Full Judgment Text
IN THE HIGH COURT OF DELHI AT NEW DELHI
Co. Pet. No. 66 of 2003
SOCIETE GENERALE ..... Petitioner
Through: None
versus
DAEWOO MOTORS INDIA LTD. ..... Respondent
Through: Mr. Rajat Nair, Advocate for
Mr. K.R. Sasiprabhu, Advocate for
Pan India Motors
Mr. Dhruv Dewan, Advocate for
ARCIL
Mr. Ajay Bhatnagar, Advocate for
Applicants/employees
Mr. Deepak Prakash & Mr. M.K.
Tiwari, Advocates for Workmen
Mr. Ramesh Gopinathan, Advocate
for the Receiver, DRT, Mumbai
Mr. Kanwal Chaudhary, Advocate for
the Official Liquidator
CORAM: JUSTICE S.MURALIDHAR
O R D E R
21.02.2013
Co. App. Nos.470 of 2008, 686 of 2008, 1648 of 2012, 1650 of 2012 (by
the workmen) and 924 of 2011 (by the Official Liquidator ) in Co. Pet.
No.66 of 2003
1. The Respondent company, Daewoo Motors India Ltd. was ordered by
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this Court to be provisionally wound up on 24 November 2003 and finally
Co. Pet. No. 66 of 2003 Page 1 of 25
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wound up on 28 July 2004. The Official Liquidator (‘OL’) attached to this
Court had been appointed as the Liquidator.
2. Prior thereto, in the proceedings initiated by the ICICI Bank (‘ICICI’)
before the Debts Recovery Tribunal (‘DRT’) No. III in Mumbai, an order
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had been passed on 9 May 2002 by the DRT, appointing a Receiver. A
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Debt Recovery Certificate in favour of ICICI was issued by DRT on 11
October 2004. ICICI assigned the Debts Recovery Certificate in favour of
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Asset Reconstruction Company (India) Ltd. (‘ARCIL’) on 29 March 2005,
thereby ARCIL stepped into the shoes of ICICI in the proceedings before
the DRT. The other assignee of the debt was Stressed Assets Stabilization
Fund (‘SASF’). The DRT, Mumbai invited bids for the sale of the fixed
asset, which was the factory premises at A-1, Surajpur Industrial Area,
Gautam Buddh Nagar, Noida, Uttar Pradesh, admeasuring 204 acres.
3. As far as the proceedings in this Court are concerned, it appears that by
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an order dated 4 March 2004 passed by the Court in an application made
by ICICI, this Court was made aware of the proceedings in the DRT
Mumbai under the Recovery of Debts due to Banks and Financial
Institutions Act, 1993 (‘RDDB Act’). The Court restrained the OL from
taking possession of the aforementioned factory premises and modified its
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earlier order in that regard passed on 24 November 2003. By an order
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dated 24 May 2006, in CA No.1549 of 2005, the Court noted that 1524
claims had been received from the workmen. It, accordingly, appointed a
three-member Committee, of which the Assistant Official Liquidator
Co. Pet. No. 66 of 2003 Page 2 of 25
(‘AOL’) was part, to scrutinize the claims of the workmen. It is seen that the
composition of the Committee was altered with one member being replaced
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by an order dated 30 July 2007.
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4. On 1 August 2006, an order was passed by this Court in CA No. 908 of
2006, taking note of the advertisement published by the DRT, Mumbai,
inviting bids for the sale of the assets of the company and copy of the said
advertisement was handed over to the OL. It was directed that “the Official
Liquidator will ensure that the interest of the workers is protected and take
care of their interest.” It was further directed that the OL “will also ensure
that the sale by the Debt Recovery Tribunal, Mumbai is in accordance with
the Second Schedule of the Income Tax Act, 1961 and best possible price is
obtained.” The Receiver appointed by the DRT, Mumbai was also
represented before the Court by learned counsel, who stated that the joint
inventory report had been prepared. The OL was then directed to take
possession of the statutory records, including the books and accounts of the
company under liquidation.
5. Despite the direction of this Court to the OL to appear before the DRT
and participate in those proceedings, it appears that for some reason that
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was not done. In an order passed on 12 February 2007 by the DRT
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Mumbai, on the basis of the report dated 8 January 2007 of the Receiver
appointed by it, it was noted that the notice had been served on all the
creditors as well as the OL of this Court. In para 23 of the order, after noting
the decision of the Supreme Court in Rajasthan State Financial
Corporation v. Official Liquidator (2005) 8 SCC 190 that the DRT was
Co. Pet. No. 66 of 2003 Page 3 of 25
entitled to order the sale of the properties even if the company was in
liquidation but only after the notice to the OL appointed by the Company
Court and after hearing the OL, the DRT noted that “In this behalf, the
notice of the sale and proceedings, from time to time, has been given to the
Official Liquidator, Delhi High Court.” DRT, by the said order, accepted
the bid submitted by Crosslinks Finlease Pvt. Ltd. (‘CFPL’) for Lot No.1
only, i.e., property at A-1, Surajpur Industrial Area, Gautam Buddh Nagar,
Noida, Uttar Pradesh for the sum of Rs. 765 crores. It was directed that on
receipt of 35% of the payment, the Receiver appointed by the DRT should
hand over the possession of the property after securing poundage fees. It
was directed that on the completion of the sale of the fixed assets, Canara
Bank or any other working capital bank should take over charge of the book
debts and realize the same. Importantly, it was directed in para 30 (e) that
“A copy of the Order shall be forwarded to the Official Liquidator, Delhi
High Court, to enable him to take charge of the records of the Defendant
No.1 Company, which are lying at the suit property, within two weeks time,
so that DRT Receiver would be in a position to hand over possession to the
Purchaser.” In para 30(j), it was directed that subsequent to payment of fees
of the Receiver, the amount of royalty of Rs. 30 lakhs which was deposited
with the Registrar, DRT, would be paid over to ARCIL and the balance
amount of the sale proceeds (after payment of the Receiver’s
commission/fees) would be kept in a fixed deposit (‘FD’).
6. It appears that on the issue of the company being entitled to duty
exemption under the Export Promotion Capital Goods Scheme, demands
were raised by the Customs and Excise authorities. The Customs authorities
Co. Pet. No. 66 of 2003 Page 4 of 25
intervened in the proceedings before the DRT. Their appeal was dismissed
by the Debts Recovery Appellate Tribunal (‘DRAT’). They approached the
High Court of Bombay. It appears that in a special leave petition (‘SLP’)
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filed by ARCIL against the order dated 15 April 2005 of the High Court of
Bombay in the writ petition filed by the Customs authorities, an order was
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passed by the Supreme Court on 12 May 2005, expressing the hope that by
the time the SLP was listed next, “the matter will be settled and finalised.”
Pursuant to the above order, a Memorandum of Understanding (‘MoU’) was
entered into between the Government of India on the one part and ARCIL
and SASF on the other, whereby, inter alia , it was agreed that the Customs
authorities will be paid in terms of the calculation set out in the MoU. The
MoU in para 6 also accounted for the fact that the payment of the
workmen’s dues would be under Section 529 A of the Companies Act, 1956
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(‘Act’). Therefore, even prior to the order passed by the DRT on 12
February 2007, the question of payment to the Customs authorities stood
concluded by way of the above MoU, which had been entered into pursuant
to the order of the Supreme Court.
7. The Committee, which was appointed by this Court to examine the
claims of the workmen, submitted its report in March 2008. In terms of the
facts set out by the OL in its application, CA No 924 of 2011, it is seen that
the Committee scrutinized as many as 1487 claims and decided as follows:
“(i) Claims of 1107 workmen totaling Rs. 19,16,00,231/- are
admitted.
(ii) Claims of 7 workmen who have obtained ex-parte awards from
other labour Courts amounting to Rs. 1,20,80,311/- are computed
Co. Pet. No. 66 of 2003 Page 5 of 25
and this Hon’ble Court is requested to take a final decision whether
the same be admitted.
(iii) Claims of 357 workmen totaling Rs. 61,30,37,607/- are
rejected on account of insufficient documentation;
(iv) Claims of 16 persons totaling Rs. 62,07,524/- are rejected on
account of their not qualifying as “workmen” within the meaning
of section 2(s) of the Industrial Disputes Act, 1947 read with
Section 529 A of the Companies Act, 1956.”
8. CA No. 1224 of 2008 was filed by certain aggrieved workmen, objecting
to the above report. The following order was passed by the Court in the said
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application on 15 January 2009:
“I do not think any orders can be passed on this application till
books of accounts/records of the company under liquidation are
examined and the claims made by the alleged workmen are
thoroughly examined on the basis of records. Therefore, at this
stage no orders are being passed on this application and the same is
disposed of with liberty to the applicant/alleged workmen to raise
claims subsequently. It is clarified that the opinion of the
committee rejecting claim of the applicants has not been confirmed
by this Court and will be examined at a subsequent stage.”
