Gujarat High Court
Textile Labour Association vs Official Liquidator Of Bansidhar Mills ... on 31 August, 2018
Author: R.M.Chhaya
Bench: R.M.Chhaya
C/COMA/291/2011 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/COMPANY APPLICATION NO. 291 of 2011
In
COMPANY PETITION NO. 79 of 1982
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TEXTILE LABOUR ASSOCIATION
Versus
OFFICIAL LIQUIDATOR OF BANSIDHAR MILLS LTD
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Appearance:
MR DS VASAVADA(973) for the PETITIONER(s) No. 1
MR RD DAVE(264) for the RESPONDENT(s) No. 3
MR UDAY R BHATT(192) for the RESPONDENT(s) No. 2
MS E.SHAILAJA(2671) for the RESPONDENT(s) No. 4
MS PJ DAVAWALA(240) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA
Date : 31/08/2018
ORAL ORDER
Heard Mr. D.S.Vasavada, learned counsel for the applicant - Textile Labour Association, Ms. P.J.Davawala, learned counsel for respondent No.1 Official Liquidator, Mr.Uday R. Bhatt, learned counsel for respondent No.2 - State Bank of India, Mr. R.D.Dave, learned counsel for respondent No.3 G.I.I.C and Ms. E. Shailja, learned counsel for respondent No.4.
2. By this application, the applicant has prayed for the following reliefs:
"(A) Be pleased to direct the Official Liquidator to pay an amount of Rs.12,69,67,676.58 to 1247 workmen from the surplus available with him after the disbursement to the workers and secured creditors has been made;Page 1 of 19 C/COMA/291/2011 ORDER
Alternatively (B) Be pleased to direct the Official Liquidator to pay Rs.3,02,88,415/ to 1247 workmen as 4 % interest in proportion to the surplus available after the disbursement;
(C) Be pleased to direct the Official Liquidator to disburse the amount by A/c. Payee cheque to each of the workmen on identification by the applicant Union;
(D) xxx"
3. Learned counsel for the parties have taken this Court through the factual matrix arising out of this application. Record indicates that the Company named Bansidhar Mills Ltd. was ordered to be wound up vide order dated 31.03.1986 passed by this Court in Company Petition No.79/1982. The Official Liquidator attached to this Court was appointed as liquidator of the Company (in liquidation) and the Official Liquidator took possession of the immovable and movable properties of the Company (in liquidation). The Official Liquidator was directed to dispose of the properties of company (in liquidation). Upon approval being granted by this Court, immovable properties belonging to the Company were sold and the money came to be realized by way of sale consideration.
4. Record indicates that the applicant filed Company Application being Company Application No.178/2004, which was disposed of vide order dated 02.11.2004, wherein this Court (Coram : Hon'ble Page 2 of 19 C/COMA/291/2011 ORDER Mr.Justice D.A.Mehta, as his Lordship the then were) was pleased to pass the following order:
"7. The Official Liquidator is accordingly directed:
"[a] to distribute a sum of Rs.2,14,31,912/ to the applicant i.e. Workmen of Bansidhar Spinning and Weaving Mills Ltd. (company in liquidation). Such payments shall be made by way of Account Payee Cheque on identification by a representative of the applicant association and as per details submitted by the applicantunion.
[b] A sum of Rs.4,74,83,666/ be paid to State Bank of India.
[c] A sum of Rs.7,02,029/ be paid to Gujarat Industrial Investment Corporation.
It will be open to the Official Liquidator to prematurely encash the Fixed Deposit Receipt for the aforesaid purpose."
5. Record further indicates that thereafter the applicant filed another company application being Company Application No.358/2008, wherein this Court (Coram : Hon'ble Mr. Justice Jayant Patel, as his Lordships the then were) vide order dated 04.08.2009 considered the following three questions :
"Broadly, the questions to be considered in the present group of applications are as under:
1. The entitlement of a secured creditor for an amount which could not be paid to him though proved on account of the operation of Section 529A of the Companies Act (hereinafter referred to as 'the Act')
2. The entitlement of the interest by a secured creditor after the date of winding up based on the Decree of any competent Page 3 of 19 C/COMA/291/2011 ORDER forum.
