2008 (2) TMI 621 - HC - Companies Law

Recovery of a sum with further interest at 21 per cent, per annum till repayment of the amount - Held that - Though the plaintiff has chosen to proceed against the defendant-company, which has already been ordered to be wound up, as a secured creditor with option of standing out side the winding up proceedings to enforce his security, even then the plaintiff would succeed in getting only such equivalent dividend amount as would be payable to the other similarly placed secured creditors of the company in liquidation. In the peculiar facts of the present case, inclined to allow the official liquidator to withdraw the amount deposited in this court, on behalf of the defendant-company, which has been invested, along with interest accrued thereon, to be treated as assets of the defendant-company available for disbursal to the eligible persons as per the preferential order under sections 529 and 529A of the Companies Act, while treating the claim of the plaintiff as similar to that of a secured creditor.

Issues Involved:
1. Recovery of the outstanding principal amount.
2. Claim of interest on the outstanding amount.
3. Quality of goods supplied by the plaintiff.
4. Entitlement of the plaintiff to withdraw the deposited amount.
5. Jurisdiction and procedural aspects post-winding up of the defendant-company.

Issue-wise Analysis:

1. Recovery of the Outstanding Principal Amount:
The plaintiff sought recovery of Rs. 1,49,805.91 with interest at 21% per annum on Rs. 1,13,747.87. The plaintiff sold goods worth Rs. 4,34,510.87 to the defendant, who made part payments totaling Rs. 3,20,763, leaving Rs. 1,13,747.87 unpaid. The defendant admitted receiving the goods but claimed they were of inferior quality. However, no evidence was provided to support this claim. Consequently, the court held that the plaintiff was entitled to the principal amount of Rs. 1,13,747.87.

2. Claim of Interest on the Outstanding Amount:
The plaintiff claimed interest at 21% per annum based on an oral agreement and commercial practice, supported by debit notes and Form No. 19A issued by the defendant's financial controller. Despite the defendant's denial in the written statement, no evidence was provided to refute the plaintiff's claim. The court found the plaintiff's claim for interest at 21% per annum to be valid and enforceable.

3. Quality of Goods Supplied by the Plaintiff:
The defendant alleged that the goods supplied were of inferior quality, causing a loss of Rs. 1,10,000. However, the defendant failed to provide any evidence or documentation to support this claim. The court concluded that the defendant did not prove the goods were defective or that any loss was suffered due to their quality.

4. Entitlement of the Plaintiff to Withdraw the Deposited Amount:
The plaintiff sought permission to withdraw the amount deposited by the defendant with the Prothonotary and Senior Master of the court. The official liquidator argued that post-winding up, the deposited amount should be treated as part of the defendant-company's assets and disbursed according to the preferential order under the Companies Act. The court agreed with this argument, rejecting the plaintiff's claim to withdraw the amount directly. Instead, it ordered the official liquidator to treat the deposited amount as an asset of the defendant-company and disburse it accordingly.

5. Jurisdiction and Procedural Aspects Post-Winding Up:
The plaintiff obtained leave from the company court under Section 446 of the Companies Act to continue the suit post-winding up. The official liquidator contended that post-winding up, the plaintiff should only receive interest at 4% per annum. The court, however, found no provision in the Companies Act or Rules supporting this contention. The court held that the plaintiff, treated as a secured creditor, was entitled to the agreed interest rate of 21% per annum until the winding-up order. Post-winding up, the plaintiff's claim would be treated similarly to other secured creditors, subject to the preferential order of disbursement under Sections 529 and 529A of the Companies Act.

Conclusion:
The suit was decreed in favor of the plaintiff for the principal amount and interest at 21% per annum. The plaintiff's request to withdraw the deposited amount was rejected, and the official liquidator was instructed to treat the deposited amount as part of the defendant-company's assets, to be disbursed according to the preferential order stipulated by the Companies Act. The plaintiff's claim was treated as that of a secured creditor, ensuring equitable treatment among similarly placed creditors.

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