2017 (1) TMI 577 - HC - Companies Law

Secured creditor entitlement to interest after the date of the winding up of the Company - whether Rules 154 and 179 of the Companies (Court) Rules, 1959 are applicable to debts due to a secured creditor by a Company in liquidation, which secured creditor stands outside the winding up and opts to realise his security for recovery of the decretal amounts? - Held that - Admittedly the Court Receiver/Official Liquidator has an approximate amount of Rupees Thirty Eight Crores Thirty Six Lakhs as on 15th November, 2016 lying with him after making all the payments as required under Section 529A of the Act. No part of this amount can be paid to the unsecured creditors of the Company so long as the full decretal amount remains outstanding and payable to the secured creditors. However, as informed that since some of the claims filed before the Official Liquidator by some of claimants claiming to be workmen of the Company in liquidation, were rejected by the Official Liquidator and the adjudication upheld by this Court and by the Appeal Court, the claimants have filed SLPs impugning the said orders. Though notice has been issued in the said SLPs by the Hon ble Supreme Court, till date no ad-interim/interim order are passed in the said SLPs. The entire balance surplus amount lying with the Court Receiver/Official Liquidator with the interest earned or accrued thereon, is ordered to be paid to ICICI Bank Ltd. and Metropolitan Infrahousing as prayed by them in their respective Notices of Motion, subject to them giving an undertaking to the Official Liquidator that they shall bring back the said amounts or part thereof if any amounts are directed to be paid.

Issues Involved:
1. Distribution of sale proceeds among secured creditors and workmen.
2. Applicability of Rules 154 and 179 of the Companies (Court) Rules, 1959.
3. Rights of secured creditors standing outside the winding-up process.
4. Entitlement to interest post-winding up order.
5. Impact of pending claims by alleged workmen.

Detailed Analysis:

1. Distribution of Sale Proceeds Among Secured Creditors and Workmen:
The primary issue was the distribution of sale proceeds from the auctioned properties of the company in liquidation (PPL). ICICI Bank, as a debenture trustee, and Metropolitan Infra Housing, a major debenture holder, sought their respective shares from the sale proceeds. The Official Liquidator opposed the distribution, arguing that secured creditors are entitled to payment only after all claims, including those of unsecured creditors, are satisfied.

2. Applicability of Rules 154 and 179 of the Companies (Court) Rules, 1959:
The court examined whether Rules 154 and 179 applied to secured creditors standing outside the winding-up process. Rule 154 deals with the valuation of debts at the date of the winding-up order, while Rule 179 pertains to the payment of subsequent interest. The court found that these rules are applicable only to creditors who submit their claims within the winding-up proceedings for adjudication by the Official Liquidator. Since ICICI Bank and Metropolitan Infra Housing opted to remain outside the winding-up process, these rules did not apply to them.

3. Rights of Secured Creditors Standing Outside the Winding-Up Process:
The court reiterated that secured creditors who stand outside the winding-up process are entitled to realize their security and recover their dues, subject to the pari passu charge in favor of workmen as per Section 529A of the Companies Act, 1956. The court emphasized that the rights of secured creditors are not diminished by their decision to remain outside the winding-up process, except for the limited purpose of ensuring the pari passu charge of workmen's dues.

4. Entitlement to Interest Post-Winding Up Order:
The court addressed whether secured creditors are entitled to interest beyond the date of the winding-up order. It was held that secured creditors standing outside the winding-up process are entitled to interest as per their contractual terms, even beyond the winding-up order date, once the dues of workmen are fully satisfied. This entitlement is not affected by Rules 154 and 179, which apply only to creditors within the winding-up process.

5. Impact of Pending Claims by Alleged Workmen:
The court noted that some claims by individuals alleging to be workmen were rejected by the Official Liquidator and upheld by higher courts. These claimants had filed Special Leave Petitions (SLPs) before the Supreme Court. Although notices were issued in the SLPs, no interim orders were passed. Consequently, the court ordered the distribution of the surplus amount to ICICI Bank and Metropolitan Infra Housing, subject to their undertaking to return the amounts if directed by the Supreme Court in the pending SLPs.

Conclusion:
The court concluded that the surplus sale proceeds should be distributed to the secured creditors, ICICI Bank and Metropolitan Infra Housing, as per their respective holdings. This distribution is subject to the condition that they provide an undertaking to return the amounts if required by the Supreme Court in the pending workmen's claims. The Notices of Motion were disposed of accordingly.

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