Nos.687 and 662/1, Kurla-Andheri Road, Saki Naka, Andheri (E), Murnbai-72 on the main road in an industrial estate (opposite Orkay Mills) where there are other factory units. The factory premises of the company in liquidation is about 200 mtrs. away from the main road. Besides the immovable property, the Official Liquidator took over possession of the movable assets as noted in the valuer''s report, approximate valuation whereof is stated to be around Rs. 14 lakhs. The particulars of movable assets furnished in the valuer''s report reads thus:

(b) After the Official Liquidator took over possession, he sim ultaneously appointed the applicant to provide security to the movable and immovable assets of the company in liquidation with effect from 24-5-1999 itself. Initially ten guards and one supervisor per shift totalling to 30 guards and three supervisors round "O" clock arrangement was provided. Justification for providing ten guards and one supervisor security arrangement as stated across the bar is that at the relevant time there was strong opposition from the workers and to preserve the property from any damage it was decided that atleast ten security guards with one supervisor round "0" clock should be engaged. That arrangement continued till April 2000 when the security arrangement was reduced to 5 security guards and one supervisor per shift totalling 15 guards and three supervisors round "O" clock. No explanation is forthcoming as to what prevented the Official Liquidator to proceed with sale of the properties in question in terms of provisions of Section 457(2A) of the Act within the specified time. If that were to be done within specified time, the necessity of continuing of such heavy security arrangement would not have been necessary at all. However, the Official Liquidator submitted report for the first time in January 2002 to seek directions of the Company Court. The Official Liquidator was required to resubmit the report which was done on 13-8-2002. Eventually, the Official Liquidator was permitted to engage valuer in September 2002. Thereafter, valuation of the movable assets was done and the said assets were put to sale on 14-1-2003. After the movable assets were sold in the Court auction it fetched only Rs. 15.30 lakhs. After that sale, the security arrangement was reduced to only two security guards and one supervisor per shift totalling 6 guards and one supervisor round "O" clock. Significantly, the security charges claimed by the applicant for all this period has piled up over Rs. 34 lakh as on 31-12-2007.

(c) The counsel for the applicant would contend that the applicant cannot be blamed for the situation as the applicant had no option but to provide sufficient number of security guards having regard to the situation prevailing at the factory premises. Indeed, this stand appears to be attractive if considered as an isolated case. However, as I have found earlier, the pattern which emerges from all the assignments and the steps taken by the Official Liquidator during the relevant period, is obviously an act of omission or commission with purpose, there was no reason for the Official Liquidator to not submit necessary report to the Court within reasonable time so as to ensure that the assets are sold as expeditiously as possible for taking the winding up order to its logical end. That has not happened in the present case which is evident from the events recorded earlier. The Official Liquidator went slow in the matter till January 2002 when he submitted the report for the first time and thereafter took almost eight months to resubmit further report to invite necessary directions from the Company Court. No justification for this lapse is forthcoming. This is notwithstanding the obligation of the Official Liquidator to take steps within a reasonable time for sale of assets (atleast movable assets could have been completed within a reasonable time), if not within the statutory period provided u/s 457(2A) of the Companies Act. However, that happened only in 2003 and that delay is cited as justification not only for providing higher number of security guards round "O" clock to preserve the assets of company in liquidation but also for the charges to provide such security arrangement, which has far exceeded the sale proceeds of the movable assets.

(d) Moreover, it is nobody''s case that there was no compound wall to the factory premises or that the movables were lying in open space without a compound wall. The factory premises could have been secured by closing the main gate/door. In that case it would be wholly unnecessary to provide such a heavy security in the factory premises. Even if the argument of the applicant that at the beginning there was strong resistance from the workers is to be accepted as it is, for the reasons already indicated and the finding reached in the earlier part of this order that there seems to be a consistent partem indicating that no sensitivity has been shown to observe proportionality of number of security personnel to be deputed on the site and for disposing off the assets with utmost despatch so as to take the order of winding up to its logical end which inevitably resulted in increasing of avoidable expenditure on security charges far exceeding the value of the assets in question. Even in this case the value of the movable assets recovered on 14-1-2003 is only Rs. 15.30 lakhs; whereas, the security charges from May 1999 till December 2007 have piled-up to around Rs. 34 lakhs. This is a matter of concern. The inevitable conclusion is that the concerned Official Liquidator was more than willing to spend on security charges in the guise of preserving the property, instead of taking prompt steps to sell the assets of the company in liquidation so as to ensure that fair returns / dividend is offered to the creditors and other stakeholders including the workers of the company in liquidation.

