TMI Blog2017 (1) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... the claimants have filed SLPs impugning the said orders. Though notice has been issued in the said SLPs by the Hon'ble Supreme Court, till date no ad-interim/interim order are passed in the said SLPs. The entire balance surplus amount lying with the Court Receiver/Official Liquidator with the interest earned or accrued thereon, is ordered to be paid to ICICI Bank Ltd. and Metropolitan Infrahousing as prayed by them in their respective Notices of Motion, subject to them giving an undertaking to the Official Liquidator that they shall bring back the said amounts or part thereof if any amounts are directed to be paid. - NOTICE OF MOTION NO. 613 OF 2014 IN SUIT NO. 3636 OF 1999, NOTICE OF MOTION NO. 3710 OF 2011 IN SUIT NO. 3636 OF 1999 - - - Dated:- 23-11-2016 - S. J. KATHAWALLA, J . For The Applicant : Mr. Virag V. Tulzapurkar, Sr. Advocate with Dr. B.B. Saraf, instructed by M/s. M.K. Ambalal Co., for the plaintiffs, Mr. F. D'Vetre, Sr. Advocate with Mr. Durgaprasad Pujari, instructed by M/s. PDS Legal, For The Official Liquidator : Mr. J.P.Sen, Senior Advocate, Mr. M.S. Deshpande, Court Receiver, present, Ms. Yogini Chauhan, Dy. Official Liquidator present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by PPL under a Trust Deed dated 21st February, 1997. As security for the payment of debentures and interest, PPL created a mortgage in favour of ICICI Bank in respect of its lands situated at villages Gharivali, Usarghar, Sandap, Sagaon and Sonarpada, Taluka Kalyan in the Registration District and Sub-District of Thane, Maharashtra and a charge over its moveable and immoveable properties. 4.2 PPL failed to make payments upon maturity of its non-convertible debentures. The above Suit being No. 3636 of 1999 was therefore filed by ICICI Bank, being the debenture trustees, to recover the unpaid principal and interest amounts under the said Trust Deed and to enforce the said mortgage and charge. By an order dated 30 June, 1999, the Court Receiver, High Court Bombay was appointed as receiver inter alia of the secured assets of PPL. By a subsequent order dated 8 February, 2002, the Court Receiver was directed to sell the secured properties by public auction. 4.3 The Court Receiver held four unsuccessful public auctions from about June 2002 to January 2004. 4.4 By an order dated 26 September, 2005 in Company Petition No. 110 of 2000, the said Company, PPL was ordered to be wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entitled to set off in case it was declared the successful bidder. 4.11 The sale was conducted by the Court Receiver. Metropolitan Infrahousing was the successful bidder for the immoveable properties (sold as Part A and B lands) for ₹ 601,00,00,000/- (Rupees Six Hundred and One crores only) and ₹ 125,01,00,000/- (Rupees One Hundred Twenty Five Crore one lakh Only) respectively aggregating to ₹ 726,01,00,000/- (Rupees Seven Hundred and twenty six crores and one lakh only). By Orders dated 21 January, 2011 and 24 February, 2011, the sales of the Part A and B properties respectively in favour of Metropolitan Infrahousing were confirmed by this Court. 4.12 Metropolitan Infrahousing, being the successful bidder as well as the debenture-holder, was allowed a set-off by the Official Liquidator to the extent of ₹ 547,28,34,538/- (Rupees Five Hundred and Forty seven Crores twenty eight lakhs thirty four thousand and five hundred thirty eight only), which amount included interest only upto 26 September, 2005 (the date of the winding up order). Metropolitan Infrahousing contested the computation of this amount of set-off and by an Order and Judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to liquidation, the distribution of the funds of the Company as well as any proceeds from the sale of any of its assets are governed by the provisions of the Companies Rules. 5.3 That Section 529 A of the Act provides that workmen's due and debts due to secured creditors shall rank pari passu and be paid in priority to all other debts. The issue as to what would be the debt payable to all creditors including workers and secured creditors is explained in Rule 154 of the Companies (Court) Rules, 1959, to the effect that the debts payable to creditors would, as far as possible, be estimated as on the date of the winding up order. 5.4 That as per Rule 179 of the Companies Rules, only once the claim of all creditors including unsecured creditors is discharged by the Official Liquidator, then from the surplus amount if any the payment of interest can be considered. 