Andhra HC (Pre-Telangana)
Canara Bank A Nationalized Bank ... vs Mopeds India Ltd., A Company Under ... on 18 March, 2004
Equivalent citations: 2004(4)ALD738, [2004]55SCL686(AP)
ORDER V.V.S. Rao, J.
1. M/s. Mopeds India Ltd., was ordered to be wound up by this Court on 17-10-1990. Official Liquidator of this Court issued notice of claim of debt to the creditors. Canara Bank and A.P. State Financial Corporation ('SFC' for brevity) filed their claim petitions. M/s. Mopeds India Ltd. Staff & Workers Union, a registered union represented by its President D. Rangaiah also filed an affidavit claiming workmen's dues. After due determination, Official Liquidator issued a notice of admission of proof of debt of workmen in Form No.70 determining an amount of Rs.1,41,19,125/- towards workmen's dues. Aggrieved by the same, Canara Bank preferred these appeals under Rule 164 of Companies (Court) Rules, 1959 (for short, the Rules).
2. Mopeds India Ltd. (now in liquidation) was incorporated under the Companies Act, 1956 on 30-5-1962 as an automobile industry for manufacture of two wheelers. The company has 300 workmen under its control. On 29-9-1987, the company made a reference under Section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). Board for Industrial and Financial Reconstruction (BIFR) registered the same as Case No.239 of 1987. By an order dated 17-7-1989, BIFR recommended for winding up of the company. Aggrieved by the same, M/s. Mopeds India Ltd. Staff & Workers Union preferred an appeal being Appeal No.25 of 1989 before the Appellate authority for Industrial and Financial Reconstruction (AIFR), New Delhi. The appeal of workers union was dismissed on 22-5-1990.
3. In pursuance of the order of BIFR, as confirmed by AIFR, Company Petition No.48 of 1989 was taken cognizance by this Court. By an order dated 15-9-1989 (while appeal of workers union was pending before AIFR), Official Liquidator of this Court was appointed as provisional liquidator, by reason of which all the assets stood vested in the company court in the charge of Official Liquidator. Be that as it is, ultimately, by an order dated 17-10-1990 made in C.P.No.48 of 1989, this Court ordered winding up of Mopeds India Ltd. By that time, Canara Bank, appellant herein, had filed a suit being O.S.No.139 of 1990 on the file of the Court of the Subordinate Judge Tirupati for realising the debts of the company. Canara Bank as well as SFC filed C.A.No.470 of 2001. They took permission of the Court under Section 446 of the Companies Act to go out of winding up. For this reason, this Court permitted SFC to sell the assets of the company. SFC and Canara Bank realised a sum of Rs. 405 lakhs and the property was handed over to the purchaser. Thereafter, Canara Bank and SFC filed claim petitions in Form No.66 under Rule 151 of the Companies Rules. SFC claimed a sum of Rs.833.91 lakhs. Based on certificate of recovery issued by Debts Recovery Tribunal (DRT) in O.A.No.972 of 1999 (Canara Bank's suit O.S.No.139 of 1990 stood transferred to DRT and re-numbered as O.A.No.972 of 1999), filed a claim petition to the tune of Rs.19,97,80,404.18 ps. These claims were enquired into by the Official Liquidator who issued notice of admission/rejection of proof of debt. By notice of rejection dated 27-6-2001, Official Liquidator rejected the claim of SFC to an extent of Rs.70.01 lakhs and also did not accept SFC as a secured creditor. So far as Canara Bank is concerned, Official Liquidator admitted its claim to an extent of Rs.6,74,06,344/-. SFC filed appeals under Rule 164 of the Companies Rules being C.A.Nos.535 and 536 of 20021. By an order dated 25-7-2003, this Court rejected the appeals by holding that date of winding up is relevant date for determining the claim of secured/unsecured creditors, that interest after the date of winding up cannot be allowed and that SFC's claim for treating as secured creditor is unsustainable.
4. Canara Bank also filed C.A.No.584 of 2002 aggrieved by the notice of acceptance of debt for an amount of Rs. 6,74,06,344.45p. By an order dated 25-7-2003, this Court dismissed the appeal. It is brought to the notice of this Court that feeling aggrieved by the orders of the company court, SFC and Canara Bank have filed appeals under Section 483 of the Companies Act. It appears that, a Division Bench of this Court suspended the order of the company court.
