Facts of the Case

In a decades-old winding-up proceeding (Company Petition No.25 of 1984) concerning M/s Godavarikhani Chit Fund (P) Limited (in liquidation), the Official Liquidator sought sanction under Sections 457(1)(e) and 460 of the Companies Act, 1956 to pay a final dividend of 22 paise in the rupee to unsecured creditors, along with ancillary directions covering postal expenses, Central Government fee, audit fee (including GST) and court fees. On scrutiny of the calculation statement filed, the Court noted that even after the proposed payment, a balance of about Rs.7,139.39 would remain with the Official Liquidator.

Issues Involved

  1. Whether the Official Liquidator should be permitted to pay the proposed dividend of 22 paise in the rupee.
  2. Whether the residual balance should instead be used to increase the payout to unsecured creditors rather than being separately transferred.

Petitioner's Arguments

  • Sanction was sought to declare and pay the final dividend at 22 paise in the rupee and to meet incidental administrative expenses, including GST on the audit fee, from the company's available funds.

Respondent's Arguments

  • None on record – the application was unopposed, with the Registrar of Companies and Regional Director noticed for information.

Court Order / Findings

  • Rather than transferring the residual balance of approximately Rs.7,139.39 to the company's account, the Court directed the Official Liquidator to instead utilise that balance to increase the dividend payout to unsecured creditors, and disposed of the application accordingly.

Important Clarification

This is a Companies Act, 1956 winding-up matter. GST is mentioned only as a minor administrative expense (part of the audit fee) that the liquidator was permitted to pay from company funds; the order has no bearing on GST law itself.

Sections Involved

  • Companies Act, 1956 – Sections 457(1)(e) and 460 (powers of liquidator, sanction for payment)
  • Companies (Court) Rules, 1959 – Rules 9, 275, 276, 280, 290

Decision – In Favour of

Applicant (Official Liquidator) – the application was allowed, with a modification directing a higher dividend payout using the residual balance.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case Number: Company Application No. 444 of 2021 in Company Petition No. 25 of 1984
Coram: Justice T. Vinod Kumar
Date of Order: 28 July 2023

Link to Download the Order

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