1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY APPLICATION NO.483 OF 2005 IN COMPANY PETITION NO.560 OF 1998 WITH O.L.R. Rajindra Karamsingh Walia Applicant Versus The Official Liquidator of M/s.Patel Synthetics Respondent AND COMPANY APPLICATION NO.748 of 2007 Rajindra Karamsingh Walia Applicant Versus The Official Liquidator of M/s.Megaware Computers Respondent AND COMPANY APPLICATION NO.993 OF 2006 CD Security Services Network Ltd. Applicant Versus M/s.Mohan Carpets (India) Ltd. And anr. Respondents AND COMPANY APPLICATION NO.861 OF 2007 Rajindra Karamsingh Walia Applicant Versus 2 The Official Liquidator of M/s.Ajit Glass Works Pvt.Ltd. Respondents COMPANY APPLICATION NO.738 OF 2007 IN COMPANY PETITION NO.382 OF 1996 Rajindra Karamsingh Walia Applicant Versus The Official Liquidator of M/s.Industrial and Research Institute Pvt.Ltd. Respondent AND COMPANY APPLICATION NO.1007 OF 2007 Guruda Keepers (India) Pvt.Ltd. Applicant Versus The Official Liquidator of M/s.Snehi Good Home Respondent AND COMPANY APPLICATION NO.1009 OF 2007 Guruda Keepers India Pvt.Ltd. Applicant Versus The Official Liquidator of M/s.Pharma Rinni Respondent AND COMPANY APPLICATION NO.614 OF 2007 C.D.Security Services Network Ltd. Applicant Versus The Official Liquidator of M/s.Rajesh Dyeing Respondent 3 AND COMPANY APPLICATION NO.615 OF 2007 C.D.Security Services Network Ltd. Applicant (In Liquidation) Versus The Official Liquidator of M/s.Enari Finance Respondent AND COMPANY APPLICATION NO.512 OF 2007 M/s.C.D.Security Services Network Ltd. Applicant Versus The Official Liquidator of M/s.Nisarga Forest Respondent AND COMPANY APPLICATION NO.100 OF 2008 Guruda Keepers India Pvt.Ltd. and anr. Applicant Versus The Official Liquidator of M/s.Fabwell Auto- Motive. Respondent AND COMPANY APPLICATION NO.101 OF 2008 IN COMPANY PETITION NO.1125 OF 2001 Guruda Keepers India Pvt.Ltd. Applicant Versus The Official Liquidator of M/s.HES Ltd. Respondent 4 APPEARANCE :- In Company Application Nos.483/2005, 738/2007, 748/2007, 861/2007, 1007/2007, 1009/2007, 100/2008, 101/2008 : Mr.C.N.Mehta for applicants. Mr.Vishwajit P. Sawant for Official Liquidator. Mr.S.Ramakanta, Deputy Official Liquidator present. In Company Application No.993 of 2006 : Mrs.Shakuntala Joshi for applicant. Mr.Vishwajit P. Sawant for Official Liquidator. Mr.S.Ramakanta, Deputy Official Liquidator present. In Company Application Nos.512/2007, 614/2007, 615/2007 : Mrs.Molina P. Thakur for applicants. Mr.Vishwajit P. Sawant for Liquidator. Mr.S.Ramakanta, Deputy Official Liquidator present. CORAM : A.M.KHANWILKAR, J. DATE : 05th March 2008. ORAL JUDGEMENT :- 1. All these applications shall stand disposed off 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 off by separate orders passed on 3rd March 2008 and 5th 5 March 2008 respectively as not pressed. In other words, the present common order will dispose off remaining twelve applications on board. 2. 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 wherefor 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. 3. The principal reason cited for non payment of the dues is on account of unavailability of funds in the account of the concerned 6 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. 4. As the issue raised in the present set of applications was over- lapping and recurring one, I thought it appropriate to hear all the applications together so as to understand the gravity of the over all 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 7 requisite information. That information has now been compiled by the Official Liquidator and placed on record along with his affidavit dated 26th February 2008. 5. It is seen that the Official Liquidator has framed a panel of security agencies. Until 20th January 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 20th January 2003 by including 15 additional security agencies, and by subsequent report dated 28th January 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, 8 C.D. Securities Network Limited, Garuda Keepers (I) Pvt.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 Pvt.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) Pvt.Ltd. in two; Industrial Security and Fire Services Bombay Pvt.Ltd. in one and Seven Star Security Services India Pvt.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 :- Sr. No. Name of the Security Agency Name of Directors/ Proprietor/ Partners 9 1 C.D.Security Services Network Ltd. 1. P.P.Singh Ahuwalia – M.D. 2. Sona Ahluwalia – Director 3. Gurucharan Singh – paid JMD. 2. Crack Detectives Pvt.Ltd. 1. Kanwaljit Kaur – M.D. 2. Gurucharan Singh – Director 3. Reliable Industrial Service 1. R.S.Walia 4. Bhagwati Allied Services 1. Ramesh Nagre 5. Guruda Keepers Pvt.Ltd. 1. Jogindra S. Kalan 2. Sandeep Shahhai 3. Harcharan Kaur Kalan 6. Mahalaxmi & Detectives Security Services 1. H.S.Walia – M.D. 2. Avinash Walia – Director 7. Sadguru Security and Consultancy Services 1. S.M.Pandey 5. 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 10 Official Liquidator to ten different security agencies is almost over Rs.12.50 crores. 6. 