5.6 That this view of Rules 154 and 179 and the proposition that a secured creditor would be entitled to interest after the date of the winding up order only on all claims being satisfied are supported by a long line of authorities including the following: (i) Bank of Maharashtra vs. Pandurang Keshav Gorwark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r if accepted by this Court to read Rule 179 of the Companies Rules to include payment to unsecured creditors prior to secured creditors would amount to a serious infirmity and is contrary to the provisions of the Act, more particularly Section 529 (1) and 529 (A). Under Section 529 (A) of the Act, the rights of the workmen are placed pari passu with the secured creditor. It does not in any manner dilute or take away the rights of a secured creditor to be paid on priority its entire dues with interest. In fact, the proviso to Section 529 (1) expressly contemplates a secured creditor to stand outside winding up and realise its security. 6.3 That there is no provision under the Act which disentitles the secured creditor to recover its debts with interest beyond the date of winding up order. 6.4 That the Official Liquidator who consented to the decree being passed in favour of the secured creditors subject only to the workmen s pari passu entitlement being protected is bound by the decree. 6.5 That the decisions of the Hon ble Supreme Court of India in the case of Bank of Maharashtra vs. Pandurang Keshav Gorwarkar and others ( supra), Laxmi Fibres Ltd. vs. A.P. Industrial Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re once again submitted that the above Notices of Motion be dismissed with costs. 8. I have considered the submissions advanced by the Learned Advocates appearing for the parties and have also considered the case law relied upon by them. In the backdrop of the facts as well as the rival contentions set out hereinabove, the main issue that falls for consideration of this Court is whether Rules 154 and 179 of the Companies (Court) Rules, 1959 are applicable to debts due to a secured creditor by a Company in liquidation, which secured creditor stands outside the winding up and opts to realise his security for recovery of the decretal amounts. To put it differently, can a secured creditor who has obtained a decree in his favour against a Company in liquidation which decree includes/directs the Company in liquidation to pay interest on the principal amount upto payment/realisation can be told by the Official Liquidator that despite the workers of the Company in liquidation having received all their dues as provided in law, the secured creditor is not entitled to any interest after the date of the winding up of the Company unless and until all the claims against the Company including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a preferential creditor. R.149. Proof of debt - (1) In a winding-up by the Court, every creditor shall, subject as hereinafter provided, prove his debt, unless the Judge in any particular case directs that any creditors or class of creditors shall be admitted without proof. (2) Formal proof of the debts mentioned in paragraph (d) of subsection (1), of section 530 shall not be required, unless the Official Liquidator shall in any special case otherwise direct, in a winding-up by the Court. R.150. Mode of proof and verification thereof - A debt may be proved by delivering or sending by post to the Liquidator, an affidavit verifying the debt made by the creditor or by some person authorised by him. If the affidavit is made by a person authorised by the creditor, it shall state the authority and means of knowledge of the deponent. A creditor need not attend upon the investigation unless required to do so by the Liquidator. R.151. Contents of proof - An affidavit proving a debt shall contain or refer to a statement of account showing the particulars of the debt, and shall specify the vouchers, if any, by which the same can be substantiated. The affida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Official Liquidator, the subsequent procedure of proof and list of creditors to be filed in Court and failure to prove debt within time fixed. Each of the aforesaid Rules contemplate adjudication of claim of the creditor lodged with the Official Liquidator. Rule 154 therefore cannot be read in isolation and must be read in the entire scheme of the Rules in which it is incorporated. Rule 154 primarily applies only to those creditors who choose to remain within the winding up proceedings and file their claim with Official Liquidator as per the Companies Rules for adjudication and payment thereof, it specifically excludes cases where secured creditor stands outside winding up and opts to realise his security for recovery of decretal amount as is in the present case. Thus Rule 154 has no applicability to any secured creditor including ICICI Bank and Metropolitan Infrahousing who admittedly are standing outside the winding up proceedings. 