3. The entitlement of the interest by the workers over the unpaid wages after the date of winding up claiming the status at par with the secured creditor taking the base of Section 529A of the Act."
6. The said application culminated into the order dated 04.08.2009, whereby it was held as under:
"20.In view of the aforesaid discussions and observations, the following conclusion
1.If after the satisfaction of the debt under Section 529A, any surplus/balance amount is available, the secured creditors would be entitled to the remaining share, if paid less on account of the workers claim to the extent of the money realized from such property, which was as the security of such secured creditor. But, such would be restricted to the contractual interest up to the date of winding up.
2.If the secured creditor is holding the decree for the interest as per the contractual rate, even for the period later to the date of winding up, he would be entitled to the interest at the rate of 4% p.a. from the date of winding up, until the property is sold from the available surplus/balance fund realised from such security, prior to the payment attributable to the preferential creditors under Section 530 of the Act. If the secured creditors are not holding the decree, for any interest later to the date of winding up, their claim is not required to be considered for interest in such category.
3.The remaining unpaid amount of interest as per the decree of the secured creditor is to be considered for payment, if surplus amount remains after satisfying the debt of all other creditors.Page 4 of 19 C/COMA/291/2011 ORDER
4.The workers would not be entitled to interest at par with the interest with the secured creditor holding the decree for contractual interest for the period after the date of winding up. The claim of the workers, if any outstanding, after payment under Section 529A of the Act would fall in the category of unsecured creditor.
5.The claim of the application of Company Application No. 185/09 be treated as falling under Section 530 of the Act and the OL shall be at the liberty to get the said claim verified, if not verified, with the help of the Chartered Accountant and such claim shall be considered as per the statutory priority and as and when fund is available."
7. Being aggrieved by the said order, the applicant preferred an appeal being O.J.Appeal No.106/2009, which came to be dismissed by Division Bench of this Court (comprising Hon'ble Mr. Justice M.R.Shah, as his Lordship the then was and Hon'ble Mr. Justice S.H.Vora) vide order dated 15.01.2003.
8. It is contended by learned counsel for the applicant that the applicant has already lodged claim of total 1247 workmen and details thereof are already furnished to the Official Liquidator alongwith the proof of debt. It was further contended that on basis of the aforesaid factual matrix, the applicant is entitled to at least 4 % interest even on pari passu. The applicant has contended in the application that the State Bank of India, who happens to be the creditor, has not obtained any decree and therefore, they are not entitled to receive any amount.
Page 5 of 19 C/COMA/291/2011 ORDER9. Record further indicates that State bank of India has filed a reply to the present Summons and relying upon the judgment and decree dated 18.07.2007 passed by Debts Recovery Tribunal, Ahmedabad, claims 6 % interest. This Court vide order dated 12.07.2011 passed in this application directed the Official Liquidator to invite claims from the preferential creditor under Section 530 of the Companies Act, 1956 (hereinafter referred to as "the Act" for short). The Official Liquidator vide report dated 30.08.2011 has brought on record the fact that as per order dated 12.07.2011, the Official Liquidator gave advertisement in "Divya Bhaskar", Gujarati daily and "DNA", English daily, which was published on 21.07.2011 and invited claims and has further declared that till 10.08.2011, no claims have been received.
