2009 (7) TMI 786 - HC - Companies Law

Whether the workers claim is required to be considered pari passu with the claim of the secured creditor? Held that - The amount of ₹ 10 lakhs from the available fund in the proceedings of Suit No. 1 of 1988 pending before the Debts Recovery Tribunal, shall be deposited, with the official liquidator. The official liquidator- shall place the copy of the order before the Tribunal for appropriate compliance. The aforesaid process of depositing the amount of ₹ 10 lakhs shall be completed within the period of four weeks from the date of production of the order before the Tribunal by the official liquidator. After the amount of ₹ 10 lakhs is deposited with the official liquidator, the official liquidator shall disburse the amount to the workers at pro rata proportionate basis by A/c. payee cheque or by crediting the amount in the bank account of concerned worker through electronic mode. The said process shall be completed within six weeks thereafter. The amount of ₹ 43 lakhs plus interest shall remain with the Tribunal subject to final order that may be passed by the Tribunal in the suit. However, if the suit is decreed and the recovery certificate is issued, any surplus amount is available towards workers claim as per section 529A, the same shall also be distributed accordingly by the Tribunal and in the event there is a failure, the official liquidator shall be at the liberty to move appropriate application before the appropriate forum. The official liquidator shall be at the liberty to make the payment of the bill of chartered accountant of ₹ 6112.

Summary

Issues:
Consideration of workers' claim in a liquidation case for distribution of funds between secured creditors and workers.

Analysis:
The judgment revolves around the consideration of workers' claims in a liquidation scenario, specifically focusing on the distribution of funds between secured creditors and workers. The official liquidator filed a report to address the workers' claim amounting to Rs. 35,43,705, which was later re-verified by a chartered accountant to be Rs. 32,24,097.89. The central issue was whether the available funds, including the amount realized from the sale of company properties, should be distributed to workers on an ad hoc basis alongside secured creditors.

The respondent bank, a secured creditor, filed a suit for Rs. 1,32,46,190 post the company's winding-up order, with the funds realized from property sales held by the bank. The official liquidator argued for pari passu consideration of workers' claims with secured creditors, advocating for the funds to be deposited with the court for equitable distribution to workers. However, the bank contended that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, empowered the recovery officer of the Debts Recovery Tribunal to handle disbursements, not the company court.

The court analyzed the apex court's decision in Allahabad Bank v. Canara Bank, emphasizing the need for a recovery certificate against the company for the Tribunal to distribute sale proceeds under the RDB Act. As the suit was pending without a recovery certificate issued, the Tribunal lacked the authority to distribute funds. The court balanced the rights of secured creditors and workers, directing the Tribunal to deposit a portion of the available funds with the official liquidator for workers' distribution under section 529A of the Companies Act.

Ultimately, the court ordered Rs. 10 lakhs to be deposited with the official liquidator for workers' distribution, while retaining Rs. 43 lakhs plus interest with the Tribunal pending final orders. The judgment underscored the importance of equitable distribution, highlighting the workers' long-standing claim and the necessity to balance the interests of both secured creditors and workers in a liquidation scenario.