2006 (7) TMI 336 - HC - Companies Law

Summary

Issues:
1. Disbursement of sale proceeds by Official Liquidator.
2. Possession of assets by secured creditor before winding up order.
3. Application for execution of certificate by respondent-Bank.
4. Allegations against Official Liquidator for not disbursing the amount.
5. Reference to a Supreme Court judgment on the powers of Debt Recovery Tribunal.

Disbursement of Sale Proceeds by Official Liquidator:
The High Court had directed the winding up of a company and appointed the Official Liquidator to handle the assets. Before the winding up order, a secured creditor had taken possession of the assets and sold them, depositing the balance amount with the Official Liquidator. The respondent-Bank filed an application for execution of the certificate to recover the amount. The Bank alleged that despite having the amount since 1997, the Official Liquidator had not disbursed it among the secured creditors as required by law, keeping it in fixed deposits instead. The Bank accused the Official Liquidator of avoiding and frustrating its lawful claim, leading to a dispute over the disbursement of the sale proceeds.

Possession of Assets by Secured Creditor Before Winding Up Order:
The RIICO, a secured creditor, had taken possession of the company's assets before the winding up order was passed. The RIICO sold the assets and deposited the balance amount with the Official Liquidator. This action was taken under the provisions of the State Financial Corporation Act, 1951. The Debt Recovery Tribunal later attached the sale proceeds lying with the Official Liquidator for realization, leading to a complex situation regarding the handling of the funds.

Application for Execution of Certificate by Respondent-Bank:
The respondent-Bank filed an application for execution of the certificate dated 18-5-2001 before the Recovery Officer of Debt Recovery Tribunal-II, Delhi. The Recovery Officer attached the sale proceeds and directed notice for its realization under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Bank sought to recover the certified amount, leading to further legal proceedings and disputes over the disbursement and handling of the funds.

Allegations Against Official Liquidator for Not Disbursing the Amount:
The Bank alleged that the Official Liquidator had not disbursed the amount among the secured creditors as required by law. Despite having the funds since 1997, the Official Liquidator had kept the amount in fixed deposits instead of distributing it. The Bank accused the Official Liquidator of suppressing material facts and frustrating its lawful claim for recovery, leading to a legal battle over the proper handling and disbursement of the sale proceeds.

Reference to Supreme Court Judgment on Powers of Debt Recovery Tribunal:
The High Court referred to a Supreme Court judgment in B. Shoes Ltd. v. Indian Overseas Bank regarding the powers of the Debt Recovery Tribunal to direct the sale of assets of a company that has been wound up and where the Official Liquidator is appointed. The High Court decided not to vacate the interim order in the matter, allowing the parties to approach the Court after the Supreme Court's decision in the referenced case. This reference highlighted the significance of the legal question at hand and its connection to broader legal principles established by higher courts.