Himachal Pradesh High Court
COAPP/23/2018 on 6 March, 2020
Author: Vivek Singh Thakur
Bench: Vivek Singh Thakur
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of .
2001 Reserved on : 25.2.2020
Date of Decision : March 6, 2020
In the matter of
M/s HIM ISPAT LTD.
Coram:
The Hon'ble Mr. Justice Vivek Singh Thakur, Judge.
Whether approved for reporting? Yes.
For Applicants/State : Mr. Sanjeev Kuthiala, Senior Advocate, with Ms Suman Thakur, Advocate, for Official Liquidator.
Mr. J.L. Kashyap, Advocate, for PNB/Applicant(s) in Company Application Non 32 of 2016 & 13 of 2018.
Mr. Shrawan Dogra, Senior Advocate, with Mr. Umesh Kanwar, Mr. Tejasvi Dogra & Mr. Bharat Thakur, Advocate, for Applicant-
Workman in Company Application No.35 of 2016, 21 & 22 of 2018.
Mr. N.K. Sood, Senior Advocate, with Mr. Aman Sood, Advocate, for applicants (IFCI & IARC) in Company application No.7 of 2018.
Ms Seema Sood & Mr. Jagan Nath, Advocates, for Applicant in ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 Company Application No.23 of 2018.
Mr. Subhash Sharma, Advocate, for IDBI .
Mr. Vinay Kuthiala, Senior Advocate, with Mr. Diwan Singh Negi, Advocate, for Applicant in Company Applications No.16 & 17 of 2018.
Vivek Singh Thakur, Judge Company Applications No.32/2016 & 13/2018 Company Application No.32 of 2016 has been preferred by Punjab National Bank (Secured Creditor), for payment of correct share in its favour, in terms of share determined by the Chartered Accountant, with regard to disbursement of `3.08 Crore, in terms of order dated July 14, 2014, passed by this Court. On April 9, 2018, one more application, being Company Application No.13 of 2018, identical, in fact verbatim, to Company Application No.32 of 2016, has also been preferred on behalf of Punjab National Bank (for short PNB). Therefore, these two applications are being disposed of together.
2. No reply has been filed by anyone to Company Application No.32 of 2016, whereas Official Liquidator has filed reply to Company Application No.13 of 2018, admitting Page 2 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 therein that an amount of `3,08,11,316/-, available for disbursement, was to be disbursed to PNB and State Bank of India (for short SBI), on the basis of report of Chartered .
Accountant and that in his first report dated 14.1.2013, the Chartered Accountant has determined the share of PNB as 67.64% and SBI as 32.36%, i.e. `1,85,20,576/- and `1,22,90,740/- respectively, in the amount of `3,08,11,316/-
but in subsequent meeting of Secured Creditors, held on March 15, 2013, representative of PNB had pointed out a clerical mistake/omission in the said report of Chartered Accountant, with respect of verification in their claim-
sharing-ratio, whereupon the Chartered Accountant had submitted revised report on May 18, 2013, verifying the sharing-ratio of PNB and SBI as 71.50% and 28.50% respectively, and quantifying share of PNB and SBI as `2,20,30,683/- and `87,80,633/- respectively, in the total amount of `3,08,11,316/-. It is also admitted in the reply that instead of releasing the amount on the basis of correct revised sharing-ratio, the amount, in favour of PNB and SBI, was released on the basis of previous incorrect sharing-
ratio. Present Official Liquidator has also tendered unconditional apology for the mistake committed by the then Official Liquidator, with further prayer that the SBI be Page 3 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 directed to refund the excess amount of `35,10,107/-. In fact, in reply excess amount has been mentioned as `30,10,107/- but learned counsel for Official Liquidator has .
clarified that mention of `30,10,107/- in prayer clause of reply instead of `35,10,107/- and sharing ratio of PNB and SBI in the table in the reply as 71.50% : 32.36%, instead of 71.50% : 28.50%, are typographical mistakes which could not be corrected before filing reply on account of oversight.
3. No response, either to Company Application No.32 of 2016 or 13 of 2018, has been preferred by the SBI.
4. In view of above factual position, these applications are disposed of, with direction to the SBI to refund the excess amount of `35,10,107/-, alongwith up-to-
date interest from the receipt thereof till payment to the PNB, if any applicable on such transactions inter se banks, as per instructions/regulations etc. issued by the Reserve Bank of India (RBI) or any other competent authority.
Company Applications No.35 of 2016, 21, 22 and 7 of 2018
5. Company Applications No.35 of 2016, 21 of 2018 and 22 of 2018, have been preferred by the Workmen for release of workmen's dues, out of the sale proceeds of assets of the Company lying with the Official Liquidator, in their favour.
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6. Company Application No.7 of 2018 has been preferred by Secured Creditors, i.e. Industrial Finance Corporation of India (in short IFCI) and IARC, for release of .
the second dividend on the sale proceeds, on pro-rata basis, to the applicants, lying with the Official Liquidator.
7. Company Application No.35 of 2016 has been filed by 14 Workmen on May 16, 2016 for disbursement of amount, out of the sale proceeds in their favour, for which they are entitled as per law. On May 24, 2016, it has been ordered, by this Court, in this Company Application that in view of order passed on December 29, 2014, matter should be listed only after decision of Company Appeal No.2 of 2014, preferred by International Asset Reconstruction Company (in short IARC), pending before Division Bench of this Court.
8. In the year 2018, Company Applications No.21 of 2018 and 22 of 2018 have also been preferred by other sets of 14 and 63 Workmen for release of workmen's dues, out of the sale proceeds, lying with the Official Liquidator, in their favour as per their entitlement.
