1993 (8) TMI 249 - HC - Companies Law

Summary

Issues:
- Claim of interest after the winding up by a secured creditor
- Interpretation of Companies (Court) Rules, 1959 regarding payment of interest
- Applicability of Provincial Insolvency Act, 1920 in determining payment of interest
- Comparison with previous legal judgments on payment of interest in winding up proceedings

Analysis:
The judgment deals with an application by the Kerala Financial Corporation, a secured creditor, regarding its claim before the liquidator of a company in liquidation. The applicant sought interest after the winding up, along with other claims, which was partially rejected by the liquidator. The applicant contended that it was entitled to interest after the winding up at a specified rate under rule 156 of the Companies (Court) Rules, 1959.

The court analyzed the relevant provisions, specifically rule 156 of the Companies (Court) Rules, 1959, which addresses cases without a contract for interest payment. The court concluded that this rule does not enable a secured creditor to claim interest after the date of winding up. Additionally, the court examined section 47 of the Provincial Insolvency Act, 1920, which governs the entitlement of secured creditors to prove their debt, including interest after adjudication. However, the court clarified that section 47 does not allow a secured creditor to claim interest post-adjudication unless certain conditions under section 61(6) of the Provincial Insolvency Act are met.

Furthermore, the court referred to rule 179 of the Companies (Court) Rules, 1959, which provides clarity on the payment of interest after winding up, stating that such payment is contingent on the existence of surplus funds after satisfying admitted claims. The court also discussed previous legal judgments, such as K.V. Lakshminaruyana Sastry v. Vijaya Commercial Bank Ltd. and State Bank of Mysore v. Official Liquidator, to differentiate cases of secured creditors standing outside the winding up from the present scenario.

In conclusion, the court emphasized that the applicant, as a secured creditor, is entitled to interest only up to the date of winding up, and any payment of interest thereafter is subject to the availability of surplus funds as per rule 179 of the Companies (Court) Rules or section 61(6) of the Provincial Insolvency Act. The court dismissed the application, stating that the liquidator's adjudication did not warrant interference, and the claim for interest post-winding up lacked merit.