10. By further order dated 09.09.2011 passed in this application, this Court directed the Official Liquidator to appoint Chartered Accountant for verification of the claims of workmen under Section 530 of the Act. The Official Liquidator has also produced on record a verification report of the claims of the workmen through M/s. Nikunj A. Sanghavi & Co., Chartered Accountants dated 04.01.2012 and further report dated 23.01.2012. Record further indicates that the Official Liquidator thereafter, filed further report in this application dated 04.04.2012, which is important to note and has Page 6 of 19 C/COMA/291/2011 ORDER averred thus:
"(4) That, this Hon'ble Court vide its order dated 25.04.2001 passed in Company Application No.110/2001 has been pleased to confirm the sale of Building Structure except land, T.K.Office and compound wall in favour of M/s.
Twist Spin Industries, Nominee of Khemji Jodhaji & Brohters Ltd. for a sale consideration of Rs.67.00 lacs. A copy of the order dated 25.04.2001 is annexed herewith and marked as AnnexureA. (5) That, this Hon'ble Court vide order dated 05.03.2004 passed in OLR No.111 of 2003 has been pleased to confirm the sale of land of said Company in favour of M/s. Shayona Land Corporation, Ahmedabad for sale of consideration of Rs.8.05 crore. A copy of the order dated 05.03.2004 is annexed herewith and marked as AnnexureB. (6) That, this Hon'ble Court vide order dated 20.07.2009 passed in Company Application No.427/2004 directed the Official Liquidator to compensate an amount of Rs.46,54,788/ to M/s. Shayona Land Corporation due to short conveyance of land in compliance of the said order of the Official Liquidator had compensate an amount of Rs.46,54,788/ to Shayona Land Corporation due to short conveyance of land. In compliance of the said order, the Official Liquidator had compensate an amount of Rs.46,54,788/ to Shayona Land Corporation. A copy of order dated 20.07.2009 passed in Company Application No.427 of 2004 is annexed herewith and marked as Annexure:C. (7) That, pursuant to the order dated 10.10.2001 passed in Company Application No. 467 of 1999 the Official Liquidator has appointed M/s. Bharat Mody & Co. Chartered Accountants for adjudication and verification of claims of workers and secured creditors. The said Chartered Accountant has worked ratio Page 7 of 19 C/COMA/291/2011 ORDER & admitted claims of workers and secured creditors which are as under: Sr. Name of Claimants Admitted claims Ratio No. (Revenue Survey No.) 1 State Bank of India 6,12,03,625/ 65.47% 2 GIIC 15,47,020/ 1.66% 3 Workmen 3,07,31,912/ 32.87% Total 9,34,82,557/ 100.00% (8) That, in this connection the Official Liquidator most respectfully submits that pursuant to the various order passed by this Hon'ble Court, the Official Liquidator has disbursed following full amounts to the secured creditors and workers of the Company under Section 529 & 529A of the Companies Act, 1956 admitted by the Chartered Accountants, which are as under:
Particu First Second Third Total
lars disbursement Disbursemen disbursement
(Rs.) t (Rs.)
(Rs.)
Workers 65,00,000/ 28,00,000/ 2,14,31,912/ 3,07,31,912/
State 81,55,009/ 55,64,950/ 4,74,83,666/ 6,12,03,625/
of Bank
of
India
GIIC 8,44,991/ 7,02,029/ 15,47,020/
Total 1,55,00,000/ 83,64,950/ 6,96,17,607/ 9,34,82,557/
10. The Official Liquidator has further brought on record that by letter dated 05.10.2011, the Official Liquidator informed the Commissioner of Income Tax Page 8 of 19 C/COMA/291/2011 ORDER that the Official Liquidator is to undertake the process of settlement of claims under Section 530 of the Act, requesting him to lodge a claim, if any. The Official Liquidator made a similar request again by letter dated 13.10.2011. The Official Liquidator has further submitted that GIIC has lodged a claim on 06.04.2000 for an amount of Rs.15,49,020/, against which, an amount of Rs.15,49,020/ has already disbursed as secured claim of GIIC. State Bank of India has also by communication dated 15.09.2011 informed that as on 30.06.2011, Rs.8,26,94,286.80 is outstanding dues of the Company (in liquidation).
