K.A. Puj, J.
1. The Official Liquidator has filed this report praying for the direction to Central Bank of India, GSFC & GIIC to refund to his office a sum of Rs. 3,06,23,526/-, Rs. 24,25,368/- and Rs. 8,28,324/- being the excess amount paid to them against outstanding dues, along with interest at such rate as may be determined by this Court.
2. The Official Liquidator has stated in his report that the respondent No. 1 i.e. Central Bank of India has filed Company Application No. 87 of 1999 praying this Court to direct the Secured Creditors of the Company, namely, GSFC & GIIC to file their claims before the Official Liquidator. While disposing of the said application, this Court directed the Official Liquidator to file fresh detailed report pointing out the excess amount paid, if any, to Central Bank of India and GSFC.
3. The relevant facts for consideration of the issue involved in the present report are that by an order dated 01.09.1992 passed by this Court in Company Petition No. 85 of 1991, the Company, namely, M/s. Gujarat Ministeel Limited was ordered to be wound up and the Official Liquidator attached to this Court was appointed as its Liquidator with all usual powers under the provisions of the Companies Act, 1956. The Official Liquidator has thereafter taken charge of the assets and properties of the Company. The sale of the assets and properties of the Company was confirmed in favour of M/s. Cincinnati Microns Ltd. for a purchaser consideration of Rs. 5.25 Crores by this Court vide order dated 11.08.1997 in OLR No. 82 of 1997. The Official Liquidator has appointed one M/s. Pankaj R. Shah, Chartered Accountant for the purpose of verification of claims submitted by the Secured Creditors of the Company, namely, Central Bank of India, GSFC & GIIC and the said Chartered Accountant vide his report dated 16.01.2000 submitted verification report which is as under:
Sr. No. Name of Bank Nature of Loan/ Claim (Rs.)Credit facility. 01. Central Bank of India Term Loan 24,76,192/-02. GIIC Term Loan 75,74,391/-03. GSFC Term Loan 2,98,140/-04. Central Bank of India C. C. A/c. 1,22,96,571/-05. Central Bank of India C. C. A/c. 61,35,929/-TOTAL 2,87,81,223/-
4. It appears from the aforesaid verification report of the Chartered Accountant that the value of debts claimed by the Secured Creditors as on the date of winding up order i.e. 01.09.1992 as provided in Rule 154 of the Companies (Court) Rules, 1959 was secured on the fixed assets of the Company and ranked pari-passu inter-se with workers dues on the amount realized by the sale of fixed assets and they are as under:
Sr. No. Name of Bank Nature of Loan. Claim (Rs.)01. Central Bank of India Term Loan 24,76,192/-02. GIIC Term Loan 75,74,391/-03. GSFC Term Loan 2,98,140/-TOTAL 1,03,48,723/-
5. The Official Liquidator has also given details of payments made to each Secured Creditors and workers of the Company in his report. The same are as under:
Central Bank of IndiaSr. No. Order dated Company Application No. Amount (Rs.)01. 14.10.1997 385 of 1997 34,02,715/-02. 19.01.1999 799 of 1993 7,00,000/-03. 11.01.2000 2,30,00,000/-04. Adjusted against FDR lying with 60,00,000/-CBI in compliance of DRT orders.TOTAL 3,31,02,715/-Gujarat State Financial Corporation
Sr. No. Order dated Company Application No. Amount (Rs.)01. 14.10.1997 385 of 1997 34,02,715/-TOTAL 34,02,715/-Gujarat Industrial Investment CorporationSr. No. Order dated Company Application No. Amount (Rs.)01. 14.10.1997 385 of 1997 34,02,715/-03. 11.01.2000 50,00,000/-TOTAL 84,02,715/- WorkersSr. No. Order dated Company Application No. Amount (Rs.)01. 14.10.1997 385 of 1997 34,02,715/-02. 16.09.1998 799 of 1993 4,34,563/-03. 19.01.1999 799 of 1993 10,30,505/-04. 30.12.1999 32,43,915/-TOTAL 81,11,698/-
7. The total amount disbursed by the Official Liquidator to the Secured Creditors and workers of the Company as per the directions of this Court are as under:
Sr. No. Name of Organization Amount disbursed (Rs.)01. Central Bank of India 3,31,02,715/-02. GSFC 34,02,715/-03. GIIC 84,02,715/-04. Workers 81,11,698/-TOTAL 5,30,10,860/-
8. The Official Liquidator has also stated in his report that by an order dated 29.07.2003 passed in Company Application No. 87 of 1999, the Official Liquidator was directed to take steps to recover the excess payment made to the respondent No. 1 i.e. Central Bank of India and GSFC. The Official Liquidator has observed in his report that the total amount of Rs. 2,87,81,223/- was payable to the Secured Creditors as per the report of the Chartered Accountant. As against this, the amount paid to the Secured Creditors was to the tune of Rs. 3,30,10,860/-. Thus, an excess amount paid to the Secured Creditors of the Company by the Official Liquidator under various orders and directions of this Court are recoverable from them and the amount recoverable is as under:
