Andhra HC (Pre-Telangana)
State Bank Of Hyderabad, Industrial ... vs Official Liquidator, High Court Of A.P. ... on 26 March, 1999
Equivalent citations: 1999(3)ALD301, 1999(3)ALT257, [1999]98COMPCAS679(AP), AIR 1999 ANDHRA PRADESH 313, (1999) 95 FJR 720, (2000) 84 FACLR 193, (1999) 2 BANKCAS 691, (1999) 3 ANDHLD 301, (1999) 3 ANDH LT 257, (1999) 98 COMCAS 679, (2000) 6 COMLJ 487
ORDER
1. The question is whether the order of the Official Liquidator whereby the wages of the workmen have been quantified can be challenged by the creditors secured or unsecured in the Company Court?
2. Krishi Engines Limited has been ordered to be wound up in CP 14/1987 on 16-11-1991 by this Court. The Official Liquidator filed CA 214 of 1996 for permission to invite the claims from the workmen of the Company in liquidation by making advertisement in local newspapers. On 3-12-1996 the application was ordered and the Official Liquidator was permitted to invite the claims of the workmen by publishing the notice in AP Times, an English daily, and Andhra Jyothi, a Telugu daily. The last date for receipt of the claims from the workmen was fixed as 31-12-1996.
3. The Official Liquidator in pursuance of the aforesaid order invited the claims from the workmen. The workers' union through its Joint Secretary filed a consolidated claim of all the workmen in the office of the Official Liquidator within the stipulated time. Thereafter the Official Liquidator issued notice to all the secured creditors including the petitioner-State Bank of Hyderabad -and the Bank took part in the proceedings and submitted its objections. The Official Liquidator on 15-4-1997 rejecting the objections of the petitioner-Bank, quantified the wages of the workmen at Rs.2,70,77,482.30 with interest at the rate of 4 percent per annum from 16-11-1991 as secured debt due to the workmen ranking part passu with the secured creditors including the petitioner-Bank.
4. The petitioner-Bank has filed CA 491/1998 for setting aside the impugned proceedings dated 15-4-1997 alleging that the Official Liquidator has wrongly rejected the valid objections of the secured creditors including that of the petitioner-Bank.
5. This application has been resisted by the Official Liquidator as also by the workers' union of the Company in liquidation.
6. The preliminary objection of the workers' union of the Company in liquidation is that the application is not maintainable because no appeal has been filed by the petitioner-Bank within the period of limitation under Rule 164 of the Companies (Court) Rules 1959 and the petitioner-Bank has no locus standi to challenge the impugned proceedings of the Official Liquidator.
7. Having heard the learned Counsel of the petitioner-Bank, the employes union of the Company in liquidation and the Official Liquidator, I am of the opinion that the petitioner-Bank has a right to challenge the impugned proceedings of the Official Liquidator through this application for the reasons stated in the subsequent paragraphs.
8. It is a matter of record that, after inviting the claims of the workmen in pursuance of the orders of this Court dated 3-12-1996, the Official Liquidator has also noticed the secured creditors including the petitioner-Bank which has filed its objections to the claims of the workmen for wages.
9. The Official Liquidator has to investigate the claims of the creditors including those of the workmen of the Company in liquidation for wages. The Official Liquidator has to investigate those claims filed before him in Form 69 under Rule 163 of the Companies (Court) Rules, 1959. He is competent to admit or reject the proof in whole or in part and to communicate his decision to the concerned creditor under Rule 163 ibid. If a creditor is dissatisfied with the decision of the Official Liquidator in respect of his proof, he may not later than 21 days from the service of notice upon him may appeal to the Court against the decision under Section 164 ibid. Thus, right of appeal is conferred on the creditor whose claim has been rejected in whole or in part. Rule 164 ibid is not applicable to a third party creditor.
