2005 (12) TMI 290 - HC - Companies Law

Issues Involved:
1. Disbursement of funds realized from the sale of assets of the company-in-liquidation.
2. Claims of unsecured creditors.
3. Claims of secured creditors.
4. Preferential claims of workers and government dues.
5. Legal status and priority of Ahmedabad Municipal Corporation's (AMC) dues.

Issue-wise Detailed Analysis:

1. Disbursement of funds realized from the sale of assets of the company-in-liquidation:
The applicant, Agrawal Textiles, sought a direction to disburse the amount realized from the sale of the company's assets among the unsecured creditors. The assets, including machinery, book debts, stock-in-trade, land, and building, were sold, realizing Rs. 1,83,52,067. Initially, this amount was distributed among Punjab National Bank (PNB) and workers in a 3:1 ratio as per the court's order dated 10-5-2000. However, this order was reviewed, and it was determined that PNB's claim was secured only to the extent of Rs. 21 lakhs, leading to a refund of the excess amount.

2. Claims of unsecured creditors:
The applicant claimed Rs. 1,90,300 as an unsecured creditor. The Official Liquidator received claims from five parties, including Agrawal Textiles, totaling Rs. 2,98,359. The applicant and other unsecured creditors were directed to provide further evidence to support their claims. The court permitted the Official Liquidator to disburse the remaining amount to unsecured creditors after satisfying the preferential claims of workers and government dues.

3. Claims of secured creditors:
PNB initially claimed Rs. 6,57,84,690 as a secured creditor. However, after investigation, only Rs. 1,83,52,067 was found admissible. The court later determined that PNB's secured claim was limited to Rs. 21 lakhs, and the excess amount was refunded. PNB was considered an unsecured creditor for the remaining amount of Rs. 1,62,52,067.

4. Preferential claims of workers and government dues:
Workers' claims were initially assessed at Rs. 74,69,954 but were verified at Rs. 44,25,494. Workers received Rs. 34,88,800, with a remaining claim of Rs. 9,36,694. The court directed the Official Liquidator to pay this amount to workers before any payments to unsecured creditors. Government dues, specifically AMC's property tax claims, were also considered preferential under section 530 of the Companies Act, 1956.

5. Legal status and priority of Ahmedabad Municipal Corporation's (AMC) dues:
AMC claimed Rs. 1,07,04,997, including principal and interest. AMC argued that its dues should be treated as a first charge on the property, giving it priority over other creditors. However, the court held that AMC's claim should be examined under section 530 of the Companies Act, 1956, which provides for preferential payments in a winding-up scenario. AMC was entitled to dues as on February 1994, amounting to Rs. 13,77,858 plus the amount for the subsequent 12 months.

Conclusion:
The court directed the Official Liquidator to disburse the remaining funds among the unsecured creditors after satisfying the preferential claims of workers and AMC. The Official Liquidator was permitted to encash fixed deposit receipts if necessary to make the payments. The application was disposed of with these directions and observations.

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