9. In Company Application No.7 of 2018, it has been stated on behalf of IFCI and IARC that assets of M/s Him Ispat Ltd (under liquidation) were sold for total Page 5 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 consideration of `14.52 Crore and after various initial disbursements and payments, balance amount of `9.16 Crore is lying with the Official Liquidator and even if IARC .
succeeds in the said Appeal the amount involved in Company Appeal No.2 of 2014, in any case, shall not exceed `1.5 Crore and, therefore, it has been prayed in this application that instead of holding entire amount with the Official Liquidator, remaining amount, i.e. `9.16 Crore minus `1.5 Crore, alongwith interest, be directed to be disbursed proportionately, in accordance with law, to the first charge holders.
10. On April 18, 2018, learned counsel appearing for the parties had expressed their agreement to the proposal of IFCI and IARC that during pendency of Company Appeal No.2 of 2014, disbursement of `1.5 Crore, out of total proceeds of `14.52 Crore, should be kept in abeyance for the time being and remaining amount, which is not in dispute in the said Appeal, be ordered to be disbursed to the rightful claimants, as per law.
11. In response to Company Application No.7 of 2018, the Official Liquidator has filed detailed reply alongwith report dated October 10, 2014, received from Chartered Accountant, regarding verification of respective Page 6 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 claims of the Secured Creditors/Workmen, wherein cut-off date, for calculating the amount of these claimants, has been taken as December 30, 2005.
.
12. The Apex Court in its judgment dated May 7, 2013, in Bank of Maharashtra v. Pandurang Keshav Gorwardkar & others, (2013) 7 SCC 754, has held that relevant date for arriving at the ratio at which the sale proceeds are to be disbursed amongst the Workmen and Secured Creditors of the debtor company, is the date of winding up order and not the date of sale.
13. rIn present case, initial winding-up order was passed on November 8, 2001, which was affirmed by the High Court on December 30, 2005, whereas bid of auction-
purchaser, for `14.52 Crore, was accepted by the Division Bench on September 28, 2011, in Company Appeal Nos.3 and 4 of 2011.
14. Perusal of order dated January 7, 2002, passed in Company Appeal No.4 of 2001, reflects that order dated November 8, 2001, passed in Company Petition No.7 of 2001, ordering winding up of Company-M/s Him Ispat Ltd., was stayed in Company Application No.42 of 2001 and the Company was permitted to continue its business by selling its products and purchasing raw material through Branch Page 7 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 Manager, SBI and Official Liquidator, appointed, was permitted to visit the premises of the Company for physical verification only and the employees were permitted to .
continue and draw salary from the employer-Company. It indicates that despite order dated November 8, 2001, on account of stay, the Company was actually wound-up on December 30, 2005, after vacation of the aforesaid interim order, on decision of the Company Petition No.7 of 2001 alongwith CWP No.604 of 2001, as also mentioned in report dated September 26, 2018 filed on behalf of Official Liquidator.
15. Actual date of winding-up in the present case is December 30, 2005. Therefore, all calculations are to be and have been made with reference to this date for all intents and purposes, except the amount to be added in workmen's dues on account of orders passed by Courts, including Labour Court, as contemplated in the Companies Act for calculation of workmen's dues, under Section 529, as, as a matter of fact, workmen were also agitating their respective claims in various Courts, including Labour Court, since 1993, and proceedings in those claims have been finalized on date(s) subsequent to the winding up order. All such claims are also to be considered and added at the Page 8 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 time of calculating and verifying the claims of Workmen, including those claims which have been permitted by this Court to be submitted/preferred by Workmen before the .
Official Liquidator and which have also been verified through Chartered Accountant.
16. Vide Annexure 'K' to the report of Chartered Accountant dated October 10, 2014, it has been placed on record that claims of Workmen from Serial No.1 to 14, for `2,09,67,359/-; Serial No.15 for `3,39,390/-; Serial No.19 to 36 for `33,74,377/-; Serial No.37 to 101 and 103 for `1,11,62,353/-; and Serial No.105 and 106 for `3,17,275/-, have been verified. However, claims of Workmen at Serial No.102 Mohinder Singh, 104 Urmila Devi and 109 Dilbagh Singh were not verified being delayed. Lateron, delay in filing the claims by these three workmen was condoned vide order dated August 14, 2018, whereupon their claims, as indicated in Annexure 'H' to the report dated October 10, 2014 of the Chartered Accountant, for `4,77,071/- have also been verified. Therefore, now total claim of workmen, duly verified by the Official Liquidator, comes to `3,61,60,754/-
+ `4,77,071/-, i.e. `3,66,37,825/-. There is no other pending claim submitted by or on behalf of any other workman.
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17. Claim of Secured Creditors, i.e. Serial Nos.16 (IFCI), 17 (SBI), 18 (PNB), 107 (IDBI) and 108 (IARC), as reflected in Annexure 'K' to the aforesaid report dated .
October 10, 2014, have also been verified.
18. Claim of Unsecured Creditors at Serial Nos.110 and 111 that of Punjab Alkalies & Chemicals Limited and Himachal Pradesh State Electricity Board, respectively, have not been verified being delayed and for want of any order condoning the delay in filing the claim by these Unsecured Creditors.
19. Undisputedly, disbursement of the amount in present case is to be governed by Sections 529, 529A and 530 of Companies Act, 1956 (old Act), which read as under:
"529. Application of insolvency rules in winding up of insolvent companies.----(1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to--
(a) debts provable;
(b) the valuation of annuities and future and contingent liabilities; and
(c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent:
Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured Page 10 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 creditor, instead of relinquishing his security 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.
r (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section:
Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to 2 [pay his portion of the expenses] incurred by the liquidator (including a provisional liquidator, if any) for the preservation of the security before its realization by the secured creditor.