Sr. No. Name of Organization Amount found Recoverable (Rs.)01. Central Bank of India 1,21,94,023/-02. GSFC 31,04,574/-03. GIIC 8,28,324/-TOTAL 1,61,26,921/-
The Official Liquidator has further stated in his report that GSFC has submitted a sum of Rs. 24,25,368/- to him. So far as Central Bank is concerned, the said Bank has filed Civil Suit before City Civil Court, Ahmedabad for recovery of its dues which was later on transferred to the Debts Recovery Tribunal, Ahmedabad and by an order dated 25.01.1999, the DRT quantified a sum of Rs. 1,80,50,991/- together with further interest @ 23.25% for the period from 09.01.1992 till realization on Rs. 1,80,50,991.88 and Rs. 1,07,399/- towards cost of the suit. The Official Liquidator has, therefore, filed this report for recovery of the aforesaid amount.
9. An affidavit is filed by one Mr. M. Mallik, Manager (Recovery) of Central Bank of India. It is stated therein that even prior to this, the Official Liquidator had filed report dated 04.02.2003 making reference of payment of alleged excess amount of Rs. 1,10,07,215/- to Central Bank of India. Thereafter, in another report dated 29.11.2005, the Official Liquidator made reference of payment of alleged excess amount of Rs. 60,07,715/- to Central Bank of India. However, during the course of hearing, this Court found that the Official Liquidator has not furnished full particulars and the basis on which it is alleged that the excess amount has been paid. Accordingly, this Court vide its order dated 13.03.2007 directed the Official Liquidator to file detailed report within a period of one week by pointing out the excess amount paid, if any to Central Bank of India and the basis of that calculation.
10. Central Bank of India had lent and advanced sizable financial assistance to the Company in liquidation and since the said financial assistance remained unpaid by the Company, the Bank after obtaining necessary leave of this Court, filed Civil Suit No. 193 of 1992 in the City Civil Court, Ahmedabad against the Company and other answerable parties for recovery of Rs. 1,80,50,991.88 together with further interest @ 23.25% from 09.01.1992 till realization. The said suit came to be transferred to the DRT, Ahmedabad and the Presiding Officer of the DRT decreed the suit on 15.12.1998 with costs by directing the Company in liquidation and other answerable parties to pay Rs. 1,80,50,991.88 with interest @ 23.25% p.a. Thereafter, Central Bank of India again approached this Court seeking permission to execute the said Certificate of Recovery by filing Company Application No. 358 of 1999 and this Court vide order dated 29.06.2000 granted the said Company Application and permitted the Bank to recover its dues against the Company in liquidation.
11. It is further stated in the said affidavit that the Recovery Officer of the DRT initiated recovery proceedings being R.P. No. 268 against the Company in liquidation and other answerable parties. In the above premises, the Recovery Officer of the DRT passed an order dated 12.03.2001 and directed the Official Liquidator to release forthwith an amount of Rs. 60 Lacs to the Certificate Holder Bank on ad-hoc basis subject to final settlement out of the sale proceeds lying in the custody and the said order has been complied with by the Official Liquidator.
12. It is further stated in the reply affidavit that the Bank has received aggregate sum of Rs. 3,31,32,274/- from the Official Liquidator towards recovery and repayment of its decretal dues. After adjusting the recovery of this amount received from the Official Liquidator and after giving its due credit on respective dates of receipt, the Bank has still to recover an amount of Rs. 30,93,11,757.04 from the Company in liquidation. The Bank is a Secured Creditor and has opted and remained outside winding up all throughout and thus the Bank is legally entitled to recover and receive its entire decretal dues out of the sale proceeds of the securities having first charge of the Bank which are presently lying with the Official Liquidator. The contentions raised by the Official Liquidator as well as by the Chartered Accountant in their respective reports are not correct and they are contrary to the various provisions of the Companies Act and the Rules.
