TMI Blog2002 (2) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... and Suhan Traders and the same persons were also directors in Parag Chemicals (P.) Ltd. and Sukan Laboratories (P.) Ltd. over and above the company in liquidation. It is the case of the workers that the said firms had borrowed monies from Kalupur Commercial Co-operative Bank Ltd. (for brevity Kalupur Bank ) and Manekchowk Co-operative Bank Ltd. (for brevity Manekchowk Bank ). On account of non-payment of those loans, the above named banks filed suits against the aforesaid firms before the Board of Nominees where decrees were passed against the firms, partners and their guarantors. The sale proceeds during the course of execution proceedings are lying deposited with the City Civil Court, Ahmedabad. The workers prayed that the properties which have been sold in the aforesaid execution proceedings really belong to the company in liquidation and, therefore, the workers have a claim over the same along with the secured creditors and, therefore, the amounts lying with the City Civil Court, Ahmedabad, should be distributed amongst the workers and the secured creditors of the company in liquidation. 2.1 In February/March, 1993, this court granted ad interim /interim stay of the exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 529 and 529A of the Companies Act, 1956 over the said amounts lying in the City Civil Court. 5.1 It is further submitted that this court has the power and authority to lift the veil and to give a finding that the properties in question, which have been sold in the course of execution proceedings before the City Civil Court, really belong to the company in liquidation. In support of the said contention, reliance has been placed on the decisions of the Supreme Court in State of U.P. v. Renusagar Power Co. AIR 1988 SC 1737, Life Insurance Corpn. of India Ltd. v. Escorts Ltd. AIR 1986 SC 1370, Sudarsan Chits (I) Ltd. v. G. Sukumaran Pillai AIR 1984 SC 1579, D.K. Khader v. Union of India AIR 2001 Kar. 176, Food Corpn. of India v. Evdomen Corpn. AIR 1999 SC 2352, Viral Filaments Ltd. v. Indusind Bank Ltd. [2001] 4 Comp. LJ 44 (Bom.) and also in U.K. Mehra v. Union of India AIR 1994 Delhi 25. 5.2 In reply, Mr. S.B. Vakil, learned counsel for Kalupur Bank, has raised a preliminary contention that Company Application Nos. 66 to 69 of 1993 are not maintainable as they do not state the provisions of law or the rule under which the applications are filed. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate entities, be covered with the corporate veil of the company in liquidation, and that this is quite different and opposite to the lifting the corporate veil of the company which is before the court. It is submitted that since the properties which were sold in the course of execution proceedings belonged to the partnership firms which were debtors of the two co-operative banks in question, the workers of the company in liquidation have no right to make any claim on the sale proceeds pursuant to the sale of the properties of the partnership firms, as the workers can only look to the properties of the company in liquidation. 5.6 It is further submitted that in any view of the matter, there is nothing to show that the properties in question were purchased out of the funds of the company which is now in liquidation. Hence, on merits, the workers union have no case. 5.7 Mr. U.D. Shukla, for the Manekchowk Co-operative Bank Ltd., has also adopted the aforesaid submissions and further submitted that so-called affidavits of Madhukant Pranlal Shah and Indravadan Pranlal Shah were filed in proceedings to which the banks were not parties and that, in any view of the matter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the claim over the properties which are sold in the course of execution proceedings before the City Civil Court, which are properties of the company in liquidation and not of the partnership firms. 8.1 Reliance is also placed on the decisions of the Apex Court in Uttam Singh Duggal Co. Ltd. v. United Bank of India [2000] 7 SCC 120 and Re: Suo Moto Proceedings Against Mr. R. Kuruppan AIR 2001 SC 2204 in support of the contention that admissions can be relied on for passing final orders and that the affidavits do constitute valid evidence. It is submitted that merely because the promoters of the company in liquidation had formed separate partnership firms and companies in order to avoid applicability of relevant tax laws and labour laws, it did not mean that the properties standing in the name of the firms cannot be treated as properties of the company in liquidation. 9. Having heard the learned counsel for the parties, it appears to the court that various proceedings were taken out by the two co-operative banks, viz. , Kalupur Commercial Co-operative Bank Ltd. and Manekchowk Co-operative Bank Ltd. for recovery of their dues/advances to different partnership firms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. 12. However, according to the workers union, because the directors themselves had admitted in the affidavit dated 1-12-1992 in Company Petition No. 39 of 1990 and in the affidavit dated 21-8-1991 in Misc. Civil Application No. 498 of 1989 that the partnership firms and the company in liquidation were treated as one for the purpose of management and finances and, therefore, no further material is required to be produced by the workers. 12.1 The contention is misconceived, because the affidavits merely indicated that the partnership firms and the company in liquidation were under the common management. The affidavits did not indicate that the properties of the partnership firms were purchased with the funds made available by the company in liquidation. The secured creditors like the two co-operative banks had advanced monies to the partnership firms and, therefore, the partnership firms as well as the respective partners were held to be liable to pay the banks dues and, in the execution proceedings, the properties of the partnership firms and their individual partners have been sold and the proceeds are lying before the executing court, being the City Civil Court at Ahm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Companies Act and held that sub-section (2) was introduced to section 446 to enlarge the jurisdiction of the court winding up the company so as to facilitate the disposal of winding up procee- dings. In view of the said provision, the Official Liquidator is not required to file suits in different courts to realise and recover the claims and subsisting debts owed to the company in liquidation. If such a provision was not there, the Official Liquidator would have been compelled to file suits, appeals, etc., which would not only result into multiplic- ity of proceedings, but would hold up the progress of the winding up proceedings and that it was, therefore, inteded that the company in liquidation must be saved from this prolix and expensive litigation and the disposal of winding up proceedings must be accelerated. 15.1 There is no dispute about the object underlying the provision of section 446(2). But when the workers have not come with any material, nor has the Official Liquidator come out with any case that the properties standing in the name of the partnership firms were really the properties of the company in liquidation or were purchased from the funds made available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... element of the public interest, the effect on parties who may be affected, etc. 17.1 In the instant case, on the basis of the material on record which merely consists of statements made by the directors of the company in liquidation who were also partners in some of the partnership firms whose properties have been sold in execution proceedings for recovery of advances taken by the partnership firms which merely indicate that the partnership firms and the company were under the common management, there is nothing to indicate that they were inter-connected financially. Applying the aforesaid test, it is not possible to state that the partnership firms and the company were inextricably connected as to be, in reality, part of one concern. 18. Reliance placed is on the Bombay High Court decision in Viral Filaments Ltd. s case ( supra ) is also misconceived. There, the court was concerned with the interpretation of the decision of the Apex Court in Allahabad Bank v. Canara Bank [2000] 4 SCC 406. In the instant case, the court is not concerned with the alleged conflict between the provisions of the Companies Act and the provisions of the Recovery of Debts due to Banks and Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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