2010 (4) TMI 619 - SC - Companies Law

Appeal - Company D was notified under Act - The sale proceeds or the properties of M/s. Killick Nixon group companies ought to be apportioned individually decree-wise. This is contrary to its earlier stand. The material available on record also reveals that these group companies have always referred to the aggregate principal amount of alleged loan given by M/s. Dhanraj Mills Private Limited.

Summary

Issues:
1. Appropriation of sale proceeds against group companies' decrees.
2. Individual liabilities of judgment debtors under separate decrees.
3. Interlocutory nature of the orders passed by the Special Court.

Analysis:
1. The case involved appeals against interlocutory orders passed by the Special Court regarding the appropriation of sale proceeds against group companies' decrees. M/s. Dhanraj Mills Private Limited had advanced interest-free loans to M/s. Killick Nixon Limited and its group companies, leading to fraudulent securities transactions and siphoning off funds. The Special Court found that the group companies were controlled by M/s. Dhanraj Mills Private Limited and treated them as a consolidated group for recovery purposes. The appellants argued for individual appropriation of sale proceeds against each decree, contrary to their earlier stand and the Special Court's findings.

2. The appellants contended that the liabilities of judgment debtors under separate decrees were not joint, and each entity should be treated individually. However, the Special Court determined that the group companies were controlled by M/s. Dhanraj Mills Private Limited, and the amounts being recovered were public funds siphoned off by the directors. The Custodian's appropriation of sale proceeds was upheld as proper, considering the interconnected nature of the transactions and the group structure.

3. The Supreme Court, after hearing submissions, concluded that the impugned orders were interlocutory in nature and did not decide substantive rights. The Court emphasized that appeals against interlocutory orders were not permissible under the relevant Act. Additionally, the Court noted that the group companies were consistently treated as a single entity and upheld the Special Court's decision to treat the decrees as consolidated. Citing precedent, the Court dismissed the appeals, affirming the Special Court's analysis and conclusion on the matter.

This comprehensive analysis covers the issues of appropriation of sale proceeds, individual liabilities of judgment debtors, and the interlocutory nature of the orders, providing a detailed overview of the legal judgment.