13. GIIC has also filed its reply. It is stated therein that the respondent No. 3 has filed Company Application No. 279 of 2001 claiming that it has to recover in all Rs. 3,24,12,346/- from Gujarat Mini Steel Limited and only Rs. 50 Lacs were paid and, therefore, remaining amount of Rs. 2,74,12,346/- were due and payable by the Official Liquidator. The Official Liquidator has wrongly stated in his report that only an amount of Rs. 92 Lacs was payable to GIIC and as Rs. 84 Lacs were already paid, the respondent No. 3 Corporation is eligible to get an amount of Rs. 8 Lacs only.
14. Affidavit-in-reply is filed by the respondent No. 2 - GSFC wherein it is stated that it has repaid an amount of Rs. 19,76,594/- with 10% interest thereon aggregating to Rs. 24,25,368/- to the Official Liquidator vide its letter dated 08.02.2000 and the same has duly been accepted and acknowledged by the Official Liquidator. It is further stated that the respondent No. 3 is not liable to repay any further amount as claimed by the Official Liquidator in his report.
15. On behalf of the workers, an affidavit of proof of debt was filed wherein it is stated that the workers have not been paid to the fullest extent and hence, after recovery effected from the Secured Creditors, the amount should be paid to them.
16. Earlier this Court has passed an order on 17.10.2007. The Court was of the view that proper compliance of undertaking given to the Court must be made by the parties. Before its compliance, no contention raised by the parties can be entertained, as it would nullify the sanctity of the order passed by this Court and also of the undertaking. The Court was further of the view that as per the report of the CA, the loan transaction over the immovable property being the secured creditor is for Rs. 24,76,192/- and the other amount to be recovered by the bank is towards the working capital and not as the secured creditor. Further as per the order of the Debt Recovery Tribunal, since suit was for the composite loan amount, outstanding figure mentioned is of Rs. 1,80,50,991/- and the order of the tribunal is ex-parte order and though, OL had appeared, it has been mentioned that defendant has not appeared. Even if the Debt Recovery Tribunal's order as it stand is accepted then also it is not in dispute that the amount paid is of Rs. 3,31,02,715/-. The Court, therefore, has prima facie come to the conclusion that the amount has been paid in excess and hence the Court has passed an interim order directing the Bank to return the amount of Rs. 2,30,00,000/- with the interest at the rate of 10 percent per annum to the OL within one month from the date of the said order.
17. The above order of the learned Single Judge was challenged in Appeal before the Division Bench of this Court in OJ Appeal No. 246 of 2007 with Civil Application No. 412 of 2007. While admitting the Appeal and passing an order in Civil Application on 19.11.2007 the Division Bench has granted ad-interim stay with the clarification that there is no stay against the proceeding for verification/adjudication of the amount already paid to the Bank and the entitlement of the Bank to receive such amount. The finding of the learned Company Judge on the above question shall be placed on record of this proceeding. The Division Bench has also made it clear that the amount already received by the appellant Bank shall remain with the appellant Bank and shall abide by the adjudication as directed by the Court.
18. In the above background of the matter, the present OLR has now come up for hearing before the Court.
19. Heard Mr. J.S. Ydav, learned advocate appearing for the Official Liquidator, Mr. S.N. Soparkar, learned Senior Counsel appearing with Mr. S.S. Panesar, for the respondent No. 1 Bank, Mr. R. D. Dave, Mr. H.S. Munshaw and Mr. Varun K. Patel for respondents Nos. 2,3 & 4 respectively.
