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2013 (1) TMI 642 - HC - Companies LawScheme of Compromise - Directors of company-in-liquidation submitted scheme of revival of company-in-liquidation - sanction to such scheme refused by Single Judge - The applicant preferred appeal before the Division Bench who passed interim order directing to implement the revival scheme and directing Official Liquidator (OL) to handover the possession within the prescribed time-limit - the applicant/appellant agreed to deposit the amount of Rs. 25,00,000 towards cost, since it was so demanded by the OL - matter carried in SLP by the OL before the Apex Court who directed the Division Bench for de novo consideration of the scheme in accordance with law who after hearing both the sides & the jugement and order, dated 7-10-2011 came to be passed - applicant sought for review of the decision of the Court, dated 7-10-2011 as OL had to recover the shortfall from the assets of the company-in-liquidation, since the Court rejected the revival scheme and the OL was not entitled to keep the balance of Rs. 25,00,000 - engagement of the advocate appearing for OL in the appeal was not approved by the Company Court - Whether judgment passed in appeal seeking scheme of revival of company-in-liquidation was to be reviewed or re called? Held that - As out of the amount of Rs. 25,00,000, since the OL has already borne the expenses of Rs. 12,43,960 towards security expenses for preservation of property and amount of security expenses are already paid by the OL, the OL cannot be directed to refund the said amount. Further, after excluding the amount of security expenses already paid, net balance comes to Rs. 12,56,040. As against the same, the bills of security agencies deployed from 23-6-2003 to 20-3-2009 of Rs. 74,64,342 are pending, for which the matters are also pending before the Company Court and, hence, the order for refund of the amount of Rs. 12,56,040 does not deserve to be passed at this stage. But it is directed that the OL shall separately mark and maintain the fund of Rs. 12,56,040 and after the dispute with the security agencies towards the bill of Rs. 74,64,342 is finalized, the OL shall make use of the amount of Rs. 12,56,040, if required, and thereafter if any surplus balance remains, the same shall be refunded to the applicant. In the present case, the OL had engaged Advocate in view of the facts and circumstances that engagement of an advocate was required. If the Company Court has declined to ratify the action of the OL, the consequence may arise that the Advocate may not get his fees for his engagement, but thereby, per se, it cannot be said that all his action, including that of defending the proceedings on behalf of the OL would be vitiated. Considering the submissions on behalf of the OL, it cannot be said that any contentions of the OL on behalf of the company-in-liquidation, may be through Advocate appointed were against the interest of the company-in-liquidation. Thus merely because the Advocate was lacking authority, per se, is no ground to review and recall the order, more particularly when it is not found that any action is taken by the OL or by the Advocate engaged by the OL against the interest of the company-in-liquidation for opposing the appeal preferred by the applicant. Thus considering the facts and circumstances, it is found that no valid ground is made out to recall and review the order, dated 7-10-2011 as where appointment of advocate by OL against order refusing sanction of revival scheme was not approved by company court, same would not be valid ground to recall and review order passed in that appeal, but it is observed that the present order shall not operate as a bar to the applicant in resorting to appropriate proceedings for protecting the interest of the company-in-liquidation, as a shareholder of the company, if otherwise permissible in law.
Issues Involved:
1. Review of the decision dated 7.10.2011 in OJ Appeal No. 8 of 2009. 2. Approval of the revival scheme for the company in liquidation. 3. Contemptuous language used in the review application. 4. Appropriation and/or refund of Rs. 25,00,000/- deposited by the applicant. 5. Validity of submissions made by an advocate without proper authority. Detailed Analysis: 1. Review of the Decision Dated 7.10.2011 in OJ Appeal No. 8 of 2009: The review applications, MCA No. 181 of 2011 and MCA No. 184 of 2011, were filed to review the judgment and order dated 7.10.2011, which dismissed the appeal and did not approve the revival scheme. The main judgment in OJ Appeal No. 8 of 2009 was also sought to be reviewed. The court considered the factual background, including the rejection of the revival scheme by the Single Judge and the subsequent appeal and interim orders. The Supreme Court had directed de novo consideration of the scheme, but the appeal was ultimately dismissed. 2. Approval of the Revival Scheme for the Company in Liquidation: The revival scheme proposed by two directors of the company in liquidation was initially declined by the Single Judge. The appeal against this decision was also dismissed. The review application sought approval of the revival scheme, but the court found no valid grounds to recall and review the order or to approve the scheme of revival. The court emphasized that the grounds for review on the question of law or appreciation of facts were not sufficient to grant approval to the revival scheme. 3. Contemptuous Language Used in the Review Application: The court noted that the language used by the applicant in the review application was prima facie contemptuous and undermined the dignity and authority of the court. The applicant sought permission to delete certain contemptuous statements and tendered an unconditional apology. The court accepted the apology but warned the applicant against using similar language in the future, stating that any further contemptuous language could result in proceedings under the Contempt of Courts Act. 4. Appropriation and/or Refund of Rs. 25,00,000/- Deposited by the Applicant: The applicant had deposited Rs. 25,00,000/- towards costs demanded by the Official Liquidator (OL) during the appeal. The court examined the utilization of this amount and found that Rs. 12,43,960/- had been spent on security expenses, leaving a balance of Rs. 12,56,040/-. However, pending security bills amounted to Rs. 74,64,342/-, which were yet to be finalized. The court directed the OL to maintain the balance of Rs. 12,56,040/- separately and to use it for settling the security bills. Any surplus remaining after finalizing the security bills should be refunded to the applicant. 5. Validity of Submissions Made by an Advocate Without Proper Authority: The applicant contended that submissions made by Mr. Roshan Desai, who represented the OL, were invalid as his engagement was not approved by the Company Court. The court found no substance in the allegation of ulterior motive or collusion. It held that the OL has the duty to defend proceedings against the company in liquidation, either personally or through an advocate. The lack of subsequent approval for the advocate's engagement did not invalidate the submissions made on behalf of the OL. The court concluded that there was no ground to review and recall the order based on this contention. Conclusion: - The review applications MCA No. 184 of 2011 and MCA No. 181 of 2011 were disposed of. - The court did not find valid grounds to recall and review the judgment and order dated 7.10.2011. - The revival scheme was not approved. - The court accepted the unconditional apology for the contemptuous language but warned against future violations. - The OL was directed to maintain the balance of Rs. 12,56,040/- separately and use it for settling pending security bills, with any surplus to be refunded to the applicant. - The submissions made by the advocate without proper authority did not invalidate the proceedings.
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