Liquidation dividend distribution requires notice before recovery of excess payments and only proportionate reserves for pending claims.

In liquidation distribution, alleged excess interim payments to secured creditors cannot be recovered with interest unless the entitlement and extent of excess are first determined after notice and an opportunity of hearing. Any such liability is deferred to decision by the Official Liquidator. Amounts set aside for belated or pending claims must also be limited to the same proportion as that payable to admitted secured creditors, rather than the full claimed amount, so that interim dividend distribution remains equitable. The recomputed dividend is to be disbursed on that proportionate basis among eligible secured creditors.

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Issues: (i) whether the alleged excess interim payments made to certain secured creditors could be treated as recoverable with interest without prior notice and determination; (ii) whether the amount to be kept aside for belated or pending claims should be the full claimed amount or only the proportionate share payable on the same basis as other secured creditors.

Issue (i): whether the alleged excess interim payments made to certain secured creditors could be treated as recoverable with interest without prior notice and determination

Analysis: The amount said to be in excess had not been determined after issuing notice to the affected creditors. The available material did not establish, on the record, the exact extent of excess payment or the basis on which interest could be imposed. Recovery could not be ordered merely at the stage of proposing a further interim dividend, particularly when the entitlement dispute required notice and opportunity of hearing.

Conclusion: The alleged excess amount and interest were not directed to be recovered forthwith, and any such liability was left to be determined by the Official Liquidator after notice to the concerned creditors.

Issue (ii): whether the amount to be kept aside for belated or pending claims should be the full claimed amount or only the proportionate share payable on the same basis as other secured creditors

Analysis: Keeping aside the entire claimed amount for creditors who had not yet regularised their claims was found to be unjust when other secured creditors were receiving only proportionate payments. The reserve for such pending claims had to be aligned with the same ratio applied to the admitted secured creditors, so that distribution remained equitable among all claimants in liquidation.

Conclusion: Only the proportionate amount was required to be set apart for belated or pending claims, and the third interim dividend was to be recomputed on that basis and disbursed uniformly to eligible secured creditors.

Final Conclusion: The applications were disposed of with directions for recomputation of the dividend, proportionate reservation for pending claims, and interim disbursement to secured creditors on an equal basis, while recovery of any alleged excess payment was deferred to determination after notice.

Ratio Decidendi: In liquidation distribution, alleged excess interim payments cannot be recovered with interest without prior notice and determination, and amounts reserved for pending claims must be kept only in the same proportion as the dividend payable to admitted creditors.

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