The Official Liquidator vs. Nil

Held

The Court held that conducting an audit is mandatory for companies under liquidation that have transactions. It noted that the Official Liquidator had recommended three Chartered Accountant firms for the audit assignment. Considering the mandatory requirement for audits and the proposals made by the Official Liquidator, the Court was inclined to allow the application. The Court directed that the Official Liquidator be permitted to engage the Chartered Accountants as proposed and get the audit executed, paying each auditor a fee of Rs. 500/- plus GST per company. The audited accounts are to be submitted to the Court for further approval. The Court further permitted the Official Liquidator to make these payments from the funds of the respective companies in liquidation, or from the Estate and Establishment Fund Account if company funds were insufficient, subject to reimbursement. Crucially, for the 25 companies with no receipts or payments during the period 01.10.2024 to 31.03.2025, the Court dispensed with the filing of their half-yearly accounts and audits, as stated in Annexure-B.

Facts

The Official Liquidator, attached to the High Court of Telangana and Andhra Pradesh, filed a Company Application seeking approval for the allocation of 22 companies under liquidation to three Chartered Accountant firms for auditing their half-yearly accounts for the period 01.10.2024 to 31.03.2025. The application also sought permission to pay an audit fee of Rs. 500/- plus GST per company, as previously fixed by the High Court of Telangana in a prior order. Furthermore, the Official Liquidator requested to dispense with the filing of half-yearly accounts and audits for 25 companies that had no transactions of receipts and payments during the specified period. The application also detailed the procedure for payment of audit fees, including from the Estate and Establishment Fund Account of the Official Liquidator if company funds were insufficient.

Key Issues

1. Whether the Court should approve the allocation of 22 companies under liquidation to three specified Chartered Accountant firms for the audit of their half-yearly accounts for the period 01.10.2024 to 31.03.2025, and permit the payment of audit fees as proposed? 2. Whether the Court should permit the Official Liquidator to dispense with the filing of half-yearly accounts and their audit for 25 companies which had no receipts or payments during the period 01.10.2024 to 31.03.2025? Contentions of the Petitioner (Official Liquidator): The Official Liquidator argued that the 22 companies had transactions requiring audit for the specified period and proposed three Chartered Accountant firms for this task. They relied on a previous order of the High Court of Telangana (dated 08.04.2022 in Company Application No.8 of 2022 in R.C.C.No.2 of 1995) which fixed the auditor fee at Rs. 500/- plus GST per company, and requested this fee structure be extended. The Official Liquidator also contended that for the 25 companies with no transactions, dispensing with the filing of half-yearly accounts and audits was permissible under Rule 300 of the Companies (Court) Rules, 1959. Contentions of the Respondent (NIL): The judgment records no arguments from the respondent.