TMI Blog2013 (11) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... er should be placed under the control of the OL and be disbursed only by the OL subject to the supervision of the Court - what required to be done was to associate the OL both at the stage of bringing the properties of the company in liquidation to sale as well as at the stage of the disbursal of the amounts. Jurisdiction of the Court - The question as to the jurisdiction of the Company Court vis-à-vis the powers of the DRT in relation to the company in liquidation was examined - The matter came to be referred to a three-Judge Bench as a result of the apparent conflict - The company in question was already under liquidation pursuant to the order passed by the Company Court - It was held by the Supreme Court that "whether the assets were realised by a secured creditor even if it be by proceeding under the SFC Act or under the Recovery of Debts Act, the distribution of the assets could only be in terms of Section 529 A of the Act and by recognising the right of the liquidator to calculate the workmen's dues and collect it for distribution among them pari pasu with the secured creditors. The OL had certainly to be associated in all the proceedings of sale by public auction or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her assignee of the debt was Stressed Assets Stabilization Fund ('SASF'). The DRT, Mumbai invited bids for the sale of the fixed asset, which was the factory premises at A-1, Surajpur Industrial Area, Gautam Buddh Nagar, Noida, Uttar Pradesh, admeasuring 204 acres. 3. As far as the proceedings in this Court are concerned, it appears that by an order dated 4th March 2004 passed by the Court in an application made by ICICI, this Court was made aware of the proceedings in the DRT Mumbai under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 ('RDDB Act'). The Court restrained the OL from taking possession of the aforementioned factory premises and modified its earlier order in that regard passed on 24th November 2003. By an order dated 24th May 2006, in CA No.1549 of 2005, the Court noted that 1524 claims had been received from the workmen. It, accordingly, appointed a three-member Committee, of which the Assistant Official Liquidator ('AOL') was part, to scrutinize the claims of the workmen. It is seen that the composition of the Committee was altered with one member being replaced by an order dated 30th July 2007. 4. On 1st August 2006, an order was passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that "A copy of the Order shall be forwarded to the Official Liquidator, Delhi High Court, to enable him to take charge of the records of the Defendant No.1 Company, which are lying at the suit property, within two weeks time, so that DRT Receiver would be in a position to hand over possession to the Purchaser." In para 30(j), it was directed that subsequent to payment of fees of the Receiver, the amount of royalty of Rs. 30 lakhs which was deposited with the Registrar, DRT, would be paid over to ARCIL and the balance amount of the sale proceeds (after payment of the Receiver's commission/fees) would be kept in a fixed deposit ('FD'). 6. It appears that on the issue of the company being entitled to duty exemption under the Export Promotion Capital Goods Scheme, demands were raised by the Customs and Excise authorities. The Customs authorities intervened in the proceedings before the DRT. Their appeal was dismissed by the Debts Recovery Appellate Tribunal ('DRAT'). They approached the High Court of Bombay. It appears that in a special leave petition ('SLP') filed by ARCIL against the order dated 15th April 2005 of the High Court of Bombay in the writ petition filed by the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laims subsequently. It is clarified that the opinion of the committee rejecting claim of the applicants has not been confirmed by this Court and will be examined at a subsequent stage." 9. On the same date, a separate order was passed by the Court in Crl. O. (Co.) 5 of 2008 as follows: "1. Official Liquidator will de-seal the room in which records/books of accounts of the company under liquidation are kept in the presence of the receiver appointed by Debt Recovery Tribunal. Secured creditors of the company under liquidation and the purchaser of the assets will be intimated and informed the date and time for carrying out necessary exercise. 2. The Official Liquidator will engage services of a photocopier for making copies of the records/books of accounts after inviting tenders for the said purpose. The receiver/secured creditors/the purchaser can appoint a nominee to be present at the time when photocopying work is in progress. 