11. Record further indicates that by further report dated 19.04.2013 filed by the Official Liquidator, it has come on record that the City Collector also issued a notice as provided under Section 152 of the Bombay Land Revenue Code for recovery of arrears amount of Rs.1,69,129/.
12. As the record indicates that the claims of the secured creditor as well as preferential creditor were verified by M/s. Nikunj A. Sanghavi & Co., Chartered Accountants and report was submitted on 15.10.2013. The Official Liquidator sent a copy of the same to each of the claimants. As indicated by the Official Liquidator in its report dated 21.01.2014, Department of Central Excise has accepted the report. However, the objections were raised by State Bank of India as well as Employees Provident Fund Organization. The Official Liquidator, in turn, Page 9 of 19 C/COMA/291/2011 ORDER sent the objections so received by the State Bank of India and Employees Provident Fund Organization to M/s. Nikunj A. Sanghavi & Co., Chartered Accountants by communication dated 21.11.2013. M/s. Nikunj A. Sanghavi & Co., submitted its Supplementary Report considering the objections so received vide communication dated 17.12.2013.
13. Record further indicates that pursuant to the order dated 10.10.2001 passed in Company Application No.467/1999, the Official Liquidator appointed M/s. Bharat Mody & Co., Chartered Accountants to verify the claims of the workmen and secured creditors and as per the said report, following claims were admitted and the ratio was provided as under:
Sr Name of Claimants Admitted Ratio . claims No (Revenue . Survey No.) 1 State Bank of India 6,12,03,625/ 65.47% 2 GIIC 15,47,020/ 1.66% 3 Workmen 3,07,31,912/ 32.87% Total 9,34,82,557/ 100.00%
14. The Official Liquidator has also stated that the Official Liquidator has disbursed an amount of Rs.5,34,96,304/ to State Bank of India, Rs.25,000/ to GIIC and Rs.2,33,48,016/ to the workmen. Record indicates that as per the report of M/s. Nikunj A. Sanghavi & Co., Chartered Accountants following can be disbursed in a manner as indicated below against Page 10 of 19 C/COMA/291/2011 ORDER the Workmen, Secured Creditor and Preferential Creditors:
Sr Name of Claimants Admitted claims . (Rs.) No .
1 State Bank of India 5,34,96,304/ 2 Workmen 2,33,48,016.51/ 3 GIIC (Towards expenses) 25,000/ 4 Employees Provident Fund 1,03,664.50 + 5 % Organization surcharge 5 Office of the 35,087/ Superintendent of Central Excise
15. The State Bank of India did not accept the Supplementary Report and raised objections, which was again referred to the M/s. Nikunj A. Sanghavi & Co., Chartered Accountants, by communication dated 30.09.2014 informing the Official Liquidator that the claim of the State Bank of India would now stand at Rs.5,35,71,304/ instead of Rs.5,34,96,304/. The said report was also sent to the State Bank of India by the Official Liquidator. The Employees Provident Fund Commissioner also raised a demand and prayed for direction of this Court directing the office of the Official Liquidator to disburse an amount of Rs.1,03,664.50/ plus 5 % surcharge, aggregating to Rs.1,08,847.62 ps.
16. This Court (Coram : Hon'ble Mr. Justice Vipul M. Pancholi) vide order dated 19.08.2015 passed the following order on 19.08.2015 :
Page 11 of 19 C/COMA/291/2011 ORDER"When this matter is called out, learned advocates for the parties have pointed out the order dated 4.8.2009 passed by this Court in Company Application No.358 of 2008 which is produced at Annexure `B with the compilation and more particularly, the observation made by this Court in paragraph 20 of the said order which reads as under:
20.In view of the aforesaid discussions and observations, the following conclusion A. If after the satisfaction of the debt under Section 529A, any surplus/balance amount is available, the secured creditors would be entitled to the remaining share, if paid less on account of the workers claim to the extent of the money realized from such property, which was as the security of such secured creditor. But, such would be restricted to the contractual interest up to the date of winding up.
