Dismissed

Urban Improvement Trust Alwar v. the Official Liquidator

Rajasthan HC28 Aug 2018COA/2/2017

Case brief

AI extract

What is this about?

The High Court dismissed the appeal of Urban Improvement Trust regarding preferential claims in company liquidation. The court found the calculation of non-construction penalty wrongful based on current rates rather than reserved prices at the time of possession. Furthermore, the appeal was dismissed as time-barred.

What did the court decide?

The company appeal was dismissed; no costs awarded.

Urban Improvement Trust Alwar Vs the Official… — Company and Corporate | Rajasthan HC (2018)

¶1

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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S.B. Company Appeal No. 2/2017

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Urban Improvement Trust , Alwar Through Its Secretary

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----Appellant

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Versus

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The Official Liquidator Of M/s Rathi Alloys And Steel Ltd. Attached To The Rajasthan High Court , B-75, Rajendra Marg, Bapu Nagar, Jaipur Raj.

¶7

----Respondent

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For Appellant(s) : Mr. BK Sharma, Adv. Mr. Sohan Lal Choudhary, Officer from UIT Alwar, present in person For Respondent(s) : Mr. US Pathole, OL with Mr. Gaurav Sharma, Adv.

¶9

HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA

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Judgment / Order

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Reserved on 16/08/2018 Pronounced on 28/08/2018

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This company appeal is time barred by 414 days. The application under Section 5 of the Limitation Act was directed to be heard alongwith the company appeal itself.

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Heard counsel for both the parties at length.

¶14

Instant company appeal has been preferred by the appellantUrban Improvement Trust, Alwar against the order dated 02/11/2015 passed by the Official Liquidator whereby part of the claim of the appellant was not considered as a preferential claim under Section 529A and 530 of the Companies Act 1956.

¶15

For the purpose of disposal of the appeal, it would be appropriate to quote provisions of Section 529A and 530(1)(a) of the Act of the Act of 1956 which provide as under:-

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(2 of 6)

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[COA-2/2017]

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“529-A OVERRIDING PREFERENTIAL PAYMENTS :-

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(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company -

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(a) workmen's dues ; and

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(b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to subsection (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts.

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(2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.

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530. PREFERENTIAL PAYMENTS :-

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(1) In a winding up, subject to the provisions of section 529A, there shall be paid in priority to all other debts -

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(a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in clause (c) of sub-section (8), and having become due and payable within the twelve months next before that date ;”

¶26

Case of the appellant is that the appellant-UIT, Alwar, a creation under the UIT Act, is a legal Authority within the meaning of aforesaid Section 530(1)(a) of the Act of 1956 and thus has a overriding preferential right of payment of all revenues, taxes, cesses and rates due from the Company in liquidation which had become payable.

¶27

The Company in liquidation had purchased three plots bearing No.194, 195 and 196 in open auction on 29/09/1981. As per terms and conditions as laid down under the provisions of the Urban Improvement Trust (Disposal of Urban Land) Rules, 1974, they were required to construct the building within three years from the date on which the possession of land is handed over. As

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(3 of 6) [COA-2/2017]

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per Rule 14A of the Rules of 1974, additional charges on failure to construct the building, transfer and surrender of plant purchased through auction was payable as under:-

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“14-A. Additional charges on failure to construct the building, transfer and surrender of land purchased through auction.-

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(1) If a person who purchases the land through public auction for residential or commercial purposes, has not constructed a building within three years from the date on which possession of land is handed over, he shall pay levy at the rate of 2.5 % per year of the present prevailing reserve price to the concerned trust upto ten years and if building has still not been constructed the lease of the land shall stand cancelled.

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(2) The land purchased through auction shall not be transferred without giving information of such transfer to the trust and before such transfer all dues of trust shall be paid.”

¶33

Since the Company has gone into liquidation and was directed to be wound up vide order of this Court dated 24/08/2001, the claim for payment under Section 530 was therefore, put up before the Official Liquidator. The Official Liquidator sought the information and the appellant furnished the complete details vide letter dated 16/06/2014. The Official Liquidator sought information relating to lease money and nonconstruction penalty in terms of aforesaid Rule 14A payable before 24/08/2001. The claim was put in Form No.66 showing separate amount of lease money and non-construction penalty. Thus, the total amount claimed was 23,56,920/- as against non-construction penalty for the three plots, lease money of Rs.2,33,333/- was claimed. The Official Liquidator passed an order under Form No.70 on 02/11/2015 treating the amount as against the lease money to be the only preferential claim while a sum of Rs.23,56,920/- was treated as an ordinary claim under Section 530(2).