9. On the same date, a separate order was passed by the Court in Crl. O.
(Co.) 5 of 2008 as follows:
“1. Official Liquidator will de-seal the room in which
records/books of accounts of the company under liquidation are
kept in the presence of the receiver appointed by Debt Recovery
Tribunal. Secured creditors of the company under liquidation and
Co. Pet. No. 66 of 2003 Page 6 of 25
the purchaser of the assets will be intimated and informed the date
and time for carrying out necessary exercise.
2. The Official Liquidator will engage services of a photocopier for
making copies of the records/books of accounts after inviting
tenders for the said purpose. The receiver/secured creditors/the
purchaser can appoint a nominee to be present at the time when
photocopying work is in progress.
3. Official Liquidator will write a request letter within two weeks
to the Institute of Company Secretaries and the Institute of
Chartered Accountants with a request to ask their Members to
nominate article clerks for examining the books of
accounts/records of the company under liquidation. The said
Members and article clerks will be paid honorarium/remuneration,
which will be fixed by this Court. It may be noted here that the
exercise will be helpful to the said Member/article clerks, who in
future can become specialist in dealing with insolvency cases and
cases of companies under liquidation. The institutes are requested
to circulate the letter written by the Official Liquidator amongst
their members.
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List again on 27 March, 2009.”
10. The report of the Committee, which examined the workmen’s claims, is
yet to be accepted by the Court. Certain workmen filed CA Nos.470 of 2008
and 686 of 2008, objecting to the Committee’s findings. Certain other
workmen who were awaiting clearance of their dues in terms of the
Committee’s report filed CA Nos.1648 of 2012 and 1650 of 2012.
11. An application filed by the workmen, being CA No.227 of 2011, was
Co. Pet. No. 66 of 2003 Page 7 of 25
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rejected by the Court by order dated 15 July 2011, in which it was noted
that out of the sum paid as upfront money by the successful auction
purchaser (‘AP’), a sum of Rs. 50 crores had been earmarked by the
Recovery Officer (‘RO’) towards workmen’s claims. The said amount has
been kept in a separate FD by ARCIL. The prayer in the said application by
the workmen that the said sum should be utilized for settling the admitted
claims of the workmen was rejected by the Court after noting that an
application had been filed before the DRT for setting aside the sale since the
AP had not paid any further sum.
12. The OL filed CA No.924 of 2011, in which it was, inter alia , stated that
the Receiver appointed by the DRT had sold the factory premises of the
company by way of a ‘private treaty’. In para 16, it was stated as under:
“16. That Official Liquidator attached to this Hon’ble Court has at
no point of time been associated with the process of sale of the said
property of the company in liquidation situated at A-1, Surajpur
Industrial Area, Gautam Budh Nagar, Tehsil Dadri District
Ghaziabad, U.P. Even the manner in which the sale proceeds have
been appropriated have neither been informed to the Official
Liquidator nor to this Hon’ble Court. In such circumstances the
Recovery Officer, DRT, Mumbai is acting in gross violation of the
settled law as regards the realization/distribution of the sale
proceeds.”
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13. In the said application filed on 18 May 2011, it was, inter alia , prayed
that the sale proceeds realised by the Receiver appointed by the DRT should
be directed to be deposited by the OL; the OL should be permitted to invite
the claims from all secured/preferential creditors through publication; a firm
Co. Pet. No. 66 of 2003 Page 8 of 25
of Chartered Accountants (‘CAs’) on the panel of the OL should be
appointed for the scrutiny of the statutory records of the company; a CA
from the panel should be appointed to scrutinize the claims of the workmen
and Government commission on account of actual realisation from the
assets and interest accrued should be disclosed by the RO of the DRT.
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14. Significantly, in the status report dated 20 April 2011 filed less than a
month prior to the above application, it was pointed out by the OL, in
relation to the report of the Committee constituted by the Court to examine
the claims of the workmen, as under:
“6. That the Committee has rejected 357 claims due to insufficient
documentation. In compliance of order of the Hon’ble Court passed
on 15.01.2009, the office of the Official Liquidator has verified the
records of the Company (In Liqn.) pertaining to the workers at the
factory situated at A-1, Surajpur Industrial Area, Gautam Budh
Nagar, Noida, U.P. Particulars of 1319 workers have been verified
which apparently are the part of rejected claims numbering 357, It
requires further examination and admission of their claims if found
fit by the Committee.
7. That as regards to the examination and admission of claim of
1107 workmen, objections were raised by the representative of the
workers as to the repetition of the names of the workers, calculation
made thereon etc. on the report filed by the Committee.
It is also observed from the report of the Committee that the
Committee has scrutinized the claims on the basis of random
selection method i.e. 40 out of each bundle of 100 files. It appears
that each and every claim of the workers has not been gone through
and ascertain by the Committee. The Official Liquidator has already
Co. Pet. No. 66 of 2003 Page 9 of 25
filed CA No.957/10 praying to the Hon’ble Court to direct the
Committee to re-examine the claim and to quantify the amount to be
disbursed.”
15. ARCIL has filed a comprehensive reply to the above application of the
OL pointing out that the OL has taken a stand completely contrary to the
one earlier taken. It was pointed out that despite the notices issued by the
DRT to the OL there was no participation by the OL in the proceedings
before the DRT. Reference was also made to CA No. 274 of 2007 filed by
ARCIL for directions to the Committee constituted by the Court to examine
the claims of the workers to submit a report. Upon such report being
submitted, the OL was directed to file a formal claim before the Recovery
Officer, Mumbai, DRT on behalf of the workmen within ten days. The full
facts regarding the sale of the assets by the RO with the DRT and the MoU
entered with the Central Government concerning the dues payable to the
Customs authorities were set out in the said application.
16. In the reply filed by the OL to the said application, it was inter alia
stated as under:
“Para 1 to 18: In Para 1 to 18 it is submitted that the claims of the
workers are under active consideration before the Committee
appointed by this Hon’ble Court vide order dated 24.5.2006.
Official Liquidator is eagerly awaiting the report of the said
Committee. Official Liquidator would file a formal claim before the
recovery officer DRT, Mumbai as and when the report is submitted
by the Committee.”
17. The fact that the OL was aware of the proceedings before the DRT is
Co. Pet. No. 66 of 2003 Page 10 of 25
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apparent from the letter written on 22 January 2008 to ICICI relating to
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the order passed by the DRT on 16 October 2007 and asking for provision
for sufficient space “so that record of the company in liquidation can be
shifted.” Again, in the objections filed to another application, being CA
No.470 of 2008 by the workmen, objecting to the report of the Committee,
the OL took the stand in its reply as under:
“In reply to para 50 to 51 it is submitted that the provisions of the
RDDB Act was invoked in the matter and the properties of the
company were sold by DRT Mumbai. In such a situation the role of
the Official Liquidator is limited to the adjudication of the claims
under section 529(a) of the Companies Act 1956. As the claims of
employees other than workmen do not full under section 529(A) the
same have rightly been rejected.”
18. The OL himself filed CA No.957 of 2010 for directions to the
Committee to re-examine the claims of the workmen and for directions to
the Receiver appointed by the DRT, the AP or workmen union to cooperate
with the OL. In the said application, in para 5, it was stated as under:-
“5. That the factory premises of the company (In Liqn.) is situated
at A-1, Surajpur Industrial Area, Noida (U.P.) for which a receiver
stands appointed by the DRT Mumbai and the Hon’ble High Court
of Delhi vide its order dated 04/03/2004 had restrained the Official
Liquidator, Delhi from taking over the possession of the factory
premises situated at the above mentioned site and presently the
factory premises of the Company (In Liqn.) has been sold by
Hon’ble DRT Mumbai for a sum of Rs. 765 crore.”
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19. An order was passed by the RO, DRT on 16 October 2007, where,
Co. Pet. No. 66 of 2003 Page 11 of 25
inter alia , the following directions were issued for disbursement of the
amounts deposited by the AP:
“On receipt of 35% upfront payment and issuance of Debentures,
allotment letters to ARCIL and SASF to their satisfaction creation
of pledge and hypothecation, DRT Receiver should forthwith
handover possession of the suit properties after securing poundage
fees. The accrued interest on the amount of Rs. 76.5 ( sic. 765) crore
already deposited by the buyer would be taken into account while
accepting the balance 25% upfront payment. An amount of Rs. 50
crore out of the said upfront payment shall be paid to ARCIL for
being deposited and held by it on behalf of this Tribunal in an
interest bearing account in a bank till payment of workmen’s dues to
the Official Liquidator/Asst. Official Liquidator (in charge) of
Respondent No.1. Upon receipt of the said upfront payment, DRT
Receiver shall forthwith reimburse to ARCIL all expenses incurred
on behalf of first charge holders as also pay itself the Receiver’s fee
being fixed under this order. Further DRT Receiver is directed to
forthwith distribute the balance cash portion of said upfront payment
to ARCIL on behalf of first charge holders. Upon payment of
workmen’s dues to Official Liquidator/Asst. Official Liquidator (in
charge) of Respondent No.1, the surplus, if any, out of the said
deposit of Rs. 50 crore (with accrued interest) shall be distributed to
ARCIL on behalf of the first charge holders.
