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TMI Blog2013 (11) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... dia) Ltd. ('ARCIL') on 29th March 2005, thereby ARCIL stepped into the shoes of ICICI in the proceedings before the DRT. The other 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 Commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing capital bank should take over charge of the book debts and realize the same. Importantly, it was directed in para 30 (e) 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') f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed workmen are thoroughly examined on the basis of records. Therefore, at this stage no orders are being passed on this application and the same is disposed of with liberty to the applicant/alleged workmen to raise claims 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeds have been appropriated have neither been informed to the Official Liquidator nor to this Hon'ble Court. In such circumstances the Recovery Officer, DRT, Mumbai is acting in gross violation of the settled law as regards the realization/distribution of the sale proceeds." 13. In the said application 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er active consideration before the Committee appointed by this Hon'ble Court vide order dated 24.5.2006. Official Liquidator is eagerly awaiting the report of the said Committee. Official Liquidator would file a formal claim before the recovery officer DRT, Mumbai as and when the report is submitted by the Committee." 17. The fact that the OL was aware of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the first charge holders. ....... 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. Further the Official Liquidator/Asst. Official Liquidator (in charge) of Respondent No.1, is hereby directed to lodge/submit the final quantum of 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. Conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare Bapat Kabe Sinha & Associates and ARCIL has been appointed as the new Receiver. This is evident from the affidavit dated 12th February 2013 filed by Mr. Ramesh Gopinathan, Advocate appearing for the Receiver, enclosing a copy of the said order of the DRT. 24. On 29th November 2012, this Court had passed the following order:- "C.A. Nos.470/2008, 853/2008 and 686/2008 & C.A. Nos. 1648 and 1650/2012 C.A. Nos.470/2008, 853/2008 and 686/2008 have been filed by DCM Daewoo Employees Union and one Sundar Lal. C.A. Nos.1648/2012 and 1650/2012 have been filed by the Employees Welfare Forum. All the aforenoted applicants have given their objections to the report dated 07.02.2008 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n rejected. Further, it is apparent that the books and accounts of the company are yet to be examined properly by the CAs. They were also not associated at the stage of examination of the workmen's claims. In the circumstances, this Court is persuaded to accept the plea that the report submitted by the Committee appointed by this Court on 24th May 2006 to examine the workmen's claims should be rejected and this exercise be undertaken by another Committee with the participation of the two CAs. 29. Accordingly, this Court sets aside the report submitted by the Committee which examined the workmen's claims and directs that all the workmen's claims that have thus far been lodged with the OL will be examined by the following Committee: (i) Mr. S.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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 (SC) and International Coach Builders Ltd. v. Karnataka State Financial Corpn. [2003] 43 SCL 297 (SC). 34. The facts in Rajasthan State Financial Corporation (supra) show that even before the Appellants could initiate the proceedings under the State Financial Corporations Act, 1951 ('SFC Act'), 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 are 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." 35. In para 17 of the said judgment, it was observed: "Thus, on the authorities 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; iv) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the creditor concerned is to approach the Company Court for appropriate directions regarding the realisation of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-in-liquidation." 38. This Court does not find the decision in Bakemans Industries Pvt. Ltd. (supra) to be directly concerning the point regarding the disbursement of the auction proceeds. The said decision, no doubt, reiterates that a financial institution governed by the SFC Act would still be amenable to the discipline of Section 529A of the Act and that where a company is under liquidation, the sale of the properties of the company as well as the distribution of the proceeds would be under the directions of the Company Court. 39. The Madras High Court has, in Subhash Kathuria v. Deve Sugars Ltd. (In Liquidation) [2010] 158 Comp. Case 78 (Madras), summarized the entire law in para 41. For the purposes of the present case, sub paras 19, 21, 23, 35 and 37 of the said para 41 are releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DB Act they should be placed at the disposal of the OL is different from the law explained by the Supreme Court in Rajasthan State Financial Corporation (supra). What appears from a careful reading of paras 16, 17 and 18 of the said judgment is that the OL has certainly to be associated in all the proceedings of sale by public auction or otherwise of the properties of the company in liquidation and the orders of the DRT. As noted hereinbefore, the DRT has issued notices to the OL at every stage. The Court is now informed that since 2012, the OL has been participating in the proceedings before the DRT and now before the DRAT. Therefore, there may be no apprehension that the orders might be passed in the proceedings under the RDDB Act without the participation of the OL. It is for the OL to diligently pursue those proceedings hereinafter. 42. Further, the legal position that emerges is that the exercise of disbursal of the sums by the DRT can be undertaken only with the participation of the OL. It is the OL who will settle the claims of the workmen and of all the secured, preferential and unsecured creditors. This disbursal of the amounts should happen hereafter only with the full p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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