Calcutta High Court
Asansol Durgapur Development ... vs The Official Liquidator on 30 June, 2017
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
1
OD 7
CA 33 of 2013
WITH
BIFR 510 of 1992
CA 488 of 2011
CA 514 of 2013
CA 515 of 2013
IN THE HIGH COURT AT CALCUTTA
ORIGINAL JURISDICTION
IN THE MATTER OF :
ASANSOL DURGAPUR DEVELOPMENT AUTHORITY
VERSUS
THE OFFICIAL LIQUIDATOR, HIGH COURT, CALCUTTA
AND
IN THE MATTER OF :
MINING & ALLIED MACHINERY CORPORATION LTD.
(IN LIQUIDATION)
BEFORE:
The Hon'ble JUSTICE SANJIB BANERJEE
Date : 30th June, 2017.
For A.D.D.A :
Mr. B.K.Chatterjee, Sr. Advocate appears Mr. Raja Basu Chowdhury,Advocate appears Mr. Sayantan Bose,Advocate appears Mr. Joy Saha,Sr. Advocate appears.
Mr. Shamit Sanyal,Advocate For Official Liquidator :
Mr. Aninda Bhattacharya,Advocate 2 Mr. Amiya Kumar Sur,Advocate appears.
Md. Hafiz Ali,Advocate appears.
Mr. S. Pal,Advocate appears.
The Court :- These matters have remained pending for a long time and were assigned to this Bench, released and taken up again at the behest of the parties.
The short question that arises is whether certain fixed deposit receipts, Kishan Vikash Patra certificates and cash deposited by the erstwhile employees of the company (in liquidation) with the company prior to its liquidation are liable to be refunded to such erstwhile employees or to their order; or they are to be dealt with in accordance with law by the Official Liquidator. The point urged by the erstwhile employees through their associations as applicants is that the property in the fixed deposits or the certificates or the monies did not pass to the company or the company (in liquidation) and, as such, they have to be returned to the depositors named in the documents or the owners of the KVP certificates or the persons who deposited the monies and not appropriated in any other manner.
Indeed, the erstwhile employees, or their associations, and the Asansol Durgapur Development Authority entered into an agreement without reference to the company (in liquidation) or the Official Liquidator or the secured creditors of the company (in liquidation) by which it was agreed that the deposits would be made over to ADDA as the virtual nominee of the erstwhile employees who had 3 made the deposits or kept the certificates with the company. It is not necessary to recount how an order was obtained from the Company Court without reference to the secured creditors of the company (in liquidation), though it was, fortunately, undone before the amounts covered by the FDRs, the certificates and the cash deposits could be appropriated or taken away by ADDA.
The company, Mining & Allied Machinery Corporation Ltd, was referred in 1992 to the Board for Industrial and Financial Reconstruction under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. After no measures could be identified to revive the company, the BIFR made a recommendation on June 29, 2001 under Section 20(1) of the Act of 1985 for the company to be wound up. The company was wound up by this Court by an order of May 16, 2002. In an appeal arising out of the order of winding-up or one of the subsequent orders, a scheme was directed to be framed by the Appellate Court so that the township which was occupied by the erstwhile employees of the company (in liquidation) did not have to be vacated. The township had been built on land made available to the company by the State of West Bengal. In short, under the scheme, the houses and dwelling units under the occupation of the erstwhile employees of the company (in liquidation) continued to be retained by them on certain terms and conditions, including as to payment, which may not be relevant for the present discussion.
There was a prior scheme propounded by a circular which was published by the company, before its liquidation, qua the allottees of the houses or dwelling units at the company's township. The initial circular was dated June 3, 4 1999 and carried the number of 11/99. It pertained to erstwhile employees who were still occupying the company quarters. The circular provided for the erstwhile employees of the company, then not in liquidation, to give their option for staying in the quarters, for the purpose whereof they would have to make a security deposit. A proforma licence agreement was appended to the circular and such licence agreement contemplated licence fees and security deposits to be paid by the erstwhile employees who continued to enjoy the company's quarters.
Clause 2 of the licence agreement appended to circular no. 11/99 dated June 3, 1999 provided as follows:
"It is agreed that the Licensee shall deposit and keep in deposit with the Licensor a sum of Rs. .............. only as Security for the due and proper performance of the terms of this leave and licence, which amount shall be refunded to the Licensee mentioned on the termination or revocation of this licence after deducting therefrom such amount as may be due to the Licensor by way of arrears of charges/compensation for the use and occupation of the said premises and/or for the loss and/or damage to the depositors, if required, articles and things belonging to the Licensor." In addition, clause (3) of the proforma licence agreement referred to a licence fee that was payable. The figures would have, probably, varied from person to person and in the proforma agreement it was kept blank. An annexure to the proforma licence agreement or to the circular itself of June 3, 1999 indicated the quantum of security deposits required to be furnished by the 5 erstwhile employees in occupation of the various categories of accommodation and the corresponding licence fees. The quantum of deposit ranged from Rs. 61,300/- to Rs. 8,85,400/- and the licence fees ranged from Rs. 818 to Rs. 5000/- per month. Water charges were also payable at variable rates depending on the type of accommodation.