…….
A copy of the Order shall be forwarded to the Official Liquidator,
Delhi High Court, to enable him to take charge of the records of the
Defendant No.1 Company, which are lying at the suit property,
within two weeks time. Further the Official Liquidator/Asst. Official
Liquidator (in charge) of Respondent No.1, is hereby directed to
lodge/submit the final quantum of dues of workmen of Respondent
No.1 as admitted by the Official Liquidator/Asst. Official Liquidator
Co. Pet. No. 66 of 2003 Page 12 of 25
(in charge), to this Hon’ble Tribunal within two weeks from the date
of this order.
……..
The Receiver would be discharged upon completion of the work
entrusted as hereinabove as far as fixed assets are concerned and
shall continue as DRT Receiver for current assets till the sale of
current assets & Rs. 50 lacs out of sale proceeds to be kept aside for
settling the fee of DRT Receiver. Sale proceeds minus Rs. 50.50
crores [Rs. 50 crores for workmen plus Rs. 50 lakhs supra] would be
released to ARCIL for clearing the dues of the crown and for
rateable distribution among secured creditors. On settling the fee of
the DRT receiver balance be released to ARCIL.”
20. Consequently, the stand now taken by the OL in CA No.924 of 2011
appears to either ignore or contradict what was stated before the Court in
various applications earlier. The position that emerges is that despite the
notices to the OL, he did not participate in the proceedings before the DRT.
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21. The factual position is set out in the affidavit dated 30 April 2012 filed
in this Court by the Receiver appointed by the DRT. In para 9 of the said
affidavit, inter alia , it was stated as under:
“9. It is submitted that the details of the sale proceeds of the assets
of the company under liquidation are as below:
A total amount of Rs. 267.75 crore, being 35% of the upfront
amount has been received.
That the amount received was appropriated through the DRT-III,
Mumbai, a detailed below:
Rs.100. 85 crore was paid to Commissioner of Customs,
Co. Pet. No. 66 of 2003 Page 13 of 25
Mumbai based on Memorandum of Understanding between
the Union of India and Arcil and ors. as recorded in the Order
dated 9.12.2005 passed by Hon’ble Supreme Court in SLP
No. CC No.5185 of 2005
Rs.95.40 crore paid to first charge holders viz. Arcil and
SASF towards reimbursement of expenses incurred;
Rs. 50 crore was kept with Arcil to be held in interest bearing
account on behalf of DRT Receiver toward workers dues;
Rs. 50 lacs was kept with Arcil to be held in Interest bearing
account towards receivers’ fees;
The balance amount of about Rs. 21 crores was distributed to
Arcil and SASF towards their share of the sale consideration.”
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22. On 22 November 2012, the RO, DRT cancelled the sale of fixed assets
of the company in liquidation in favour of CFPL/Pan India Motor Pvt. Ltd.
It is further informed that this order was confirmed by the Presiding Officer
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of the DRT by order dated 30 January 2013. The further appeal filed by the
AP before the DRT is stated to be pending. The question is as to whether
the sum of Rs. 267.75 crores paid by the AP stands forfeited?
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23. By an order dated 22 November 2012, the DRT has discharged the
earlier Receiver appointed by it, i.e., M/s. Khare Bapat Kabe Sinha &
Associates and ARCIL has been appointed as the new Receiver. This is
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evident from the affidavit dated 12 February 2013 filed by Mr. Ramesh
Gopinathan, Advocate appearing for the Receiver, enclosing a copy of the
said order of the DRT.
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24. On 29 November 2012, this Court had passed the following order:-
Co. Pet. No. 66 of 2003 Page 14 of 25
“ C.A. Nos.470/2008, 853/2008 and 686/2008 & C.A. Nos. 1648
and 1650/2012
C.A. Nos.470/2008, 853/2008 and 686/2008 have been filed by
DCM Daewoo Employees Union and one Sundar Lal. C.A.
Nos.1648/2012 and 1650/2012 have been filed by the Employees
Welfare Forum. All the aforenoted applicants have given their
objections to the report dated 07.02.2008 given by the Committee
whereby the claims of the aforenoted persons were partially
admitted and partially rejected. Counsel for the applicants are
permitted to file a written synopsis not exceeding two pages in
support of their averments.
Co.Pet.66/2003
Learned counsel for the parties points out that the sale which had
been ordered by the DRT Mumbai is the subject matter of challenge
but the earnest money of more than 265 crores which has been
deposited before the Receiver Mr. Ramesh Gopinathan is yet lying
with him and learned counsel for the workers submits that a sum of
Rs.50 crores in fact has been segregated for the benefit of the
workers which amount has to be received by them. None is present
for the Receiver. Let notice of default be issued to the Receiver.
Fresh status report be filed by the Official Liquidator.
Renotify for 21.02.2013.”
25. When the above order was passed, the attention of the Company Court
was not drawn to the fact that the Receiver was not Mr. Gopinathan. He was
only the lawyer for the earlier Receiver appointed by the DRT, which
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Receiver, as noted above, was discharged by the DRT on 22 November
2012. As of now, ARCIL is the Receiver and it has already been represented
through its counsel. Learned counsel for ARCIL has confirmed that a sum
Co. Pet. No. 66 of 2003 Page 15 of 25
of Rs. 50 crores has been kept apart in an FD for the benefit of the
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workmen. Accordingly, it is held that the order dated 29 November 2012
does not survive. Neither Mr. Gopinathan, Advocate nor his client, the
earlier Receiver appointed by the DRT, need appear in the Court any longer.
26. One of the contentions raised by learned counsel for the workmen today
was that such of the claims of the workmen that have been admitted
by the Committee appointed by this Court should be paid out of the
sum of Rs. 50 crores lying with ARCIL in an FD. It was repeatedly urged
that while the secured creditors, the Customs authorities as well as ARCIL
have been paid from the sum deposited by the AP, it is the workmen who
have not received any payment whatsoever for the last several years.
27. The difficulty in entertaining the above plea is that the question whether
the amount deposited by the AP should stand forfeited as a result of the sale
being set aside by the DRT is yet to be decided. In fact, the validity of these
orders of the DRT are in challenge in the proceedings pending before the
DRAT. Consequently, it is not possible, at this stage, for the Court to pass
any orders regarding disbursement of the dues of the workmen.
28. The other reason is that the report of the Committee is under challenge.
Even the OL has stated that the Committee’s report should not be accepted
and the claims of the workmen should be re-examined. There are challenges
to the report also by those workmen whose claims have been rejected.
Further, it is apparent that the books and accounts of the company are yet to
Co. Pet. No. 66 of 2003 Page 16 of 25
be examined properly by the CAs. They were also not associated at the
stage of examination of the workmen’s claims. In the circumstances, this
Court is persuaded to accept the plea that the report submitted by the
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Committee appointed by this Court on 24 May 2006 to examine the
workmen’s claims should be rejected and this exercise be undertaken by
another Committee with the participation of the two CAs.
29. Accordingly, this Court sets aside the report submitted by the
Committee which examined the workmen’s claims and directs that all the
workmen’s claims that have thus far been lodged with the OL will be
examined by the following Committee:
(i) Mr. S.K. Tandon, retired Additional District Judge;
residing at 244, Bank Enclave, Near Laxmi Nagar,
Delhi – 110 092 (Mobile No. 9811719888)
(ii) Mr. Sanjay Yadav, Deputy OL (Mobile No. 9350907527)
(iii) Mr. Tarun Goyal, Chartered Accountant
CP-58, IInd floor, Pitampura,
Delhi – 110 018. (Mobile No. 9810185384)
(iv) Mr. Sanjeev Saxena, Chartered Accountant,
M/s. Sanjeev Saxena & Co.,
Flat No. 110, Ground Floor,
4855/24, Ansari Road, Darya Ganj,
New Delhi – 110 002. (Mobile No. 9868215565).
30. Each member of the Committee will be paid a fee of Rs. 1,00,000 and a
sum of Rs. 20,000 will be paid to each member as an initial fees within a
period of two weeks out of the Common Pool Fund of the OL and the
balance fee after the completion of the exercise. The Committee will
Co. Pet. No. 66 of 2003 Page 17 of 25
endeavour to complete its exercise within a period of two months from
today and, in any event, will submit its report not later than three months
from today.
31. The next issue that needs to be considered is whether the direction
should be issued, at this stage, on the application, CA No. 924 of 2011, filed
by the OL to the effect that any monies that remain for disbursal as a result
of the final orders in the proceedings arising from the orders of the DRT
setting aside the sale to the AP and any fresh sums that might be received
hereafter should be placed under the control of the OL and be disbursed
only by the OL subject to the supervision of the Court.
32. Mr. Kanwal Chaudhary, learned counsel for the OL, has placed reliance
on the decisions of the Supreme Court in Rajasthan State Financial
Corporation v. Official Liquidator (supra) and Bakemans Industries Pvt.