Explanation.--For the purposes of this proviso, the portion of expenses incurred by the liquidator for the preservation of a security which the secured creditor shall be liable to pay shall be the whole of the expenses less an amount which bears to such expenses the same proportion as the workmen's portion in relation to the security bears to the value of the security.Page 11 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP
Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 (3) For the purposes of this section, section 529A and section 530,--
(a) "workmen", in relation to a .
company, means the employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947);
(b) "workmen's dues", in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:--
(i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman, in respect of services rendered to the company and any compensation r payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947);
(ii) all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution;
(iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen's Compensation Act, 1923 (8 of 1923) rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company;Page 12 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP
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(iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the .
workmen, maintained by the
company;
(c) "workmen's portion", in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of--
(i) the amount of workmen's dues; and
(ii) the amounts of the debts due to the secured creditors.
r Illustration 529A. Overriding preferential payment.- (1) Notwithstanding anything contained in any other provision of this Act, or any other law for the time being in force, in the winding up of a company-
(a) workmen's dues; and
(b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts.
(2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them in which case they shall abate in equal proportions.
530. Preferential payments. - (1) In a winding up subject to the provisions of section 529A, there shall be paid in priority to all other debts-
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(a) all revenues taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in clause (c) of sub-section (8), and having become due .
and payable within the twelve months next before that date;
(b) all wages or salary (including wages payable for time or piece work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months next before the relevant date subject to the limit specified in sub-section (2);
(c) all accrued holiday remuneration becoming payable to any employee, or in r the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution;
(d) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts due, in respect of contributions payable during the twelve months next before the relevant date, by the company as the employer of any persons, under the Employees' State Insurance Act, 1948 (34 of 1948), or any other law for the time being in force;
(e) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen's Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect Page 14 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 of any compensation or liability for compensation under the said Act in respect of the death or disablement of any employee of the company;
.
(f) all sums due to any employee from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees maintained by the company; and
(g) the expenses of any investigation held in pursuance of section 235 or 237, in so far as they are payable by the company.
(2) The sum to which priority is to be given under clause (b) of sub-section (1), shall not, in the case of any one claimant, 2 [exceed such sum as may be notified by the Central Government in the Official Gazette].
(3) Where any compensation under r the Workmen's Compensation Act, 1923 (8 of 1923), is a weekly payment, the amount due in respect thereof shall, for the purposes of clause (e) of sub-section (1), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under the said Act.
(4) Where any payment has been made to any employee of a company,-- (i) on account of wages or salary; or (ii) to him, or in the case of his death, to any other person in his right, on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee or other person in his right would have been entitled to priority in the winding up has been diminished by reason of the payment having been made.
(5) The foregoing debts shall--
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(a) rank equally among themselves and be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions; and .
(b) so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge.
(6) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged forthwith so far as the assets are sufficient to meet them, and r in the case of the debts to which priority is given by clause (d) of sub-section (1), formal proof thereof shall not be required except in so far as may be otherwise prescribed.
(7) In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding up order, the debts to which priority is given by this section shall be a first charge on the goods or effect so distrained on, or the proceeds of the sale thereof:
Provided that, in respect of any money paid under any such charge, the landlord or other person shall have the same rights of priority as the person to whom the payment is made.
(8) For the purposes of this section--
(a) any remuneration in respect of a period of holiday or of absence from work through sickness or other good cause shall be deemed to be wages in respect of services rendered to the company during that period;Page 16 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP
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(b) the expression "accrued holiday remuneration" includes, in relation to any person, all sums which, by virtue either of his contract of employment or of any enactment (including any order made or .
direction given under any enactment), are payable on account of the remuneration which would, in the ordinary course, have become payable to him in respect of a period of holiday, had his employment with the company continued until he became entitled to be allowed the holiday;
(bb) the expression "employees" does not include a workman; and
(c) the expression "the relevant date"
means--
(i) in the case of a company r ordered to be wound up compulsorily, the date of the appointment (or first appointment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date;
and
(ii) in any case where sub-clause
(i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company.
(9) This section shall not apply in the case of a winding up where the date referred to in sub-section (5) of section 230 of the Indian Companies Act, 1913 (7 of 1913), occurred before the commencement of this Act, and in such a case, the provisions relating to preferential payments which would have applied if this Act had not been passed, shall be deemed to remain in full force."
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20. The Apex Court in Allahabad Bank v. Canara Bank and another, (2000) 4 SCC 406, has held that Secured Creditors fall under two categories, i.e. one who desire to .
go before the Company Court and the other who like to stand outside the winding-up. Relevant paragraphs are as under:
"62. Secured creditors fall under two categories. Those who desire to go before the Company Court and those who like to stand outside the winding up.
63. The first category of secured creditors mentioned above are those who go before the Company Court for dividend by relinquishing their security in accordance with the insolvency rules mentioned in section 529. The insolvency rules are those contained in sections 45 to 50 of the Provincial Insolvency Act. Section 47(2) of that Act states that a secured creditor who wishes to come before the official liquidator has to prove his debt and he can prove his debt only if he relinquishes his security for the benefit of the general body of creditors. In that event, he will rank with the unsecured creditors and has to take his dividend as provided in section 529(2). Till today, the Canara Bank has not made it clear whether it wants to come under this category.
64. The second class of secured creditors referred to above are those who come under S. 529A(1)(b) read with proviso (c) to section 529(1). These are those who opt to stand outside the winding up to realise their security. Inasmuch as section 19(19) permits distribution to secured creditors only in accordance with section 529A, the said category is the one consisting of creditors who stand outside the winding up. These secured creditors in certain circumstances can come before the Company Court (here the Tribunal) and claim priority over all other creditors for release of amounts out of the other monies lying in the Company Court Page 18 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 (here, the Tribunal). This limited priority is declared in section 529A(1) but it is restricted only to the extent specified in clause (b) of section 529A(1). The said provision refers to sub-clause
(c) of the proviso to section 529(1) and it is .
necessary to understand the scope of the said provision.