5. The determination by Official Liquidator admitting proof of debt of workmen was set aside by this court by a common order dated 17-7-1998 in C.A.No.426 of 1997, O.S.A.Nos.3 and 4 of 1998 and Company Appeal Nos.1 and 2 of 1997. The Official Liquidator was directed to reconsider the matter upon affording opportunity to all the parties including employees. Thereafter, the Official Liquidator issued notice to SFC, Canara Bank, ex-management, ex-Secretary of the company and workers union represented by Secretary. The workers union submitted a claim for an amount of Rs.4,33,71,314/- representing arrears from July 1996 to 15-9-1989, closure compensation, gratuity, notice pay of one month and interest at 18% per annum from October 1990 to December 1996. The workers union also produced material before Official Liquidator to show that it is a registered union regularly submitting annual returns in Form E as per Regulations to the competent authority consisting 307 members. The workers also filed a claim petition in Form No.67 under Rule 152 of Companies Rules.
6. SFC, Canara Bank and ex-Secretary of company raised objections to the claim of the workers union contending that claim is not proper, that workers union is not a registered union, that claim for wages from July 1986 to October 1990 cannot be accepted as company was under lock and key of Canara Bank, that the claim for closure compensation under Section 25 of the Industrial Disputes Act, 1947 is not proper, that the claim for one month notice pay is not proper, that the workers resorted to illegal strike and therefore they are not eligible for wages beyond 15-9-1986 and that the names of workers who died and who left the company are also included in the list of workers, that the claim for bonus and interest at 18% per annum is untenable. Other objections are also raised regarding the status of the workers. It was contended that Section 529A of the Companies Act has no application. All the parties also filed written statements before the Official Liquidator. The Official Liquidator framed the following issues.
i) Whether the claim petition filed by the President of M/s. Mopeds India Staff and Workers Union is maintainable on behalf of its members?
ii) Whether the claim made under various heads by the workmen are covered under Section 529 and 529-A of the Companies Act, 1956, giving the workers the status of secured creditors?
iii) Whether any part of any amount claimed by the workmen falls outside Sections 529 and 529A of the Companies Act, 1956?
iv) Whether workmen are entitled for closure compensation @ 15 days salary for every completed year of service or only for 3 months in terms of provisions of Section 25 FFF of the Industrial Disputes Act?
v) What could be the cut off date to decide the closure of the company?
vi) Whether any person has to be excluded from the purview of the definition of the workmen in terms of the provisions of Section 2(s) of the Industrial Disputes Act?
vii) Whether the workmen were gainfully employed during the period of their claim?
viii) Whether the workmen are entitled for interest and if so at what rate and from which date?
ix) Whether the Official Liquidator has to represent before the DRT to protect the interest of secured creditors and the claims of the workmen?
7. By notice of admission of proof of debt of workmen dated 27-6-2001, Official Liquidator admitted the workmen's claim as a secured debt to an extent of Rs.1,41,19,125/- ranking pari passu to the claim of other secured creditors together with interest at 4% per annum from the date of appointment of Official Liquidator i.e., 15-9-1989. Official Liquidator assessed bonus amount of Rs.15,29,148/- as an unsecured debt.
8. Learned Standing Counsel for SFC, Sri Y.N. Lohitha, and the learned Standing Counsel for Canara Bank, Sri Deepak Bhattacharjee made lengthy submissions covering wide range of points in relation to Sections 528, 529, 529A and 530 of the Companies Act. Learned counsel also attacked the impugned notice of admission of workers debt (hereafter called 'the impugned order') on various grounds. A summary of these submissions in brief is as follows.
9. The Official Liquidator while taking action in accordance with Rules 147 to 279 of the Companies rules is not competent to adjudicate the claims of secured/unsecured creditors as well as workmen. He cannot accept or reject a claim of proof of debt. Alternatively, by reason of Clause (a) of proviso to sub-section (1) of Section 529, the Liquidator represents the workmen and, therefore, he cannot be an authority to determine the workmen's dues as it would result in real bias. By reason of the provisions of Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDB Act) and by reason of Section 29 of SFC Act read with Section 529 (1) of the Companies Act, the workmen's payment can only be addressed only after satisfying the secured debt of SFC and Canara Bank.
10. The summary of other submissions made by both the counsel which are made alternatively is as follows. When the company was ordered to be wound up, statement of affairs was filed which contains the liabilities of the company. The said statement filed under Section 454 of the Companies Act should be the basis for quantifying the debt of the workmen and the Official Liquidator cannot resort to independent adjudication under Section 529 of the Act. The workers union is not a registered trade union and, therefore, they cannot represent the workers. By reason of this, filing a mere affidavit would not satisfy the requirement of law and the affidavit filed in Form No.67 read with Rule 152 of the Companies Rules is of no avail. The amount claimed towards workmen's dues under various heads and/or the number of workmen who are allegedly entitled for such amounts is incorrect in the light of the statement and communication filed before BIFR and AIFR and competent authorities. Payment of wages under labour law and other allowances during strike period is impermissible. The benefit under Section 25FFF of I.D. Act for payment of closure compensation is not available to the workers.