B. If the secured creditor is holding the decree for the interest as per the contractual rate, even for the period later to the date of winding up, he would be entitled to the interest at the rate of 4% p.a. from the date of winding up, until the property is sold from the available surplus/balance fund realised from such security, prior to the payment attributable to the preferential creditors under Section 530 of the Act. If the secured creditors are not holding the decree, for any interest later to the date of winding up, their claim is not required to be considered for interest in such category.
C. The remaining unpaid amount of interest as per the decree of the secured creditor is to be considered for payment, if surplus amount remains after satisfying the debt of all other creditors.
Page 12 of 19 C/COMA/291/2011 ORDERLearned advocates for the parties thereafter referred to the report submitted by the concerned Chartered Accountants which is produced at page 166 of the compilation. However, from the said report, it is not clear whether the concerned Chartered Accountant has considered the observation made by this Court as reproduced hereinabove.
In view of the same, the Official Liquidator is directed to send the papers to the concerned Chartered Accountant with a request to consider the aforesaid direction given by this Court and give his further reverification report within a period of three weeks from the receipt of the order. After receipt of the reverification report from the Chartered Accountant, the Official Liquidator shall file appropriate report before the next date of hearing. S.O. To 14.9.2015."
17. Pursuant to the aforesaid order, the Official Liquidator asked M/s. Nikunj A. Sanghavi & Co., Chartered Accountants to confirm whether the Chartered Accountant while adjudicating the claims of the Secured Creditor of the Company (in liquidation) have considered the order or not and also directed if they have not considered the said order, said order may be considered and claims of the Secured Creditor may be reverified and readjudicated.
18. As record indicates that the Chartered Accountant asked for further details, which culminated into revised report dated 23.10.2015. The Chartered Accountants has clarified in the said report that the State Bank of India has obtained decree from the D.R.T on 11.10.2007 for an amount of Page 13 of 19 C/COMA/291/2011 ORDER Rs.6,12,02,625/ along with 6 % interest from 05.05.1989 to 11.10.2007 plus cost of the suit at Rs.40,000/. The Chartered Accountant has opined that State Bank of India has already received an amount of Rs.6,12,03,625/ towards its adjudicated claim under Sections 529 and 529A of the Act. The Chartered Accountant further opined that an amount of Rs.5,35,71,304/ would be eligible claim of the State Bank of India under Section 530 of the Act, which is based on calculation of 6 % interest instead of 4 %. As record indicates that such report was also sent to the State Bank of India for its comment. The Official Liquidator by further report dated 06.10.2016 has contended that the rate of interest after date of winding up order in case of a secured creditor holding decree towards interest should not exceed 4 % for the post windingup period till date of realization in term of judgment and order dated 04.08.2009 passed by this Court.
19. The Official Liquidator has filed further report dated 27.09.2017, wherein the Official Liquidator has relied upon the verification report submitted by M/s. Nikunj A. Sanghavi & Co., Chartered Accountants has averred thus:
Page 14 of 19 C/COMA/291/2011 ORDERSr. Name of Claimants Admitted Remark Nos. claims 1 Employees Provident 1,08,848/ Payment Fund Organization made in (Payment made) terms of order dated 24.04.2015 2 Office of the 35,087/ Can be Superintendent of paid in Central Excise full 3 State Bank of India 5,34,96,304/ With
(a) interest 6 % disputed or claim of interest at 6 % subject to direction of the Hon'ble High Court in the matter.
3(b) State Bank of India 3,53,19,189/ Can be interest paid on pro rata basis 4 GIIC (Towards 25,000/ Can be expenses) paid in full 5 Workmen 2,33,48,016.5 Can be 1/ paid on Pro rata basis
20. The Official Liquidator has also prayed for permission to make payment of Rs.35,087/ to the Superintendent of Central Excise Department being Preferential Creditor and Rs.25,000/ to GIIC being expenses incurred by GIIC, as state hereinabove. The Official Liquidator has declared that as on date, an Page 15 of 19 C/COMA/291/2011 ORDER amount of Rs.2.14 lacs approximately is there in the fund of the Company (in liquidation).
