Allowed

Official Liquidator of M/S Various Companies(in Liquidtion) v. Na

Gujarat HC9 May 2018OLR/50/2018

Case brief

AI extract

What is this about?

The Bench granted a report seeking permission for the Official Liquidator to carry out annual audits of Fixed Deposit Receipts (FDRs) and pay auditor fees of Rs. 15,000 from the Common Pool Fund to ensure transparency and accountability in fund management.

What did the court decide?

The prayers to permit annual FDR audit and to pay the auditor fees of Rs. 15,000 from the Common Pool Fund were granted.

Official Liquidator of M/S Various Companies(in… — Banking and Recovery | Gujarat HC (2018)

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C/OLR/50/2018 ORDER

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/OFFICIAL LIQUDATOR REPORT NO. 50 of 2018

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OFFICIAL LIQUIDATOR OF M/S VARIOUS COMPANIES(IN LIQUIDTION) Versus

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========================================================== Appearance:

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MR SAURABH M PATEL(5019) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1

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CORAM: HONOURABLE MR.JUSTICE C.L. SONI

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Date : 09/05/2018

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ORAL ORDER

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Following are the orders/ directions sought in paragraph no.10 of the present report:

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“a) That, the Hon’ble Court may be pleased to kindly note the unique initiative of FDR audit undertaken by the office of the Official Liquidator and be pleased to take on record the audit report dated 04.05.2018 as submitted by the auditor M/s. C.P.Jain & Co. in respect of FDRs kept by the Official Liquidator with various banks and consider the contents of the said report certifying the existing fund position in FDRs.

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b) That, the Hon’ble Court may be pleased to permit the Official Liquidator to carry out annual audit of FDRs and to submit audit report after the end of every financial year before the Hon’ble High Court for approval.

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c) That, the Hon’ble Court may be pleased to make payment of Rs.15,000/- to the auditor M/s. C.P.Jain & Co. (Rs.15,000/- plus taxes) from the Common Pool Fund maintained by this office in view of para 6 of the report.

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d) Such further and other orders and directions as may be considered just and appropriate by this Hon’ble Court may also be passed. ”

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Page 1 of 5

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C/OLR/50/2018 ORDER

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2. Paragraph nos.3 to 9 of the report, read as under:

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“3. That, the Official Liquidator most respectfully submits that as per the provisions of the Companies Act,1956 and Companies Court Rules,1959, there is no prescribed provision regarding how to ensure proper procedure regarding audit of the FDRs being maintained by the Official Liquidator out of the sale proceeds of the assets of the various companies (in liq.). Therefore, for the purpose of placing a reformative system regarding FDR audit comprising of tasks like verification of physical FDRs, books thereof and verification of bank records of all banks, those are maintaining such FDRs, comparative verification and analysis of records of Official Liquidator and Banks etc., the Official Liquidator has decided to carry out a FDR audit for such purposes, so as to ascertain as to whether the system, functionalism on O/o. Official Liquidator for FDRs and whether the details of FDRs in Official Liquidator office and in banks are genuine, correct or whether any improvement is needed in this regard.

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4) That, the Official Liquidator most respectfully submits that in accordance with the Rule 293 of the Companies Court Rules, 1959, as mentioned above, any surplus fund lying at the disposal of Official Liquidator is to be invested in the form of interest bearing Fixed Deposit Receipts (FDRs) with various banks. The purpose of this investment is to secure maximum return on the surplus funds till the permission and direction of the Hon’ble High Court is made for disbursement to the Secured Creditors, Workers and other stakeholders in due course.

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5) That, the Office of the Official Liquidator through a separate “FDR section” comprising of ICLS officer and Government Staff have been taking due care in the maintenance of such huge funds with proper books, records and documents. It has been as established practice of this office to verify the FDRs available in Official Liquidator records with the corresponding bank records in order to reconcile and confirm the exact fund position from time to time. However, since the number of FDRs are huge with a total fund of Rs.966.06 crores and the office of the Official Liquidator has limited staff handling the entire work of liquidation proceedings with respect to all companies in liquidation, a need was felt by

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Page 2 of 5

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C/OLR/50/2018 ORDER

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the Official Liquidator to carry out a FDR audit through some independent auditor by assigning them the said work of FDR audit and reconciliation thereof.