20. Before filing the present report the Official Liquidator has filed two reports earlier on 4.2.2003 as well as on 29.11.2005. While disposing of both the reports the Court has directed the Official Liquidator to file detailed report with full particulars and the basis on which it is alleged that the excess amount has been paid. The said direction has not been carried out and in the same manner the present report is filed. He has further submitted that the Bank has obtained a decree from the competent Court i.e. Debt Recovery Tribunal and unless and until that decree has been challenged or got upset, it cannot be said that the respondent No. 1 - Bank has been paid any excess amount. He has further submitted that all the secured creditors including respondent No. 1 Bank as well as the workers have been paid to the fullest extent and hence the respondent No. 1 Bank is entitled to retain the amount given to the Bank towards its decreetal amount. For this purpose he relied on the decision of the Hon'ble Supreme Court in the case of Allahbad Bank v. Canara Bank and Anr.reported in : [2000]2SCR1102 , wherein it is held that the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to Banks or financial institutions. Once the Tribunal passes an order that the debt is due, the Tribunal has to issue a certificate under Section 19(22) to the Recovery Officer for recovery of the debt specified in the certificate. The Court further held that basically the Tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate under Section 19(22). Under Section 18, the jurisdiction of any other Court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the Tribunal. The Court further observed that even in regard to 'execution', the jurisdiction of the Recovery Officer is exclusive. It is not the intendment of the Act that while the basic liability of the defendant Company is to be decided by the Tribunal under Section 17, the Banks/Financial Institutions should go to the Civil Court or the Company Court or some other authority outside the Act for the actual realisation of the amount. The certificate granted under Section 19(22) has to be executed only by the Recovery officer. No dual jurisdictions at different stages are contemplated. Further, Section 34 of the Act clearly stated that RDB Act overrides other laws to the extent of 'inconsistency', Obviously, the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner. The Court, therefore, held that the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other Court or authority much less the Civil Court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act.
21. Mr. Soparkar has further submitted that since the secured creditors and workers have been paid in entirety and what is left with the Official Liquidator or what is sought to be recovered from the respondent No. 1 Bank is nothing but the surplus and under Rule 179 of the Companies (Court) Rules, 1959, in the event of there being a surplus after payment in full of all the claims admitted to proof, creditors whose proofs have been admitted would be entitled to interest only at the rate of 4 per cent per annum on the admitted amount of claim. However, a secured creditor who obtained leave of the winding up court without any conditions under Section 446 of the Act, can enforce the decree fully as against the liquidator and is entitled to get interest as decreed by the civil Court subject to Section 529A of the Act read with Rule 179 of the Rules. In support of his submission he relied on the decision of Kerala High Court in the case of Federal Bank Ltd. and Ors. v. Official Liquidator and Ors. reported in 2003 Vol.113 Company Cases 410, wherein it is held that dues of the workmen of a company in liquidation and debts due to secured creditors under Section 529A of the Companies Act, 1956, are to be treated pari passu and shall be paid in priority to all other debts. In a case where there is no surplus after payment in full of all the claims admitted to proof, the creditors who stood outside the winding up proceedings as well as the secured creditors who fall under Section 529A would be treated alike to the extent of being granted interest at the rate of 4 per cent under Rule 179 of the Rules. But where there is a surplus amount after satisfying the decree of secured creditors, including secured creditors who stood outside the winding up as well as those who are covered under Section 529A read with Rule 179, secured creditors who obtained a decree with interest at a rate higher than 4 per cent would be entitled to realise the said interest from the surplus amount. In such an event, even though there is a surplus, secured creditors covered under Section 529A would not be entitled to interest in excess of 4 per cent. Here in the present case, since the respondent No. 1 Bank has obtained the decree in its favour with interest at the rate higher than 4 per cent it would be entitled to realise the said interest from the surplus amount. He has, therefore, submitted that the Official Liquidator is bound to honour the decree of the Civil Court obtained by the Bank and pay the interest as ordered in the decree. Contributories and other shareholders would be entitled to the rest of the amount after the decree was so satisfied.
22. As against this, Mr. J.S. Yadav, learned advocate appearing for the Official Liquidator has submitted that as per the undertaking given by the respondent No. 1 Bank before this Court, the excess amount paid should have been returned to the Official Liquidator. He has further submitted that the respondent No. 1 Bank is not entitled to receive the decreetal amount and in any case it cannot claim any interest after the date of winding up order. Even as per Rule 179 of the Companies (Court) Rules, the respondent No. 1 Bank is entitled to interest at the rate of 4 per cent per annum. The excess amount is, therefore, required to be returned. He has further submitted that the respondent No. 1 Bank cannot claim the decreetal amount which includes the rate of interest at 23.25% per annum. No adjudication was made by the Debt Recovery Tribunal. The decree was passed ex-parte and hence even on merits, the claim of the respondent No. 1 Bank is not satisfied.
