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2013 (2) TMI 86 - HC - Companies LawWinding up petition - Secured creditors - preference over other secured creditors - Right of Sporting Pastime India Ltd. ( SPIL ) to receive amount after release of an amount by the IT department as refund with interest - Held that - As already noticed, this Court had, on 22nd September 2006, already required the IT Department to refund the sum to SPIL and further ordered that the sum should be deposited with Canara Bank in terms of the judgment dated 18th November 2005. Since the Madras High Court has, by order dated 9th May 2007, directed that the release of the said amount should be only to SPIL and to no one else, this Court directs the IT Department to deposit in the account of SPIL with SBI Branch the sum of Rs. 17,40,29,511 together with interest calculated in terms of Section 244 of the IT Act within a period of three weeks from today. This is subject to the orders that may be passed in the appeal preferred by the IT Department and any further orders that may be passed by any other higher judicial forum. Immediately upon the amount being deposited in its account, SPIL will instruct SBI to transmit by RTGS the amount deposited to the account of Canara Bank, Green Park Extn., New Delhi. The above order is subject further to Canara Bank filing an affidavit in this Court, within two weeks, stating that depending on the orders passed by the ITAT or any higher judicial fora and any further order passed by this Court, Canara Bank will refund the said amount or any part thereof together with whatever interest as may be directed by this Court. This order is without prejudice to the rights and contentions of SPIL as regards its liability as may be determined by ITAT or by any other judicial forum. For reporting compliance and further hearing, list these matters on 12th February 2013 at 2.15 pm.
Issues Involved
1. Implementation of previous judgments and orders regarding the liability of Sporting Pastime India Ltd. (SPIL). 2. Winding up of Data Access (India) Ltd. (DAIL) due to its inability to pay debts. 3. Transfer of funds from DAIL to various entities and the legality of such transfers. 4. Compliance with court orders by Cheran Holdings Pvt. Ltd. (CHPL), KCP Associates Holdings Pvt. Ltd. (KCPH), Cheran Enterprises Pvt. Ltd. (CEPL), and SPIL. 5. Attachment and release of funds by the Income Tax Department. 6. Appeals and writ petitions filed in various courts including the Madras High Court and the Supreme Court. Detailed Analysis 1. Implementation of Previous Judgments and Orders Regarding SPIL's Liability The court addressed the issue of implementing previous judgments and orders concerning SPIL's liability. The judgment dated 18th November 2005 required SPIL to remit back the transferred amount to DAIL's account with ABN Amro Bank, which would then be transferred to Canara Bank. This order was confirmed by the Division Bench on 20th November 2009, making it final. 2. Winding Up of Data Access (India) Ltd. (DAIL) Due to Its Inability to Pay Debts The winding-up petition (CP No. 292 of 2004) was filed by Pacific Convergence Corporation Ltd. (PCCL) under Sections 433(e) and 434 of the Companies Act, 1956, due to DAIL's inability to pay its debts. DAIL admitted to a liability of Rs. 446.5 crores, including Rs. 18 crores claimed by the Income Tax Department. The court rejected a Scheme of Arrangement proposed by CHPL due to strong opposition from secured creditors and admitted the winding-up petition. 3. Transfer of Funds from DAIL to Various Entities and the Legality of Such Transfers The court scrutinized the transfer of $17 million received by DAIL from DAA to CHPL and subsequently to KCPH, CEPL, and SPIL. Canara Bank contended that these funds were held in trust by DAIL and should not have been intermingled with other funds. The court found the transactions suspicious and not credible, affirming the interim order to protect the interests of secured creditors. 4. Compliance with Court Orders by CHPL, KCPH, CEPL, and SPIL The court issued several directions to ensure compliance with its orders. On 21st January 2011, it attached all bank accounts and deposits of CEPL, CHPL, SPIL, and KCPH, restraining them from making payments or creating third-party interests without court permission. The attachment orders would be withdrawn upon depositing Rs. 78.45 crores with Canara Bank by 31st March 2011, failing which interest would accrue at 15% per annum. 5. Attachment and Release of Funds by the Income Tax Department The Income Tax Department had provisionally attached Rs. 25 crores from SPIL, appropriating Rs. 17.40 crores towards tax demands. The balance amount of Rs. 7.59 crores remained in a fixed deposit with SBI, Adayar Branch, Chennai. The court directed the IT Department to deposit these amounts with the Official Liquidator and subsequently with Canara Bank, subject to compliance with the Madras High Court's interim orders. 6. Appeals and Writ Petitions Filed in Various Courts Several appeals and writ petitions were filed in different courts. The Division Bench dismissed appeals by CHPL, KCPH, and SPIL, affirming the order dated 18th November 2005. SPIL's writ petitions in the Madras High Court resulted in an interim order restraining the release of attached funds to any party other than SPIL. The Supreme Court dismissed Canara Bank's SLP, requesting the Madras High Court to expedite the hearing of pending writ petitions. Conclusion The court directed SPIL and other involved parties to comply with previous judgments and orders, ensuring the return of misappropriated funds to Canara Bank. The IT Department was instructed to release the attached funds to SPIL, which would then be transferred to Canara Bank. The court emphasized the need for compliance with its orders to protect the interests of secured creditors and ensure justice in the winding-up proceedings of DAIL.
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