Public Exchequer Funds Are Allocated For Specific Administrative And Operational Expenses For Liquidation Process, Not For Employee Benefits: Calcutta High Court

The Calcutta High Court held that using public exchequer funds for medical or terminal benefits from an Official Liquidator’s establishment charges account is generally not permissible. These funds are typically allocated for specific administrative and operational expenses related to the liquidation process, not for employee benefits.

The Calcutta High Court considered an application filed by the Company Paid Staff working in the Office of the Official Liquidator, High Court at Calcutta seeking the grant of terminal medical benefits along with exemption from Income Tax under Section 10(10) of the Income Tax Act.

The Bench of Justice Krishna Rao observed, “It is not denied that at present there is an accumulated fund of fixed deposit of Rs. 50,98,62,300.80/- which is lying in the Credit of Official Liquidator’s Establishment Charges Account. Funds available in the Credit of Official Liquidator Establishment Charges Account refers to the money held by the Official Liquidator specifically for covering the expenses of their office, including staff’s salaries, operational cost and other related charges. This account is distinct from other accounts related to the liquidation of specific companies and is used to ensure the smooth functioning of the Official Liquidator’s Office.”

Senior Advocate Ranjan Bachawat represented the Applicants, while Senior Advocate Manju Bhuteria represented the for the Official Liquidator.

Case Brief

An application was filed under Rules 308 and 309 of the Companies (Court) Rules, 1959, by the Company Paid Staff working in the Office of the Official Liquidator, High Court at Calcutta, seeking the grant of terminal medical benefits along with exemption from Income Tax under Section 10(10) of the Income Tax Act.

The Company Paid Staff submitted that the present retirement benefits for the regular Company Paid Staff are not enough to maintain the rest life and since it is not adequate to educate their children and to settle them. It was also submitted that He in the way of high living cost including education, medical and maintenance of the families of the Company Paid Staff, the emoluments, as received upon retirements, are actually hardship to maintain the rest of their life.

While the Official Liquidator contended that there is no provision for pension or any medical benefits for the Company Paid Staff after superannuation. It was further submitted that the regular Company Paid Staff does not have any entitlement of Contributory Provident Fund (CPF) or Central Government Health Scheme (CGHS) facilities and at present the regular Company Paid Staff are getting Rs. 2000/- per month as medical allowances.

Court’s Analysis

The Court opined that the account of Official Liquidator’s Office is used to cover expenses incurred by the Official Liquidator’s Office in carrying out the liquidation process, such as legal fees, publication costs and administrative overhead. These funds are typically allocated for specific administrative and operational expenses related to the liquidation process, not for employee benefits.

The Court referred to the decision of the Supreme Court in Official Liquidator vs. Dayanand & Ors.(2008) wherein it was held that the salaries and allowances payable to the Company Paid Staff should be suitably increased in the wake of huge escalation of living costs. The Hon’ble Court further directed the Official for increasing the emoluments of the Company Paid Staff.

However, the Court observed, that it did not find any reasons for allowing the terminal benefit as prayed for by the Company Paid Staff but it cannot be ignored that medical costs in India are rising. Thus, the Official Liquidator is directed to pay Rs. 3000/- per month as Medical Allowance to the Company Paid Staff from the 1st July, 2025 .

Accordingly, the Application was disposed of.

Cause Title:Fire & General Insurance Company Of India Ltd. (In Liqn.) -Andchandan Kumar Ganguly And Ors. V. The Official Liquidator, High Court, Calcutta

Appearance:

Applicants: Mr. Ranjan Bachawat, Sr. Adv. Mr. Sarosij Dasgupta, Adv Mr. Nilay Sengupta, Adv. Mr. Sujit Banerjee, Adv

The Official Liquidator: Ms. Manju Bhuteria, Sr. Adv. Ms. Arundhati Barman Roy, Ms. Shreya Choudhary, Adv.

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