IFCI Ltd. vs Official Liquidator of Patel Mills Company Ltd. (In Liqn)

R.M. Chhaya, J.—By way of this application the applicant has prayed for the following reliefs:

(A) Be pleased to direct Respondent Official Liquidator to file a detailed report containing full details of amount now lying/funds available at present with him in respect of proceeds that were received out of sale of assets and properties-movable and immovable, of The Patel Mills Company Ltd. (In liquidation) and disbursements made till now) to the eligible secured creditors and the workers therefrom;

(B) Be pleased to direct Respondent to get the 2 (two) claims of the Applicant (Annexure-E and F) verified by the Chartered Accountants in accordance with law and accordingly, allow the distribution of amounts so claimed to the Applicant as secured creditor of The Patel Mills Company Ltd. (In liquidation);

(C) Be pleased to pass any further or such other order/s that may be deemed just and proper in the interest of justice.

It appears from the record of the application that the Company named The Patel Mills Company Ltd. (In liquidation) (hereinafter referred to as Company for the sake of brevity) was ordered to be wound-up by this Court vide order dated 22.1.1996 passed in Company Petition No. 130 of 1995. It reveals from the record that Industrial Investment Bank of India Ltd. (formerly known as Industrial Reconstruction Bank of India) had advanced sum of Rs. 93 lacs to the Company as a term loan for its modernization project. It appears that such a sum was advanced in lieu of Loan Agreement and Deed of Hypothecation dated 6.2.1987 whereby the charge was created in favour of said financial institution on all its movable properties except the book debts. It also further reveals that mortgage was created in favour of the said financial institution by executing deed of deposit of title deed on 23.2.1988 on immovable properties situated at Ahmedabad in Rakhiyal area which admeasures 58,816 sq. mtrs. It is a matter of record that charge came to be registered under the provisions of the Companies Act, 1956 before the Registrar of Companies, Gujarat on 7.10.1987 which came to be modified on 23.2.1988. This fact is indicative from the certificate issued by Registrar of Companies which is at Annexure A (colly.) to this application. It appears from the record that as the Company committed default in making payment, IIBI Ltd. filed application before the Debt Revenue Tribunal, Ahmedabad (DRT) being Original Application No. 88 of 1999 against the Company and its guarantors for the claim amount of Rs. 1,93,93,599/- plus interest, cost etc. It reveals from the record that the application so filed by IIBI was allowed and the DRT vide judgment dated 13.4.2006 ordered the defendants i.e. the Company and its guarantors to pay sum of Rs. 1,93,93,599/- with simple interest @ 6% p.a. from 9.3.1999 until realisation. The DRT however disposed of the application against Dena Bank and Industrial Development Bank of India Ltd. and a recovery certificate came to be issued accordingly by the Presiding Officer of the DRT, Ahmedabad.

It is the case of the present applicant that IIBI Ltd. entered into an agreement i.e. Deed of Assignment dated 8.6.2011 whereby IIBI Ltd. has unconditionally and irrevocably sold, transferred and assigned their financial facilities written together with related other benefits forever to the present applicant. It is therefore the case of the applicant that by virtue of the said Deed of Assignment the applicant as an assignee of IIBI Ltd.-the assignor has become full and absolute legal beneficial owner of all financial facilities and underlying securities as mentioned in Schedule-1 of the said Deed of Assignment which is part of record at Annexure C to this application. It is the case of the applicant that Deed of Assignment is legal, valid and same is enforceable in accordance with terms and conditions thereof and that by virtue of the said Deed of Assignment now the applicant is absolute owner of the financial facilities which are enlisted in the said Deed of Assignment as per Schedule-1.

It is the case of the applicant that thus the applicant is a first charge holder secured creditor and an amount of Rs. 1,22,47,739/- is due and payable as on 21.1.1996 the date of the winding up order. It further reveals from the record that the applicant in response to the public notice dated 21.2.2012 submitted his claim along with affidavit of proof of debt before the Official Liquidator and on the basis of such claim having been raised the present application is filed.