(e) In my opinion, therefore, the claim becomes questionable, which aspect will have to be enquired into in appropriate proceedings. For the time being, suffice it to observe that it is not possible to straightway accede to the claim of the applicant regarding outstanding dues on the assumption that services were offered for such high number of security guards deployed on the factory premises for the relevant period. All aspects will have to be considered by the Official Liquidator having regard to the observations made in this order. After appropriate enquiry, the Official Liquidator will be free to make payment of the amount determined to the applicant only from the sale proceeds of the assets of the company.

Re.: Company Application No. 615 of 2007

(a) Insofar as Company Application No. 615 of 2007 in relation to Enazai Finance Limited (in liquidation) is concerned, it is seen that the winding up order has been passed on 15-7-2005. However, during pendency of the company petition, Provisional Liquidator was appointed on 26-4-1999. The Provisional Liquidator took over possession of the assets of the company in liquidation on 29-11-1999 and engaged services of the applicant to provide security to 19 plots belonging to the company in liquidation situated at Village Collam, Tal. Sanghum, Goa admeasuring around 28,330.04 sq.mtrs. area. The security arrangement, however, was limited to one security guard per shift for all these plots in respect of first and second shifts; whereas, two security guards were deployed for night shift. No arrangement for supervisor was provided by the security agency. Going by the number of security guards deployed to preserve such huge property, the same is obviously just and proper number of security guards.

(b) However, the question that remains to be considered is whether the Official Liquidator has committed any lapse in not selling the said immovable properties in respect of which security arrangement was required to be deployed since December 1999. It appears that an attempt was made by the Official Liquidator to sell the properties in question only in 2005. However, that did not fructify on account of stay granted by Supreme Court in Special Leave to Appeal (CRL) Nos. 406-409 of 2004, dated 18-11-2005. The fact remains that the Official Liquidator did not take any steps in the matter till 2005. Be that as it may, the appropriate course for the Official Liquidator is to ascertain the present status of the stay order granted by the Supreme Court and if that order is already vacated, to forthwith put up the properties for sale. In the event the stay order is still continuing, the Official Liquidator will be free to proceed in respect of other properties which are not subject-matter of attachment such as at Aurangabad and Goa, if the same are available for sale. Steps for sale of those properties shall be taken forthwith by the Official Liquidator so that the outstanding claim of the applicant can be paid from the sale proceeds of the said properties of the company in liquidation.

Re.: Company Application No. 512 of 2007

(a) Insofar as Company Application No. 512 of 2007 is concerned, the Provisional Liquidator has been appointed in terms of order dated 21-2-2001. Consequent to that order the Official Liquidator took possession of immovable properties situated at five different places belonging to the company in liquidation on different dates. Two properties are situate at Ratnagiri which consist of land and structures. The lands Gate Nos. 1761 and 1768 at TVA Lanja, Village Gawhane are 212 and 352 gunthas, ie., five acres and over eight acres respectively, whereas area of room Nos. 205 and 206 (combined) is 225 sq.ft. Carpet area, 270 sq.ft. Built up area excluding furniture and fixtures. Besides, there are three other properties which ha\\ c been taken over by the Official Liquidator situate at Dahivad Tal. Shirpur, Dist. Dhule, at Shirpur proper-District Dhule, at Murbad-District Thane. The land situate in Thane District is agricultural land and a bungalow and possession whereof has been taken recently on 9-5-2007. However, one security guard per shift has been appointed in respect of said property. Similarly, only one security guard per shift is appointed in respect of the property situate at Shirpur which admeasures about 1299 sq. ft.. Insofar as property as Dahivad is concerned, the same admeasures about 46 acres. In relation to the said property, justification for appointing two guards per shift is understandable, but insofar as properties situate at Ratnagiri which are hardly about four and eight acres respectively, it is incomprehensible that two guards per shift were necessary. Besides, the question still remains is as to why the Official Liquidator has failed to take steps to sell the properties in question since 2001. Atleast properties at Ratnagiri, Shirpur and Dahivad, possession whereof has been taken as back as in October 2001, no explanation is forthcoming as to why steps as required by the provisions of Companies Act, within reasonable time have not been taken by the Official Liquidator. There is nothing to indicate that stay from any Court was operating in relation to such sale.

