2017 (6) TMI 608 - HC - Companies Law

Companies in liquidation - attachment orders - appointment of official liquidator - Held that - The purpose of considering the claims of the secured and unsecured creditors, the preferential creditors and also the claims of the investors/depositors etc., the properties which are admittedly standing in the name of the companies in liquidation attached by the competent authority under the provisions of the MPID Act are required to be handed over to the Official Liquidator for the purpose of sale and physical control thereof. The competent authority is thus required to be issued an order and direction to handover the physical possession, custody and control of all such properties standing in the name of the aforesaid companies in liquidation which are attached by the competent authority under the provisions of the MPID Act to the Official Liquidator expeditiously. Insofar as moveable and immoveable assets of the company i.e. M/s.City Limouzines (India) Ltd. (in liquidation) are concerned, the said Special MPID Court of Session, Greater Bombay or the competent authority whomsoever is in possession thereof are concerned, the same shall be handed over by them to the Official Liquidator within two weeks from the date of communication of this order. It is made clear that MPID Court / competent authority who is in possession of the properties of the directors and/or agents of the said company M/s.Aryarup Tourism Club Resorts Private Limited (In Liquidation) would be entitled to deal with those properties, including the sale thereof for the purpose of discharging the claims of the investors / depositors and are not required to hand over those properties to the Official Liquidator in view of the fact that no such claims are made by the Official Liquidator in respect of those properties till date. The Official Liquidator shall forward the order of adjudication passed on various claims of investors/depositors made so far in respect of the companies in liquidation which are subject matters of this proceedings before the MPID Court to MPID Court / competent authority. He shall also forward the balance claims which are yet to be adjudicated upon by the Official Liquidator to the MPID Court/competent authority for the purpose of adjudication. The claims which are already adjudicated upon by the Official Liquidator shall be treated as the adjudication of the claims by the MPID Court/competent authority and shall not be adjudicated upon again by the MPID Court for the purposes of making payment.

Issues Involved:

1. Handover of records/books of accounts and properties of companies in liquidation.
2. Transfer/release of bail amount and assets to the Official Liquidator.
3. Adjudication and settlement of claims by creditors and investors.
4. Jurisdiction and powers of the MPID Court vs. Company Court.
5. Distribution of sale proceeds among creditors and investors.
6. Compliance with prior court orders and directions.

Issue-wise Detailed Analysis:

1. Handover of Records/Books of Accounts and Properties of Companies in Liquidation:
The Official Liquidator sought an order directing the Economic Offences Wing (EOW) and the Enforcement Directorate to hand over the records/books of accounts and properties of M/s. City Limouzines (India) Ltd. and M/s. City Realcom Ltd. (both in liquidation) to the Official Liquidator. The EOW had attached properties worth over ?10 crores of M/s. City Limouzines (India) Ltd. and its promoters. The EOW stated no objection to remitting the money to the Official Liquidator provided the claims of duped investors were settled on a priority basis. The court directed the EOW, Mumbai to hand over the records/books of accounts to the Official Liquidator within two weeks, retaining photocopies if necessary.

2. Transfer/Release of Bail Amount and Assets to the Official Liquidator:
The Official Liquidator sought an order against the Special MPID Court of Session, Greater Bombay, to transfer/release the bail amount of ?60,00,000/- and movable and immovable assets of the companies in liquidation to the Official Liquidator. The court directed the Special MPID Court and the competent authority to hand over the said amount and all assets of M/s. City Limouzines (India) Ltd. (in liquidation) to the Official Liquidator within two weeks.

3. Adjudication and Settlement of Claims by Creditors and Investors:
The Official Liquidator had received approximately 40,000 claims from investors and secured creditors of the two companies in liquidation. The court allowed the Official Liquidator to invite claims from workers/creditors and make payments towards advertisement charges for inviting these claims. The court also directed the Official Liquidator to forward the adjudicated claims to the MPID Court/competent authority for payment distribution.

4. Jurisdiction and Powers of the MPID Court vs. Company Court:
The court held that the MPID Court and the Companies Act operate in separate fields. Once a company is wound up, the properties and effects of the company vest in the Official Liquidator, and the MPID Court cannot pass orders dealing with these properties. The MPID Act is meant for the protection of depositors, whereas the Companies Act covers all creditors, including secured and unsecured creditors, preferential creditors, and depositors. The court emphasized that the provisions of the Companies Act, 1956, would apply to financial establishments in winding up, and the MPID Act cannot override these provisions.

5. Distribution of Sale Proceeds Among Creditors and Investors:
The court directed that the properties standing in the name of the companies in liquidation attached by the competent authority under the MPID Act be handed over to the Official Liquidator for sale. The sale proceeds are to be distributed among creditors, including secured creditors, preferential creditors, and investors, in accordance with sections 529, 529A, and 530 of the Companies Act, 1956. The court also allowed the Official Liquidator to sell four properties disclosed by an ex-director and remit the sale proceeds to the MPID Court for distribution among investors.

6. Compliance with Prior Court Orders and Directions:
The court reiterated the compliance with its previous orders, including the direction to the Official Liquidator to invite claims from creditors and investors and to make payments towards advertisement charges. The court also directed the MPID Court/competent authority to distribute the sale proceeds among investors on a pro-rata basis and to convey any balance claims to the Official Liquidator for further distribution.

Conclusion:
The court emphasized the distinct roles and jurisdictions of the MPID Court and the Company Court, directing the handover of properties and records to the Official Liquidator and ensuring the equitable distribution of sale proceeds among all creditors and investors as per the Companies Act, 1956. The court also mandated compliance with its prior orders and facilitated the adjudication and settlement of claims by the Official Liquidator and the MPID Court/competent authority.

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