2008 (3) TMI 482 - HC - Companies Law

Refund of excess amount paid against outstanding dues along with interest at such rate as may be determined by this court - Held that - It is premature at this stage to state that any excess amount is paid to respondent No. 1 bank. Respondent No. 1 bank has got a valid decree from the Debts Recovery Tribunal in its favour. The decree specifically states the amount with interest at the rate of 23.25 per cent. 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 respondent No. 1 bank that is to be paid as per the provisions contained in section 530 of the Companies Act 1956.Since the Debts Recovery Tribunal has passed the decree it is presumed that the decree was passed after proper adjudication. So long as the decree remains in existence this court cannot take the view that it is an ex-parte decree or it is passed without any adjudication. The court therefore at this stage does not issue any direction to respondent No. 1 bank to refund the excess amount. It is however open for the official liquidator to approach the Debts Recovery Appellate Tribunal challenging the decree in question

Issues Involved:
1. Recovery of excess payment made to secured creditors.
2. Validity and enforcement of the decree obtained by the Central Bank of India from the Debts Recovery Tribunal.
3. Entitlement of secured creditors and workers to the surplus amount after payment of claims.
4. Jurisdiction of the Debts Recovery Tribunal versus the Company Court.

Detailed Analysis:

1. Recovery of Excess Payment Made to Secured Creditors:
The official liquidator filed a report seeking directions for the Central Bank of India, GSFC, and GIIC to refund excess amounts paid against their outstanding dues, totaling Rs. 3,06,23,526, Rs. 24,25,368, and Rs. 8,28,324 respectively, along with interest. The official liquidator supported his claim with a verification report from a chartered accountant, which detailed the amounts claimed and paid to the secured creditors. The report indicated that the total amount disbursed to secured creditors and workers was Rs. 5,30,20,860, while the amount payable was Rs. 2,87,81,223, leading to an excess payment of Rs. 1,61,26,921.

2. Validity and Enforcement of the Decree Obtained by the Central Bank of India from the Debts Recovery Tribunal:
The Central Bank of India obtained a decree from the Debts Recovery Tribunal for Rs. 1,80,50,991 with interest at 23.25% per annum. The bank argued that it had received Rs. 3,31,32,274 from the official liquidator towards recovery of its decretal dues and still had an outstanding amount of Rs. 30,93,11,757.04. The bank maintained that it was legally entitled to recover its entire decretal dues from the sale proceeds of the securities. The court noted that the decree from the Debts Recovery Tribunal was valid and binding unless challenged and set aside by the Debts Recovery Appellate Tribunal.

3. Entitlement of Secured Creditors and Workers to the Surplus Amount After Payment of Claims:
The official liquidator argued that any excess amount paid should be refunded to him for distribution as per the provisions of the Companies Act, 1956. The court referred to Rule 179 of the Companies (Court) Rules, 1959, which states that in the event of a surplus after payment of all claims, creditors are entitled to interest at 4% per annum. The court also noted that secured creditors who obtained a decree with higher interest rates are entitled to realize the said interest from the surplus amount. The Central Bank of India, having obtained a decree with interest at 23.25%, was entitled to recover this interest from the surplus funds.

4. Jurisdiction of the Debts Recovery Tribunal Versus the Company Court:
The court emphasized that the jurisdiction of the Debts Recovery Tribunal in adjudicating the liability and issuing recovery certificates is exclusive. The Companies Act and relevant judicial precedents, including Allahabad Bank v. Canara Bank and Rajasthan Financial Corporation v. Official Liquidator, were cited to underline that the distribution of sale proceeds in a winding-up scenario must involve the official liquidator and be supervised by the company court. However, the adjudication of liability and recovery of the amount by execution of the certificate remain within the exclusive jurisdiction of the Debts Recovery Tribunal and Recovery Officer.

Conclusion:
The court concluded that it was premature to state that any excess amount was paid to the Central Bank of India, given the valid decree from the Debts Recovery Tribunal. The official liquidator was advised to challenge the decree before the Debts Recovery Appellate Tribunal if he believed it was incorrect. The court did not issue any immediate direction for the refund of the excess amount but allowed for future action based on the outcome of any appeal against the decree. The O.L.R. was disposed of with these observations and directions.

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