65. Under sub-clause (c) of the proviso to section 529(1), the priority of the secured creditor who stands outside the winding up is confined to the "workmen's portion" as defined in S. 529(3)(c). 'Workmen's portion' means the amount which bears to the value of the security, the same proportion which the amount of the workmen's dues bears to the aggregate of (a) workmen's dues and (b) the amounts of the debts due to all the creditors. This is explained in the illustration under the said provision. If the workmen's dues in all are (say) Rs. 1 lakh and the debt due to all secured creditors is Rs. 3 lakhs, the total amount due to all of them comes to Rs. 4 lakhs. Therefore, the workmen's share come to 25% (Rs. 1 lakh out of Rs. 4 lakhs). Now if the value of the security of a secured creditor (like Canara Bank) is Rs. 1 lakh, the 'workmen's portion' will be Rs. 25,000 which is the pro-rata amount to be shared by the said secured creditor. By virtue of section 529A(1)(b) his priority over all others out of other monies available in the Tribunal is restricted to Rs. 25,000 only."
21. In Andhra Bank v. Official Liquidator, (2005) 5 SCC 75, the Apex Court has discussed the rights of Secured Creditors as under:
"22. In terms of the aforementioned provisions, the secured creditors have two options (i) they may desire to go before the Company Judge; or (ii) they may stand outside the winding-up proceedings. The secured creditors of the second category, however, would come within the purview of Section 529-A(1)(b) read with proviso
(c) appended to Section 529(1). The "workmen's portion" as contained in proviso (c) of sub-section (3) of Section 529 in relation to the security of any Page 19 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 secured creditor means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of (a) workmen's due, and (b) the amount of the debts due to all the (sic secured) .
creditors. ....."
"23. The language of Section 529-A is also clear and unequivocal, in terms whereof the workmen's dues or the debts due to the secured creditors, to the extent such debts rank under clause (c) of the proviso to subsection (1) of Section 529 pari passu with such dues, shall have priority over all other debts. Once the workmen's portion is worked out in terms of proviso (c) of sub-section (1) of Section 529, indisputably the claims of the workmen as also the secured creditors will have to be paid in terms of Section 529-A."
22. Considering the aforesaid pronouncements, the Apex Court in Jitendra Nath Singh v. Official Liquidator, (2013) 1 SCC 462, has drawn its conclusions on interpretation of the provisions of Sections 529 and 529A of the Companies Act as follows:
"16.1 A secured creditor has only a charge over a particular property or asset of the company. The secured creditor has the option to either realize his security or relinquish his security. If the secured creditor relinquishes his security, like any other unsecured creditor, he is entitled to prove the debt due to him and receive dividends out of the assets of the company in the winding up proceedings. If the secured creditor opts to realize his security, he is entitled to realize his security in a proceeding other than the winding up proceeding but has to pay to the liquidator the costs of preservation of the security till he realizes the security.
16.2 Over the security of every secured creditor, a statutory charge has been created in the first limb of the proviso to clause (c) of sub-section (1) Page 20 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 of Section 529 of the Companies Act in favour of the workmen in respect of their dues from the company and this charge is pari passu with that of the secured creditor and is to the extent of the workmen's portion in relation to the security of .
any secured creditor of the company as stated in clause (c) of sub-section (3) of Section 529 of the Companies Act.
16.3 Where a secured creditor opts to realize the security then so much of the debt due to such secured creditor as could not be realized by him by virtue of the statutory charge created in favour of the workmen shall to the extent indicated in clause (c) of the proviso to sub-section (1) of Section 529 of the Companies Act rank pari passu with the workmen's dues for the purposes of Section 529A of the Companies Act.
16.4 The workmen's dues and where the secured creditor opts to realize his security, the debt to the secured creditor to the extent it ranks pari passu with the workmen's dues under clause (c) of the proviso to sub-section (1) of Section 529 of the Companies Act shall be paid in priority over all other dues of the company."
23. In present case, it is undisputed that some amount, out of sale proceeds of assets of the Company, already stands released in favour of Secured Creditors without taking into consideration the provisions of Sections 529 and 529A of the Companies Act, wherein statutory charge has been created in favour of workmen in respect of their dues from the Company over the security of every Secured Creditor and also workmen's dues have been categorized as 'overriding preferential payments'.
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24. As per reply to Company Application No.7 of 2018, filed by the Official Liquidator, as on March 31, 2018, an amount of `14,75,59,374/- (sale proceeds + interest) is .
available with the Official Liquidator and out of that amount he has proposed to disburse `12.00 Crore to the Secured Creditors and the workmen, provisionally, as per the ratio determined by the Chartered Accountant in his report dated October 10, 2014, by taking claim of the Workmen pari passu to the claim of Secured Creditors and to keep the remaining amount to be disbursed after the decision of the appeal, pending before a Division Bench of this Court, preferred by IARC. Official Liquidator has also proposed to disburse claim of Workmen to the extent of 75% of the claim adjudicated (verified) by the Chartered Accountant and calculated as pari passu with the Secured Creditors.
25. In this regard, discussion in judgment of the Apex Court in Jitendra Nath Singh's case supra in following paragraphs is relevant:
"11. In our considered opinion, therefore, on a reading of the provisions of clause (c) of sub- section (1) of Section 529 of the Companies Act along with the provisions of the Insolvency Act relating to the respective rights of secured and unsecured creditors, a secured creditor of an insolvent company which is being wound up has only a right over the particular property or asset of the company offered to the secured creditor as a security and the unsecured creditors have rights Page 22 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 over all other properties or assets of the insolvent company. We may now examine whether the proviso to sub-section (1) of Section 529 of the Companies Act makes any difference to these rights of secured creditors and unsecured .
creditors of an insolvent company.
12. The first limb of the proviso to sub-section (1) of Section 529 of the Companies Act states that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein. Clause (c) of sub-
section (3) of Section 529 of the Companies Act states that the "workmen's portion", in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of (i) the amount of workmen's dues; and (ii) the amounts of the debts due to the secured creditors. Thus, the first limb of the proviso to clause (c) of sub- section (1) of Section 529 of the Companies Act creates a statutory charge over the security of every secured creditor to the extent of the workmen's portion. In other words, every property or asset of an insolvent company, which is being wound up and which has been offered as a security to a secured creditor is subject statutorily to a pari passu charge in favour of the workmen to the extent of the workmen's portion by virtue of the proviso to sub-section (1) of Section 529 of the Companies Act. Therefore, the first limb of the proviso to sub-section (1) of Section 529 does not create any pari passu charge in favour of secured creditor over property or asset of the company which has not been given as security by the company to the secured creditor. Rather, the language of the first limb of this proviso makes it crystal clear that the security of every secured creditor created dehors the proviso to sub-section (1) of Section 529 of the Companies Act is statutorily subjected to a pari passu charge in favour of the workmen by the first limb of the proviso to sub-section (1) of Section 529 of the Companies Act.
