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2013 (11) TMI 334 - HC - Companies LawDisposal of assets and clearance of dues - liquidation of company - Validity of Report The Committee appointed by the Court to examine the workmen s claims should be rejected and this exercise be undertaken by another Committee with the participation of the two CAs - The Court sets aside the report submitted by the Committee which examined the workmen s claims and directs that all the workmen s claims that have thus far been lodged with the OL will be examined afresh - The Committee will endeavour to complete its exercise within a period of two months. Directions Issued - Whether the direction should be issued at this stage on the application filed by the OL - Held that - If and when the stage reached for disbursal of any further amounts with the DRT, it will be done only after hearing the OL and strictly in accordance and, in particular, the scheme of Section 529A of the Act - any monies that remained for disbursal as a result of the final orders in the proceedings arising from the orders of the DRT setting aside the sale to the AP and any fresh sums that might be received hereafter should be placed under the control of the OL and be disbursed only by the OL subject to the supervision of the Court - what required to be done was to associate the OL both at the stage of bringing the properties of the company in liquidation to sale as well as at the stage of the disbursal of the amounts. Jurisdiction of the Court - The question as to the jurisdiction of the Company Court vis- -vis the powers of the DRT in relation to the company in liquidation was examined - The matter came to be referred to a three-Judge Bench as a result of the apparent conflict - The company in question was already under liquidation pursuant to the order passed by the Company Court - It was held by the Supreme Court that whether the assets were realised by a secured creditor even if it be by proceeding under the SFC Act or under the Recovery of Debts Act, the distribution of the assets could only be in terms of Section 529 A of the Act and by recognising the right of the liquidator to calculate the workmen s dues and collect it for distribution among them pari pasu with the secured creditors. The OL had certainly to be associated in all the proceedings of sale by public auction or otherwise of the properties of the company in liquidation and the orders of the DRT - the DRT had issued notices to the OL at every stage - since 2012, the OL had been participating in the proceedings before the DRT and now before the DRAT - Therefore, there may be no apprehension that the orders might be passed in the proceedings under the RDDB Act without the participation of the OL It was for the OL to diligently pursue those proceedings. The exercise of disbursal of the sums by the DRT can be undertaken only with the participation of the OL - It was the OL who will settle the claims of the workmen and of all the secured, preferential and unsecured creditors - This disbursal of the amounts should happen only with the full participation of the OL. There was an opportunity for the OL to have participated at that stage, but for the reasons best known to him, he did not choose to do so - The payments made to the Customs authorities in terms of the MoU also cannot be interfered with unless the sale was set aside or an appellate court holds that the amount cannot be forfeited - it should be returned to the AP The action will have to await the outcome of the orders passed in those proceedings.
Issues Involved:
1. Winding up and liquidation of Daewoo Motors India Ltd. 2. Proceedings before the Debt Recovery Tribunal (DRT) and involvement of the Official Liquidator (OL). 3. Sale of fixed assets and protection of workmen's interests. 4. Examination and settlement of workmen's claims. 5. Jurisdiction and authority of the Company Court vis-`a-vis the DRT. 6. Disbursal of sale proceeds and associated legal principles. Detailed Analysis: 1. Winding up and liquidation of Daewoo Motors India Ltd.: The Respondent company, Daewoo Motors India Ltd., was provisionally wound up on 24th November 2003 and finally wound up on 28th July 2004. The Official Liquidator ('OL') attached to the Court was appointed as the Liquidator. 2. Proceedings before the Debt Recovery Tribunal (DRT) and involvement of the Official Liquidator (OL): Prior to the winding-up order, ICICI Bank initiated proceedings before the DRT, which appointed a Receiver and issued a Debt Recovery Certificate in favor of ICICI. ICICI assigned this certificate to Asset Reconstruction Company (India) Ltd. ('ARCIL') and Stressed Assets Stabilization Fund ('SASF'). Despite the Court's direction, the OL did not participate in the DRT proceedings, leading to the sale of the company's fixed assets without the OL's involvement. The DRT accepted a bid from Crosslinks Finlease Pvt. Ltd. ('CFPL') for Rs. 765 crores, and directed the OL to take charge of the company's records. 3. Sale of fixed assets and protection of workmen's interests: The DRT directed the sale of the factory premises and ensured that the OL was notified. The OL was to ensure that the sale protected the workers' interests and complied with legal procedures. Despite directions, the OL did not participate in the DRT proceedings, leading to concerns about the sale process and the distribution of proceeds. 4. Examination and settlement of workmen's claims: A Committee was appointed to scrutinize workmen's claims, which submitted a report in March 2008. The Committee admitted claims of 1107 workmen totaling Rs. 19,16,00,231/-, but rejected claims of 357 workmen due to insufficient documentation. The Court ordered the examination of the company's records before passing any orders on the claims. Despite objections and applications by workmen, the Court held that the Committee's report should be re-examined, leading to the appointment of a new Committee to scrutinize the claims. 5. Jurisdiction and authority of the Company Court vis-`a-vis the DRT: The Supreme Court's decision in Rajasthan State Financial Corporation v. Official Liquidator clarified that the DRT can order the sale of properties of a company in liquidation only after notifying and hearing the OL. The distribution of sale proceeds must involve the OL and be under the supervision of the Company Court. The Court reiterated that the OL must be associated with the sale process to ensure proper price and distribution according to Section 529A of the Companies Act. 6. Disbursal of sale proceeds and associated legal principles: The OL applied for the sale proceeds to be deposited with the OL and for the scrutiny of claims by Chartered Accountants. ARCIL opposed this, highlighting the OL's non-participation in DRT proceedings. The Court noted that the OL must be associated with the disbursal of sale proceeds, but declined to interfere with payments already made pursuant to DRT orders. The Court directed that any further disbursal of amounts must involve the OL and comply with Section 529A of the Companies Act. Conclusion: The Court set aside the Committee's report on workmen's claims and appointed a new Committee to re-examine the claims. The OL must be involved in the sale and disbursal processes, and future disbursals must comply with legal provisions. The OL's application and related applications by workmen were disposed of accordingly.
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