Ltd. v. New Cawnpore Flour Mills AIR 2008 SC 2699 to urge that once the
liquidation proceedings are in progress, the disbursal of the amounts, even
by the DRT, would be subject to the directions of the Company Court. The
above submissions are countered by Mr. Dhruv Dewan, learned counsel for
ARCIL, who points out that in terms of the aforementioned decisions, what
is required to be done is to associate the OL both at the stage of bringing the
properties of the company in liquidation to sale as well as at the stage of the
disbursal of the amounts.
33. The question as to the jurisdiction of the Company Court vis-à-vis the
Co. Pet. No. 66 of 2003 Page 18 of 25
powers of the DRT in relation to the company in liquidation was examined
by a three-Judge Bench of the Supreme Court in Rajasthan State Financial
Corporation v. Official Liquidator (supra). The matter came to be referred
to a three-Judge Bench as a result of the apparent conflict in the decisions of
the Supreme Court in Allahabad Bank v. Canara Bank (2000) 4 SCC 406
and International Coach Builders Ltd. v. Karnataka State Financial
Corporation (2003) 10 SCC 482.
34. The facts in Rajasthan State Financial Corporation v. Official
Liquidator (supra) show that even before the Appellants could initiate the
proceedings under the State Financial Corporations Act, 1951 (‘SFC Act’),
the company in question was already under liquidation pursuant to the order
passed by the Company Court. It was held by the Supreme Court that
“whether the assets are realised by a secured creditor even if it be by
proceeding under the SFC Act or under the Recovery of Debts Act, the
distribution of the assets could only be in terms of Section 529 A of the Act
and by recognising the right of the liquidator to calculate the workmen’s
dues and collect it for distribution among them pari pasu with the secured
creditors.”
35. In para 17 of the said judgment, it was observed:
“Thus, on the authorities what emerges is that once a winding-up
proceeding has commenced and the Liquidator is put in charge of the
assets of the company being wound up, the distribution of the
proceeds of the sale of the assets held at the instance of the financial
institutions coming under the Recovery of Debts Act or of financial
corporations coming under the SFC Act, can only be with the
Co. Pet. No. 66 of 2003 Page 19 of 25
association of the Official Liquidator and under the supervision of the
Company Court.”
36. While clarifying that there was no consistency in the decisions in
Allahabad Bank v. Canara Bank (supra) and International Coach
Builders Ltd. v. Karnataka State Financial Corporation (supra), the
Supreme Court clarified:
“the distribution of the sale proceeds under the direction of the
Company Court is his responsibility. To ensure the proper working
out of the scheme of distribution, it is necessary to associate the
Official Liquidator with the process of sale so that he can ensure, in
the light of the directions of the Company Court, that a proper price is
fetched for the assets of the company-in-liquidation.”
37. Finally, in para 18, the legal position was summarized as under:
“18. In the light of the discussion as above, we think it proper to sum
up the legal position thus:-
i) A Debts Recovery Tribunal acting under the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 would be entitled
to order the sale and to sell the properties of the debtor, even if a
company-in- liquidation, through its Recovery Officer but only after
notice to the Official Liquidator or the liquidator appointed by the
Company Court and after hearing him.
ii) A District Court entertaining an application under Section 31 of
the SFC Act will have the power to order sale of the assets of a
borrower company-in- liquidation, but only after notice to the
Official Liquidator or the liquidator appointed by the Company Court
and after hearing him.
iii) If a financial corporation acting under Section 29 of the SFC Act
seeks to sell or otherwise transfer the assets of a debtor company-in-
Co. Pet. No. 66 of 2003 Page 20 of 25
liquidation, the said power could be exercised by it only after
obtaining the appropriate permission from the Company Court and
acting in terms of the directions issued by that court as regards
associating the Official Liquidator with the sale, the fixing of the
upset price or the reserve price, confirmation of the sale, holding of
the sale proceeds and the distribution thereof among the creditors in
terms of Section 529A and Section 529 of the Companies Act.
iv) In a case where proceedings under the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 or the SFC Act are not set
in motion, the creditor concerned is to approach the Company Court
for appropriate directions regarding the realisation of its securities
consistent with the relevant provisions of the Companies Act
regarding distribution of the assets of the company-in-liquidation.”
38. This Court does not find the decision in Bakemans Industries Pvt. Ltd.
v. New Cawnpore Flour Mills (supra) to be directly concerning the point
regarding the disbursement of the auction proceeds. The said decision, no
doubt, reiterates that a financial institution governed by the SFC Act would
still be amenable to the discipline of Section 529A of the Act and that where
a company is under liquidation, the sale of the properties of the company as
well as the distribution of the proceeds would be under the directions of the
Company Court.
39. The Madras High Court has, in Subhash Kathuria v. Deve Sugars
Limited [2010] 158 Company Cases 78 (Madras) , summarized the entire
law in para 41. For the purposes of the present case, sub paras 19, 21, 23, 35
and 37 of the said para 41 are relevant and read as under:
“19. Once the recovery certificate is issued by DRT in favour of
the banks and financial institutions, who are secured creditors, then
Co. Pet. No. 66 of 2003 Page 21 of 25
sale of immovable properties cannot be carried out by the Official
Liquidator in winding up proceedings and such sale is to be
conducted by the Recovery Officer in execution of recovery
certificate issued by the DRT.
….
21. The participation of the Official Liquidator in the proceedings
before the DRT is in discharge of his duties and as a necessary
corollary, non-participating in the proceedings and not defending
the interest of the company or the secured credits or the workmen,
would amount to failure in discharging the duties.
….
23. DRT and the Recovery Officer can sell the property, but, only
after issuing notice to the Official Liquidator and after hearing
him.
…..
35. RDB Act 1993 is a special law and hence will prevail over the
general law, in the Companies Act.
…….
37. Once the sale is confirmed by the Recovery Officer and the
Sale Certificate is issued, it cannot be said to be illegal or void.”
40. In the considered view of the Court, as far as the present case is
concerned, the question whether a further auction of the property in
question will be required to be undertaken cannot be decided at this
stage. This is a question that can be answered only on the conclusion of
the proceedings arising out of the orders passed by the DRT setting aside
the same. The further question, whether the amount paid by the AP will
stand forfeited, will also depend on the outcome of the above proceedings
only on the hope that the said question would be answered. To reiterate,
therefore, it would be premature for the Court to speculate as to
whether the sum of Rs. 50 crores, which is in an FD with ARCIL,
would remain with it for meeting the dues of the workmen. At the same
Co. Pet. No. 66 of 2003 Page 22 of 25
time, the Court records the submission by ARCIL that, subject to the
orders that may be passed in the proceedings under the RDDB Act, it is
prepared to settle the dues of the workmen which would be found
admissible by the Committee appointed by this Court.
41. The plea of learned counsel for the OL that as and when the monies
become available for disbursement as a result of the proceedings under
the RDDB Act they should be placed at the disposal of the OL is
different from the law explained by the Supreme Court in Rajasthan
State Financial Corporation v. Official Liquidator (supra). What
appears from a careful reading of paras 16, 17 and 18 of the said
judgment is that the OL has certainly to be associated in all the
proceedings of sale by public auction or otherwise of the properties of the
company in liquidation and the orders of the DRT. As noted
hereinbefore, the DRT has issued notices to the OL at every stage. The
Court is now informed that since 2012, the OL has been participating in
the proceedings before the DRT and now before the DRAT. Therefore,
there may be no apprehension that the orders might be passed in the
proceedings under the RDDB Act without the participation of the OL. It
is for the OL to diligently pursue those proceedings hereinafter.
42. Further, the legal position that emerges is that the exercise of
disbursal of the sums by the DRT can be undertaken only with the
participation of the OL. It is the OL who will settle the claims of the
workmen and of all the secured, preferential and unsecured creditors.
Co. Pet. No. 66 of 2003 Page 23 of 25
This disbursal of the amounts should happen hereafter only with the full
participation of the OL.
43. The Court is not inclined, at this stage, to pass orders regarding the
sums that have already been disbursed pursuant to the orders of the DRT.
There was an opportunity for the OL to have participated at that stage,
but for the reasons best known to him, he did not choose to do so. The
payments made to the Customs authorities in terms of the MoU also
cannot be interfered with unless, of course, the sale itself is set aside or
an appellate court holds that the amount cannot be forfeited. In such
circumstances it should be returned to the AP. This action, therefore, will
have to await the outcome of the orders passed in those proceedings.
44. The Court, therefore, holds that if and when the stage is reached for
disbursal of any further amounts with the DRT, it will be done only after
hearing the OL and strictly in accordance and, in particular, the scheme
of Section 529A of the Act.
45. The OL’s application, CA No.924 of 2011, is disposed of in the
above terms.
46. The other applications, i.e., CA Nos.470 of 2008, 686 of 2008, 1648
of 2012 and 1650 of 2012, are also disposed of in the above terms.