(b) As noted earlier, the inevitable conclusion is that the delay in sale has resulted in piling of the security charges. The claim of the applicant in relation to providing security to five properties has piled up to the extent of about 45 lakhs since October, 2001. If the properties were to be sold with promptitude, there would have been no reason to continue the security arrangement for such a long period. All these aspects will have to be addressed in appropriate enquiry to ascertain whether it is an act of commission or omission of the officials of Official Liquidator and connived with the security agencies. In the event it is found that the inaction was on account of such connivance, the claim of the concerned security agency would become questionable in which case the matter will have to be viewed in different perspective.

(c) For the time being suffice it to observe that the Official Liquidator will have to consider all these aspects before the claim of the applicant for outstanding dues is accepted. The Official Liquidator is directed to ensure that all the immovable properties are put to sale within the time specified by law and in any case within reasonable period from today. The applicant security agency would be entitled for payment subject to the outcome of the enquiry required to be undertaken in terms of the observations made in this order.

Re.: Company Application No. 1009 of 2007

(a) The company was ordered to be wound up in terms of order dated 7-12-1998. Consequent thereto the Official Liquidator took possession of the assets of the company in liquidation on 26-6-2000 and simultaneously appointed the applicant as security agency to safeguard the assets of the company in liquidation. The applicant deployed two guards per shift in three shifts i.e. totally six guards round "O" clock. However, this strength of security guards has been reduced with effect from 25-8-2005 to only one guard per shift. The assets of the company in liquidation have been sold in Court auction on 4-5-2006. In view of the sale of the assets, the services of security agency was discontinued from 6-6-2006. It is seen that no payment has been made to the applicant since the date of appointment. To preserve the assets of the company which were originally estimated at around Rs. 10 lakhs, two guards per shift were deployed on the factory premises. Whereas, the claim as aforesaid of the applicant agency has piled up to around Rs. 14 lakhs towards security charges in respect of the said immovable assets. However, when both the movable as well as immovable assets were put to sale, the sale has fetched only Rs. 17 lakhs. The figures speak for themselves as to the manner in which the security services were continued for unreasonably long period in the first place and by appointing excessive security guards per shift coupled with the fact that no steps were taken to sell the property even when there was no stay order operating in relation to such properties. All these matters will have to be enquired into at the appropriate level and taken to its logical end.

(b) The argument of the applicant that UCO Bank has already agreed to take the burden of security charges and the sale of assets has been at the instance of UCO Bank, the applicant be paid the outstanding dues from the said sale proceeds, does not commend to me. The counsel for the Official Liquidator points out that UCO Bank registered protest and disputed the factum of services offered by the applicant agency and liability to pay any amount for such services. All these aspects will have to be considered by the Official Liquidator while adjudicating the claim of the applicant after giving notice to the UCO Bank as well as to the other secured creditors.

(c) The counsel for the applicant would contend that the number of security guards to be appointed has been ratified by the Court. That argument does not commend to me. Similar contention ; ms already been answered by me in the earlier part of this judgment.

