Dismissed

Icici Bank Limited v. Garware Nylons Limited and Anr.

Bombay HC12 Dec 2014CA/318/2014

Case brief

AI extract

What is this about?

The court dismissed the bank's application challenging the Official Liquidator's report on interim dividend distribution in Garware Nylons Ltd. The court held the bank was estopped from disputing the claim amount after accepting it in prior proceedings.

What did the court decide?

Company Application No. 318 of 2013 dismissed. Official Liquidator's Report dated 26 November 2013 made absolute.

Icici Bank Limited Vs Garware Nylons Limited and Anr. — Company and Corporate | Bombay HC (2014)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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OFFICIAL LIQUIDATOR’S REPORT DATED 26TH NOVEMBER 2013

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ALONG WITH

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COMPANY APPLICATION NO. 318 OF 2014

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COMPANY PETITION NO. 521 OF 1992

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In the matter between:

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Henkal Chemicals India Ltd. … Petitioner

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And

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Garware Nylons Ltd. (In Liquidation) … Respondent ICICI Bank Ltd. … Applicants

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Mr. J.P.Sen, Sr. Adv. a/w. Ms. Kavita Shah, for the OL.

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Mr. N.M.Ganguli for Workmens.

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Mr. Onkar Gupte i/b G.P.Law and Associates for workers union.

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Ms. Bhagwat for ICICI Bank – Applicant in CA No.318 of 2014

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Mr. Sachin Joshi for Bank of Maharashtra.

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Ms. Yogini Chauhan, Assistant OL, present.

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CORAM: S.J. KATHAWALLA, J.

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DATE: 12th December 2014

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P.C.:

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By his Report dated 26th November 2013, the Official Liquidator seeks directions for the declaration and payment of Interim Dividend to the workers, Banks and Financial Institutions of M/s. Garware Nylons Ltd., the Company in Liquidation. The Report sets out the basis on which the directions are sought.

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The total funds available for distribution is Rs. 10,53,72,098/- along with interest accrued thereon of Rs. 2,30,51,368/-, thus making an aggregate of Rs. 12,84,23,466/-. Of the sum of Rs. 10,53,72,098/-, Rs. 4,10,72,098/- represents the sale proceeds of mortgaged

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securities while Rs. 6,43,00,000/- represents the sale proceeds of assets that were free of any mortgage or other encumbrance.

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The Employees Provident Fund Commissioner has made an aggregate claim of Rs. 8,15,37,442/- towards Provident Fund dues. These have been partly allowed by the Official Liquidator. I am informed that the adjudication by the Official Liquidator, to the extent that it has rejected part of the Provident Fund claim, has been challenged by the Commissioner. The Company Applications filed by the Commissioner in this behalf are pending hearing and final disposal. In view of the pendency of these Company Applications and the fact that the Provident Fund dues would have priority over all other claims of workers or secured creditors, the Official Liquidator has made a provision for the entire sum of Rs. 8,15,37,442/claimed by the Commissioner.

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The Official Liquidator has, since the earlier dividend of 18% declared for the Company in Liquidation, adjudicated the claims of a further 13 workers, who would be entitled to be placed in the same position as the other workers who have already received a dividend of 18%. After making a provision for this amount, the Official Liquidator has proposed the declaration of dividend generally among the workers and the Secured Creditors at the rate of 0.913% and 1.087% from the sale proceeds of mortgaged securities and unencumbered assets respectively.

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The Official Liquidator has also sought directions regarding adjustments, from the dividend payable in respect of 120 workers, for gratuity amounts already received by them to the exclusion of the other workers. The Official Liquidator has also sought the leave of this Court for deducting from the dividend payable to each worker amounts due to the Garware Nylon Employees Co-op. Credit Society on account of loans advanced by the Society to the workers. This sum has been adjudicated by the Official Liquidator to be an aggregate sum of Rs. 11,08,680/-.

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At the hearing of the Report, the directions sought in it were not opposed by the workers or the Secured Creditors save and except for ICICI Bank Ltd. who have filed a reply to the Report. They have also filed Company Application No. 318 of 2014 on the purported

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basis that their dues on the basis of which Interim Dividend is proposed to be declared has been incorrectly computed by the Official Liquidator. It is the Applicant’s case that the Official Liquidator has proceeded on the basis that a sum of Rs. 83,34,98,577/- was due to the Applicant on the date of the winding up order when in fact a sum of Rs. 1,04,99,31,597/was due on that date.

