Dismissed

Asrec(India) Ltd. v. Brij Kishore

DRAT18 Dec 2023REGULAR APPEAL/120/2009

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal dismissed appeals filed by ASREC (India) Ltd., against judgments of the Debt Recovery Tribunal that awarded interest at 6% per annum instead of the contractual rate of 16.5%. The Tribunal held that since the borrower company was ordered to be wound up before the suit was filed, the post-winding-up interest rate is governed by the Companies (Court) Rules.

What did the court decide?

Appeals dismissed; interest rate at 6 per cent per annum confirmed; lower court order upheld.

Asrec(India) Ltd. versus Brij Kishore — Banking and Recovery | DRAT (2023)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson Appeal No.120/2009

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Between

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ASREC (India) Ltḍ … Appellant/s V/s. Brij Kishore or his successor in the office of Liquidator attached to the Hon’ble High Court of Gujarat beig Liquidator of Ganpati Pulp & Paper Mills Ltd (In Liquidation) & Ors. …Respondent/s AND Appeal No.121/2009 Between ASREC (India) Ltḍ … Appellant/s

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V/s.

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Brij Kishore or his successor in the office of Liquidator attached to the Hon’ble High Court of Gujarat being Liquidator of Ganpati Pulp & Paper Mills Ltd (In Liquidation) & Ors. …Respondent/s

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Mr Vinay Deshpande, i/b M/s. V. Deshpande & Co., Advocate for Appellant.

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Mr. Apurva S Vakil along with Ms Sonali Jain, Advocate for Respondents

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-: Common Order dated: 18/12/2023:-

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These two appeals were preferred by the Original Applicants namely the Bank of Baroda against the same set of Defendants challenging

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the judgment and order in Transfer Applications Nos. (T.A.) 202 & 203 of 1995 on the files of the Debts Recovery Tribunal-I, Ahmedabad (D.R.T). Both the T.As. were allowed by judgments and orders dated 30.01.2009 directing the defendants therein to pay to the Applicant bank ₹41,98,973.10 and ₹1,23,11,917.37 respectively together with simple interest at the rate of 6% per annum with effect from 19.12.1987 till realisation.

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The Appellant bank is aggrieved with the rate of interest awarded by the D.R.T. The bank had sought interest at the rate of 16.5% in the aforesaid T.As. which was declined and hence, the appeals.

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The debts have been taken over in both the appeals by ASREC (India) Ltd. and the Appellant was substituted.

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The facts in brief required for disposal of the appeals are thus: The Appellant had earlier filed two Civil Suit Nos. 241 & 242 of 1987 in the Court of the Civil Judge (Senior Division), Ahmedabad. After the D.R.T. was constituted, both the suits were transferred to the D.R.T and refiled. The first defendant is a company named Ganpati Pulp and Paper Mills Ltd. which went into liquidation and is represented by the Official Liquidator, High Court of Gujarat. The Ld. Presiding Officer observed that the principal borrower company was wound up and therefore, it would only be appropriated to award simple interest at the rate of 6% per annum from the date of filing of the suit till realisation. The Appellant is aggrieved and has filed these appeals stating that interest at the contractual rate of 16.5% per annum ought to have been allowed.

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Heard both sides. Documents perused.

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The Ld. Counsel appearing for the Appellant submits that the suit claim is to be awarded per the contractual rate and that the court has discretion only about future interest from the date of decree till realisation. Hence, the D.R.T. has committed an error in awarding interest at the rate of 6% only.

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Per contra, the Ld. Counsel appearing for the Respondents would contend that the principal borrower company was directed to be wound up on 17.03.1986 in a Company Proceedings before the Hon’ble High Court of Gujarat. The suits were filed only on 19.12.1987 claiming interest at the contractual rate. It is submitted that even interest awarded at the rate of 6% per annum is not correct and that interest in cases where a company has been wound up should be limited to only 4%. The Ld. Counsel appearing for the Respondent relied upon a catena of decisions in support of his arguments. The following decisions were relied upon:

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( 1) Haryana Financial Corporation vs. PNB Auto Ancillary (India) Ltd. (in liquidation) 1993 SCC OnLine Del 370.

