TaxTMI 
TaxTMI 
TaxTMI 
2008 (2) TMI 620
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....o further orders of Court. The applicant finalized the highest bidder, deposited the amount realized on the sale of lands and buildings of Rs. 50 lakhs with Andhra Bank, R.C. Puram Branch in interest bearing deposits. On the plea that they were not aware of the dues, if any, payable to its workmen by the company in liquidation, and that the Official Liquidator had failed to quantify the workmen dues for enforcing the statutory charge from out of the sale proceeds realized by them, the applicant seeks permission of this Court to appropriate the sale proceeds of Rs. 50 lakhs with interest thereon. The applicant had earlier filed C.A. No. 573 of 2005 seeking a direction against the Official Liquidator to determine the amount liable to be enforced, by way of pari passu charge, towards the workmen portion of dues under section 529A of the Companies Act. The applicant, while undertaking to discharge the pari passu workmen dues under section 529A of the Act on its determination by the Official Liquidator, seeks permission to appropriate Rs. 50 lakhs subject to enforcement of the charge by the Official Liquidator. 3. On being directed by this Court, the Applicant-Corporation filed a state....
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.....P.I.D.C. with the company under liquidation, they were entitled to be paid interest on their outstanding dues at 16 per cent per annum and that the Applicant had computed the amounts due to it to include interest at 16 per cent per annum till the date of filing of the application in C.A. No. 33 of 2006 i.e., till 30-3-2006. Learned Counsel would submit that Rule 156, of the Companies (Court) Rules, 1959, which restricts payment of interest, subsequent to the order of winding up, to 4 per cent p.a. is ultra vires the provisions of the Indian Contract Act and is liable to be ignored. Learned Counsel would submit that this Court could examine the vires of a statutory rule, under Order 27A C.P.C. He would submit that, under section 141 C.P.C., the procedure prescribed in the Code with regard to suits should be followed insofar as it can be made applicable in all proceedings in any Court. 6. The Official Liquidator, on the other hand, would submit that the Companies (Court) Rules, 1959, made by the Supreme Court under section 643(1) and (2) of the Companies Act, 1956, are statutory rules and there is a presumption regarding its constitutional validity. He would further contend that th....
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....he date of the order of the winding-up of the company or where before the presentation of the petition for winding-up, a resolution has been passed by the company for voluntary winding-up, at the date of passing of such resolution. Rule 156 : Interest. - On any debt or certain sum payable at a certain time or otherwise, whereon interest is not reserved or agreed for, and which is overdue at the date of the winding-up order, or the resolution as the case may be, the creditor may prove for interest at a rate not exceeding four per cent per annum up to that date from the time when the debt or sum was payable, if the debt or sum is payable by virtue of a written instrument at a certain time, and if payable otherwise, then from the time when a demand in writing has been made, giving notice that interest will be claimed from the date of demand until the time of payment. Rule 174 : Settlement of list of creditors. - On the date fixed or on any adjourned date, the Court shall, after hearing such evidence as may be tendered, adjudicate upon the claims and settle the list of creditors. The settlement of the list of creditors shall be recorded in a certificate signed by the Judge in Form No....
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....s liabilities. Pari passu distribution is to be made in satisfaction of the liabilities as they exist at the commencement of the winding-up. Once a winding-up order is passed the undertaking and the assets of the company pass under the control of the Liquidator whose statutory duty is to realise them and to pay the creditors from out of the sale-proceeds. On such order being passed, the creditors acquire the right to have the assets realised and distributed among them pari passu. No new rights can, thereafter, be created and no uncompleted rights can be completed, for doing so would be contrary to the creditors' right to have the proceeds of the assets distributed among them pari passu. J.K. (Bombay) (P.) Ltd. v. New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. [1970] 40 Comp. Cas. 689 (SC). 12. Section 529A of the Companies Act : Its scope : Section 529A of the Companies Act relates to Overriding preferential payments and reads as under :- "Overriding preferential payments.-(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding-up of a company- (a)workmen's dues; and (b)debts due to secured creditors to the....
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....C Act, or under the Recovery of Debts Act, by a creditor coming within those Acts, and standing outside the winding-up, is different from the distribution of the proceeds on the sale of the security. The distribution, in a case where the debtor is a company in the process of being wound-up, can only be in terms of section 529A read with section 529 of the Companies Act. The Liquidator represents the entire body of creditors and also holds a right on behalf of the workers to have a distribution pari passu with the secured creditors. Distribution of the sale proceeds, under the direction of the Company Court, is the Official Liquidator's responsibility. Rajasthan State Financial Corpn.'s case (supra). 15. The purpose of section 529A is to ensure that the workmen are not deprived of their legitimate claims in the event of the liquidation of the company. By this provision, the workmen are statutorily allowed to recover their dues from the securities. If the securities are insufficient, the claims of the workmen and the secured creditor would abate in equal proportions. In other words, by section 529A, the workmen of the Company in liquidation have been made the secured creditors in re....
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.... pari passu. If the total dues payable to a secured creditor increases, then the proportionate amount available for repayment of the dues of the workmen decreases. Accepting the contention of Sri T. Sharath, learned counsel for the applicant, would mean that, while the secured creditor would be repaid the principal and the contracted rate of interest till the date of realization, repayment of the dues of the workmen would be restricted only to the principal and they would not be entitled for interest on their dues. The very purpose of inserting section 529A, to treat workmen's dues on par with the dues of the secured creditors, would be defeated thereby. As the dues payable to the workmen are computed only till the date of the order of winding up, and the Companies (Court) Rules, 1959 disentitles them from claiming interest on such dues, except in accordance with Rule 156, permitting the secured creditor to claim interest at the contracted rate till the date of realization of its dues, would render the very provision under section 529A, which has been inserted to protect the interests of the workmen of the company under liquidation, illusory. 19. The High Court, while exercising j....
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.... which relates to jurisdiction of Courts, reads thus :- "10. Jurisdiction of Courts.-(1) The Court having jurisdiction under this Act shall be- (a )the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and (b )where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district. (2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred- (a )in respect of companies generally, by section 237, section 391, section 394, section 395 and section 397 to section 407, both inclusive; (b )in respect of companies with a paid-up share capital of not less than one lakh of rupees, ....