A corrigendum to the circular of June 3, 1999 was issued on June 17, 1999. Clause (ii) of such corrigendum is of some relevance:
"(ii) Ex employees residing in residential accommodation provided by the Corporation in Sagarbhanga/Bidhannagar who are willing to get the tenancy residential accommodation under their occupancy transferred in their names may apply to the Housing Board and forward a copy to the office of the Chief Town Administrator, MAMC Ltd., Durgapur -10. Till the time transfer of tenancy in personal name is concluded, an amount of Rs. 15,000/-
shall be withheld towards security deposit from the ex-gratia amount for those Ex-employees released under VSS. For other category employees released under superannuation/VRS shall be required to deposit the ....................The security deposit as indicated above shall be refunded after transfer of tenancy of residential accommodation and electric connection in the personal name of the occupant is concluded subject to adjustment of outstanding dues towards rent, electricity & water charges."
6It is not in dispute that in terms of the said circular and the corrigendum relating thereto, the security deposits that were required to be furnished were, indeed, furnished whether by way of cash or by way of deposit of fixed deposit receipts or KVP certificates or the like. The Official Liquidator reports that fixed deposits of value in excess of Rs.53 Crore are available, whether with the Official Liquidator or as made over to ADDA pursuant to a previous order, but which money has not yet been appropriated by ADDA. In addition, KVPs of value of about Rs.1.85 Crore and cash of about Rs.26 lakh remain with the Official Liquidator or ADDA.
The money or the fixed deposits or certificates and the like were almost lost to the company (in liquidation) pursuant to the unilateral arrangement between the ex workers of the company (in liquidation) and ADDA and the application filed in Court which was allowed without reference to the secured creditors of the company (in liquidation). At the behest of the secured creditors of the company (in liquidation) the order has been kept in abeyance in the sense that ADDA has not been permitted to appropriate the money or funds that it may have received or the deposits that may have been made over to it.
The secured creditors, primarily nationalised banks, say that against their dues running into several hundreds of crores of rupees, a total amount of about Rs. 63 crore has been released on a pro rata basis upon the assets of the company (in liquidation) fetching a price of about Rs. 100 crore. The balance amount has been retained by the Official Liquidator to cover the Official Liquidator's expenses and to await further orders of the Company Court as to 7 how the same may be disbursed. The secured creditors, speaking through the State Bank of India, insist that the deposits were required to be received by the company and the position after the company has gone into liquidation is that the depositors or the ex workers of the company (in liquidation) would be creditors of the company (in liquidation) and no more. It is the further submission on behalf of the State Bank that in respect of such dues of the workers of the company (in liquidation) Section 529A of the Companies Act, 1956 cannot be pressed into service and, as such, the ex workers of the company (in liquidation) who have made such deposits have to be regarded as ordinary creditors who will stand in the queue to be eligible to receive their dues after the entire dues of the secured creditors have been discharged.
The ex-workers or the associations espousing their cause and ADDA, which has no conflict of interest with the ex-workers, submit that the ex-workers were only required to keep a certain amount of money by way of deposit which could never been appropriated by the company (in liquidation) till such time that the conditions for such appropriation arose. It is the further submission, particularly of ADDA, that in the majority of cases fixed deposit receipts were merely made over by the ex-workers of the company to the company. As such, ADDA maintains that the fixed deposit receipts were retained by the company without the property in the fixed deposits ever passing from the depositors to the company.
What is evident from the circular of June 3, 1999, including its corrigendum of June 17, 1999, is that the ex-workers of the company who 8 retained possession of the company's quarters were required to put in liquid cash by way of deposit. The circular or its corrigendum did not contemplate the deposit to be made in any other form. It is true that that the deposits could be touched by the company only upon certain conditions in the nature of default happening. However, the right of the ex-workmen to receive back the deposits, for the moment not considering that the deposits were made by furnishing bank deposit receipts, would amount to the refund of the money by the company.
Once the company went into liquidation, the status of the ex-workers who made the deposits would be no higher than the status of an unsecured creditor of the company. It is quite irrelevant in the circumstances as to the manner in which the deposits were made, once it is appreciated that the deposits were made pursuant to the circular of June 3, 1999 that contemplated liquid money to be kept in deposit. Further, water charges and like dues could be deducted from the deposits by the company and only the balance was liable to be refunded. If any refund was not made despite a demand, the relevant ex-worker would be entitled to lodge a money claim.
Upon the company going into liquidation, all the deposits were, by law, to come under the control of the Official Liquidator for the Official Liquidator to deal with the same in accordance with the provisions of the Act of 1956. The deposits, irrespective of the manner in which they were made, have per force to be regarded as money put into the company which came into the hands of the Official Liquidator upon the company going into liquidation and the 9 disbursement thereof cannot be made otherwise than as recognised in the statute.
Accordingly, CA 488 of 2011, CA 514 of 2013, CA 515 of 2013 and CA 33 of 2013 are disposed of by holding that the fixed deposit receipts or cash or KVP certificates that the ex-workers of the company (in liquidation) deposited prior to the company going into liquidation with the company are to be retained and immediately taken control of by the Official Liquidator without ADDA or the ex- workers having any right in respect thereof or any right to deal with the same. The Official Liquidator will use such funds for disbursal to the creditors of the company (in liquidation), including the ex-workers who made the deposits, in their turn and in accordance with law. It is elementary that till the dues of the secured creditors are discharged to the extent of the securities enjoyed by such creditors, the dues of the unsecured creditors cannot be taken up. Even if the deposits are not part of the securities of the secured creditors, the general pool of the unsecured creditors of the company (in liquidation) will be entitled thereto without the depositors having any preferential right therein.
There will be no order as to costs.
A stay of the operation of the order is prayed for, which is refused.
(SANJIB BANERJEE,J.) S.Chandra 10