M/S Ap Steels LTD And Various Companies (In Liqn) vs. No Respondent

Held

The Court held that the audit report dated 21.08.2020 is taken on file. The Official Liquidator is permitted to pay M/s. T. Badarinath & Associates the audit fee of Rs. 40,000/- plus GST thereon from the Estate and Establishment Fund Account. The Court also ordered that the cost of the application and any other incidental expenses of auditing do come out of the funds of the Estate and Establishment Fund Account. The decision was based on the reasons stated in the affidavit filed along with the Judge's Summons and the absence of any objection. The Court found no impediment to granting the prayers sought by the Official Liquidator. The ratio decidendi is that where an audit report is duly submitted by a chartered accountant for companies in liquidation, and there are no objections, the High Court, exercising its powers under the Companies Act and Rules, will permit the payment of audit fees and associated costs from the liquidation funds.

Facts

The Official Liquidator, attached to the High Court for the State of Telangana, filed a Company Application under Section 462 of the Companies Act, 1956, read with Rules 9, 302, and 309 of the Companies (Court) Rules, 1959. The application sought to take on record the audit report dated 21.08.2020 for the period 01.04.2018 to 31.03.2019, submitted by M/s. T. Badarinath and Associates, Chartered Accountants, on the Estate and Establishment Fund and Company Paid Staff Terminal Benefit Fund accounts. The Official Liquidator also prayed for permission to pay an audit fee of Rs. 40,000/- plus GST thereon from the Estate and Establishment Fund Account and for costs and incidental expenses of auditing to be borne by the same fund. The application was supported by an affidavit and heard by the High Court.

Key Issues

1. Whether the audit report dated 21.08.2020, submitted by M/s. T. Badarinath and Associates for the period 01.04.2018 to 31.03.2019, should be taken on record by the Court? (Question of procedure/administration) 2. Whether the Official Liquidator should be permitted to pay an audit fee of Rs. 40,000/- plus GST thereon to the auditor from the Estate and Establishment Fund Account? (Question of financial propriety) 3. Whether the costs of the application and other incidental expenses of auditing should be directed to come out of the funds of the Estate and Establishment Fund Account? (Question of financial propriety) Contentions: Petitioner (Official Liquidator): Argued that the audit report was duly submitted and sought permission for payment of audit fees and associated costs from the designated fund, citing the reasons stated in the affidavit. No specific statutory provisions or precedents were explicitly mentioned in the arguments recorded, beyond the initial application under the Companies Act and Rules. Revenue/State: No arguments were recorded for the Revenue or State in the judgment.