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(2) S. Anthony Raj & Ors. Vs. A Shanmugam & Ors (1994) 80 Company Cases 531 (Madras),

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(3) Kerala Financial Corporation vs. Official Liquidator, High Court of Kerala (1996) 87 Company Cases 183 (Kerala),

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(4) Canara Bank Vs. Mopeds India Ltd. (in liquidation) & Ano. (2005) 124 Company Cases 827 (A.P.),

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(5) Federal Bank vs. Official Liquidator 2002 SCC OnLine Ker 559 (DB),

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(6) Textile Labour Association and Ano. Vs. Official Liquidator Jubilee Mills Ltd Company Application No. 360 of 1998 High Court of Gujarat,

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(7) Textile Labour Association vs. O.L. New Rajpur Mills Ltd. Company & Ors Application No. 358 of 2008 High Court of Gujarat.

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The Ld. Counsel appearing for the Appellant submits that the pleading in the written statements filed by defendants nos. 2 to 7 only states that the plaintiff is not entitled to claim interest at the rate mentioned in the plaint. It is pointed out that issue No. 3 is regarding the legality and propriety of the interest charged by the plaintiff and it is answered in the affirmative. The Ld. Presiding Officer has observed that the official liquidator though served with notice did not appear to contest the claim. The Ld. Counsel submits that the proceedings are not before the liquidator and therefore, it is not to be determined by the provisions of the Companies Act. The Ld. Counsel points out that the decisions referred to by the Respondent pertain to proceedings before the Company Court. Therefore, there is no embargo in allowing the claim with interest at a contractual rate.

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Coming to the decisions relied upon by the Respondent in the decision S. Anthony Raj (supra), the official liquidator’s order in a claim put forth by the workmen of the factory which has been wound up came up for consideration and it was concluded that since the closure of the factory was due to unavoidable circumstances beyond the control of the company in liquidation, for, it was closed down due to the winding up order, the claim should be closure compensation to the extent provided under the Industrial Dispute Act. The Madras High Court relying on a judgment of the Supreme Court in State of Kerala vs. M Padmanabhan Nair, MANU/SC/0296/1984 and Rule 156 of the Companies (Court) Rules, 1959 held that the creditor is entitled to interest not exceeding 4 per cent per annum from the date the sum or debt becomes payable by a written instrument and if payable otherwise, then from the time when the demand in writing has been

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made. It is observed that Rule 156 has put a ceiling on the rate of interest not exceeding 4 per cent per annum.

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In Kerala Financial Corporation (Supra), the liquidator of a company under liquidation had rejected the claim of interest after winding up. The Applicant therein had contended that it is entitled to interest after winding up also under Rule 156 of the Companies (Court) Rules. The Kerala High Court held that the Applicant is one of the secured creditors is entitled to claim admitted interest only up to the date of winding up and the payment of interest after that date will be governed by Rule 179 of the Companies (Court) Rules. It is also further observed that the payment of interest after the date of winding up will arise only where there is a surplus.

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In the decision of Haryana Financial Corporation (Supra), the contention raised on behalf of the Financial Corporation was that the Official Liquidator could not reject any part of the claim of the secured creditor in respect whereof a court had passed a decree and the official liquidator contended that no interest to any creditor can be paid beyond what has been laid down under Rules 156 and 179 of the Companies (Court) Rules, 1959, without any distinction between secured and unsecured creditors. The Hon’ble Delhi High Court held that the changeability of interest is governed by the provisions of the Insolvency Act and also under the Companies Act in the case of a company in liquidation by Rules 156 and 179 of the Company (Court) Rules. Future interest could be paid in terms of the decree in case any surplus is available for distribution after meeting the claim of the workers and the secured creditors.

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The Andhra Pradesh High has in the decision of Canara Bank

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(supra), held that the claim of interest after the date of winding up shall be subject to Rules 154 and 156 of the Companies (Court) Rules.

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The other decisions referred to above are also to a similar effect. 14. Coming to the fact of the case in hand, it is adequately clear that the principal borrower M/s Ganpati Pulp and Paper Mills Ltd was ordered to be wound up by the Hon’ble High Court of Gujarat vide order dated 17.03.1986. The Appellant had filed suit No. 241 of 1987 only on 19.12.1987 and therefore, the provisions of the Companies Act and Rules the contractual rate of interest could only be claimed till the order of winding up was passed. Thereafter, the rate of interest could only be by the Rules.

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Under the circumstances, I find no reason to interfere with the findings of the D.R.T. awarding interest at the rate of 6 per cent and not at the contractual rate.

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The appeals have no merits and are, therefore, dismissed.

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Sd/Chairperson

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mks-01 & 02

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Asrec(India) Ltd. v. Brij Kishore

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Asrec(India) Ltd. v. Brij Kishore

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Asrec(India) Ltd. versus Brij Kishore