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(4 of 6)

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[COA-2/2017]

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Counsel for the appellant submits that even the sum calculated as above, is to be considered as a preferential claim as it is also revenue due to the local authority. Learned counsel has also relied on Section 61 of the Rajasthan Urban Improvement Act, 1959 to submit that all the fees and charges received by the Trust under this Act would be credited to the improved fund of the Trust and thus has to be considered as a revenue.

¶37

Having noted the glaring difference between original amount of lease and the penalty imposed, the appellant was asked to place before the Court the method and manner in which calculation has been done relating to the penalty whereupon, a factual report has been submitted indicating the calculation done for each plot. From perusal thereof, it was seen that while the lease amount has been calculated on the basis of the reserved price as fixed on the day when the land was sold, the price fixed for calculating non-construction penalty (NCP) has been assessed as the DLC rate of the land as it exists on the day when the calculation has been conducted i.e. on 02/01/2000. Thus, for plot no.194, the calculation as per Rule 14A has been 405X4000X2.5%X18=Rs.7,29,000/-. Similarly for plot no.195, the calculation has been 405X4000X2.5%X18=Rs.7,29,000/- and for plot no.196, the calculation has been 499.40X4000X2.5%X18 =Rs.8,98,000/-.

¶38

The officer of the Urban Improvement Trust has explained that value of land has been taken as on the day when the calculation has been done and the same has been multiplied by 18 years whereas the rate on which the land was purchased was Rs.83/- per square meter.

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(5 of 6)

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[COA-2/2017]

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He was also specifically asked as to how the DLC rate of 2001 is calculated when the multiplication has been done from the day the construction was required to be completed i.e. 1984-85. Thus, this Court finds that it could be only the DLC rate as in the year when the construction has been completed and multiplied by the number of years when the construction was not done. However, the calculation conducted by the UIT is wrongful and is contrary to Rule 14A.

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Accordingly, the claim of the petitioner on the basis of aforesaid calculation is not maintainable. 13. In normal course, the appellant could have been directed to revise its calculation accordingly and submit his claim before the Official Liquidator for the NCP Account but this Court is rejecting the claim mainly because of following reasons:14. A report was called for from the Official Liquidator relating to the assets of the Company in liquidation and he has submitted that by virtue of taking over possession of the properties and assets of the Company on 04/09/2001, the properties have been sold with the approval of this Court. The possession of the assets has been already handed over to the highest bidder on 04/01/2008. Claims were invited from all creditors and upon receipt of 572 claims, 8 claims were found to be of secured creditors and list of creditors under Rule 167 and 169 of the Companies (Court) Rules 1959 was placed before this Court. The first interim dividend was paid to 8 secured creditors to the tune of Rs.32 Crore. On 22/03/2013 directions were issued to disburse the second interim dividend amount of Rs.15,12,40,000/- which was disbursed to the secured creditors. The sale relating to one

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(6 of 6)

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[COA-2/2017]

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property was confirmed by the Court on 03/02/2015 and another property was sold and its sale was confirmed on 29/05/2015.

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In compliance of orders passed by this Court, the Official Liquidator has disbursed 27.52089% dividend of the total admitted claim amount to the workmen of the company and a total amount of Rs.1,06,91,532/- has been paid while unclaimed amount of Rs.17,76,358/- has been transferred in the account of the Registrar of Companies.

¶47

In this manner, so far as the claim of the petitioner is concerned, which falls under Section 530 of the Act of 1956 as a preferential claim, cannot be disbursed as till date the Official Liquidator has only paid 22.95% of the claimed dividend to the secured creditors and 27.52% to the workers. The properties, which are yet to be sold, would fall less than Rs.5 Crore as per the value assessed.

¶48

The report submitted by the Official Liquidator is taken on record.

¶49

Thus viewed, the exercise in the present case would be in futility, moreover, the claim set up by the appellant is time barred by 414 days and no reason has come forward.

¶50

In this view of the matter, the present company appeal is dismissed. No costs.

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(SANJEEV PRAKASH SHARMA),J

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Raghu/

Urban Improvement Trust Alwar v. the Official Liquidator

Case brief

What is this about?

What did the court decide?

Urban Improvement Trust Alwar v. the Official Liquidator

Case brief

What is this about?

What did the court decide?

What the court decided

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Parties & counsel

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