2015 (6) TMI 1166 - HC - Companies Law

Entitlement of the Applicant to recover any sum against the company in liquidation on the basis of a decree obtained against the guarantors of the company - Held that - The decree is merely against the guarantors of the company in liquidation and does not give rise to any decretal debt, against the company in liquidation. Secondly, and even otherwise, insofar as the proofs of debt under Rule 163 of the Company (Court) Rules, 1959 are concerned, the Official Liquidator has to act strictly in accordance with the provisions of the Companies Act and the Rules, for adjudication of debts. Under these provisions, interest is payable to creditors only if the company is left with a surplus fund after disbursement of the debts of the secured creditors and workers on pari passu basis under the provisions of Section 529 and 529A of the Act and also after distribution of preferential dues under Section 530 of the Act. Until the distribution of dues thus has been accomplished and it is ascertained that there are surplus funds after such distribution, there is no question of awarding any interest on the dues of any creditor. There is no case here of any such surplus funds as of date. The original adjudication by the Official Liquidator of the proof of debt submitted on 24 April 2008 by the Applicant, thus, need not be disturbed. As far as the other prayer, namely, the claim made in prayer clause (b) of the Application for safeguarding of the assets, is concerned, the Applicant will have to lodge its proof of debt for this claim with the Official Liquidator and the Latter will have to adjudicate the same and make a report, accordingly to this Court. After adjudicating the claim, the Official Liquidator shall submit its final report concerning the adjudication of the claims received by it, so far, to enable this Court to ascertain the distribution of dues in accordance with the provisions of Law;

Summary

Issues:
1. Setting aside the adjudication of the Applicant's claim by the Official Liquidator.
2. Entitlement of the Applicant to recover any sum against the company in liquidation based on a decree obtained against the guarantors.
3. Declaration of the claim towards safeguarding of the assets of the Company in liquidation.

Analysis:
1. The Applicant sought to set aside the adjudication of their claim by the Official Liquidator based on a subsequent decree obtained against the guarantors of the company. The Court clarified that the decree against the guarantors does not create a decretal debt against the company in liquidation. The Official Liquidator must adhere to the Companies Act and Rules for debt adjudication. Interest can only be paid if surplus funds are available after settling debts of secured creditors and workers. As there are no surplus funds currently, the original adjudication by the Official Liquidator was upheld.

2. Regarding the claim for safeguarding the assets of the Company in liquidation, the Applicant was instructed to submit proof of debt to the Official Liquidator for adjudication. The Official Liquidator was directed to adjudicate this claim within three weeks and submit a final report to the Court for proper distribution of dues in accordance with the law. The Applicant could apply for further payment if surplus funds are identified after settling dues of secured creditors and workers.

3. The Court disposed of the Company Application by rejecting certain prayer clauses and directing the Applicant to submit proof of debt for the safeguarding claim. The Official Liquidator was tasked with adjudicating this claim and preparing a report for the Court's review. The Applicant was given the opportunity to seek additional payment if surplus funds were available. The Official Liquidator was also instructed to consider the Applicant's response to a show cause notice in their report. No costs were awarded in this matter.