13. The second limb of the proviso to sub- section (1) of Section 529 of the Companies Act Page 23 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 states the consequences which follow where a secured creditor, instead of relinquishing his security and proving his debt, opts to realize his security. These are: (a) the liquidator shall be entitled to represent the workmen and enforce .
such charge; (b) any amount realized 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 realized 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 of the Companies Act. What is relevant in this case is the consequence in clause
(c) which provides that the portion of the debt due to the secured creditor as could not be realized because of the statutory charge created in favour of the workmen on the security of the creditor shall to the extent stated therein rank pari passu with the workmen's portion for the purposes of Section 529A of the Companies Act. Hence, clause
(c) of this proviso does not create a pari passu charge over properties or assets of the company which have not been offered to the secured creditor as security, but to the extent of the loss of security suffered by a particular secured creditor because of the statutory charge created in favour of the workmen, the secured creditor is ranked pari passu with the workmen for overriding preferential payment under Section 529A of the Companies Act.
14. Section 529A of the Companies Act states that notwithstanding anything contained in any other provision of the Companies Act or any other law for the time being in force, in the winding up of a company (a) workmen's dues; and (b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of Section 529 of the Companies Act pari passu with such dues, shall be paid in priority to all other debts. This would mean that the workmen's dues and only the debts due to the secured creditors to the extent such debts rank pari passu with workmen's dues under clause (c) of the proviso to sub- section (1) of Section 529 will have priority Page 24 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 over all other debts of the company. The entire object of Section 529A of the Companies Act is to ensure overriding preferential payment of (a) the workmen's dues and (2) debts due to secured creditors to the extent such debts rank under .
clause (c) of the proviso to sub-section (1) of Section 529 pari passu with the workmen's dues. The effect of the non-obstante clause in the opening part of Section 529A of the Companies Act, therefore, is that notwithstanding anything in the Companies Act and any other law including the Insolvency Act, workmen's dues and dues of the secured creditor which could not be realized because of the pari passu charge in favour of the workmen under the proviso to sub-section (1) of Section 529 and only to the extent such dues rank pari passu with the dues of the workmen under clause (c) of the said proviso are paid in priority over all other dues.
15. We may now refer to sub-section (2) of Section 529 of the Companies Act which states that all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of Section 529 of the Companies Act. The proviso to sub-section (2), however, states that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realize his security, he shall be liable to pay his portion of the expenses incurred by the liquidator (including a provisional liquidator, if any) for the preservation of the security before its realization by the secured creditor. This provision in sub- section (2) of Section 529 of the Companies Act makes it amply clear that all creditors, secured and unsecured, of the insolvent company are entitled to prove for and receive dividends out of the assets of the company but so far as secured creditors are concerned, they have the option either to relinquish their security in which case they like any unsecured creditor would only be entitled to prove for and receive the dividends out of the assets of the company or to realize the security instead of relinquishing the security in which case they have to pay to the liquidator only Page 25 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 expenses for the preservation of the security until they realize the security by appropriate proceedings other than the winding up proceedings."
.
26. In Jitendra Nath Singh's case supra, a Secured Creditor has only a charge over a particular property or assets of a Company whereupon Secured Creditor is holding mortgage, charge or lien as a security for a debt due to him from the debtor and where a creditor, such as a Bank or Financial Institution, does not hold a mortgage, charge or lien on the property of the Company or any part thereof as a security for a debt due to it from the Company, it is not 'Secured Creditor' for the purposes of Sections 529 and 529A of the Companies Act (See: Para-8).
27. In view of the aforesaid exposition of law, it is evident that under Section 529A(1)(b), the Secured Creditors shall be entitled for overriding preferential payments of debts to the extent these are governed under clause (c) of proviso to Section 529(1), pari passu with workmen's dues, if the Secured Creditor, instead of relinquishing his security and proving his debts, opts to realize his security without participating in the winding-up proceedings, and in case he participates effectively in the winding-up proceedings then Section 529A(1)(b) will not be available to the Secured Creditor for want of applicability of Page 26 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 clause (c) of proviso to Section 529(1) of the Companies Act.
28. Payment under Sections 529A(1)(a) and .
529A(1)(b) shall be made in priority to all other dues.
Amount of debt payable under Section 529A(1)(b) is to be determined, in terms of clause (c) of the proviso to Section 529(1). As held by the Apex Court, for such debt ranking pari passu with the workmen's dues for the purpose of Section 529A, two limbs of proviso to Section 529(1) are to be satisfied. In first limb, there must be security of Secured Creditor, whereupon pari passu charge shall be deemed in favour of workmen to the extent of workmen's portion therein and in the second limb the Secured Creditor must have opted to realize his security and during realization of security, the Secured Creditor must have been prevented from realizing the amount of workmen's portion in his security so as to rank the said debt pari passu with the workmen's dues for the purpose of Section 529A. In absence of security and exercise of option by Secured Creditor to realize the same, there will not be any debt equivalent to workmen's portion, realization whereof could not be made by the Secured Creditor and in such eventuality there will be no right of overriding preferential Page 27 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 payments under Section 529A(1)(b) in favour of Secured Creditor.