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.11.00 crores. 7. 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 11 observe that the bare perusal of the said chart would highlight the gravity of the matter under consideration. The said chart is marked “X”. 8. 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 theofficials 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. 9. 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 stake holders 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 12 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 Accountant, Valuers and in particular security agencies-to preserve and protect the assets of the company and to dispose off the same by realising its fair value for being distributed amongst the stake holders in the company in liquidation in accordance with the provisions of Companies Act. The Official Liquidator is obliged to dispose off 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 stake holders 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 off, naturally, for preserving the same, 13 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 stake holders in the company in liquidation, and at the same time result in distributing largesse to the security agencies for prolonged period, avoidable though. 10. 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 14 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 stake holders have alleged theft or siphoning away of the assets in spite 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 stake holders in the company in liquidation)? 11. 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 15 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. 12. 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. 13. 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 16 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. 14. 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 17th July 1998. The Official Liquidator took over the possession of the assets and properties of the said company on 07th December 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 :- Sr. Nos. Particulars Qty. Nos. Sr.No. In Valuation Report ROOM NO.1 : 1 Fire Extinguishers 10 1 17 Sr. Nos. Particulars Qty. Nos. Sr.No. In Valuation Report 2 Electrical Control Panels with Capacitors, Switch Boards etc. 1 2 3 Computer Tables size : 4'9”x2'x2 1/2' 17 3 4 Steel Cupboards Size : 4' x2 1/2' x1 1/2' 1 5 5 Slotted Angle Racks Size : 2' x4' x7' 3 6 6 Tube Light with Fittings 48 7 7 Type Writers : Make : Godrej 2 8 8 Chairs 10 9 9 Vacuum Cleaner 1 11 10 Screen Monitor Size : 11” and 12” Model : Essen Make : Wipro. 48 12 11 Tower Cabinets Desk Top Model : Fact Girder. 02) 06) 13 12 Printers with Key Board 3 14 13 Ceiling Fan Size : 48” 1 15 14 Mega Bite Computers Prospectus Books 02 Racks 16 15 ERSA-Lotange ESU-250 Spannunge – 380V Leistung-7KW 3x20' AMP. ERSA- Ernst Gmbh & Co. KG-D 6980 01 17 16 Two Sitter Sofa 1 18,(i) 17 Big Size Plastic Boxes with Books 2 19 ROOM NO.2 : 1 Slotted Angle Racks Size : 2' x4' x7' 13 6 2 Tube Light with Sittings 10 7 3 Monitor Screens 6 12 4 Wooden Tables Size :2' x2 1/2”x4' 2 20 5 Empty Steel Box 1 21 6 Printer Parts in Dismantled Condition 0 22 ROOM NO.3 1 Slotted Angle Racks Size : 7' x2' x4' 5 6 2 Wooden Tables Size : 2' x4' 2' 7 4 3 Sofa (Side) 4 18.(ii) 4 Double Sofa 1 18.(iii) 5 Wooden Racks Size : 3'x1 1/2' x6 ½' 9 23 6 Water Filter 1 24 7 Plastic Boxes with Assembly Components, Screws etc. Size : 10”x5”4” 25 25 18 Sr. Nos. Particulars Qty. Nos. Sr.No. In Valuation Report 8 Tube Light with Fittings 5 7 ROOM NO.4 : 1 Screen Monitor 8 12 2 Wooden Tables 6 4 3 Steel Frames Size : 43”x49” LOT 26 4 Slotted Angle Racks 2 6 5 Steel Cot 1 27 6 Fiber Plastic Chair 300 10 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 meters. 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.. 19 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 latter. 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 December 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 20 the three shifts for the earlier period, having regard to the nature of property which was required to be protected. Significantly, when the movables were disposed off 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 incomprenensible. Notably, such heavy security arrangement was continued for almost five years from 1998 till December 2003. 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 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 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 21 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 over all 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 over all situation prevailing in the office of the Official Liquidator during the relevant period which has been unravelled now. In my opinion, until proper enquiry is conducted and the larger questions enquired, the security charges from 07th December 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 22 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 self-same immovable property, which application will