11. The learned counsel for the Official Liquidator, Sri M. Anil Kumar, made the following submissions. The appeal under Section 164 or Section 460 or Section 483 is not maintainable at the instance of a person who claims to be a secured creditor. The appellant in Company Appeal No.473 of 2001 has already been held by this Court as unsecured creditor and therefore no appeal would lie against orders of Official Liquidator to this Court. Dealing with the other submissions, he would contend that the workmen of company in liquidation never went on strike, but only gave a strike notice. Therefore, they are entitled for closure compensation with effect from the date of publication of winding up order in accordance with sub-section (3) of Section 445 of the Act which lays down that winding up order filed with Registrar of Companies under sub-section (1) of Section 445 of the Act shall be notice of discharge to employees of the company. In view of this, prior to passing of winding up order, in law, there was no closure of the company by the erstwhile management. While calculating workmen dues the Official Liquidator has taken into consideration the number of workers or their legal heirs on the rolls as on the date of winding up order excluding the dead-persons which is permissible under law as per the rules made in accordance with Section 643, especially Rules 148, 149, 158, 159 and 163 of the Rules, and it is competent for the Official Liquidator to accept or reject the proof of debt of the workmen and Official Liquidator does not incur any disqualification by reason of the power conferred to representing the workmen in the winding up of the company. Without prejudice to this submission, the learned counsel for the Official Liquidator placed reliance on the judgment of the Supreme Court in ALLAHABAD BANK v CANARA BANK1, INTERNATIONAL COACH BUILDERS LTD. v. KARNATAKA STATE FINANCIAL CORPORATION2. The learned counsel has taken me through the entire material on record to contend that the findings recorded by the Official Liquidator on all the nine issues are sustainable and do not warrant any interference by this Court.
12. After giving anxious consideration, this Court is of the considered opinion that these appeals are not maintainable for reasons more than one.
First, claim of Canara Bank, who are the appellants in Company Appeal No.467 of 2001 has already been accepted to an extent of Rs.6,74,06,344.45 ps. (Rupees six crores seventy four lakhs six thousand three hundred forty four and forty five paise only). Likewise, the claim of SFC, the appellant in the Company Appeal No.473 of 2001 was treated as claim by unsecured creditor and Official Liquidator rejected the claim of SFC as secured creditor to an extent of 70.01 lakhs. Both of them filed appeals before this Court and they were dismissed by this Court.
Secondly, SFC has not been treated as secured creditor in the winding up of Mopeds India Limited (in liquidation). Therefore, the appeal under Rule 164 of the Rules would not lie at the instance of SFC unless they themselves had filed their claim in Form No.66. As noticed hereinabove, SFC has already filed a claim petition under Rule 148 and Official Liquidator treated them as unsecured creditors and the Official Liquidator rejected the claim. Against the order of rejection in Form No.69, an appeal has already been filed which was dismissed.
Thirdly, under Section 460 of the Companies Act if the Official Liquidator takes a decision which is contrary to wishes of the creditors or contributors of the company either in the matter of administration of assets or distribution thereof a person aggrieved by an act or decision of the liquidator may apply to the Court praying either to confirm, reverse or modify the act or decision. This is not one such case where the omission or commission of the liquidator of the company referable to sub-section (3) read with sub-section (5) of Section 460 of the Companies Act is complained of.
Fourthly, under Section 483 of the Companies Act, appeal would lie in the matter of winding up of company by the Court against orders of learned Single Judge sitting as Company Court to the Division Bench of the Court. Not being such matter, appeal under Section 483 of the Companies Act is also not maintainable. The Canara bank, appellant in Company Appeal No.467 of 2001 also invoked Section 19 as well as Section 457(3) of the Companies Act. A bare perusal of these provisions would show that they have no relevance nor do they provide for such appeal to the Company Judge against act of commission or omission while determining the claims of creditors submitted either in Form No.65 or 66 pursuant to notice issued under Rule 148 of the Rules.
Fifthly, the SFC as well as Canara bank have invoked Rule 164 of the Rules in their respective applications to make different grievance against admission of proof of debt in Form No.70 issued by the Official Liquidator. Rule 164 of the Rules reads as under.
164. Appeal by creditor:- If a creditor is dissatisfied with the decision of the Liquidator in respect of his proof, the creditor may, not later than 21 days from the date of service of the notice upon him of the decision of the Liquidator, appeal to the Court against the decision. The appeal shall be made by a Judge's summons, supported by an affidavit which shall set out the grounds of such appeal, and notice of the appeal shall be given to the Liquidator. On such appeal, the Court shall have all the powers of an appellate Court under the Code.