3. Official Liquidator will write a request letter within two weeks to the Institute of Company Secretaries and the Institute of Chartered Accountants with a request to ask their Members to nominate article clerks for examining the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed on 18th May 2011, it was, inter alia, prayed that the sale proceeds realised by the Receiver appointed by the DRT should be directed to be deposited by the OL; the OL should be permitted to invite the claims from all secured/preferential creditors through publication; a firm of Chartered Accountants ('CAs') on the panel of the OL should be appointed for the scrutiny of the statutory records of the company; a CA from the panel should be appointed to scrutinize the claims of the workmen and Government commission on account of actual realisation from the assets and interest accrued should be disclosed by the RO of the DRT. 14. Significantly, in the status report dated 20th April 2011 filed less than a month prior to the above application, it was pointed out by the OL, in relation to the report of the Committee constituted by the Court to examine the claims of the workmen, as under: "6. That the Committee has rejected 357 claims due to insufficient documentation. In compliance of order of the Hon'ble Court passed on 15.01.2009, the office of the Official Liquidator has verified the records of the Company (In Liqn.) pertaining to the workers at the factory situated at A-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings before the DRT is apparent from the letter written on 22nd January 2008 to ICICI relating to the order passed by the DRT on 16th October 2007 and asking for provision for sufficient space "so that record of the company in liquidation can be shifted." Again, in the objections filed to another application, being CA No.470 of 2008 by the workmen, objecting to the report of the Committee, the OL took the stand in its reply as under: "In reply to para 50 to 51 it is submitted that the provisions of the RDDB Act was invoked in the matter and the properties of the company were sold by DRT Mumbai. In such a situation the role of the Official Liquidator is limited to the adjudication of the claims under section 529(a) of the Companies Act 1956. As the claims of employees other than workmen do not full under section 529(A) the same have rightly been rejected." 18. The OL himself filed CA No.957 of 2010 for directions to the Committee to re-examine the claims of the workmen and for directions to the Receiver appointed by the DRT, the AP or workmen union to cooperate with the OL. In the said application, in para 5, it was stated as under:- "5. That the factory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dues of workmen of Respondent No.1 as admitted by the Official Liquidator/Asst. Official Liquidator (in charge), to this Hon'ble Tribunal within two weeks from the date of this order. .. The Receiver would be discharged upon completion of the work entrusted as hereinabove as far as fixed assets are concerned and shall continue as DRT Receiver for current assets till the sale of current assets Rs. 50 lacs out of sale proceeds to be kept aside for settling the fee of DRT Receiver. Sale proceeds minus Rs. 50.50 crores [Rs. 50 crores for workmen plus Rs. 50 lakhs supra] would be released to ARCIL for clearing the dues of the crown and for rateable distribution among secured creditors. On settling the fee of the DRT receiver balance be released to ARCIL." 20. Consequently, the stand now taken by the OL in CA No.924 of 2011 appears to either ignore or contradict what was stated before the Court in various applications earlier. The position that emerges is that despite the notices to the OL, he did not participate in the proceedings before the DRT. 21. The factual position is set out in the affidavit dated 30th April 2012 filed in this Court by the Receiver appointed by the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.2008 given by the Committee whereby the claims of the aforenoted persons were partially admitted and partially rejected. Counsel for the applicants are permitted to file a written synopsis not exceeding two pages in support of their averments. Co.Pet.66/2003 Learned counsel for the parties points out that the sale which had been ordered by the DRT Mumbai is the subject matter of challenge but the earnest money of more than 265 crores which has been deposited before the Receiver Mr. Ramesh Gopinathan is yet lying with him and learned counsel for the workers submits that a sum of Rs. 50 crores in fact has been segregated for the benefit of the workers which amount has to be received by them. None is present for the Receiver. Let notice of default be issued to the Receiver. Fresh status report be filed by the Official Liquidator. Renotify for 21.02.2013." 