2010 (2) TMI 578 - HC - Companies Law

Winding up - Overriding preferential payments - Held that - Pendency of company petition was not brought to the notice of the Hon ble Bench, but as soon as, it came to the notice that a winding up petition was pending, then it was made clear in the order dated 18-10-1996 that all the directions issued by this Court in this case would be subject to the orders, which may be passed by the learned Company Judge in winding up petition. Meaning thereby, the earlier order dated 25-2-2005, on which the PSIDC is basing its claim, was subject to the orders, that may be passed by the learned Company Judge. Therefore, the provisions of the Act would prevail and PSIDC cannot claim preference to the release of the said amount over and above the secured creditors in this relevant connection. Thus, the contrary arguments of learned counsel for the PSIDC stricto sensu deserve to be and are hereby repelled, in the obtaining circumstances of the case. Appeal dismissed.

Summary

Issues:
- Dismissal of application by Company Judge for release of payment from sale of sugar stock
- Claim by PSIDC for payment to canegrowers invoking Companies Act, 1956 and relevant rules
- Contestation by Official Liquidator on maintainability and locus standi of PSIDC's claim
- Appeal by State of Punjab through PSIDC against dismissal of application

Analysis:

The judgment involves a dispute where the State of Punjab, represented by PSIDC, appealed against the dismissal of its application by the Company Judge for the release of payment from the sale of sugar stock of a company under liquidation. The PSIDC sought payment to be made to canegrowers, citing provisions of the Companies Act, 1956 and relevant rules. The Official Liquidator contested PSIDC's claim, arguing on the maintainability and locus standi of the claim, stating that claims post the winding up order are not admissible. The Company Judge had dismissed PSIDC's application, leading to the appeal by the State of Punjab through PSIDC.

The PSIDC contended that the State of Punjab had sanctioned a loan for canegrower payments, and thus, should receive the amount from the sale. However, the Official Liquidator argued that post-winding up claims are not permissible under the Act. The Court noted that earlier orders were subject to the Company Judge's decisions, emphasizing the supremacy of the Act in such matters. It was highlighted that secured creditors had precedence over the amount, as established through pending recovery proceedings. The Court upheld the Company Judge's decision, finding no legal flaws in the dismissal of PSIDC's claim.

In conclusion, the Court dismissed the company appeal by the State of Punjab through PSIDC, without awarding costs. The judgment reaffirmed the precedence of secured creditors in such cases and upheld the Company Judge's decision to deny PSIDC's claim for payment release from the sale of sugar stock of the company under liquidation.