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6) That, the Official Liquidator submits that after due consideration of the facts that the office of the Official Liquidator is maintaining various FDRs of different amounts with various banks, it was decided that an independent FDR audit by a panel C.A. Firm may be carried out in order to verify and confirm the correctness of the existing fund position as per the FDR record of this office. Further, this initiative being the first of its kind by any of the Official Liquidator of the country has been taken in order to enhance transparency and accountability in the process of maintenance of funds by the Official Liquidator. For the first time, this unique FDR audit was undertaken and the task was assigned to C.A. Firm M/s. C.P.Jain & Co. from the panel of C.A. Maintained by office of Official Liquidator to carry out an independent and impartial audit of FDR records, after thorough verification with the concerned banks. Further, the said auditor was instructed to submit their audit report in time bound manner.

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7. That, it is submitted that the Official Liquidator has assigned the auditwork to M/s. C.P.Jain & Company, Ahmedabad for the audit/reconciliation of FDRs of various companies in liquidation in various banks. The scope of the audit includes verifying the physically available FDRs in the O/o. Official Liquidator, Ahmedabad and certifying the same, Further, the auditor was directed to cross verify the FDRs with respective banks ans secure a certified fund position from the banks. Thereafter, the auditor has to submit his report on the FDRs available with the office of Official Liquidator. In view of the above tasks, it was decided that audit fees will be paid Rs.15,000/- in accordance with the CA scheme approved by the Hon’ble High Court.

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8. In view of the facts and circumstances submitted at para 1 to 7 above and in view of the fact the such FDR audit would be beneficial for the purpose of accuracy in record and maintenance of FDRs and eventually shall enhance transparency in the system both in Official Liquidator office and bank, the Official Liquidator humbly proposes that the FDR audit under taken by the

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Page 3 of 5

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C/OLR/50/2018 ORDER

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Official Liquidator may be continued and carried out further on every financial year, if permitted and directed by the Hon’ble High Court in this regard. The Official Liquidator may be permitted to carry out such FDR audit after the end of the financial year i.e. 31^st March and submit his report alongwith audit report before the Hon’ble High Court for approval of the same by this Hon’ble High Court. The fee of such auditor to be paid by the Official Liquidator as per scheme sanctioned by the Hon’ble High Court at the relevant time.

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9. That, the office of Official Liquidator has received the audit report dated 04.05.2018 from FDR Auditor M/s. C.P.Jain & Co. The Hon’ble High Court may kindly take note that para 2 and 3 of the certificate issued by auditor clearly state that

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“This is to certify that the physical receipts of the Fixed Deposit with the various banks have been verified and reconciled from the records of Banks and found to be tallying. As per our verification total Fixed Deposits with various banks is Rs.966.06 Crores (Rupees Nine Hundred Sixty Six Crores and Six Lacs only) comprising of 1376 Fixed Deposits as per attached statement.

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We further certify that the records maintained by the Official Liquidator, High Court of Gujarat reflect true and fair view of the funds available by way of Fixed Deposit with the Office”

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Thus, the Auditor has duly certified the FDR position of O.L.Office and this is a clear endorsement and affirmation of the best practice of this office. A copy of audit report is annexed herewith and marked as annexure ‘A’. ”

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Learned advocate Mr.Saurabh Patel appearing for the Official Liquidator submitted that since there was no system prevailing and no procedure prescribed in law for the purpose of verification of the FDRs in the office of the Official Liquidator, it was thought by the office of the Official Liquidator to introduce reformative system by way of FDRs’ audit and to get the audit of FDRs conducted by the Chartered Accountant to ensure the proper verification of the FDRs and availability of the FDRs in the office of the Official Liquidator. Mr.Patel submitted that such audit by Chartered Accountant since is helpful, it

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Page 4 of 5

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C/OLR/50/2018 ORDER

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may be allowed to be continued, as presently for 1 year, the Chartered Accountant has done such audit and has given his report finding, that there is proper maintaining of the FDRs with the office of the Official Liquidator. He also requested to permit the Official Liquidator to pay the fees to the Chartered Accountant and also to permit him to continue to engage the Chartered Accountant for such purpose.

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The Court having heard learned advocate Mr.Patel and having considered the contents of the present report finds that while taking note of unique initiation of the FDRs audit undertaken by the office of the Official Liquidator and of the audit report dated 04.05.2018 at annexure-A submitted by the auditor M/s. C.P.Jain & Co. in respect of the FDRs kept by the Official Liquidator with various banks, the prayers sought in paragraph no.10 (b) and (c) could be granted. They are accordingly granted. The report stands disposed of.

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(C.L. SONI, J)

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Manshi

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Official Liquidator of M/S Various Companies(in Liquidtion) v. Na

Case brief

What is this about?

What did the court decide?

Official Liquidator of M/S Various Companies(in Liquidtion) v. Na

Case brief

What is this about?

What did the court decide?

What the court decided

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