2003 (7) TMI 585 - HC - Companies Law

Summary

Issues Involved
1. Conclusiveness of the Recovery Certificate issued by the Debts Recovery Tribunal (DRT).
2. Entitlement of Canara Bank to claim post-liquidation interest.
3. Legality of rejection of loans given to workmen of the company.

Issue-Wise Detailed Analysis

Conclusiveness of the Recovery Certificate issued by the Debts Recovery Tribunal (DRT)
The primary issue addressed is whether the recovery certificate issued by the DRT is conclusive proof of debt binding on the Official Liquidator in relation to the company in winding up. The court noted that Canara Bank is a secured creditor and had filed a claim based on the recovery certificate issued by the DRT. However, the Official Liquidator admitted only part of the claim and rejected the balance. The court emphasized that under sections 124 and 125 of the Companies Act, even if a charge is not registered with the Registrar of Companies, it does not prejudice the repayment of the loan secured by the charge. The court further clarified that while the DRT may award interest during the pendency of the suit and post-decree period, this does not apply in the context of winding up. The court concluded that the recovery certificate issued by the DRT is not conclusive proof binding on the Official Liquidator, and the claim must be proved as per the Companies (Court) Rules.

Entitlement of Canara Bank to Claim Post-Liquidation Interest
The second issue was whether Canara Bank could claim interest after the date of the winding-up order. The court referred to Rules 154 and 156 of the Companies (Court) Rules, which stipulate that the value of debts and claims against the company shall be estimated as of the date of the winding-up order. The court held that post-liquidation interest cannot be claimed as a matter of right, and any interest allowed by the Official Liquidator is capped at 4% per annum from the date the debt becomes payable if it is payable by virtue of a written agreement. The court cited previous judgments, including the Rajasthan High Court's ruling in Rajasthan Financial Corpn. v. Official Liquidator, to support this position.

Legality of Rejection of Loans Given to Workmen of the Company
The third issue addressed the rejection of claims related to loans given to workmen of the company. The court reiterated that the Official Liquidator must distribute the assets of the company on an equal proportionate basis among all creditors, including workmen, secured creditors, and unsecured creditors. The court emphasized that the amounts realized from the sale of the company's assets must be distributed in accordance with section 530 of the Companies Act and Rules 166 to 196 of the Companies (Court) Rules. The court upheld the Official Liquidator's decision to reject part of Canara Bank's claim, asserting that the bank could not claim a preferential status over other creditors.

Conclusion
The court dismissed the appeal, affirming the Official Liquidator's decision to admit only part of Canara Bank's claim and reject the balance. The court held that the recovery certificate issued by the DRT is not conclusive proof binding on the Official Liquidator, post-liquidation interest cannot be claimed as a matter of right, and the distribution of the company's assets must be done on an equal proportionate basis among all creditors.