2019 (7) TMI 2029 - HC - Companies Law

Entitlement of secured and unsecured creditors in a liquidation case - entitlement to enforce their full claim on the basis of the certificate under Section 19(22) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - HELD THAT - It is not in dispute that the amount which is lying in deposit with the bank through the Company Court will have to be sent to the Recovery Officer for disbursement. However, looking to the dispute between the secured creditors regarding their unsatisfied claims and the objection raised by the unsecured creditors regarding their entitlement and the claims made by the unsecured creditors, in my view, it would be appropriate at this stage to direct the Recovery Officer to ascertain the entitlement of the secured creditors and the unsecured creditors keeping in view the priorities as per Section 529 A of the Companies Act, 1956 and Section 31 B of the RDB Act. For the purpose of provisional determination of the entitlement of the secured creditors and unsecured creditors, the Recovery Officer shall consider that the amount of Rs.20,00,00,000/- is available for disbursement.

Summary

Issues involved: Determination of entitlement of secured and unsecured creditors in a liquidation case.

In the judgment, it was noted that an objection was raised by unsecured creditors, including Collector, Wardha, State Sales Tax Department, and Central Excise and Customs Department, claiming that secured creditors had waived their right to make further claims after adjudication by the Official Liquidator, citing Rule 163 of the Company (Court) Rules and a previous judgment. On the other hand, secured creditors argued that they were entitled to enforce their full claim based on a certificate under Section 19(22) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The court acknowledged the dispute between the parties and directed the Recovery Officer to determine the entitlement of both secured and unsecured creditors, considering the priorities under Section 529A of the Companies Act, 1956, and Section 31B of the RDB Act. The Recovery Officer was instructed to provisionally determine the entitlement, with an amount of Rs.20,00,00,000 available for disbursement. The unsecured creditors were given one month to file their claims, and the Recovery Officer was tasked to submit a report within four months, taking into account claims from both secured and unsecured creditors. Secured creditors were also allowed to submit their claims or fresh claims within the specified timeframe.