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2010 (5) TMI 394 - HC - Companies LawWhether the OTS agreement is not enforceable? Held that - As the entire amount of ₹ 90 lakhs obtained by the LMDL Company (in liquidation) was settled for a total amount of ₹ 132 lakhs. Since the Managing Director of LMDL Company has already paid more than ₹ 97 lakhs and handed over two drafts of total balance amount of ₹ 47,71,330 to the counsel for PICUP Company in the Court, so, the learned Company Judge was legally right to implement the OTS scheme (Annexure A 3)/agreement (Annexure A 4) in the obtaining circumstances of the case. No other illegality has been pointed out in the impugned order by the learned counsel for the PICUP Company and Official Liquidator. Appeal dismissed.
Issues Involved:
1. Jurisdiction of the Company Court to enforce the One Time Settlement (OTS) scheme. 2. Validity and enforceability of the OTS scheme and agreement. 3. Payment and settlement under the OTS scheme. 4. Conditional release of funds to the Punjab & Sind Bank. Detailed Analysis: 1. Jurisdiction of the Company Court to Enforce the OTS Scheme: The appellant-PICUP Company contended that the Company Court lacked jurisdiction to enforce the OTS scheme, arguing that such schemes lack statutory sanction. However, the Court held that under Section 446 of the Companies Act, the Company Court has jurisdiction to entertain and dispose of any suit or proceeding by or against the company, including the enforcement of the OTS scheme. The Court emphasized that the Company Judge has the authority to decide on the implementation of the OTS scheme, especially since the LMDL Company was already under liquidation and the Official Liquidator had taken over its assets. 2. Validity and Enforceability of the OTS Scheme and Agreement: The Court examined whether the OTS scheme (Annexure A3) and the subsequent agreement (Annexure A4) could be enforced. The PICUP Company argued that the OTS proposal was canceled due to non-compliance within the agreed period. However, the Court noted that the Managing Director of LMDL Company had paid a substantial amount along with penal interest. Citing precedents, the Court ruled that the OTS scheme and agreement could be enforced despite the delay in payment, as the PICUP Company had received almost the entire amount. The Court referenced the Supreme Court's ruling in the case of Sardar Associates v. Punjab & Sind Bank, which held that RBI guidelines, including OTS schemes, are binding and can be implemented. 3. Payment and Settlement Under the OTS Scheme: The Court found that the Managing Director of LMDL Company had entered into an OTS scheme with all creditors, including PICUP Company, and had paid approximately the entire agreed amount. The Court dismissed the argument that the OTS scheme could not be enforced due to its cancellation by PICUP Company, stating that the agreement (Annexure A4) was legally binding and could not be revoked unilaterally after acceptance. The Court emphasized that PICUP Company, having received substantial payments, was estopped from denying the enforceability of the OTS scheme. 4. Conditional Release of Funds to the Punjab & Sind Bank: The Official Liquidator argued that releasing funds to Punjab & Sind Bank without its claim being registered would deprive other creditors of their shares. The Court addressed this by highlighting the Company Judge's conditional order, which required the bank to file a claim with the Official Liquidator and provide an undertaking to refund the amount if directed. This safeguarded the interests of all parties and ensured that the bank would return the amount with interest if it was not entitled to it. Conclusion: The Court concluded that the OTS scheme (Annexure A3) and the agreement (Annexure A4) were enforceable and that the Company Court had jurisdiction to enforce them. It dismissed the appeals filed by PICUP Company and the Official Liquidator, upholding the Company Judge's order to implement the OTS scheme and conditionally release funds to Punjab & Sind Bank. The Court found no merit in the arguments against the enforceability of the OTS scheme and agreement, emphasizing that the substantial payments made under the scheme justified its enforcement.
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