Court approves sale of Maharana Mills Ltd. properties in liquidation, distributing proceeds to workers and creditors

The court approved the sale of Maharana Mills Ltd.'s properties in liquidation, resulting in proceeds of approximately Rs. 13.20 crores. Workers' claims under section 529A were verified, with admissible claims totaling Rs. 34,85,47,106. The State Bank of Saurashtra did not object to the official liquidator's reports. A total of Rs. 37,59,75,625 was sought for disbursement to workers, with secured creditors having claims of Rs. 11,27,44,952. The court allowed ad hoc disbursement of Rs. 12 crores among workers and secured creditors, with Rs. 1.50 crores retained for contingencies, concluding the matter with parties' consent.

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Issues Involved:
1. Sale of properties of the company in liquidation.
2. Verification and admissibility of workers' claims under section 529A of the Companies Act, 1956.
3. Objections to the official liquidator's reports.
4. Disbursement of funds to workers and secured creditors.
5. Ad hoc disbursement of funds.

Issue-wise Analysis:

1. Sale of Properties of the Company in Liquidation:
The Union representing the workmen sought the court's direction to the official liquidator to invite offers for the sale of Maharana Mills Ltd. (in liquidation) through advertisements. The court permitted the official liquidator to appoint a chartered accountant to verify workers' claims and later approved the sale of the company's properties. The official liquidator sold various assets, including a villa/guest house and mill premises, realizing a total of approximately Rs. 13.20 crores.

2. Verification and Admissibility of Workers' Claims Under Section 529A:
The official liquidator, through a chartered accountant, verified the workers' claims. The admissible claim under section 529A was initially determined to be Rs. 35,09,55,245 and later revised to Rs. 34,85,47,106. The claims included amounts for salary, gratuity, and retrenchment compensation, while claims for privilege leave, bonus, and notice pay were categorized as "ordinary claims." The chartered accountant's verification was based on the court's decision in the case of Textile Labour Association v. Official Liquidator of Jubilee Mills Ltd.

3. Objections to the Official Liquidator's Reports:
The State Bank of Saurashtra (now State Bank of India) initially opposed the application but did not file any objections to the official liquidator's reports dated September 29, 2005, and January 23, 2006. The court observed that the details in these reports remained uncontroverted and undisputed. The respondent bank did not challenge the court's order dated October 3, 2007, which directed the official liquidator to consider the claims to the extent of the admissible limit.

4. Disbursement of Funds to Workers and Secured Creditors:
The workers' union filed a fresh application seeking the disbursement of Rs. 37,59,75,625 to 2,908 workmen and an additional amount towards provident fund and interest. The official liquidator's report indicated that the total claims of the secured creditors (State Bank of India, IDBI Bank Ltd., and Central Bank of India) amounted to Rs. 11,27,44,952, while the workers' claims were significantly higher. The court noted the prolonged delay in disbursing funds to the workers despite the realization of sale proceeds.

5. Ad hoc Disbursement of Funds:
The court considered the request for ad hoc disbursement of funds and noted that the State Bank of India had not raised any objections to the chartered accountant's reports until the present application. The court observed that the rules do not prohibit ad hoc disbursement and directed the official liquidator to disburse Rs. 12 crores on an ad hoc basis among the workers and secured creditors, retaining Rs. 1.50 crores for contingencies. The ad hoc disbursement was to be made in the following ratio: Workers (Rs. 9.23 crores), SBI (Rs. 1.41 crores), IDBI (Rs. 1.09 crores), and CBI (Rs. 0.27 crores).

Conclusion:
The court directed the official liquidator to proceed with the ad hoc disbursement of Rs. 12 crores among the workers and secured creditors while retaining Rs. 1.50 crores for contingencies. The order was passed with the consent of the parties involved, without prejudice to their rights and contentions regarding the final quantification of claims and disbursement ratio. The application was disposed of accordingly.

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