9911796707
TMI Blog1999 (9) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... r; which once again shall have to rank pari pasu with the dues of the Secured Creditors under section 529A of the Companies Act, 1956 ( the Act ) ? 2. The subsequent question based upon the contention coming from the ld. counsel for the Secured Creditors is, as to whether the Credit Society can make a preferential claim over the money, when the assets of the Mills Company were mortgaged to the Secured Creditors and the Liquidator on a transfer of equity of redemption was entitled only to the redemption ? The said questions arise in Company Application which has been taken out in the Company Petition by applicant Nutan Mills Employees Co-Operative Credit Society Limited. The Respondents are the Liquidator for the mills company in liquidation, the secured creditors and the Textile Labour Association, Ahmedabad. The prayer in the Judge s summons which has been taken out by the learned counsel for the applicant and is supported by the affidavit of one Shri Sindhi runs thus : "That this Court be pleased to issue direction to the Respondent Official Liquidator to pay Rs. 8,95,196.50 paise to the Applicant being the amount standing to the credit of the applicant in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 988, but later on the company was not able to honour its commitment and after the failure of the revival exercise, the BIFR had formed the opinion that the company requires to be wound up under section 433 (F) of the Act, as it was just and equitable to wind up the Company. This opinion came to be forwarded to this High Court and ultimately the orders of winding up came to be passed by this Court on 6-7-1993 and the Respondent No. 1 came to be appointed as the Liquidator. According to the applicant Society from 14-7-1991 to 19-11-1998, the mills company (in liquidation) had remitted an amount of Rs. 8,35,000.00 to the applicant Society as the deductions made by the mills company from the workers salary/wages, but on the date of the closure of the mills company, the amount of Rs. 8,95,196.50 remained outstanding to the Society. According to the applicant, this amount which has remained in the hands of the company would be impressed with the trust and that the mills company (in liquidation) would be a sort of trustee, or quasi trustee qua the above said amount and that the Liquidator is bound to repay the same to the beneficiaries, namely the workers of the mills company in liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court on 21-1-1999, this Court had directed the Liquidator to give the inspection of the books of account to Mr. M.V. Shah, the learned counsel for the applicant and that, as per the said directions he had deputed his representative who had given inspection of the books of account of the company to Mr. Shah in presence of the representative of the applicant Society and the representative of the Textile Labour Association. The learned Liquidator has submitted that it would be necessary to estab- lish the claim of the applicant society according to the provisions of the Companies Act, after hearing the secured creditors, namely the respondent Nos. 2 to 10 and the Textile Labour Association, the respondent No. 11. The case put forth therefore by the Chairman of the applicant Society in the above said three supporting affidavits is that, under a tripartite agreement the mills company in liquidation promised to deduct the amount but has not remitted the same to the applicant Society. It is the say of the applicant that the above said amount lying with the respondent No. 1 company, the Liquidator is impressed with the character of trust money and, therefore, the applicant society is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s full support from the contentions being raised by the learned counsel Mr. Buch who appears for the respondent No. 3 the ICICI Ltd. The say coming from the learned counsels for the secured creditors is that, the above said money which according to the applicant would be lying with the Mills Company (in liquidation) can not be said to be the money impressed with the character of a trust, and that the Liquidator is having funds in his hands which are nothing but the sale proceeds of the assets of the company, over which the secured creditors had a first charge and, therefore, the preferential claim being put forth by the applicant Society can not be sustained and that; therefore no prayer can be granted to the applicant Society in these proceedings. Alternatively the contention coming from the learned counsel Mr. Desai and Mr. Buch is that, if at all the above said money could be said to be workers dues, their claim should rank pari pasu with the claim of the secured creditors under section 529A and that, the payment could be effected after ascertaining the funds available for secured creditors, whose claim would rank pari pasu . The learned counsel Mr. Shah for the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e system to the New York bank for the account of the defendant, a bank in England. On 2nd August the defendant petitioned the English High Court to be wound up compulsorily. The plaintiff brought the action in England against the defendant claiming, inter alia, a declaration that on 3-7-1974 the defendant became a trustee for the plaintiff of that sum, namely US$ 2,000,687-50. In these facts and circumstances it was held that, the plaintiff was entitled in equity to trace the mistaken payment and to recover the same and that the above said money at the commencement of the winding up did not belong to the defendant and had never formed part of its property, subject to the statutory trust under the winding up. Any how the question appears to be easily answerable with the assistance of the pronouncement of this Court in Central Bank of India v. Recovery Mamlatdar [1996] 87 Comp. Cas. 284 . The learned company Judge in this decision has taken a view that the sums payable by the company to Employees State Insurance Corporation and deducted from employees wages are to be held in trust by the company. It has been said that the money which the company had deducted from the wages o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y acquire the character of an agent of the credit society to effect recovery on behalf of the society and to pay the amount to the society. The company would have no legal title or beneficial interest in the money so collected by it, and when the company had neither legal nor beneficial ownership in the property, and when it was merely a custodian until it remitted the amount to the society, and could not mix the amount with its own funds and had no liability to pay interest, undoubtedly, the amount in the hands of the company was impressed with a trust and could not form part of the assets of the company in liquidation. It has been further held that the liquidator has, therefore, to pay the amount out before he undertakes distribution of the assets of the company. This decision puts the controversy to an end and therefore, Question No. 1 shall have to be answered accordingly by saying that, the money in the hand of the company had been impressed with the character of a trust money and that, the Credit Society can make a preferential claim. The subsequent question referred to above is based upon the contention coming from Ld. counsel Mr. Roshan Desai appearing on behalf of one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that would not mean that this money loses the character and significance of a trust money. This trust money lying with the Mills Company, have not been set apart and has mingled with the assets of the Mills Company. But this intermingling of trust money held by the Mills Company in trust, with the assets of the Mills Company, can not take away the element of trust from the transaction and would not convert trust money into the assets of the Mills Company. The intermingling of these two different properties can never be taken as the passing of the property in the trust money in the hands of a trustee, in favour of a trustee, or else the trustees in many such cases would also enjoy position of a creator of a trust and the only beneficiaries. This would militate against the very basics of the Doctrine of Trust not only implied but express also. The conclusion therefore is that, the prayer as prayed for in the Judge s summons requires to be granted. I order accordingly. In the result, therefore, the Liquidator is directed to pay the above said amount to the applicant Credit Society from the funds available with him, before he undertakes the exercise of distribution of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