Co. Pet. No. 66 of 2003 Page 24 of 25
Co. Pet. No.66 of 2003
nd
47. List on 22 May 2013.
S. MURALIDHAR, J.
FEBRUARY 21, 2013
tp
Co. Pet. No. 66 of 2003 Page 25 of 25
Co. Pet. No. 66 of 2003
SOCIETE GENERALE ..... Petitioner
Through: None
versus
DAEWOO MOTORS INDIA LTD. ..... Respondent
Through: Mr. Rajat Nair, Advocate for
Mr. K.R. Sasiprabhu, Advocate for
Pan India Motors
Mr. Dhruv Dewan, Advocate for
ARCIL
Mr. Ajay Bhatnagar, Advocate for
Applicants/employees
Mr. Deepak Prakash & Mr. M.K.
Tiwari, Advocates for Workmen
Mr. Ramesh Gopinathan, Advocate
for the Receiver, DRT, Mumbai
Mr. Kanwal Chaudhary, Advocate for
the Official Liquidator
CORAM: JUSTICE S.MURALIDHAR
O R D E R
21.02.2013
Co. App. Nos.470 of 2008, 686 of 2008, 1648 of 2012, 1650 of 2012 (by
the workmen) and 924 of 2011 (by the Official Liquidator ) in Co. Pet.
No.66 of 2003
1. The Respondent company, Daewoo Motors India Ltd. was ordered by
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this Court to be provisionally wound up on 24 November 2003 and finally
Co. Pet. No. 66 of 2003 Page 1 of 25
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wound up on 28 July 2004. The Official Liquidator (‘OL’) attached to this
Court had been appointed as the Liquidator.
2. Prior thereto, in the proceedings initiated by the ICICI Bank (‘ICICI’)
before the Debts Recovery Tribunal (‘DRT’) No. III in Mumbai, an order
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had been passed on 9 May 2002 by the DRT, appointing a Receiver. A
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Debt Recovery Certificate in favour of ICICI was issued by DRT on 11
October 2004. ICICI assigned the Debts Recovery Certificate in favour of
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Asset Reconstruction Company (India) Ltd. (‘ARCIL’) on 29 March 2005,
thereby ARCIL stepped into the shoes of ICICI in the proceedings before
the DRT. The other assignee of the debt was Stressed Assets Stabilization
Fund (‘SASF’). The DRT, Mumbai invited bids for the sale of the fixed
asset, which was the factory premises at A-1, Surajpur Industrial Area,
Gautam Buddh Nagar, Noida, Uttar Pradesh, admeasuring 204 acres.
3. As far as the proceedings in this Court are concerned, it appears that by
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an order dated 4 March 2004 passed by the Court in an application made
by ICICI, this Court was made aware of the proceedings in the DRT
Mumbai under the Recovery of Debts due to Banks and Financial
Institutions Act, 1993 (‘RDDB Act’). The Court restrained the OL from
taking possession of the aforementioned factory premises and modified its
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earlier order in that regard passed on 24 November 2003. By an order
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dated 24 May 2006, in CA No.1549 of 2005, the Court noted that 1524
claims had been received from the workmen. It, accordingly, appointed a
three-member Committee, of which the Assistant Official Liquidator
Co. Pet. No. 66 of 2003 Page 2 of 25
(‘AOL’) was part, to scrutinize the claims of the workmen. It is seen that the
composition of the Committee was altered with one member being replaced
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by an order dated 30 July 2007.
st
4. On 1 August 2006, an order was passed by this Court in CA No. 908 of
2006, taking note of the advertisement published by the DRT, Mumbai,
inviting bids for the sale of the assets of the company and copy of the said
advertisement was handed over to the OL. It was directed that “the Official
Liquidator will ensure that the interest of the workers is protected and take
care of their interest.” It was further directed that the OL “will also ensure
that the sale by the Debt Recovery Tribunal, Mumbai is in accordance with
the Second Schedule of the Income Tax Act, 1961 and best possible price is
obtained.” The Receiver appointed by the DRT, Mumbai was also
represented before the Court by learned counsel, who stated that the joint
inventory report had been prepared. The OL was then directed to take
possession of the statutory records, including the books and accounts of the
company under liquidation.
5. Despite the direction of this Court to the OL to appear before the DRT
and participate in those proceedings, it appears that for some reason that
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was not done. In an order passed on 12 February 2007 by the DRT
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Mumbai, on the basis of the report dated 8 January 2007 of the Receiver
appointed by it, it was noted that the notice had been served on all the
creditors as well as the OL of this Court. In para 23 of the order, after noting
the decision of the Supreme Court in Rajasthan State Financial
Corporation v. Official Liquidator (2005) 8 SCC 190 that the DRT was
Co. Pet. No. 66 of 2003 Page 3 of 25
entitled to order the sale of the properties even if the company was in
liquidation but only after the notice to the OL appointed by the Company
Court and after hearing the OL, the DRT noted that “In this behalf, the
notice of the sale and proceedings, from time to time, has been given to the
Official Liquidator, Delhi High Court.” DRT, by the said order, accepted
the bid submitted by Crosslinks Finlease Pvt. Ltd. (‘CFPL’) for Lot No.1
only, i.e., property at A-1, Surajpur Industrial Area, Gautam Buddh Nagar,
Noida, Uttar Pradesh for the sum of Rs. 765 crores. It was directed that on
receipt of 35% of the payment, the Receiver appointed by the DRT should
hand over the possession of the property after securing poundage fees. It
was directed that on the completion of the sale of the fixed assets, Canara
Bank or any other working capital bank should take over charge of the book
debts and realize the same. Importantly, it was directed in para 30 (e) that
“A copy of the Order shall be forwarded to the Official Liquidator, Delhi
High Court, to enable him to take charge of the records of the Defendant
No.1 Company, which are lying at the suit property, within two weeks time,
so that DRT Receiver would be in a position to hand over possession to the
Purchaser.” In para 30(j), it was directed that subsequent to payment of fees
of the Receiver, the amount of royalty of Rs. 30 lakhs which was deposited
with the Registrar, DRT, would be paid over to ARCIL and the balance
amount of the sale proceeds (after payment of the Receiver’s
commission/fees) would be kept in a fixed deposit (‘FD’).
6. It appears that on the issue of the company being entitled to duty
exemption under the Export Promotion Capital Goods Scheme, demands
were raised by the Customs and Excise authorities. The Customs authorities
Co. Pet. No. 66 of 2003 Page 4 of 25
intervened in the proceedings before the DRT. Their appeal was dismissed
by the Debts Recovery Appellate Tribunal (‘DRAT’). They approached the
High Court of Bombay. It appears that in a special leave petition (‘SLP’)
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filed by ARCIL against the order dated 15 April 2005 of the High Court of
Bombay in the writ petition filed by the Customs authorities, an order was
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passed by the Supreme Court on 12 May 2005, expressing the hope that by
the time the SLP was listed next, “the matter will be settled and finalised.”
Pursuant to the above order, a Memorandum of Understanding (‘MoU’) was
entered into between the Government of India on the one part and ARCIL
and SASF on the other, whereby, inter alia , it was agreed that the Customs
authorities will be paid in terms of the calculation set out in the MoU. The
MoU in para 6 also accounted for the fact that the payment of the
workmen’s dues would be under Section 529 A of the Companies Act, 1956
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(‘Act’). Therefore, even prior to the order passed by the DRT on 12
February 2007, the question of payment to the Customs authorities stood
concluded by way of the above MoU, which had been entered into pursuant
to the order of the Supreme Court.
7. The Committee, which was appointed by this Court to examine the
claims of the workmen, submitted its report in March 2008. In terms of the
facts set out by the OL in its application, CA No 924 of 2011, it is seen that
the Committee scrutinized as many as 1487 claims and decided as follows:
“(i) Claims of 1107 workmen totaling Rs. 19,16,00,231/- are
admitted.
(ii) Claims of 7 workmen who have obtained ex-parte awards from
other labour Courts amounting to Rs. 1,20,80,311/- are computed
Co. Pet. No. 66 of 2003 Page 5 of 25
and this Hon’ble Court is requested to take a final decision whether
the same be admitted.
(iii) Claims of 357 workmen totaling Rs. 61,30,37,607/- are
rejected on account of insufficient documentation;
(iv) Claims of 16 persons totaling Rs. 62,07,524/- are rejected on
account of their not qualifying as “workmen” within the meaning
of section 2(s) of the Industrial Disputes Act, 1947 read with
Section 529 A of the Companies Act, 1956.”
8. CA No. 1224 of 2008 was filed by certain aggrieved workmen, objecting
to the above report. The following order was passed by the Court in the said
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application on 15 January 2009:
“I do not think any orders can be passed on this application till
books of accounts/records of the company under liquidation are
examined and the claims made by the alleged workmen are
thoroughly examined on the basis of records. Therefore, at this
stage no orders are being passed on this application and the same is
disposed of with liberty to the applicant/alleged workmen to raise
claims subsequently. It is clarified that the opinion of the
committee rejecting claim of the applicants has not been confirmed
by this Court and will be examined at a subsequent stage.”