Re.: Company Application No. 101 of 2008

(a) As far as Company Application No. 101 of 2008 is concerned, the winding up order came to be passed on 23-1-2004. The Official Liquidator was, however, appointed as Provisional Liquidator by order dated 19-10-2001. The Official Liquidator took over possession of the assets of the company in liquidation on 20-2-2002 and appointed the applicant security agency to safeguard the said property. Although the Official Liquidator took possession of movable and immovable assets of the company in liquidation, however, in due course, it transpired that the property possessed by the company in liquidation was leasehold property. The owner of the property approached for possession of the said property. I am informed that the Rent Court has already decreed the suit for possession filed by the owner. On the basis of said Decree, the bailiff has taken forcible possession of the immovable property. The owner has, however, given an undertaking that the movable assets lying in the premises will be preserved. That assurance was given on 4-2-2005 by the owner. It appears that initially the security agency was not permitted to enter the premises on and from the date when the possession of immovable property has been taken over by the owner. That fact is conceded in the communication sent by the security agency dated 3-6-2007 addressed to the Official Liquidator. The security agency called upon the Official Liquidator to relieve them from their assignment and pay the outstanding dues. There is nothing to indicate as to what steps have been taken by the Official Liquidator in spite of said communication. The fact remains that originally nine security guards and three supervisors were appointed on 20-2-2002 to protect the movable property of the company in liquidation, the estimated valuation whereof is over Rs. 40.20 lakhs. However, strength of security guards came to be reduced to two guards per shift from 6-2-2005 after the owner took over possession of the immovable property and gave an undertaking to preserve the movable assets of the company in liquidation. As a matter of fact, after February, 2005, in what manner two security guards were providing security to the movable assets has not been placed on record. On the other hand, the communication sent by the security agency to the Official Liquidator would indicate that the security guards of the applicant were not even permitted to enter the premises. If so, there is no question of any security service offered atleast since February, 2005. It necessarily follows that the claim of the applicant of having provided security even after February, 2005 becomes doubtful. At any rate, no explanation is forthcoming as to why the security guards were continued in spite of undertaking of the owner which has been accepted by the Official Liquidator in February, 2005.1 am informed that the security agency has been discontinued with effect from 31-5-2005. The movables of the company in liquidation are presently in the custody of the owners of the immovable property. Taking over all view of the matter, the appropriate course is to direct the Official Liquidator to examine the claim of the applicant keeping in mind the observations made in the earlier part of this judgment and submit report to this Court for such directions as may be advised.

Re.: Company Application No. 100 of 2008

(a) The Official Liquidator has been appointed as Provisional Liquidator in terms of order dated 14-3-2000. The Official Liquidator took possession of the movable and immovable assets of the company in liquidation. The movable assets of the company consists of following:

Insofar as immovable assets are concerned, the factory premises is situate at Survey Nos. 290/297, Village Kondle, Kudus Aghai Road, Tal. Wada, Distt. Thane. Initially nine security guards were appointed to safeguard the property to work in shifts namely two guards and one supervisor per shift. However, after deliberations with the secured creditors in the meeting of 13-6-2000, it was agreed that two security guards per shift and over all one supervisor, thus making the total strength to seven persons, would be more than sufficient. Going by the said report which is a conscious decision taken by the Official Liquidator at the instance of secured creditors. It is possible to take a view that the security strength provided at the site was necessary. However, the question that remains to be addressed is why appropriate steps were not taken by the Official Liquidator for disposal of the movable and immovable assets expeditiously although there was no impediment for such sale. Almost eight years have elapsed but no steps to sell the assets in question have been taken. The statement submitted by the Official Liquidator concedes the position that no attempt to sale the property has been made for all these years. Resultantly, the security charges have piled up to around Rs. 19 lakhs. The Official Liquidator ought to have called upon the secured creditor to deposit the security charges amount besides taking steps to sell the assets of the respondent company. The Official Liquidator shall take necessary steps in this behalf and submit report forthwith for seeking appropriate directions from the Court.