In response to the notice issued by this Court, the Official Liquidator has filed a report dated 10.9.2012. The Official Liquidator has narrated in the said report that after the order of winding up, the movable and immovable assets of the properties of the company were put to sale and the same is confirmed and has also stated that the claim of the workers has been verified and adjudicated by Chartered Accountants. It appears from the further averments in the report that the Official Liquidator has distributed the total amount of Rs. 5,63,37,316/- to the workers and Rs. 7,01,56,645/- to the secured creditors u/s. 529 of the Act under different orders passed by this Court. It is averred that the Official Liquidator invited claim u/s. 529A of the Companies Act by an advertisement published in Divyabhaskar'' (Gujarati daily) and DNA (English daily). It is further stated by the Official Liquidator that the Official Liquidator has received claim from the present applicant and other various claims from other creditors of the company under liquidation and the same came to be forwarded for its verification to the Chartered Accountants.

The Offcial Liquidator has filed further report dated 25.9.2012 wherein it has been stated as under:

5) In view of the above, the Official Liquidator submits that the claim of IFCI (assignee of IIBI) admissible as secured claims u/s. 529A of the Companies Act, 1956 is Rs. 1,13,54,072/-.

6) That, the Official Liquidator further submits that the rest of the claim is against interest for the period from the date of winding up order (i.e. 22-01-1996) up to 31-03-2012 amounting to Rs. 2,45,03,455/- would be unsecured claim u/s. 530 of the Companies Act, 1956 which is payable after statutory preferential claims, if any, in full.

7) xxx xxx xxx xxx

8) That, the Official Liquidator further most respectfully submits that the funds of Rs. 44.41 Crores approximately are available in the Companies account as on 21-09-2012.

Copy of the report dated 4.9.2012 (Annexure A) filed by the Official Liquidator also indicates that the applicant as assignee of Reserve Bank of India has stated thus:

A Claim of IFCI

We are informed that secured claims of IDBI and Dena Bank (including interest up to the date of winding up order) aggregating to Rs. 7,01,56,645/- have already been paid in full. Therefore, IDBI and Dena Bank have no outstanding secured claim. Similarly, the workers claims ranking pari-passu with the secured creditors have also been paid in full. Therefore, the claims of workers entitled for overriding preferential treatment u/s. 529A of the Companies Act, 1956 are also already fully paid by the Official Liquidators. Further, the preferential claims of employees u/s. 530 of the Act have already been examined by us and report thereon is already submitted to the Official Liquidators vide our letter dtd. 19.06.2012. However, the secured claims filed by IFCI as assignee of IIBI is neither verified and examined nor paid. Therefore, we report in respect of the claim filed by IFCI as under:

In respect of the claim of IFCI assignee of the IIBI, we have been provided following documents in support of the claim by the office of the Official Liquidators:

-O.L.R. dtd. 05.09.2005

-Letter dtd. 27.06.2005

-Letter of I.D.B.I. dtd. 27.07.2005

-Letter of Dena bank dtd. 12.07.2005

-Letter of Dena bank dtd. 06.01.2004

-Summary report of High Court of Gujarat

-High Court of Gujarat Orders dtd. 22.08.00, 07.03.2001, 20.11.2003, 20.12.2004, 22.02.2005, 11.10.2005

In addition to above following documents were provided by IFCI in support of their claim:

-Letter dtd. 30.03.12 submitting detailed claim u/s. 529A & 530

-Detailed working of the claims u/s. 529 & 530.

-Deed of Assignment dtd. 08.06.2011

-Decree of DRT dtd. 13.04.2006

-Affidavit of proof of debt dtd. 30.03.2012

-Charge certificate in favour of IIBI dtd. 04.08.1987.

-Ledger accounts maintained by IIBI.

On examination and verification of the claim on the basis of documents submitted by IFCI in support of the claim, we find that the IFCI has claimed the principal amount of Rs. 88,00,000/- and interest of Rs. 25,47,210 @ 11.5% up to 22.01.1996 i.e. the date of winding up of the company and additional interest of Rs. 4,48,062 and Liquidated damages of Rs. 4,52,467 up to the date of winding up aggregating to Rs. 1,22,47,739/-. The IFCI has further claimed interest and other charges of Rs. 2,23,27,463/- as for the period after the date of winding up as an unsecured creditors u/s. 530 of the Act.