The Rule provides that if a creditor is dissatisfied with the decision of the liquidator in respect of his proof, the creditor may not later than twenty one days from the date of service of notice upon him of the decision of the liquidator appeal to the Court against the decision. The term 'creditor' used in Rule 164 of the Rules cannot be understood as every creditor of the company in liquidation. The term 'creditor' used in Rule 164 of the Rules refers to only person or persons who pursuant to notice in Form No.64 or 65 issued as per Rule 168(2) submits a claim and proves his debt. A person who in a given circumstances appears before the Official Liquidator at the time of determination of the claim of the creditor either supporting or opposing cannot be treated as creditor though such a person may be of equal status as that of creditor in relation to a company in liquidation. A person after receiving notice either in Form No.64 or 65 has to file an affidavit in Form No. 66 for the purpose of proof of debt. Such person alone shall be entitled for the determination of the debt by the Official Liquidator. Further, after conducting such enquiry and investigation the liquidator may either reject claim by issuing Form No.69 or accept the claim by issuing Form No.70 to the person. If the person or persons to whom Form No.69 rejecting claim is issued or person or persons whose claim has been admitted by issuing notice of admission in Form No.70, they are alone creditors for the purpose of Rule 164 of the Rules. The rival creditors be they secured creditors or unsecured creditors cannot be treated as creditors for the purpose of filing appeal under Rule 164 of the Rules. This becomes clear by reference to Rule 165 of the Rules, which reads as under.
165. Procedure where creditor appeals:- (1) The liquidator shall, upon receiving notice of the appeal against a decision rejecting a proof wholly or in part, file with the Registrar such proof with the order containing the grounds of rejection.
(2) It shall be open to any creditor or contributory to apply to the Court for leave to intervene in the appeal, and the Court may, if it thinks fit, grant the leave subject to such terms and conditions as may be just. Where such leave has been granted notice of the hearing of the appeal shall be given to such creditor or contributory.
13. The rival creditor or contributor, whose claim was either accepted or rejected is only given limited right to intervene in appeal filed by another creditor at whose instance the liquidator issued either Form No.69 rejecting the claim or Form No.70 accepting the claim. In the case on hand Canara Bank or SFC are themselves creditors and therefore they cannot file appeal against the decision of the liquidator in Form No.70 accepting the claim of the workmen for their dues. In the event of workmen filing appeal against determination of their dues by the liquidator, as per Rule 165(2) the appellants herein can intervene in the matter with the leave of the Court. Reading provisions of Rules 148 to 165 together it is not possible to accept the submission of the learned counsel for the appellants that appeal would lie.
14. The right of appeal to a designated Court or a Forum must be specifically provided by the Statute. In the absence of authority of law there is no inherent right to file appeal. This is a settled principle of law. If any authority is required, a reference may be made to the decision of the Supreme Court in GANGA BAI v. VIJAY KUMAR3 wherein it was held:
The main controversy before us centres round the question whether that appeal was maintainable. On this question the position seems to us well-established. There is a basic distinction between the right of suit and the right of appeal. There is an inherent right in every person to bring a suit of a civil nature and unless the suit is barred by statute one may, at one's peril, bring a suit of one's choice. It is no answer to a suit, however, frivolous the claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. But the position in regard to appeals is quite the opposite. The right of appeal inheres in no one and therefore an appeal for its maintainability must have the clear authority of law.
15. This Court in STATE BANK OF HYDERABAD v. OFFICIAL LIQUIDATOR4 has held that Rule 164 provides right of appeal to the creditor whose claim has been rejected and is not applicable to the third party creditor. The relevant observations made by the Court are as follows.
16. 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 No.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, appeal to the court against the decision under rule 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.
17. As against the claim of the workman, to a sum of Rs.4,33,71,314/- (Rupees four crores thirty three lakhs seventy one thousand three hundred and fourteen only) representing wages from July, 1986 to 15.9.1999 and other amounts, the liquidator admitted the claim in a sum of Rs.1,41,19,125/- (Rupees one crore forty one thousand nineteen thousand one and twenty five only) towards workmen dues. If the workmen are aggrieved they can alone file appeal under Rule 164 before this Court and in such an event it is within the discretion of this Court to grant lease to Canara Bank or SFC to intervene in the matter. The appeal as such by third party creditors like Canara Bank or SFC is not maintainable under Rule 164. In that view of the matter, though elaborate submissions are made, it would not be proper for this Court to adjudicate other issues.
18. In the result, for the above reasons, the appeals are dismissed. There shall be no order as to costs.