Re.: Company Application No. 1007 of 2007

(a) The winding-up order was passed on 8-6-1994. Consequent thereto the Official Liquidator took over possession of the assets of the company in liquidation on 5-1-1999 and simultaneously appointed the applicant security agency to safeguard the immovable property at Village Usarli Khurd, Tal. Panvel, Distt. Raigad. Initially the applicant claims to have deployed two guards per shift i.e., six guards. However, the strength of guards was reduced to one guard per shift i.e., three guards per day with effect from 1-9-2005. Be that as it may, the total outstanding dues claimed by the applicant is in the sum of Rs. 9,04,551 payable on account of security charges with effect from 5-1-1999 till 31 -12-2007. The reason why initially two security guards were appointed per shift from 1999 and which arrangement was continued till September 2005, is not forthcoming. In any case, if the applicant could manage with one guard per shift since September, 2005. I see no justification as to why same arrangement could not have been accepted as proper arrangement with effect from 5-1-1999 itself. In the present case, although issue relating to excessive number of guards would be relevant for the period from January 1999 till September 2005, but there is yet another facet which needs to be considered, inasmuch as, no reason is forthcoming as to why the Official Liquidator was not in a position to proceed with the sale of the movable assets so that recurring liability would have been reduced. The amount payable towards security charges to the applicant has now piled up to over Rs. 9 lakhs. This is obviously on account of the inaction or act, of omission and commission of the officials of Official Liquidator in not taking prompt steps for sale of the assets in terms of requirements of provisions of Companies Act, and at any rate within a reasonable period. These aspects will have to be considered by the Official Liquidator in the light of observations made in the earlier part of this order while examining the claim of the applicant and to submit report seeking appropriate directions regarding payment to the applicant as well as sale of the immovable properties in question.

General

That takes us to the nature of directions to be issued in the present set of applications so as to obviate further loss to the stakeholders of the company in liquidation. In that context I had called upon the Official Liquidator to furnish the names of companies where the secured creditors have set up their claims. Pursuant thereto the Official Liquidator has placed on record that there are about 37 companies in relation to which the secured creditors have registered their claims. Insofar as those companies are concerned, the Official Liquidator may be free to call upon the secured creditors to take over the liability of security services engaged for preservation of assets of the company in liquidation. The secured creditors may be called upon to deposit commensurate amount. If such deposit is made, the Official Liquidator may be free to disburse appropriate amount to the security agency only after thorough enquiry in respect of relevant matters and on recording clear opinion that the security agency is entitled for such amount. The amount, however, be disbursed to the concerned security agency only after taking prior permission of the Court.

Insofar as companies in which there are no claims of secured creditors (about 16 in number), as indicated in the chart by the Official Liquidator, obviously the Official Liquidator will not be able to create funds to discharge the liability of the security agencies until the assets are sold in auction.

It is also noticed that out of 104 companies at least in respect of 60 companies, proceedings are pending before the Debts Recovery Tribunal at the instance of secured creditors. Obviously, so long as those proceedings are not finally terminated, the Official Liquidator will not be in a position to take any precipitative steps. However, the Official Liquidator in those cases may move the concerned Debts Recovery Tribunal so as to persuade the Tribunal to dispose of the assets of the company in liquidation so that sale proceeds can be invested to be made subject to the outcome of DRT proceedings. Until such time, the secured creditors at whose instance proceedings before the DRT are pending, should be made liable to pay proportionate security charges. There can be no doubt that if such application is moved before the DRT, suitable orders would be passed in the interest of all concerned. For the purpose of sale of assets either by the Official Liquidator or the secured creditors at whose instance the DRT recovery proceedings are pending is common. Obviously, both would like to realize the best value of the assets of the company in liquidation so as to settle the outstanding claims and avoid paying recurring cost on security service charges therefor.

Needless to observe that in respect of the company in which no such DRT proceeding is pending and where there is no impediment in sale of the assets of the company in liquidation, there is no reason for prolonging the process of sale. In such cases, the Official Liquidator shall ensure that the assets of the company in liquidation are immediately put up for sale forthwith by following necessary procedure. It is only on realization of the sale proceeds that the claim of the concerned security agency can be satisfied or settled out of such amount to the extent it is found to be acceptable and legitimate.

