Ol Of M/S Khodiyar Pottery Works Limited (In Liqn) vs. State Bank Of INDIA

Facts

The Official Liquidator (OL) of M/s. Khodiyar Pottery Works Limited (in liquidation) filed a report seeking ratification of appointing security guards and permission to pay their bills. The company was ordered to be wound up in 1999, and a Sale Committee was constituted in 2000. Movable assets, including superstructure, were sold for Rs. 1.11 crores. Six security guards were employed from M/s. Blockade Defence Service, a panel agency, from December 4, 2019, to safeguard the company's assets. The security agency submitted a bill of Rs. 1,12,799/- for the period December 4-31, 2019, which included GST. The company's account had Rs. 10,86,296/- available as of October 2019, but these funds were reserved for other expenses. The OL requested permission to pay the security bill from available company funds or, if insufficient, from a common pool fund maintained for various companies in liquidation, subject to future reimbursement from asset sales.

Held

The Court considered the averments made in the report and acknowledged that the Official Liquidator had appointed security guards from M/s. Blockade Defence Service to safeguard the company's assets. The security agency had raised a bill of Rs. 1,12,799/-, which required payment. The Court permitted the Official Liquidator to pay this amount of Rs. 1,12,799/- to M/s. Blockade Defence Service from the common pool funds managed by the Official Liquidator. It was further directed that this amount would be reimbursed as and when such funds are realized from the sale of the company's assets in the future, after obtaining a specific order from the Court for such reimbursement. The Court did not explicitly ratify the appointment of security guards as a separate issue but implicitly approved the expenditure by permitting payment. The issues regarding payment from the company's account were superseded by the direction to use common pool funds.

Key Issues

1. Whether the Official Liquidator's action in appointing security guards for safeguarding the assets of the company in liquidation is to be ratified by the Court? 2. Whether the Official Liquidator is permitted to pay the monthly security bill/expenses from the funds available in the company's account? 3. If sufficient funds are not available in the company's account, whether the Official Liquidator is permitted to pay the monthly security bill/expenses from the common pool fund of various companies in liquidation, subject to adjustment against future realization of sale proceeds? Petitioner's Contentions (Official Liquidator): The Official Liquidator contended that the appointment of security guards was necessary for safeguarding the company's assets. The security agency's bill of Rs. 1,12,799/- for December 2019, calculated as per minimum wages and including GST, needs to be paid. While funds were available in the company's account, they were earmarked for other expenses. Therefore, permission was sought to utilize company funds or, alternatively, the common pool fund for payment, with a provision for future reimbursement from asset sales. No specific authorities, circulars, or precedents were cited in the judgment for the petitioner's arguments.