2011 (9) TMI 1148 - HC - Companies Law

Summary

Issues Involved:
1. Approval of set-off amount.
2. Condonation of delay in communicating the set-off amount.

Detailed Analysis:

1. Approval of Set-Off Amount:
The Official Liquidator sought approval for a set-off amount of Rs. 5,47,28,34,538/- as computed under Rule 154 of the Companies (Court) Rules, 1959, read with Section 529A of the Companies Act, 1956. The company in liquidation had borrowed money from ICICI Bank, which was a secured creditor and debenture trustee. The Court decreed the debenture trustees' claim in the sum of Rs. 6,85,82,98,695/-. The properties of the company were sold to Metropolitan Infrahousing Ltd. for Rs. 6,01,00,00,000/- and Rs. 1,25,01,00,000/-, respectively. The Official Liquidator appointed S.M. Pradhan & Co., Chartered Accountants, to calculate the set-off amount. They reported that the principal amount of non-convertible debentures issued by the company was Rs. 1,36,79,22,640/- and the interest up to the winding-up date amounted to Rs. 4,35,14,15,366/-, totaling Rs. 5,71,93,38,006/-. Metropolitan held 95.69% of these debentures, equating to Rs. 5,47,28,34,538/-. The Chartered Accountants also noted that Metropolitan claimed interest up to February 2011, amounting to Rs. 12,83,85,44,059/-, inclusive of compounded interest. However, the Official Liquidator argued that under Rule 154, claims should be considered only up to the winding-up date, i.e., 26th September 2005.

Metropolitan contended that the full set-off amount as per the decree should be awarded, as the decree was passed after the winding-up order with the liquidator as a party. They argued that Rule 156, which limits interest to 4%, was inapplicable as the interest was part of the agreement and decreed. The Official Liquidator, however, maintained that the Rules did not permit granting interest beyond the stipulated rate and relied on Rule 154 and the judgment in IDBI Ltd. vs. Official Liquidator.

The Court noted that Rule 154 requires the value of debts and claims to be estimated as of the winding-up order date. Rule 156 allows creditors to prove for interest at a rate not exceeding 4% per annum up to the winding-up date if interest is not reserved or agreed upon. Rule 179 deals with subsequent interest, stating that creditors whose proofs have been admitted shall be paid interest from the winding-up order date to the final dividend declaration date at a rate not exceeding 4%.

The Court held that the liquidator's computation of the set-off amount was correct, as it adhered to the Rules. The liquidator could not grant full set-off as claimed by Metropolitan, as the computation had to be in terms of the Companies (Court) Rules, 1959. The Court also noted that Metropolitan's claim for set-off was based on their successful bid for the company's property and that the Rules should not be held inapplicable merely because Metropolitan was the auction purchaser.

2. Condonation of Delay:
The Official Liquidator requested condonation of the delay in communicating the set-off amount to the Court Receiver, citing a one-month delay. The Court acknowledged the delay but did not find it to be a significant issue affecting the overall proceedings.

Conclusion:
The Court approved the set-off amount of Rs. 5,47,28,34,538/- as computed by the Official Liquidator and Chartered Accountants, adhering to Rule 154 of the Companies (Court) Rules, 1959. The request for condonation of the delay in communication was also granted. The judgment emphasized the importance of adhering to the statutory rules and procedures in winding-up proceedings and set-off calculations.