2012 (11) TMI 646 - HC - Companies Law

Scheme of Winding up - Whether the creditor Malanpur was correctly treated and classified with the Inter-Corporate Depositors and not as a secured creditor - Malanpur sold the pledged shares for consideration of Rs.1.39 crores - Held that - Malanpur cannot be treated as a distinct class of creditor on the ground that it was a decree holder. It was certainly not a secured creditor. Also in agreement with the counsel for the Malanpur that even if the scheme has been sanctioned and payment to the creditors is to be made under the scheme, criminal proceedings under Section 138 of the NI Act cannot be stayed or quashed by the Company Court. Considering the Terms of Settlement Spice Jet or Modi Group cannot urge and contend that 55,60,000 shares are liable to be forfeited or should be forfeited. The said contention would be contrary to the settlement and stand which they have taken before the company court. The compromise and settlement between them clearly stipulates that these shares are not liable to be forfeited. Modi Group and Spice Jet had argued and contended that sale and transfer of 55,60,000 pledged shares by Malanpur was null and void and contrary to law & reference was made to the orders passed in the Civil Suit at Calcutta. It will not be appropriate and proper for us to go into and examine the said orders of the Calcutta High Court and proceedings as it is clearly beyond what is required and mandated by the Supreme Court in the order dated 6th July, 2009 wherein opined that the High Court should decide the said question in accordance with law and in the meanwhile, status quo as regards the transfer of shares shall continue till the High Court decides the matter expeditiously. Thus examination or go into the question on merits relating to the proceedings pending before the Calcutta High Court and the orders passed therein is not warranted. We express no opinion in this regard.

Issues Involved:
1. Classification of Malanpur as an unsecured creditor.
2. Treatment of the principal amount due to Malanpur.
3. Criminal proceedings under Section 138 of the NI Act.
4. Forfeiture and transfer of pledged shares.

Issue-Wise Detailed Analysis:

1. Classification of Malanpur as an Unsecured Creditor:
Malanpur argued that it was wrongly classified as an unsecured creditor or inter-corporate depositor. It contended that shares pledged with it were sold to recover dues, forming a separate class. However, the court held that Malanpur was correctly treated and classified with the inter-corporate depositors and not as a secured creditor. The court emphasized that a decree holder does not form a separate class and cannot be treated as a distinct class of creditor on the ground that it was a decree holder. The court cited various precedents and statutory provisions to assert that unsecured creditors form a single class and must be treated equally regardless of having a court decree.

2. Treatment of the Principal Amount Due to Malanpur:
Malanpur claimed that the principal amount due was not Rs. 5 crores but Rs. 5,83,96,465/-, including interest. The court rejected this contention, stating that the principal amount advanced was Rs. 5 crores, and treating the amount mentioned in the court decree as the principal would lead to an unwarranted distinction between a decree holder and other claimants, affecting the pari passu principle. The court reaffirmed that unsecured creditors must be treated alike, and the decree amount does not elevate the creditor to a different class.

3. Criminal Proceedings under Section 138 of the NI Act:
Malanpur had initiated proceedings under Section 138 of the NI Act due to dishonored cheques. The court held that proceedings under Section 138 cannot be stayed or quashed by the Company Court under Section 391(6) of the Companies Act. The court referred to precedents, including Krishna Texport Industries Ltd. and JIK Industries Limited, to emphasize that criminal proceedings are distinct and cannot be stayed or quashed by Company Court orders. The court clarified that the observations in the impugned orders for staying or quashing proceedings under Section 138 of the NI Act are deleted, and the effect of payment under the sanctioned scheme on these proceedings would be determined by the concerned criminal court.

4. Forfeiture and Transfer of Pledged Shares:
The issue of forfeiture of 55,60,000 pledged shares was examined based on the Supreme Court's directions. The shares were initially issued to companies of the Modi Group as collateral security for ICDs. Disputes arose regarding the validity of these shares, and allegations of deceitful issuance were made. However, a settlement was reached between the Modi Group and Royal Holding Services Limited, leading to the withdrawal of the application challenging the shares' validity. The court noted that the settlement agreement explicitly stated that the shares would not be forfeited. Consequently, the court held that Spice Jet or Modi Group could not contend that the shares were liable to be forfeited, as it would contradict the settlement terms.

Conclusion:
The court dismissed Malanpur's appeal, affirming its classification as an unsecured creditor and rejecting its claim for a higher principal amount. The court also ruled that criminal proceedings under Section 138 of the NI Act cannot be stayed or quashed by the Company Court. Additionally, the court upheld the settlement agreement regarding the pledged shares, preventing their forfeiture. The appeals filed by Spice Jet and others were disposed of with the observations made.

← Previous Next →