LEGAL PRINCIPLE: COMPANY LAW — Liquidation — Statutory Powers — Section 224 of Companies Act, 1968 — Custody of Company Property
PRINCIPLE STATEMENT
The word "appears" in Section 224 of the Companies Act, 1968, empowers the liquidator to take custody of property which appears to him to belong to the company, without first having the ownership determined by the court. Such taking of custody is preservative in nature and does not determine ownership.
RATIO DECIDENDI (SOURCE)
Per Ogundare, JSC, in Provisional Liquidator of Tapp Industries Limited v. Tapp Industries Limited (1995) NLC-2281991(SC) at pp. 19, 23; Paras. D–A, B–C.
"In a winding up by the court, the liquidator shall take into his custody, or under his control, all the property and choses in action to which the company is or appears to be entitled. The word 'appears' in Section 224 is significant; it empowers the liquidator to take custody of property which appears to him to belong to the company, without first having the ownership determined by the court. Such taking of custody is preservative in nature and does not determine ownership."
EXPLANATION / SCOPE
The liquidator may take custody of property that appears to belong to the company. Ownership need not be finally determined. The action is preservative, not adjudicative. The principle applies to winding-up proceedings. The liquidator acts to prevent dissipation. The court will later determine ownership if disputed. The rule protects the company’s assets. The liquidator must act in good faith. The word “appears” gives broad authority. The principle is statutory.