In other words, in all cases, unless there is impediment in proceeding with sale of the assets of the company in liquidation, the Official Liquidator shall be obliged to take immediate steps for sale of the assets of the company in liquidation. While putting up the assets of the company in liquidation for sale, the Official Liquidator may have due regard to the fact as to whether it is possible to sell the same as one lot or separately so as to derive best returns therefrom. In case, the Official Liquidator is of the opinion that the movable assets should be put up for sale in separate lot, he may do so by seeking prior directions from the Court in that behalf at the earliest. In any case, once the movable assets of the company are sold and the sale of immovable assets is required to be deferred, depending on the nature of immovable property, the Official Liquidator shall issue instructions for reducing the number of security personnel so as to lessen the liability of the company in liquidation on that head.

It was argued on behalf of the applicants that the issue of payment of outstanding dues towards security services should not be linked with the sale of assets of the company. Instead, the Official Liquidator be directed to pay the due amount from and out of the Consolidated Funds. This argument clearly overlooks that the Consolidated Fund has been created under the Court''s Order for a particular purpose. It is noticed that the Consolidated Fund was created in terms of order passed by the Company Judge on 9-11-1978 on the report of the Official Liquidator dated 7-11-1978. In the said report, the Official Liquidator had noted that as per the prevailing practice in the office of the Official Liquidator at the relevant time company staff were working as Senior Assistants in the General Cadre, though the Court had sanctioned 17 Assistants and whose services were engaged for effectuating the order of winding up in respect of different companies. The Official Liquidator was of the view that for logistical convenience it would be appropriate to create a consolidated fund to be formed by drawing required amounts from the accounts of various companies so that the salary of the staff employed by the Official Liquidator can be paid from the said fund. That suggestion was made as common staff was employed by the Official Liquidator to handle the liquidation proceedings of all the companies where winding up order has been passed. In other words, the consolidated fund was created for the limited purpose of "paying salaries of the company paid staff" from the said fund. Accordingly, it is not possible to accede to the request of the applicants to issue direction to the Official Liquidator to disburse their outstanding dues from that fund.

Insofar as applicants are concerned, they are providing security services in respect of specific companies in liquidation. It is not as if their services are availed for all the companies under the control of Official Liquidator as is the case of the company paid staff. Moreover, as noted earlier, the outstanding dues of ten security agencies in respect of all the 104 assignments is over Rs. 12.87 crores. If the claim of the applicant is accepted as it is, it will far exceed the amount available in the consolidated fund to the extent of Rs. 9.28 crores. As aforesaid, the fund is required to defray the salaries and charges of Rs. 8.29 crores, towards Printing and Stationery Rs. 55.24 lakhs and Office Expenses Rs. 43.45 lakhs. In this view of the matter, there is no question of paying outstanding dues of the security agencies (applicants herein) out of the consolidated fund.

For the aforesaid reasons, all the applications are being disposed of by this common order in the following terms:

(A) The Official Liquidator shall examine the claim of each of the applicant herein and other security agencies whose claims are pending before him, keeping in mind the observations made hitherto;

(B) The Official Liquidator shall ensure that the assets (movable and immovable) of company in liquidation in respect of which there is no claim of any secured creditor and there is no impediment for sale of such assets, shall take steps to sell those assets forthwith by following necessary procedure and sale proceeds recovered from such sale shall be disbursed in accordance with law;

(c) In cases where the secured creditors have set up claims in respect of t-the assets of company in liquidation, the Official Liquidator shall call upon the secured creditors to deposit suitable commensurate amount towards security charges to be paid to the concerned security agency after due verification of its claim. In addition, if there is no impediment to sell the assets (movable/immovable) of such company in liquidation, the Official Liquidator may simultaneously ensure that the assets are put up for sale forthwith by following necessary j procedure;

(D) In cases where the secured creditors of any company have instituted recovery proceedings before the DRT, the Official Liquidator shall forthwith move the concerned DRT praying for sale of the assets of the company and to invest the sale proceeds in suitable fixed deposit scheme to derive best returns thereon, which amount can be disbursed subject to such orders to be passed by the competent ( Court;

(f) Copy of this order be forwarded forthwith to the Secretary, Ministry of Company Affairs, Government of India for information and taking necessary action as may be advised in the light of observations made hereinbefore.