10. In the case of Jagannath Saran v. S.N. Lokras and others, AIR (38) 1951 Nagpur 275, the Official Liquidator had filed a list of certified claims, amongst others, the claims of four persons totalling Rs.2,98,544-13-6. A contributory and creditor had filed an application before the Company Court objecting the above four claims. The Company Court rejected the application on the ground that the objector had no locus standi to apply. This order of rejection was challenged in appeal.
11. A Division Bench of the Nagpur High Court held in the case of Jagannath Saran (supra) that a person who" has suffered a legal grievance is one against whom a decision has been pronounced which has wrongfully deprived him of something or wrongfully refused him something which be had a right to demand or wrongfully affected his title to something is a person aggrieved within the meaning of Section 183(5) of the Companies Act, 1913. The Bench further found that when Official Liquidator investigates debts and claims etc., and draws a list of creditors, it is an "act" within the meaning of Section 183(5) ibid. The Bench also extracted Section 179(i) of the Companies Act, 1913 in Para 19 of its judgment which reads as under :
"to do all such other things as may be necessary for winding up the affairs of the Company and distributing its assets."
The Bench observed that one of the most important matters in winding up is ascertaining the claims against the Company and to determine who are to be paid and how much. The Official Liquidator is to decide whether to include a claim in the list or not and, therefore, his conclusion is a decision and hence is appealable under Section 183(5) ibid.
12. Sub-section (6) of Section 460 of the Companies Act, 1956 reads as under :
"Any person aggrieved by any act or decision of the liquidator may apply to Court; and the Court may confirm, reverse or modify the act or decision complained of, and make such further order as it thinks just in the circumstances."
This sub-section corresponds to Section 183(5) of the Companies Act, 1913.
13. The secured debt of the workmen to the extent of Rs.2,70,7,482.30 with interest ranking pari passu with the claims of the other secured creditors including those of the petitioner-Bank, if rejected or reduced, would be made available for distribution among the secured creditors etc., and in that event, they will naturally be entitled to claim enhanced amounts. The impugned order of the Official Liquidator has deprived the right of the petitioner-Bank to claim more amount than which is to be received now by it pari passu with the claims of the workmen and, therefore, the petitioner-Bank appears to be a person aggrieved and as a sequel to that, it has a right of appeal under subsection (6) of Section 460 of the Companies Act, 1956.
14. Section 179(i) of the Companies Act, 1913 corresponds to Section 457(e) of the Companies Act, 1956. As noted above, the Division Bench of the Nagpur High Court has held in the case of Jagannath Saran (supra) that the act of the Official Liquidator in drawing up the list of creditors is an act within the meaning of Section 183(5) of the Companies Act, 1913 and it also amounts to a decision. Under Rule 167 of the Companies (Court) Rules, 1959, the Official Liquidator has to prepare a list of creditors and this list is to be filed in the Company Court along with a certificate. This list attains finality unless it is amended or varied under the orders of the Court vide Rule 168 ibid. I therefore, respectfully agree with the opinion of the learned Judge of the Division Bench of the Nagpur High Court expressed in the case of Jagannath Saran (supra) and hold that drawing up the list of creditors is an "act" and/or a "decision" within the meaning of Section 460(6) of the Companies Act, 1956 and, therefore, the right to apply under this provision extends to any person who has been affected by the Official Liquidator's act or decision. Therefore, the creditors have a locus in the matter of exercise of powers by the liquidator.
15. True that while granting leave to ICICI in CA 54/1992 and CA 55/1992 and to IDB1 in CA 280/1992 and CA 281 /1992 on 7-8-1998 vide Clause (6) contained in Para 17 of the impugned order, the applicants were ordered to undertake to deposit the workmen dues quantified at Rs.3,83,96,973.50 as per the provisions of Section 529-A of the Companies Act, 1956, but it cannot be said that the workmen dues as quantified by the Official Liquidator were confirmed by this Court because the question as to whether the impugned proceedings of the Official Liquidator were correct or not, was neither questioned nor considered in those applications.
16. In the result, the preliminary objection that the petitioner-Bank has no locus standi and, therefore, the application is not maintainable, is rejected and it is held that the application is maintainable.