Delhi High Court Upholds Liability Of Company To Reimburse Official Liquidator's Security Expenses For Safeguarding Corporate Assets

Background of the Case

The winding-up process of the appellant company (M/s Connoisseur Buildtech Pvt. Ltd.) was going on in the year 2016. A disputed plot of the company was there in Greater Noida, which was secured by the official liquidator through a professional security agency, incurring costs exceeding Rs. 18 lakhs. In the year 2017, the winding-up of the company was conditionally recalled by the High Court; however, the company was required to reimburse the official liquidator for all the expenses.

Due to the failure of the company to pay the dues, the official liquidator filed the application seeking directions to recover the dues. The bench of a learned single judge was pleased to issue the direction, holding the company responsible for the costs.

Contention of the Parties

The appellant company argued that the property didn't belong to the company but to some other entity named M/s. Connoisseur Infrabuild Pvt. Ltd., and the official liquidator has acted negligently without verifying the ownership.

It also argued that the reliance on the statement of Mr. Anil Sharma, ex-director of the appellant company, recorded under Rule 130 of the Companies (Court) Rules, 1959, is wholly misconceived, as the same statement was recorded under threat and misrepresentation.

Per contra, the official liquidator relied on the doctrine of estoppel and argued that the appellants' silence and acquiescence induced the official liquidator to act to his detriment and incur substantial expenses in the bona fide discharge of his statutory duties.

Observations of the Delhi High Court

The High Court observed that under Section 454 of the Companies Act, 1956, and Rule 130 of the Companies (Court) Rules, 1959, the directors have a statutory duty to equip the liquidator with complete and accurate information. Therefore, the official liquidator was fully justified in relying upon these unambiguous representations, which constituted a binding acknowledgment of liability.

The Bench also noted that the ex-director had not only made detailed statements before the official liquidator but also issued a handwritten undertaking, agreeing to bear the expenses incurred.

Further, the bench noted that the recall order of winding-up clearly states that the subject property is an asset of the appellant company. The observation was passed on in the presence of the appellant's counsel, and no objections were raised. Also, the appellant didn't avail any statutory remedy of appeal either against the recall order or against the clarification order, which explicitly treated the subject property as an asset of the Appellant Company and unequivocally stipulated that the security expenses incurred for its protection were to be borne by the Appellant.

Case Name: M/s Connoisseur Buildtech Pvt. Ltd. through Mr. Anil Sharma (Ex-Director) v. Official Liquidator of M/s Connoisseur Buildtech Pvt. Ltd. & Anr.

Case No.: CO.APP. 9/2022, CM APPL. 55543/2022, CM APPL. 55545/2022 & CM APPL. 12382/2023

Coram: Justice Anil Kshetrapal and Justice Harish Vaidyanathan Shankar

Judgment Date: 17.10.2025