2008 (10) TMI 358 - HC - Companies Law

Winding up - availability of inherent powers to this Court in the matter of allowing payment to be made to the legal heirs by the Official Liquidator without insisting on production of a succession certificate - Held that - Mere inclusion of the names of the legal representatives of the deceased worker by the Official Liquidator in his report or the permission granted to these legal representatives to represent the interest of the deceased worker during verification of claim before the Official Liquidator or then by the Division Bench in the company appeal does not have the effect of dispensing with the requirement of rule 280. After closure of the company consequent to winding-up or even before that, most of the workers must have gone elsewhere or shifted even to various other towns/places in search of livelihood. In some applications it is mentioned that the widows had shifted to some interior places and hence, there was some delay in presenting the claim or challenging its rejection. The situation and plight of such dependents of the deceased worker is not hard to realise. Rule 280 has been enacted only to safeguard the interest of such dependents. But then in this jurisdiction identity of the genuine legal heirs is required to be established elsewhere and brought on record of Official Liquidator. In the circumstances, I do not find that this Court can deviate from the procedure prescribed and in any case, there is no material before this Court or even before the Official Liquidator to record a finding about the applicants being legal heirs of the respective deceased workers.All Applications are, therefore, rejected.

Issues Involved:
1. Entitlement of legal heirs to receive dividend payments without succession certificates.
2. Applicability of inherent powers of the Court under Rule 9 of the Companies (Court) Rules, 1959.
3. Interpretation and application of Rule 280 of the Companies (Court) Rules, 1959.
4. Previous judgments and their relevance to the current case.

Issue-wise Detailed Analysis:

1. Entitlement of Legal Heirs to Receive Dividend Payments Without Succession Certificates:
The legal heirs of deceased workers of Hariganga Steel & Alloys Ltd., a company in liquidation, filed applications seeking directives for the Official Liquidator to pay them the dividend amounts without insisting on succession certificates. The Official Liquidator had calculated the total entitlement of each worker and declared a 14 percent dividend payable to them. The heirs argued that the insistence on succession certificates was arbitrary and unsustainable, especially given the small amounts involved and the hardships faced by the dependents of the deceased workers.

2. Applicability of Inherent Powers of the Court Under Rule 9 of the Companies (Court) Rules, 1959:
The applicants contended that the Court should exercise its inherent powers under Rule 9 to allow payments to be made to the legal heirs without succession certificates. Rule 9 states that nothing in the Rules shall limit or affect the inherent powers of the Court to give directions or pass orders necessary for the ends of justice or to prevent abuse of the process of the Court. The applicants argued that the inherent powers should be invoked to do justice in the present case.

3. Interpretation and Application of Rule 280 of the Companies (Court) Rules, 1959:
Rule 280 deals with the payment of dividends or return of capital due to a deceased creditor or contributory. It allows the Official Liquidator to apply to the Court for sanctioning such payments without a succession certificate if the amount is Rs. 500 or less, provided the Official Liquidator is satisfied with the claimant's right and title. The Court must then scrutinize the correctness of the Official Liquidator's satisfaction and sanction the payment upon obtaining a personal indemnity from the payee. The Court found that Rule 280 does not permit the Company Court to sanction payments directly to claimants without the Official Liquidator's intervention and compliance with the safeguards prescribed in Rule 280.

4. Previous Judgments and Their Relevance to the Current Case:
The applicants cited various judgments to support their case, including a Division Bench judgment in Company Appeal No. 8 of 2007, which held that Rule 164 does not bar applications made beyond the prescribed period if justified. However, the Court distinguished this case from the present one, noting that Rule 280 expressly restricts the Official Liquidator's power to make payments without a succession certificate and does not provide for the Court to waive this requirement. The Court also considered other unreported judgments and orders but found them inapplicable to the present issue.

Conclusion:
The Court concluded that it could not deviate from the procedure prescribed in Rule 280, which safeguards the interests of genuine creditors. The applications were rejected, but the Court directed that if the applicants move for succession certificates or similar authority, the concerned competent Court or authority should decide such proceedings expeditiously.

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