23. In support of his submission he relied on the various judgments of Apex Court as well as different High Courts. However, decisions cited by Mr. Yadav are not relevant to the issue involved in the present OLR. It is true that a controversy arose by virtue of two conflicting judgments of the Hon'ble Supreme Court in the case of Allahbad Bank v. Canara Bank and Ors. and International Coach Builders Ltd., v. Karnataka State Financial Corporation. However, the same was resolved by the Apex Court in the case of Rajasthan State Financial Corporation and Ors. v. Official Liquidator and Anr. reported in : AIR2006SC755 , it is held therein that 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 association of the Official Liquidator and under the supervision of the Company Court. The right of a financial institution or of the Recovery Tribunal or that of a financial corporation or the court which has been approached under Section 31 of the SFC Act to sell the assets may not be taken away, but the same stands restricted by the requirement of the Official Liquidator being association with it, giving the Company Court the right to ensure that the distribution of the assets in terms of Section 529A of the Companies Act takes place. The Court further held that there is no inconsistency between the decisions in Allahbad Bank v. Canara Bank and in International Coach Builders Ltd., v. Karnataka State Financial Corporation, in respect of the applicability of Section 529 and 529A of the Companies Act in the matter of distribution among the creditors. The right to sell under the SFC Act or under the Recovery of Debts Act by a creditor coming within those Acts and standing outside the winding up, is different from the distribution of the proceeds of the sale of the security. The distribution in a case where the debtor is a company in the process of being wound up, can only be in terms of Section 529A read with Section 529 of the Companies Act. After all, the Liquidator represents the entire body of creditors and also holds a right on behalf of the workers to have a distribution pari passu with the secured creditors and the duty for further distribution of the proceeds on the basis of the preferences contained in Section 530 of the Companies Act under the directions of the Company Court.
24. In other words, 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. It was in that context that the rights of the Official Liquidator were discussed in International Coach Builders Ltd. The Debt Recovery Tribunal and the District Court entertaining an application under Section 31 of the SFC Act should issue notice to the Liquidator and hear him before ordering a sale, as the representative of the creditors in general.
25. Based on the statutory provisions contained in the Companies Act, 1956 with special reference to Section 529A of the Act and the judicial pronouncements, Mr. Yadav has strongly urged that the excess amount paid to the respondent No. 1 Bank should be ordered to be refunded to the Official Liquidator.
26. Having heard learned advocates for the respective parties and having considered the rival submissions and authorities cited before the Court, the Court is of the view that it is premature at this stage to state that any excess amount is paid to the respondent No. 1 Bank. The respondent No. 1 Bank has got a valid decree from the Debt Recovery Tribunal in its favour. The decree specifically states the amount with interest at the rate of 23.25%. The secured creditors and workers have been paid. The Official Liquidator is not in a position to state that any amount is to be paid to any other secured creditor or the workman. Even if the amount is to be recovered from the respondent No. 1 Bank, that is to be paid as per the provisions contained in Section 530 of the Companies Act, 1956. The decision of the apex Court in Allahabad Bank as well as Kerala High Court in Federal Bank, clearly states that under Rule 179 of the Companies (Court) Rules, the decree holder can get the decreetal amount with interest at the rate of 4 per cent per annum and even then any surplus is left the interest awarded by the Debt Recovery Tribunal should be paid to such decree holder. Since Debt Recovery Tribunal has passed the decree it is presumed that the decree was passed after proper adjudication. So long as decree remains in existence this Court cannot take the view that it is an ex-parte decree or it is passed without any adjudication. Proper forum for challenging the decree is the Debt Recovery Appellate Tribunal and unless and until that decree is reversed by the Appellate TribunalThis Court cannot take the view that the decree was passed without any adjudication and once the claim has been adjudicated and there is surplus fund, the respondent No. 1 Bank is entitled to get the decreetal amount with interest from the surplus amount. Once the adjudication is done by the Debt Recovery Tribunal, there is no question of another adjudication by this Court. The decree passed by the Debt Recovery Tribunal is not under challenge before this Court and hence, it is not proper for this Court to go beyond that decree and pass any order contrary to it during its subsistence.
27. The Court, therefore, at this stage does not issue any direction to the respondent No. 1 Bank to refund the excess amount. It is, however, open for the Official Liquidator to approach the Debt Recovery Appellate Tribunal challenging the decree in question and if the decree is set aside, it is open for the Official Liquidator to file further report before the Court seeking appropriate direction for refund of the excess amount paid to the respondent No. 1 Bank.
28. Subject to the aforesaid observations and directions, this OLR is accordingly disposed off.