25. When the above order was passed, the attention of the Company Court was not drawn to the fact that the Receiver was not Mr. Gopinathan. He was only the lawyer for the earlier Receiver appointed by the DRT, which Receiver, as noted above, was discharged by the DRT on 22nd November 2012. As of now, ARCIL is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Tandon, retired Additional District Judge; residing at 244, Bank Enclave, Near Laxmi Nagar, Delhi - 110 092 (Mobile No. 9811719888) (ii) Mr. Sanjay Yadav, Deputy OL (Mobile No. 9350907527) (iii) Mr. Tarun Goyal, Chartered Accountant CP-58, IInd floor, Pitampura, Delhi - 110 018. (Mobile No. 9810185384) (iv) Mr. Sanjeev Saxena, Chartered Accountant, M/s. Sanjeev Saxena Co., Flat No. 110, Ground Floor, 4855/24, Ansari Road, Darya Ganj, New Delhi - 110 002. (Mobile No. 9868215565). 30. Each member of the Committee will be paid a fee of Rs. 1,00,000 and a sum of Rs. 20,000 will be paid to each member as an initial fees within a period of two weeks out of the Common Pool Fund of the OL and the balance fee after the completion of the exercise. The Committee will endeavour to complete its exercise within a period of two months from today and, in any event, will submit its report not later than three months from today. 31. The next issue that needs to be considered is whether the direction should be issued, at this stage, on the application, CA No. 924 of 2011, filed by the OL to the effect that any monies that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s what emerges is that once a winding-up proceeding has commenced and the Liquidator is put in charge of the assets of the company being wound up, the distribution of the proceeds of the sale of the assets held at the instance of the financial institutions coming under the Recovery of Debts Act or of financial corporations coming under the SFC Act, can only be with the association of the Official Liquidator and under the supervision of the Company Court." 36. While clarifying that there was no consistency in the decisions in Allahabad Bank (supra) and International Coach Builders Ltd. (supra), the Supreme Court clarified: "the distribution of the sale proceeds under the direction of the Company Court is his responsibility. To ensure the proper working out of the scheme of distribution, it is necessary to associate the Official Liquidator with the process of sale so that he can ensure, in the light of the directions of the Company Court, that a proper price is fetched for the assets of the company-in-liquidation." 37. Finally, in para 18, the legal position was summarized as under: "18. In the light of the discussion as above, we think it proper to sum up the legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the purposes of the present case, sub paras 19, 21, 23, 35 and 37 of the said para 41 are relevant and read as under: "19. Once the recovery certificate is issued by DRT in favour of the banks and financial institutions, who are secured creditors, then sale of immovable properties cannot be carried out by the Official Liquidator in winding up proceedings and such sale is to be conducted by the Recovery Officer in execution of recovery certificate issued by the DRT. . 21. The participation of the Official Liquidator in the proceedings before the DRT is in discharge of his duties and as a necessary corollary, non-participating in the proceedings and not defending the interest of the company or the secured credits or the workmen, would amount to failure in discharging the duties. . 23. DRT and the Recovery Officer can sell the property, but, only after issuing notice to the Official Liquidator and after hearing him. .. 35. RDB Act 1993 is a special law and hence will prevail over the general law, in the Companies Act. . 37. Once the sale is confirmed by the Recovery Officer and the Sale Certificate is issued, it cannot be said to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll participation of the OL. 43. The Court is not inclined, at this stage, to pass orders regarding the sums that have already been disbursed pursuant to the orders of the DRT. There was an opportunity for the OL to have participated at that stage, but for the reasons best known to him, he did not choose to do so. The payments made to the Customs authorities in terms of the MoU also cannot be interfered with unless, of course, the sale itself is set aside or an appellate court holds that the amount cannot be forfeited. In such circumstances it should be returned to the AP. This action, therefore, will have to await the outcome of the orders passed in those proceedings. 44. The Court, therefore, holds that if and when the stage is reached for disbursal of any further amounts with the DRT, it will be done only after hearing the OL and strictly in accordance and, in particular, the scheme of Section 529A of the Act. 45. The OL's application, CA No.924 of 2011, is disposed of in the above terms. 46. The other applications, i.e., CA Nos.470 of 2008, 686 of 2008, 1648 of 2012 and 1650 of 2012, are also disposed of in the above terms. Co. Pet. No.66 of 2003 47. 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