21. Learned counsel for the applicant submitted that appropriate direction be issued for payment of interest at the rate of 4 % to 1247 workmen.
22. As against this, Mr. U.R.Bhatt, learned counsel for respondent No.2 - State Bank of India has also reiterated that the admitted claim may be paid accordingly at the rate of 6 % per annum.
23. Learned counsel for the applicant has also relied upon the affidavit and rejoinder and has reiterated that this Court in similar cases ie. Patel Mills, New Rajpur Mills, New Gujarat Synthetic Unit Nos.1 and 2 etc., have given 4 % interest to the workmen under Section 530 of the Act. Learned counsel for the applicant further submitted that after considering the amount to be paid to the Superintendent of Central Excise and GIIC, as indicated in the report dated 27.09.2017, this Court may pass appropriate order of disbursement on pro rata basis.
24. In the peculiar facts and circumstances arising out of this application and upon considering the report of M/s. Nikunk A. Sanghavi & Co. Chartered Accountants, claim of the workmen and State Bank of India is almost in the ratio of 2:1 and therefore, in opinion of this court, the amount should be disbursed Page 16 of 19 C/COMA/291/2011 ORDER between the workmen and State Bank of India in the ratio of 40:60. Though Mr. Bhatt, learned counsel for the State Bank of India has contended that there is a decree of Debt Recovery Tribunal, which was provided for 6 % interest. However, the fact remains that the workmen are also entitled to equal treatment and claims of both the workmen and State Bank of India as a Secured Creditor are required to be dealt with on pari passu basis, keeping in mind the entitlement of total amount of workmen and State Bank of India and accordingly, appropriate ratio can be prescribed in order to balance the equities between both the workmen and State Bank of India.
25. Even the claim under Section 530 of the Act will have to be worked out on pro rata basis between the State Bank of India and the workmen and therefore, in the facts and circumstances of the case, the workmen would not be entitled for the interest at the rate of 4 % as a whole and similarly, respondent No.2 - State Bank of India would also not be entitled to stricto senso 6 % interest as per the judgment and decree of Debts Recovery Tribunal, Ahmedabad. Therefore, in opinion of this Court, following directions need to be given:
(1) The Official Liquidator shall pay a sum of Rs.35,087/ to Superintendent, Central Excise Department, in satisfaction of its claim under Section 530 of the Act as a Preferential Creditor.Page 17 of 19 C/COMA/291/2011 ORDER
(2) The Official Liquidator is permitted to pay a sum of Rs.25,000/ to GIIC as reimbursement of the expenses incurred by GIIC. (3) The Official Liquidator is also permitted to retain Rs.1,00,000/ (Rs. One Lakh) for meeting expenses for final winding up of the Company (in liquidation).
(4) Rest of the amount lying in the fund of the Company (in liquidation) shall be disbursed between the workmen and State Bank of India in the ratio of 40 : 60 respectively.
(5) The applicant - Association shall produce necessary identification of each workmen with the office of the Official Liquidator and on furnishing such identification, the amount be disbursement in equal proportion amongst the workmen by R.T.G.S individually after due verification by the Official Liquidator.
(6) Respondent No.2 - State Bank of India be paid the amount as worked out hereinabove on usual undertaking that may be filed by respondent No.2
- State Bank of India. The Official Liquidator is hereby directed to disburse the amount to the workmen and the State Bank of India as observed by this Court in the manner and method as provided in the judgment delivered in the case of Omex Mills Ltd.Page 18 of 19 C/COMA/291/2011 ORDER
With the above direction, present Company Application is thus disposed of.
(R.M.CHHAYA, J) SUCHIT Page 19 of 19