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The Official Liquidator has filed an affidavit to oppose the Company Application and urged that the sum of Rs. 83,34,98,577/- taken into account for computing the share of the Applicant in the Interim Dividend is accurate. In support of this plea, he has urged the following in his reply:

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a) The Company was wound up on 18th December 1998. Suit No. 3728 of 1999 filed by the Applicant against the Company was lodged on 26th April 1999 after the Company was wound up. In the Plaint in the said Suit, the Applicant valued their claim at Rs. 83,34,98,547/- and paid court fees on that basis. It is manifest from the Plaint that this sum of Rs. 83,34,98,547/- did not consist merely of the principal alleged to be due, but was also inclusive of interest.

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b) During the pendency of the Suit, the Applicant’s Advocates addressed a letter dated 4th November 2004 to the Official Liquidator claiming that a sum of Rs. 1,04,99,31,597/was due to them as on the date of winding up. This letter, apart from a bald assertion of alleged amounts due as principal and interest, contained no particulars or documents in support of such assertion.

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c) A meeting was held on 3rd November 2004 in the Office of the Deputy Official Liquidator. At the meeting, the Financial Institutions including the Applicant herein furnished particulars of their claim. At this meeting, the claim of the Applicant was recorded as a sum of Rs. 83,34,98,577/-. A copy of the minutes of this meeting was forwarded to all the secured creditors including the Applicant under cover of a letter dated 19th November 2004. This letter and the Minutes of this Meeting have not been disclosed by the Applicant in their Company Application. The Applicant, having received a copy of the Minutes, did not dispute the correctness of the amount recorded therein as their claim.

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d) The Official Liquidator submitted a status report dated 11th July 2005 to the Debt Recovery Tribunal, Mumbai I seeking directions for the distribution of dividend to the workers and secured creditors. In this report, the Official Liquidator took into account the sum of Rs. 83,34,98,577/- claimed by the Applicant as being due to them in their Suit. The Applicants did not file a reply to the Status Report or dispute the correctness of the basis on which dividend had been computed.

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e) An order dated 10th October 2005 was passed by the DRT-I on the Status Report directing distribution of dividend as prayed for in the Report. The order expressly recorded that the claim of the Applicant was Rs. 83,34,98,577/-. The Applicant’s Advocate, who was present at the hearing of the Report, did not dispute the correctness of this figure. Pursuant to this order, the Applicant received a sum of Rs. 15,00,29,744/- (18% dividend on the admitted sum of Rs. 83,34,98,577/-). This Order and the distribution of dividend on the basis thereof have not been challenged by the Applicant.

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f) The present Company Application has been filed after a lapse of 9 years purporting to dispute for the first time the correctness of the basis on which dividend was computed and distributed. The Applicant, having accepted the distribution of dividend pursuant to the order dated 10th October 2005, are estopped from doing so. g) The Company Application is also bereft of any particulars as to how the figure of Rs. 1,04,99,31,597/- has been arrived at. It offers no more information than the letter dated 4th November 2004 and offers no ground to revise the figure of Rs. 83,34,98,577/- referred to in the Applicant’s Suit which formed the basis of distribution of dividend in the past and which forms the basis of the proposed distribution of dividend in the Report dated 26th November 2013.

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I have carefully considered the respective contentions of the parties. I find no merit in the Company Application filed by the Applicant. The Applicant has furnished no basis for the figure of Rs. 1,04,99,31,597/- which it claims was due to it on the date of the winding up order. On the contrary, the Applicant has consistently acted, in its own Suit and in the proceedings before the DRT-I, on the basis that its claim is Rs. 83,34,98,577/-. I therefore

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find no error in the basis on which the Official Liquidator has computed Interim Dividend in

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his Report dated 26th November 2013.

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I accordingly pass the following order:

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a) Company Application No. 318 of 2013 is dismissed with no order as to costs.

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b) The Official Liquidator’s Report dated 26th November 2013 is made absolute in

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terms of prayers (a) to (f) thereof.

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( S.J.KATHAWALLA, J. )

Icici Bank Limited v. Garware Nylons Limited and Anr.

Case brief

What is this about?

What did the court decide?

Icici Bank Limited v. Garware Nylons Limited and Anr.

Case brief

What is this about?

What did the court decide?

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