9. On the same date, a separate order was passed by the Court in Crl. O.
(Co.) 5 of 2008 as follows:
“1. Official Liquidator will de-seal the room in which
records/books of accounts of the company under liquidation are
kept in the presence of the receiver appointed by Debt Recovery
Tribunal. Secured creditors of the company under liquidation and
Co. Pet. No. 66 of 2003 Page 6 of 25
the purchaser of the assets will be intimated and informed the date
and time for carrying out necessary exercise.
2. The Official Liquidator will engage services of a photocopier for
making copies of the records/books of accounts after inviting
tenders for the said purpose. The receiver/secured creditors/the
purchaser can appoint a nominee to be present at the time when
photocopying work is in progress.
3. Official Liquidator will write a request letter within two weeks
to the Institute of Company Secretaries and the Institute of
Chartered Accountants with a request to ask their Members to
nominate article clerks for examining the books of
accounts/records of the company under liquidation. The said
Members and article clerks will be paid honorarium/remuneration,
which will be fixed by this Court. It may be noted here that the
exercise will be helpful to the said Member/article clerks, who in
future can become specialist in dealing with insolvency cases and
cases of companies under liquidation. The institutes are requested
to circulate the letter written by the Official Liquidator amongst
their members.
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List again on 27 March, 2009.”
10. The report of the Committee, which examined the workmen’s claims, is
yet to be accepted by the Court. Certain workmen filed CA Nos.470 of 2008
and 686 of 2008, objecting to the Committee’s findings. Certain other
workmen who were awaiting clearance of their dues in terms of the
Committee’s report filed CA Nos.1648 of 2012 and 1650 of 2012.
11. An application filed by the workmen, being CA No.227 of 2011, was
Co. Pet. No. 66 of 2003 Page 7 of 25
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rejected by the Court by order dated 15 July 2011, in which it was noted
that out of the sum paid as upfront money by the successful auction
purchaser (‘AP’), a sum of Rs. 50 crores had been earmarked by the
Recovery Officer (‘RO’) towards workmen’s claims. The said amount has
been kept in a separate FD by ARCIL. The prayer in the said application by
the workmen that the said sum should be utilized for settling the admitted
claims of the workmen was rejected by the Court after noting that an
application had been filed before the DRT for setting aside the sale since the
AP had not paid any further sum.
12. The OL filed CA No.924 of 2011, in which it was, inter alia , stated that
the Receiver appointed by the DRT had sold the factory premises of the
company by way of a ‘private treaty’. In para 16, it was stated as under:
“16. That Official Liquidator attached to this Hon’ble Court has at
no point of time been associated with the process of sale of the said
property of the company in liquidation situated at A-1, Surajpur
Industrial Area, Gautam Budh Nagar, Tehsil Dadri District
Ghaziabad, U.P. Even the manner in which the sale proceeds have
been appropriated have neither been informed to the Official
Liquidator nor to this Hon’ble Court. In such circumstances the
Recovery Officer, DRT, Mumbai is acting in gross violation of the
settled law as regards the realization/distribution of the sale
proceeds.”
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13. In the said application filed on 18 May 2011, it was, inter alia , prayed
that the sale proceeds realised by the Receiver appointed by the DRT should
be directed to be deposited by the OL; the OL should be permitted to invite
the claims from all secured/preferential creditors through publication; a firm
Co. Pet. No. 66 of 2003 Page 8 of 25
of Chartered Accountants (‘CAs’) on the panel of the OL should be
appointed for the scrutiny of the statutory records of the company; a CA
from the panel should be appointed to scrutinize the claims of the workmen
and Government commission on account of actual realisation from the
assets and interest accrued should be disclosed by the RO of the DRT.
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14. Significantly, in the status report dated 20 April 2011 filed less than a
month prior to the above application, it was pointed out by the OL, in
relation to the report of the Committee constituted by the Court to examine
the claims of the workmen, as under:
“6. That the Committee has rejected 357 claims due to insufficient
documentation. In compliance of order of the Hon’ble Court passed
on 15.01.2009, the office of the Official Liquidator has verified the
records of the Company (In Liqn.) pertaining to the workers at the
factory situated at A-1, Surajpur Industrial Area, Gautam Budh
Nagar, Noida, U.P. Particulars of 1319 workers have been verified
which apparently are the part of rejected claims numbering 357, It
requires further examination and admission of their claims if found
fit by the Committee.
7. That as regards to the examination and admission of claim of
1107 workmen, objections were raised by the representative of the
workers as to the repetition of the names of the workers, calculation
made thereon etc. on the report filed by the Committee.
It is also observed from the report of the Committee that the
Committee has scrutinized the claims on the basis of random
selection method i.e. 40 out of each bundle of 100 files. It appears
that each and every claim of the workers has not been gone through
and ascertain by the Committee. The Official Liquidator has already
Co. Pet. No. 66 of 2003 Page 9 of 25
filed CA No.957/10 praying to the Hon’ble Court to direct the
Committee to re-examine the claim and to quantify the amount to be
disbursed.”
15. ARCIL has filed a comprehensive reply to the above application of the
OL pointing out that the OL has taken a stand completely contrary to the
one earlier taken. It was pointed out that despite the notices issued by the
DRT to the OL there was no participation by the OL in the proceedings
before the DRT. Reference was also made to CA No. 274 of 2007 filed by
ARCIL for directions to the Committee constituted by the Court to examine
the claims of the workers to submit a report. Upon such report being
submitted, the OL was directed to file a formal claim before the Recovery
Officer, Mumbai, DRT on behalf of the workmen within ten days. The full
facts regarding the sale of the assets by the RO with the DRT and the MoU
entered with the Central Government concerning the dues payable to the
Customs authorities were set out in the said application.
16. In the reply filed by the OL to the said application, it was inter alia
stated as under:
“Para 1 to 18: In Para 1 to 18 it is submitted that the claims of the
workers are under active consideration before the Committee
appointed by this Hon’ble Court vide order dated 24.5.2006.
Official Liquidator is eagerly awaiting the report of the said
Committee. Official Liquidator would file a formal claim before the
recovery officer DRT, Mumbai as and when the report is submitted
by the Committee.”
17. The fact that the OL was aware of the proceedings before the DRT is
Co. Pet. No. 66 of 2003 Page 10 of 25
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apparent from the letter written on 22 January 2008 to ICICI relating to
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the order passed by the DRT on 16 October 2007 and asking for provision
for sufficient space “so that record of the company in liquidation can be
shifted.” Again, in the objections filed to another application, being CA
No.470 of 2008 by the workmen, objecting to the report of the Committee,
the OL took the stand in its reply as under:
“In reply to para 50 to 51 it is submitted that the provisions of the
RDDB Act was invoked in the matter and the properties of the
company were sold by DRT Mumbai. In such a situation the role of
the Official Liquidator is limited to the adjudication of the claims
under section 529(a) of the Companies Act 1956. As the claims of
employees other than workmen do not full under section 529(A) the
same have rightly been rejected.”
18. The OL himself filed CA No.957 of 2010 for directions to the
Committee to re-examine the claims of the workmen and for directions to
the Receiver appointed by the DRT, the AP or workmen union to cooperate
with the OL. In the said application, in para 5, it was stated as under:-
“5. That the factory premises of the company (In Liqn.) is situated
at A-1, Surajpur Industrial Area, Noida (U.P.) for which a receiver
stands appointed by the DRT Mumbai and the Hon’ble High Court
of Delhi vide its order dated 04/03/2004 had restrained the Official
Liquidator, Delhi from taking over the possession of the factory
premises situated at the above mentioned site and presently the
factory premises of the Company (In Liqn.) has been sold by
Hon’ble DRT Mumbai for a sum of Rs. 765 crore.”
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19. An order was passed by the RO, DRT on 16 October 2007, where,
Co. Pet. No. 66 of 2003 Page 11 of 25
inter alia , the following directions were issued for disbursement of the
amounts deposited by the AP:
“On receipt of 35% upfront payment and issuance of Debentures,
allotment letters to ARCIL and SASF to their satisfaction creation
of pledge and hypothecation, DRT Receiver should forthwith
handover possession of the suit properties after securing poundage
fees. The accrued interest on the amount of Rs. 76.5 ( sic. 765) crore
already deposited by the buyer would be taken into account while
accepting the balance 25% upfront payment. An amount of Rs. 50
crore out of the said upfront payment shall be paid to ARCIL for
being deposited and held by it on behalf of this Tribunal in an
interest bearing account in a bank till payment of workmen’s dues to
the Official Liquidator/Asst. Official Liquidator (in charge) of
Respondent No.1. Upon receipt of the said upfront payment, DRT
Receiver shall forthwith reimburse to ARCIL all expenses incurred
on behalf of first charge holders as also pay itself the Receiver’s fee
being fixed under this order. Further DRT Receiver is directed to
forthwith distribute the balance cash portion of said upfront payment
to ARCIL on behalf of first charge holders. Upon payment of
workmen’s dues to Official Liquidator/Asst. Official Liquidator (in
charge) of Respondent No.1, the surplus, if any, out of the said
deposit of Rs. 50 crore (with accrued interest) shall be distributed to
ARCIL on behalf of the first charge holders.
…….