Therefore, keeping the IFCI claim at par with other secured creditors, the claim of IFCI including principal and interest at the contractual rate calculated up to the date of winding up order would be admissible as secured claim u/s. 529A of the Act. On verification of the claim of IFCI it is found that loan of Rs. 93,00,000/- was sanctioned to the company in the year 1987 with interest @ 11.5% P.A. with six monthly rest. Thereafter, the repayment of a component of Rs. 44,00,000/- of loan was rescheduled in 1992 with revised rate of interest @ 15% P.A. and on remaining 49,00,000/- rate of interest continued to be 11.5% P.A. The interest was regularly paid by the company till March 1994. Principal amount of Rs. 5,00,000/- were also repaid out of the loan component of Rs. 49,00,000/-. We have calculated the total outstanding dues of the IFCI (As Assignee) on the basis of above facts and figures. The calculation are annexed with this report as Annexure-A. Therefore the admissible secured claim of IFCI accordingly is found as under:

Rest of the claim of IFCI comprising interest only beyond the date of winding up order would be unsecured claim falling u/s. 530 of the Act. On verification of the workings of interest calculation accordingly, the unsecured claims of IFCI u/s. 530 of the Act is found as under:

Therefore, the claim against interest for the period from the date of winding up order up to 31.03.2012 amounting to Rs. 2,45,03,455/- would be unsecured claim u/s. 530 of the Companies Act, 1956 payable after payment of statutory preferential claims, if any, in full.

The Official Liquidator has further pointed out that as the present applicant is assignee and the said issue is pending before this Court, this Court may not deal with it, as the issue is pending before the Division Bench.

Mr. Indravadan Parmar, learned Counsel for the applicant has further submitted that u/s. 530 of the Act r/w. Rule 179 Company (Court) Rules, 1959 in the event if there is a surplus available with the Official Liquidator after the payment of all the claims admitted to proof, the creditors whose proof have been admitted shall be paid monies from the date of the winding up of the order or of the resolution as the case may be @ not exceeding 4% p.a. Mr. Parmar therefore submitted that the applicant would be entitled to at least 4% interest for the period from the date of winding up i.e. from the date of winding up order. Mr. Parmar has relied upon the judgment of the Hon''ble Bombay High Court in the case of Pravin S. Shah, Sole Proprietor of United Dyes (India) Vs. Rashtriya Mill Mazdoor Sangh, .

Considering the averments made in the application and considering both the reports filed by the Official Liquidator and also considering the verification report of the Chartered Accountant, it is clear that the applicant as an assignee of IIBI has a secured claim u/s. 529A of the Act amounting to Rs. 1,13,54,072/- and hence the applicant is entitled to the said amount. As far as the claim of the interest is concerned, it is no doubt true that Rule 179 stipulates that in the event of surplus, after payment in full all the claims admitted to proof, the creditor whose proof has been admitted shall be entitled interest from the date of winding up order @ not exceeding 4% p.a. on the admitted amount of the claim. The Bombay High Court in the case of Rashtriya Mill Mazdoor Sangh (supra) has held that the claim of interest can be considered only if the company is left with surplus after distribution to the creditors and workers as per provisions of sections 529 and 529A of the Act and after distribution of preferential dues u/s. 530 of the Act. In the instant case, the claim of the applicant as assignee is verified by the Chartered Accountant and the Official Liquidator on the basis of such verification has found that admissible claim of the applicant as secured claim u/s. 529 of the Act is Rs. 1,13,54,072/- as mentioned hereinabove. From the report of the Chartered Accountant which is on record there are other claims which are yet to be considered. It is found from the report that certain preferential claims are also yet to be considered and therefore, at this stage, it cannot be said that all claims have been settled including preferential claim u/s. 530 and that the surplus is available. In the event therefore the claim of interest to the tune of Rs. 2,23,27,463/- towards interest for the period after the date of winding up, a claim u/s. 530 as an unsecured creditor can be considered under Rule 179 of the Company (Court) Rules, 1959 at an appropriate stage as held by the Bombay High Court.

In the result, the summons is partly accepted and the application is partly allowed. The Official Liquidator is hereby directed to pay Rs. 1,13,54,072/- to the applicant from the available funds on condition that the applicant shall file undertaking to the effect that in the event if any liability arises on account of the assignment deed between the applicant and IIBI the applicant shall reimburse the aforesaid amount and shall also file further undertaking that in case if any liability under the Income Tax arises the same shall be also borne by the present applicant. In view of the aforesaid, the report is partly accepted and the Official Liquidator is directed to make ad-hoc payment as aforesaid. It is further made clear that it would be open for the applicant to raise claim of interest at an appropriate stage u/s. 530 of the Act r/w. 179 of the Company (Court) Rules. The application stands disposed of accordingly.