11. Similarly Rule 179 also is not applicable to a secured creditor who has chosen to remain outside the winding up proceedings and has not lodged his claim with the Official Liquidator. The language of Rule 179 clearly read there be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurity and proving his debt, opts to realise his security, (a) the liquidator shall be entitled to represent the workmen and enforce such charge; (b) any amount realised by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of workmen's dues; and (c) so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of Section 529A.] Thus, a limited impediment is introduced with regard to the claim of a secured creditor under the winding up provisions of the Act with a view to protect the rights of the workmen to receive their wages on a pari passu basis. 13. It may be noted that under S. 445 (3) of the Companies Act, 1956, the workmen stand discharged from the date of the winding up order. Workmen are not entitled to any amount after the date of their discharge. It is therefore this date which is held relevant for determining the pari passu ratios u/s 529A. 14. The judgment of the Hon ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de winding-up and one who opts to prove his debts in winding-up. We are unable to accept it. As a result of the amendments made by the Act of 1985 in the Companies Act, 1956, SFCs as secured creditors, must seek leave of the Company Court for the limited purpose of ensuring that the pari passu charge in favour of the workmen is safeguarded by imposition of suitable conditions under the supervision of the Company Court. If this amounts to impeding their hitherto unimpeded rights, so be it. Such is the parliamentary intendment, according to us. This impediment is of a limited nature for the specific purpose of protecting the pari passu charge of the workmen s dues and subject thereto, SFCs can continue to exercise their statutory rights as secured creditors without being reduced to the status of unsecured creditors required to prove their debts in insolvency and stand in line with other unsecured creditors. Neither is the apprehension expressed justified, nor the contention sound. 8. It is clear from the aforesaid judgment that no doubt the changes brought about in the Companies Act through amendments of 1985 impede even the statutory powers available to a secured creditor lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said Rules do not apply to secured creditors who stand outside the winding up proceedings. Para 29 reads thus: 29. Now, the question which remains to be decided is whether interest can be claimed by the secured creditors after the date of winding up order or not. Rule 154 of the Companies (Court) Rules on which counsel for the official liquidator has put reliance is not applicable in respect of the secured creditors who stand outside the winding up. Since the secured creditors stand outside the winding up on the strength of their security, the consortium of banks are entitled to realise the interest in terms of the order passed by the court of competent jurisdiction. The date of winding up is relevant only for those creditors whose claim is required to be settled by the official liquidator. Since the claim of the consortium of banks is not required to be adjudicated upon by the official liquidator, they are entitled to execute the order inclusive of interest against the sale proceeds of their securities. However, such realisation would be subject to the dues of the workmen as and when finalised in respect of which the banks shall furnish undertaking aforesaid. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by itself does not mean that the computations and calculations of the said set off as made by the Metropolitan is final and conclusive. Once this set off is granted and the purchaser brings in the balance amount of sale price, the balance so brought in will have to abide by the respective rights of the parties to it. The question of the purchaser's entitlement (as a secured creditor choosing to remain outside winding up) to the balance which Dharmadhikari, J. had no occasion to consider will then have to be decided in the light of the law on the point. 20. For the aforestated reasons, I am not in agreement with the submissions advanced on behalf of the Official Liquidator. 21. Admittedly the Court Receiver/Official Liquidator has an approximate amount of Rupees Thirty Eight Crores Thirty Six Lakhs as on 15th November, 2016 lying with him after making all the payments as required under Section 529A of the Act. No part of this amount can be paid to the unsecured creditors of the Company so long as the full decretal amount remains outstanding and payable to the secured creditors. 22. However, I am informed that since some of the claims filed before the Official Liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X
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