A copy of the Order shall be forwarded to the Official Liquidator,
Delhi High Court, to enable him to take charge of the records of the
Defendant No.1 Company, which are lying at the suit property,
within two weeks time. Further the Official Liquidator/Asst. Official
Liquidator (in charge) of Respondent No.1, is hereby directed to
lodge/submit the final quantum of dues of workmen of Respondent
No.1 as admitted by the Official Liquidator/Asst. Official Liquidator
Co. Pet. No. 66 of 2003 Page 12 of 25
(in charge), to this Hon’ble Tribunal within two weeks from the date
of this order.
……..
The Receiver would be discharged upon completion of the work
entrusted as hereinabove as far as fixed assets are concerned and
shall continue as DRT Receiver for current assets till the sale of
current assets & Rs. 50 lacs out of sale proceeds to be kept aside for
settling the fee of DRT Receiver. Sale proceeds minus Rs. 50.50
crores [Rs. 50 crores for workmen plus Rs. 50 lakhs supra] would be
released to ARCIL for clearing the dues of the crown and for
rateable distribution among secured creditors. On settling the fee of
the DRT receiver balance be released to ARCIL.”
20. Consequently, the stand now taken by the OL in CA No.924 of 2011
appears to either ignore or contradict what was stated before the Court in
various applications earlier. The position that emerges is that despite the
notices to the OL, he did not participate in the proceedings before the DRT.
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21. The factual position is set out in the affidavit dated 30 April 2012 filed
in this Court by the Receiver appointed by the DRT. In para 9 of the said
affidavit, inter alia , it was stated as under:
“9. It is submitted that the details of the sale proceeds of the assets
of the company under liquidation are as below:
A total amount of Rs. 267.75 crore, being 35% of the upfront
amount has been received.
That the amount received was appropriated through the DRT-III,
Mumbai, a detailed below:
Rs.100. 85 crore was paid to Commissioner of Customs,
Co. Pet. No. 66 of 2003 Page 13 of 25
Mumbai based on Memorandum of Understanding between
the Union of India and Arcil and ors. as recorded in the Order
dated 9.12.2005 passed by Hon’ble Supreme Court in SLP
No. CC No.5185 of 2005
Rs.95.40 crore paid to first charge holders viz. Arcil and
SASF towards reimbursement of expenses incurred;
Rs. 50 crore was kept with Arcil to be held in interest bearing
account on behalf of DRT Receiver toward workers dues;
Rs. 50 lacs was kept with Arcil to be held in Interest bearing
account towards receivers’ fees;
The balance amount of about Rs. 21 crores was distributed to
Arcil and SASF towards their share of the sale consideration.”
nd
22. On 22 November 2012, the RO, DRT cancelled the sale of fixed assets
of the company in liquidation in favour of CFPL/Pan India Motor Pvt. Ltd.
It is further informed that this order was confirmed by the Presiding Officer
th
of the DRT by order dated 30 January 2013. The further appeal filed by the
AP before the DRT is stated to be pending. The question is as to whether
the sum of Rs. 267.75 crores paid by the AP stands forfeited?
nd
23. By an order dated 22 November 2012, the DRT has discharged the
earlier Receiver appointed by it, i.e., M/s. Khare Bapat Kabe Sinha &
Associates and ARCIL has been appointed as the new Receiver. This is
th
evident from the affidavit dated 12 February 2013 filed by Mr. Ramesh
Gopinathan, Advocate appearing for the Receiver, enclosing a copy of the
said order of the DRT.
th
24. On 29 November 2012, this Court had passed the following order:-
Co. Pet. No. 66 of 2003 Page 14 of 25
“ C.A. Nos.470/2008, 853/2008 and 686/2008 & C.A. Nos. 1648
and 1650/2012
C.A. Nos.470/2008, 853/2008 and 686/2008 have been filed by
DCM Daewoo Employees Union and one Sundar Lal. C.A.
Nos.1648/2012 and 1650/2012 have been filed by the Employees
Welfare Forum. All the aforenoted applicants have given their
objections to the report dated 07.02.2008 given by the Committee
whereby the claims of the aforenoted persons were partially
admitted and partially rejected. Counsel for the applicants are
permitted to file a written synopsis not exceeding two pages in
support of their averments.
Co.Pet.66/2003
Learned counsel for the parties points out that the sale which had
been ordered by the DRT Mumbai is the subject matter of challenge
but the earnest money of more than 265 crores which has been
deposited before the Receiver Mr. Ramesh Gopinathan is yet lying
with him and learned counsel for the workers submits that a sum of
Rs.50 crores in fact has been segregated for the benefit of the
workers which amount has to be received by them. None is present
for the Receiver. Let notice of default be issued to the Receiver.
Fresh status report be filed by the Official Liquidator.
Renotify for 21.02.2013.”
25. When the above order was passed, the attention of the Company Court
was not drawn to the fact that the Receiver was not Mr. Gopinathan. He was
only the lawyer for the earlier Receiver appointed by the DRT, which
nd
Receiver, as noted above, was discharged by the DRT on 22 November
2012. As of now, ARCIL is the Receiver and it has already been represented
through its counsel. Learned counsel for ARCIL has confirmed that a sum
Co. Pet. No. 66 of 2003 Page 15 of 25
of Rs. 50 crores has been kept apart in an FD for the benefit of the
th
workmen. Accordingly, it is held that the order dated 29 November 2012
does not survive. Neither Mr. Gopinathan, Advocate nor his client, the
earlier Receiver appointed by the DRT, need appear in the Court any longer.
26. One of the contentions raised by learned counsel for the workmen today
was that such of the claims of the workmen that have been admitted
by the Committee appointed by this Court should be paid out of the
sum of Rs. 50 crores lying with ARCIL in an FD. It was repeatedly urged
that while the secured creditors, the Customs authorities as well as ARCIL
have been paid from the sum deposited by the AP, it is the workmen who
have not received any payment whatsoever for the last several years.
27. The difficulty in entertaining the above plea is that the question whether
the amount deposited by the AP should stand forfeited as a result of the sale
being set aside by the DRT is yet to be decided. In fact, the validity of these
orders of the DRT are in challenge in the proceedings pending before the
DRAT. Consequently, it is not possible, at this stage, for the Court to pass
any orders regarding disbursement of the dues of the workmen.
28. The other reason is that the report of the Committee is under challenge.
Even the OL has stated that the Committee’s report should not be accepted
and the claims of the workmen should be re-examined. There are challenges
to the report also by those workmen whose claims have been rejected.
Further, it is apparent that the books and accounts of the company are yet to
Co. Pet. No. 66 of 2003 Page 16 of 25
be examined properly by the CAs. They were also not associated at the
stage of examination of the workmen’s claims. In the circumstances, this
Court is persuaded to accept the plea that the report submitted by the
th
Committee appointed by this Court on 24 May 2006 to examine the
workmen’s claims should be rejected and this exercise be undertaken by
another Committee with the participation of the two CAs.
29. Accordingly, this Court sets aside the report submitted by the
Committee which examined the workmen’s claims and directs that all the
workmen’s claims that have thus far been lodged with the OL will be
examined by the following Committee:
(i) Mr. S.K. Tandon, retired Additional District Judge;
residing at 244, Bank Enclave, Near Laxmi Nagar,
Delhi – 110 092 (Mobile No. 9811719888)
(ii) Mr. Sanjay Yadav, Deputy OL (Mobile No. 9350907527)
(iii) Mr. Tarun Goyal, Chartered Accountant
CP-58, IInd floor, Pitampura,
Delhi – 110 018. (Mobile No. 9810185384)
(iv) Mr. Sanjeev Saxena, Chartered Accountant,
M/s. Sanjeev Saxena & Co.,
Flat No. 110, Ground Floor,
4855/24, Ansari Road, Darya Ganj,
New Delhi – 110 002. (Mobile No. 9868215565).
30. Each member of the Committee will be paid a fee of Rs. 1,00,000 and a
sum of Rs. 20,000 will be paid to each member as an initial fees within a
period of two weeks out of the Common Pool Fund of the OL and the
balance fee after the completion of the exercise. The Committee will
Co. Pet. No. 66 of 2003 Page 17 of 25
endeavour to complete its exercise within a period of two months from
today and, in any event, will submit its report not later than three months
from today.
31. The next issue that needs to be considered is whether the direction
should be issued, at this stage, on the application, CA No. 924 of 2011, filed
by the OL to the effect that any monies that remain for disbursal as a result
of the final orders in the proceedings arising from the orders of the DRT
setting aside the sale to the AP and any fresh sums that might be received
hereafter should be placed under the control of the OL and be disbursed
only by the OL subject to the supervision of the Court.
32. Mr. Kanwal Chaudhary, learned counsel for the OL, has placed reliance
on the decisions of the Supreme Court in Rajasthan State Financial
Corporation v. Official Liquidator (supra) and Bakemans Industries Pvt.