29. In present case, on March 6, 2019, a .
supplementary affidavit has been filed on behalf of IFCI and IARC, wherein it is stated that the said Secured Creditors have not relinquished their security and have opted to realize securities as detailed in the affidavit, as existing immovable properties, whereupon mortgage has been created by the Company in their favour and it is further stated in the affidavit that IFCI has also filed claim with the Official Liquidator vide its claim dated December 15, 2010, as one of the Secured Creditors of the Company specifically stating in Para-7 of the said claim letter that it has not relinquished its securities and, therefore, it continues to be a Secured Creditor (first charge holder) on the assets of the Company, which are being sold and charges will shift to sale proceeds of the fixed assets on finalization of the sale and, therefore, IFCI is entitled for payment of its dues as Secured Creditor, on priority basis, and this claim of IFCI is without prejudice to the claim filed before Debt Recovery Tribunal, Chandigarh.
30. In aforesaid supplementary affidavit dated March 6, 2019 filed on behalf of IFCI except existing Page 28 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 immovable properties referred, no other property including assets of the Company sold by the Official Liquidator, has been claimed under mortgage, charge or lien of the .
Secured Creditors or any part thereof as a security for the debt due to Secured Creditors from the Company.
Therefore, assets of the Company, sold by Liquidator, are not a security for the purposes of Sections 529 and 529A of the Companies Act.
31. Further, from the affidavit filed by IFCI, it is evident that till date this Secured Creditor is in process of realizing the security wherein, as of now, there is no debt due to the said Secured Creditor, which could be termed as not realized by it by virtue of the proviso to Section 529(1), in terms of clause (c) thereof, or as the amount of workmen's portion in its security to rank it pari passu with the workmen's dues for the purpose of Section 529A.
32. As held by the Apex Court, the fact of non-
obstante clause in the opening part of Section 529A of the Companies Act is that notwithstanding anything in the Companies Act or any other law, including the Insolvency Act, workmen's dues and dues of the Secured Creditors referred in Section 529A(1)(b) are to be paid in priority over all other dues alongwith workmen's dues under Section Page 29 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 529A(1)(a). In present case, there is no debt due as prescribed in Section 529A(1)(b) of the Companies Act, therefore, under Section 529A, workmen's dues have to be .
paid in priority over all other dues. As there is no other debt having right of overriding preferential payment, there is no reason to withhold any portion of workmen's dues pending adjudication the dispute/claim of Secured Creditors who have no debut to claim disbursement under Section 529A(1)(b) of the Companies Act.
33. Also, it is case of none of the parties that the assets of the Company, from sale whereof sale proceeds are lying with the Official Liquidator, were securities of any of the Secured Creditor, muchless of the IFCI as in above referred supplementary affidavit dated March 6, 2019, filed on behalf of IFCI, there is reference of other existing assets referred therein as security but not of the assets of the Company sold by the Official Liquidator and, therefore, the Secured Creditors cannot claim right over the sale proceeds as 'security' referred in proviso to Section 529(1) and when there is no security, there is no question of preventing the Secured Creditors from realizing the amount equivalent to workmen's portion in terms of clause (c) of proviso to Section 529(1) for calculating the amount for the purpose of Page 30 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 Section 529A(1)(b). Even if it is considered that the assets of the Company were also kept as security with any of the Secured Creditors, then also accepting the order of the High .
Court to sale out those assets, the Secured Creditors are deemed to have submitted their respective claims, in pursuance to the order of the High Court, before the Official Liquidator, more particularly for receiving dividend from the sale proceeds, the said security stands submitted to the domain of winding-up, losing the character of 'security' in terms of Sections 529 and 529A. Further, it is not the case of Secured Creditors herein that there is certain amount which they could not realize as security on account of pari passu charge created in favour of workmen in first limb of the proviso to Section 529(1).
34. In view of the above discussion and ratio of law laid down by the Apex Court, it is unambiguous that, in the present case, there is no debt due to the Secured Creditors, falling in the category of 'debts' defined under clause (b) of Section 529A(1) of the Companies Act, to be paid as overriding preferential payments under Section 529A(1)(b) to them. So far as workmen's dues under Section 529A(1)(a) are concerned, the Official Liquidator has submitted report of Chartered Accountant dated October Page 31 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 10, 2014, wherein except three claims of workmen, all claims have been verified as workmen's dues and the claims of the remaining three applicants have been got .
verified by the Official Liquidator lateron, after passing of order, of condonation of delay in filing of those claims, in Company Application No.36 of 2014. Therefore, workmen's dues of workmen, who had filed the claims before the Official Liquidator, stand duly verified.
35. In view of pendency of Company Appeal before Division Bench of this Court, preferred by IARC, it would not be appropriate to release the entire sale proceeds of the assets of the Company lying with the Official Liquidator.
The Official Liquidator has proposed disbursement of an amount of `12.00 Crore to the Secured Creditors/workmen, provisionally. Accordingly, at this stage, an amount of `12.00 Crore, as proposed by the Official Liquidator, is ordered to be disbursed to the Secured Creditors and Workmen. An amount of `3,61,60,754/- + `4,77,071/-, i.e. `3,66,37,825/-, out of the said amount of `12.00 Crore, shall be paid first to the Workmen, in consonance with the provisions of Section 529A of the Companies Act, and the remaining amount shall be disbursed amongst the Secured Creditors on pro rata basis, taking into consideration Page 32 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 sharing ratio of the amount verified by the Chartered Accountant in his report dated October 10, 2014, referred supra.
.
36. Amount in favour of SBI shall be released only after refund of excess amount received by it, in terms of order passed in Company Applications No.32 of 2016 and 7 of 2018 and before releasing share of SBI, the said amount or any other amount, mutually agreed as refundable amount between SBI and PNB shall be deducted from the share of SBI and paid to the PNB by the Official Liquidator.
37. rPayment to the Workmen, whose claims have been vertified, shall be made in their favour by remitting the same in their Bank Accounts or Bank Accounts of legal heirs in the event of death of the Workman. The Official Liquidator shall release the payment immediately after receiving particulars of individual Bank Accounts of the Workmen applicants herein or their legal heirs, as the case may be, through their Advocate(s).