Ltd. v. New Cawnpore Flour Mills AIR 2008 SC 2699 to urge that once the
liquidation proceedings are in progress, the disbursal of the amounts, even
by the DRT, would be subject to the directions of the Company Court. The
above submissions are countered by Mr. Dhruv Dewan, learned counsel for
ARCIL, who points out that in terms of the aforementioned decisions, what
is required to be done is to associate the OL both at the stage of bringing the
properties of the company in liquidation to sale as well as at the stage of the
disbursal of the amounts.
33. The question as to the jurisdiction of the Company Court vis-à-vis the
Co. Pet. No. 66 of 2003 Page 18 of 25
powers of the DRT in relation to the company in liquidation was examined
by a three-Judge Bench of the Supreme Court in Rajasthan State Financial
Corporation v. Official Liquidator (supra). The matter came to be referred
to a three-Judge Bench as a result of the apparent conflict in the decisions of
the Supreme Court in Allahabad Bank v. Canara Bank (2000) 4 SCC 406
and International Coach Builders Ltd. v. Karnataka State Financial
Corporation (2003) 10 SCC 482.
34. The facts in Rajasthan State Financial Corporation v. Official
Liquidator (supra) show that even before the Appellants could initiate the
proceedings under the State Financial Corporations Act, 1951 (‘SFC Act’),
the company in question was already under liquidation pursuant to the order
passed by the Company Court. It was held by the Supreme Court that
“whether the assets are realised by a secured creditor even if it be by
proceeding under the SFC Act or under the Recovery of Debts Act, the
distribution of the assets could only be in terms of Section 529 A of the Act
and by recognising the right of the liquidator to calculate the workmen’s
dues and collect it for distribution among them pari pasu with the secured
creditors.”
35. In para 17 of the said judgment, it was observed:
“Thus, on the authorities what emerges is that once a winding-up
proceeding has commenced and the Liquidator is put in charge of the
assets of the company being wound up, the distribution of the
proceeds of the sale of the assets held at the instance of the financial
institutions coming under the Recovery of Debts Act or of financial
corporations coming under the SFC Act, can only be with the
Co. Pet. No. 66 of 2003 Page 19 of 25
association of the Official Liquidator and under the supervision of the
Company Court.”
36. While clarifying that there was no consistency in the decisions in
Allahabad Bank v. Canara Bank (supra) and International Coach
Builders Ltd. v. Karnataka State Financial Corporation (supra), the
Supreme Court clarified:
“the distribution of the sale proceeds under the direction of the
Company Court is his responsibility. To ensure the proper working
out of the scheme of distribution, it is necessary to associate the
Official Liquidator with the process of sale so that he can ensure, in
the light of the directions of the Company Court, that a proper price is
fetched for the assets of the company-in-liquidation.”
37. Finally, in para 18, the legal position was summarized as under:
“18. In the light of the discussion as above, we think it proper to sum
up the legal position thus:-
i) A Debts Recovery Tribunal acting under the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 would be entitled
to order the sale and to sell the properties of the debtor, even if a
company-in- liquidation, through its Recovery Officer but only after
notice to the Official Liquidator or the liquidator appointed by the
Company Court and after hearing him.
ii) A District Court entertaining an application under Section 31 of
the SFC Act will have the power to order sale of the assets of a
borrower company-in- liquidation, but only after notice to the
Official Liquidator or the liquidator appointed by the Company Court
and after hearing him.
iii) If a financial corporation acting under Section 29 of the SFC Act
seeks to sell or otherwise transfer the assets of a debtor company-in-
Co. Pet. No. 66 of 2003 Page 20 of 25
liquidation, the said power could be exercised by it only after
obtaining the appropriate permission from the Company Court and
acting in terms of the directions issued by that court as regards
associating the Official Liquidator with the sale, the fixing of the
upset price or the reserve price, confirmation of the sale, holding of
the sale proceeds and the distribution thereof among the creditors in
terms of Section 529A and Section 529 of the Companies Act.
iv) In a case where proceedings under the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 or the SFC Act are not set
in motion, the creditor concerned is to approach the Company Court
for appropriate directions regarding the realisation of its securities
consistent with the relevant provisions of the Companies Act
regarding distribution of the assets of the company-in-liquidation.”
38. This Court does not find the decision in Bakemans Industries Pvt. Ltd.
v. New Cawnpore Flour Mills (supra) to be directly concerning the point
regarding the disbursement of the auction proceeds. The said decision, no
doubt, reiterates that a financial institution governed by the SFC Act would
still be amenable to the discipline of Section 529A of the Act and that where
a company is under liquidation, the sale of the properties of the company as
well as the distribution of the proceeds would be under the directions of the
Company Court.
39. The Madras High Court has, in Subhash Kathuria v. Deve Sugars
Limited [2010] 158 Company Cases 78 (Madras) , summarized the entire
law in para 41. For the purposes of the present case, sub paras 19, 21, 23, 35
and 37 of the said para 41 are relevant and read as under:
“19. Once the recovery certificate is issued by DRT in favour of
the banks and financial institutions, who are secured creditors, then
Co. Pet. No. 66 of 2003 Page 21 of 25
sale of immovable properties cannot be carried out by the Official
Liquidator in winding up proceedings and such sale is to be
conducted by the Recovery Officer in execution of recovery
certificate issued by the DRT.
….
21. The participation of the Official Liquidator in the proceedings
before the DRT is in discharge of his duties and as a necessary
corollary, non-participating in the proceedings and not defending
the interest of the company or the secured credits or the workmen,
would amount to failure in discharging the duties.
….
23. DRT and the Recovery Officer can sell the property, but, only
after issuing notice to the Official Liquidator and after hearing
him.
…..
35. RDB Act 1993 is a special law and hence will prevail over the
general law, in the Companies Act.
…….
37. Once the sale is confirmed by the Recovery Officer and the
Sale Certificate is issued, it cannot be said to be illegal or void.”
40. In the considered view of the Court, as far as the present case is
concerned, the question whether a further auction of the property in
question will be required to be undertaken cannot be decided at this
stage. This is a question that can be answered only on the conclusion of
the proceedings arising out of the orders passed by the DRT setting aside
the same. The further question, whether the amount paid by the AP will
stand forfeited, will also depend on the outcome of the above proceedings
only on the hope that the said question would be answered. To reiterate,
therefore, it would be premature for the Court to speculate as to
whether the sum of Rs. 50 crores, which is in an FD with ARCIL,
would remain with it for meeting the dues of the workmen. At the same
Co. Pet. No. 66 of 2003 Page 22 of 25
time, the Court records the submission by ARCIL that, subject to the
orders that may be passed in the proceedings under the RDDB Act, it is
prepared to settle the dues of the workmen which would be found
admissible by the Committee appointed by this Court.
41. The plea of learned counsel for the OL that as and when the monies
become available for disbursement as a result of the proceedings under
the RDDB Act they should be placed at the disposal of the OL is
different from the law explained by the Supreme Court in Rajasthan
State Financial Corporation v. Official Liquidator (supra). What
appears from a careful reading of paras 16, 17 and 18 of the said
judgment is that the OL has certainly to be associated in all the
proceedings of sale by public auction or otherwise of the properties of the
company in liquidation and the orders of the DRT. As noted
hereinbefore, the DRT has issued notices to the OL at every stage. The
Court is now informed that since 2012, the OL has been participating in
the proceedings before the DRT and now before the DRAT. Therefore,
there may be no apprehension that the orders might be passed in the
proceedings under the RDDB Act without the participation of the OL. It
is for the OL to diligently pursue those proceedings hereinafter.
42. Further, the legal position that emerges is that the exercise of
disbursal of the sums by the DRT can be undertaken only with the
participation of the OL. It is the OL who will settle the claims of the
workmen and of all the secured, preferential and unsecured creditors.
Co. Pet. No. 66 of 2003 Page 23 of 25
This disbursal of the amounts should happen hereafter only with the full
participation of the OL.
43. The Court is not inclined, at this stage, to pass orders regarding the
sums that have already been disbursed pursuant to the orders of the DRT.
There was an opportunity for the OL to have participated at that stage,
but for the reasons best known to him, he did not choose to do so. The
payments made to the Customs authorities in terms of the MoU also
cannot be interfered with unless, of course, the sale itself is set aside or
an appellate court holds that the amount cannot be forfeited. In such
circumstances it should be returned to the AP. This action, therefore, will
have to await the outcome of the orders passed in those proceedings.
44. The Court, therefore, holds that if and when the stage is reached for
disbursal of any further amounts with the DRT, it will be done only after
hearing the OL and strictly in accordance and, in particular, the scheme
of Section 529A of the Act.
45. The OL’s application, CA No.924 of 2011, is disposed of in the
above terms.
46. The other applications, i.e., CA Nos.470 of 2008, 686 of 2008, 1648
of 2012 and 1650 of 2012, are also disposed of in the above terms.
Co. Pet. No. 66 of 2003 Page 24 of 25
Co. Pet. No.66 of 2003
nd
47. List on 22 May 2013.
S. MURALIDHAR, J.
FEBRUARY 21, 2013
tp
Co. Pet. No. 66 of 2003 Page 25 of 25