38. The workmen, who are not applicants herein, shall also be entitled for release of amount as indicated by the Chartered Accountant, in his report dated October 10, 2014, placed on record, by the Official Liquidator, but after filing an appropriate application before the Official Page 33 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 Liquidator with complete details of their individual Bank Accounts and the Official Liquidator shall release the payment after ascertaining correct identity of the workmen .
and/or legal heir(s) in case of deceased workman.
39. No amount shall be paid to any workman except remitting the same by way of transfer in his Bank Account.
No middleman, including Office Bearer of Trade Unions need to be associated in payment process and every workman shall be made known that nothing is deductible or payable to any middleman/Trade Union and/or its Office Bearers and the workman shall also be apprised that any demand raised by the Trade Union or its Office Bearer or middleman, in any manner, in relation to release of amount in present case, shall amount to obstruction in the implementation of Court orders and such act shall be dealt with seriously.
40. The amount of workmen against Claim Nos.15, 22,34,35,36,38,61,68,85,99,102 and 104 shall not be released except leave of the Court, whereas amount against claim of other workmen, including claim at Serial No.109, shall be released on furnishing particulars of Bank Accounts to the Official Liquidator through their counsel.
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41. The Official Liquidator is directed to declare the dividends payable to the Creditors and to release the payment proportionately amongst them as per share ratio .
already worked out by the Chartered Accountant from remaining amount, out of `12.00 Core, after deducting verified workmen's dues referred supra.
42. The payment shall be released within one month from the date of receipt of certified copy of the order, subject to supplying details of bank account(s).
43. The Official Liquidator is directed to inform the workmen at Serial Nos.15, 22,34,35,36,38,61,68,85,99,102 and 104, through Registered Post, advising them to submit their applications to the Official Liquidator with complete detail of their respective bank account(s) and thereafter Official Liquidator is directed to file an appropriate application thereafter, seeking leave of the Court for release of the verified amount. Till then the said amount shall not be disbursed.
44. In response to Company Application No.7 of 2018, the Official Liquidator has also filed report dated 24.12.2018, supported by an affidavit, wherein details of amounts to be released to Secured Creditors from whom advance was received for payment on account of watch Page 35 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 and ward, valuation fee, insurance, etc. and to Security Agency, has been given as under:
Sr. Particulars Amount (In
.
No. Rs.)
1. Amount received from secured 10,20,279 creditors on account of watch & watch exp., valuation fee, insurance, and pre- exp. etc. mentioned in para 4 & 5 (except IFCI, because an amount of Rs.27,39,457=00 has been paid in terms of Hon'ble High Court order dated 05.11.2012)
2. Amount to be released to the 5,79,487 security agency namely M/s Jai Jawan Security Agency
45. In prayer clause of aforesaid report dated 24.12.2018, , request has been made to permit Official Liquidator to reimburse the advance of `10,20,279/-
received from Secured Creditors to them and pay balance amount of `5,79,487/- to the Security Agency, namely M/s Jai Jawan Security Agency. No objection has been filed by any party to it. Therefore, the Official Liquidator is also permitted to reimburse `10,20,279/- to Secured Creditors and to pay `5,79,487/- to Security Agency, namely Jai Jawan Security Agency, as referred in the report of the Official Liquidator.
46. The Official Liquidator has also prayed for fixing the fee to be payable to the Chartered Accountant, namely Shri Ravi Chand Sood. The said prayer has been Page 36 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 considered, separately, during adjudication of Company Application No.23 of 2018 filed by Chartered Accountant Shri Ravi Chand Sood for payment of his fee.
.
47. Company Applications No.35 of 2016, 21, 22and 7 of 2018 stand disposed of in the aforesaid terms, with direction to the Official Liquidator to file compliance report with appropriate application on or before 30.5.2020.
Company Application No.23 of 2018
48. This application has been filed by Chartered Accountant Shri Ravi Chand Sood for release of fee for his travelling and sitting and with respect to Interim Reports submitted by him, in accordance with the bills submitted by him to the Official Liquidator.
49. Vide order dated 9.10.2007, passed in COAPP Nos. 100 and 102 of 2005, this Court had constituted a panel of Chartered Accountants, which includes the name of M/s Ravi Sood & Co., with observation that remuneration of Chartered Accountants will be on case-to-case basis, depending on the nature and quantum of work to be performed/assigned to them and the Official Liquidator will obtain prior permission before payment is made. Copy of the said order has been filed with this application as Annexure "B". Not only copies of Memorandum of Fee/Bills Page 37 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 submitted by the Chartered Accountant have been filed with this application but copies of numerous letters written during July 2013 to July 2015 by the Chartered Accountant .
to the Official Liquidator, for release of his fee, have also been filed with the application.
50. In response to this application, reply/report dated 26.10.2018 has been filed on behalf of the Official Liquidator, wherein submissions made by the Chartered Accountant have been admitted but with further averment that in 3rd Interim Report dated 14.1.2013, calculations were wrong and for adjudication of different claims, the Chartered Accountant has charged different rate of fee, which is on higher side, in comparison to the fee of Chartered Accountant fixed by the Hon'ble High Court of Bombay vide order dated 5.9.2018, passed in OLR No.127 of 2017 in CP No.642 of 1983 and, therefore, prayer for allowing payment of fee to the Chartered Account at the rate of `250/- per claim or as may be fixed by the Court, has been made.
51. The Chartered Accountant has filed rejoinder to the reply and has submitted that he had submitted Final Report to the Official Liquidator on 10.4.2014, which was placed in the meeting of Secured Creditors on 15.10.2014 Page 38 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 and bill of Final Report, amounting to `6,24,720/-, was submitted to the Official Liquidator on 7.7.2015, which amount also remains unpaid by the Official Liquidator till .
date. He has further submitted that total bills of `99,000/-
for preparation of three Interim Reports and for verification of three Interim Claims, total amounting to `7.18 Crore, as stated by him in Para-4 of his Report dated 26.10.2018, remains unpaid by the Official Liquidator till date. He has also stated that total Bills of `1,99,500/- for travel and sitting fee to visit and attend the meeting in the Office of Official Liquidator from 19.10.2012 to 18.5.2013 and from 22.7.2013 to 19.12.2014 are also unpaid till date.
52. It is clarified in the rejoinder that in the order dated 5.9.2018, passed by Hon'ble High Court of Bombay, wherein fee for re-adjudication of workmen claims at the rate of `250/- per claim has been allowed, complete facts have not been narrated in the order and also that fee at the rate of `250/- per claim was for re-adjudication of the claims of workmen and not for adjudication of original claims of workmen and the said order is irrelevant for determining the issue of payment of fee to Chartered Accountant in present case. Lastly, prayer for payment of total Bills of Page 39 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 `9,23,220/- (99,000 + 1,99,500 + 6,24,720) has been made.
53. A Supplementary Affidavit dated 5.1.2019 has .
also been filed by the Chartered Accountant in support of his averments made in the application and rejoinder, wherein outline of exercise undertaken by him in verifying each and every claim and preparing Interim and Final Reports has been explained in detail. Contention of the Chartered Accountant put forth in the Supplementary Affidavit has not been rebutted by the Official Liquidator or any other party till date despite lapse of a period of more than one year.
54. Undisputedly, bills of Chartered Accountant are pending for approval and payment since 2012 till date.
Last bill was submitted by the Chartered Accountant on 7.7.2015. Since then, till date, the Official Liquidator has not taken any pain for getting the bills approved from the Court and now suddenly has come with the plea that his fee charged by the Chartered Accountant is on the higher side, in comparison to the fee fixed by the High Court of Bombay.
55. Fee of Chartered Accountant, in present case, is to be governed by the order dated 9.10.2007, passed by this High Court, wherein it is ordered that remuneration of Page 40 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 the Chartered Accountant will be on case-to-case basis, depending upon the nature and quantum of work to be performed/assigned.
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56. Chartered Accountant in his Supplementary Affidavit has detailed the exercise undertaken by him to which no response has been filed by anyone. Quantum of work performed by the Chartered Accountant in the cases adjudicated by the High Court of Bombay is not before this Court and initial order passed by the Bombay High Court at the time of engagement/ empanelment of Chartered Accountants is also not available, whereas in present case at the time of empanelling Chartered Accountants, question of remuneration was kept open on the basis of nature and quantum of work to be performed/assigned.
57. In aforesaid circumstances, it would not be just and fair to deduct any amount from the fee claimed by the Chartered Accountant, that too in the year 2020, with respect to the bills submitted by him to the Official Liquidator, during the years 2012 to 2015. Therefore, the Official Liquidator is also directed to make payment of bills of the Chartered Accountant within one month from receipt of a copy of this order, compliance whereof shall be Page 41 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 reported by the Official Liquidator in his report to be filed on or before 30.5.2020 as already ordered.
58. Application stands disposed of.
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Company Applications No.16 & 17 of 2018
59. Request letters dated March 23, 2018 received from Principal Commissioner of Income Tax (2), Chandigarh, for launching prosecution under Section 276C(2) of Income Tax Act, 1961, in case of M/s Him Ispat Ltd. (Under Liquidation), Chandigarh, for the Assessment Years 2013-14 & 2014-15 respectively, have been treated as Company Applications No.16 & 17 of 2018.
60. The allegation in their applications is that Return for the Assessment Year 2013-14 was due on September 30, 2013 but the Tax has been deposited on December 26, 2017 and Return with respect to Assessment Year 2014-15 was due on September 30, 2015, but Tax has been deposited on August 26, 2016. It is asserted that the Official Liquidator cannot claim immunity from prosecution under Section 635A of the Companies Act, for the reason that omission and commission of the Official Liquidator is not in good faith and non-compliance of provisions of Income Tax Act is a willful and deliberate failure to deposit sovereign dues within time. Lastly, prayer for permission Page 42 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 for launching prosecution against the Company/ Official Liquidator has been made.
61. In reply to Company Application No.16 of 2018, .
it is submitted on behalf of Official Liquidator that full Income Tax amount of M/s Him Ispat Ltd. could not be deposited at the time of filing of Return as the Bank had not given the credit for TDS on the interest income as on the date of filing the Return and after filing of return, the Official Liquidator never got the demand letter from Income Tax Department, as mandated under Section 143 of the Income Tax Act nor the liability was visible in the demand section of the Company's login on e-filing Web Site of the Department, which led to delay in deposit of the tax and the said tax has been deposited on December 26, 2017, immediately after receiving notice of prosecution in December, 2017. It is further stated in the reply that the Office of Official Liquidator is a Government Office and it is neither engaged in running any business nor is the Director or shareholder of the Company in liquidation and the transactions of the Companies under liquidation are under the supervision of the High Court of Himachal Pradesh, Shimla. Therefore, Office of Liquidator cannot be said to have evaded the tax willfully. It is further stated in the Page 43 of 44 ::: Downloaded on - 06/03/2020 20:27:25 :::HCHP Co. Applications No.32/2016, 35/2016, 7/2018, 13/2018, 16/2018, 17/2018, 21/2018, 22/2018 and 23/2018 in Company Petition No.7 of 2001 reply that it is not a case of evasion of tax but simply a case of late deposit of tax, whereupon appropriate interest has also been levied and paid and the Official Liquidator has .
deposited the balance Tax alongwith interest when Tax liability was shown in the electronic system of the Income Tax Department and the Tax liability was already disclosed by the Official Liquidator himself in the Income Tax Return filed on March 31, 2015.
62. Identical reply has been filed in Company Application No.17 of 2018.
63. I r am of the considered opinion that the explanation rendered by the Official Liquidator is satisfactory. Therefore, it is not a fit case for granting approval for launching prosecution, as prayed. Accordingly, both the applications are dismissed and disposed of.
( Vivek Singh Thakur )
March 6, 2020(sd) Judge.
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