Dismissed

Maddali Kameswara Rao, v. Sree Pujitha Chit Fund Pvt.Ltd.

Telangana HC3 Jan 2013COMPA/920/2012

Case brief

AI extract

What is this about?

The single-judge bench dismissed an application seeking leave to continue execution proceedings against a company in liquidation. The court held that the applicant is merely an unsecured creditor and the execution proceedings were void under Section 537 of the Companies Act as they were initiated after winding up commenced. The applicant must register his debt via the Official Liquidator.

What did the court decide?

The applicant was not permitted to continue execution proceedings or withdraw amounts; must await Official Liquidator's notice to register the claim.

Maddali Kameswara Rao, Vs Sree Pujitha Chit Fund… — Company and Corporate | Telangana HC (2013)

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HON’BLE SRI JUSTICE SANJAY KUMAR

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COMPANY APPLICATION No.920 of 2012 in COMPANY PETITION No.28 of 2010

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Date: 03.01.2013

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Between:

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Maddali Kameswara Rao .. Applicant and Sree Pujitha Chit Fund Pvt. Ltd., rep., by its Official Liquidator .. Respondent

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HON’BLE SRI JUSTICE SANJAY KUMAR

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COMPANY APPLICATION No.920 of 2012 in COMPANY PETITION No.28 of 2010

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O R D E R:

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The applicant, Maddali Kameswara Rao, subscribed to a chit offered by Sree Pujitha Chit Fund Private Limited, the company in liquidation. As his dues in respect of the said chit were not paid, he approached the District Consumer Forum, Guntur in C.C.No.653 of 2007 seeking payment of Rs.16,81,660/- along with interest. By order dated 20.03.2009, the District Consumer Forum awarded him Rs.19,95,570/- along with interest. Seeking execution of the said order, he filed E.P.No.2 of 2010 before the District Consumer Forum in March, 2010.

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While so, by order dated 07.10.2010 passed in Company Petition No.28 of 2010, this Court directed the winding up of Sree Pujitha Chit Fund Private Limited. The said order reflects that the

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Company Petition was instituted on the basis of an affidavit dated 10.11.2009. As per Section 441(2) of the Companies Act, 1956 (for brevity ‘the Act of 1956’), the winding up of a company dates back to the time of presentation of the petition for winding up.

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In the light of the winding up order passed by this Court, the present application has been filed. The applicant thereby seeks leave of this Court to pursue the execution proceedings in E.P.No.2 of 2010 enabling him to withdraw the amounts deposited with the District Consumer Forum, Guntur by South Indian Bank Limited, Indian Bank, State Bank of India and Canara Bank, the bankers of the company in liquidation, from out of the funds belonging to it.

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Upon notice being ordered on 25.09.2012, the Official Liquidator filed report dated 29.11.2012, wherein he pointed out that the applicant was, at best, an unsecured creditor of the company in liquidation and therefore, he could not be permitted to realise his debt through the execution proceedings. Reference was made to case law in support of the contention that Section 446 of the Act of 1956 would not come to the rescue of the applicant in the given circumstances to pursue the execution proceedings.

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Heard Sri C.V.L.N. Murthy, learned counsel for the applicant, and Sri M. Anil Kumar, learned counsel for the Official Liquidator.

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Though it is the contention of Sri C.V.L.N. Murthy, learned counsel, that the Consumer Protection Act is a special enactment put in place to safeguard the interests of consumers and that the special enactment should prevail over general company law, viz., the Act of 1956, this Court is not inclined to accept the same. The scheme of the Act of 1956 demonstrates that a special procedure is provided thereby for realisation of debts by the creditors of a company which is in the process of liquidation. The petitioner, even if he holds a decree or an

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order from a competent Court against the company in liquidation, can only aspire to the status of an unsecured creditor of the company. Though the dispute raised by him was earlier in point of time to the institution of the winding up petition in C.P.No.28 of 2010 and the order was passed therein before the said date, the fact remains that the execution proceedings were initiated only after the filing of the winding up petition. Section 537 of the Act of 1956 manifests that once a company is being wound up by order of the company Court, any execution put in force without leave of the company Court against the estate or effects of the company, after the commencement of the winding up, shall be void. Therefore, the very initiation of the execution proceedings by the applicant in E.P.No.2 of 2010 is hit by this statutory embargo. Having already initiated the execution proceedings, the applicant is now belatedly seeking the leave of this Court to pursue the same.

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This Court finds merit in the contention of Sri M. Anil Kumar, learned counsel, that merely because he has obtained an order from the District Consumer Forum, the applicant cannot seek priority over the secured creditors of the company in liquidation. At best, the order passed by the District Consumer Forum would constitute proof of the applicant’s debt, which is due and payable by the company in liquidation, before the Official Liquidator. It is also the case of Sri M. Anil Kumar, learned counsel, that there are no funds available in so far as the company in liquidation is concerned and the statements of affairs are yet to be filed by its erstwhile management. This Court therefore finds no reason to permit the applicant to pursue and continue with the execution proceedings. The applicant would necessarily have to await the issuance of notice by the Official Liquidator under Rule 148 of the Companies (Court) Rules, 1959 for the purpose of registering his claim against the company in liquidation.

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The Company Application is accordingly dismissed.

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___________________ SANJAY KUMAR, J. 3^rd January, 2012. cbs

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HON’BLE SRI JUSTICE SANJAY KUMAR

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COMPANY APPLICATION No.920 of 2012 in COMPANY PETITION No.28 of 2010

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3^rd January, 2013

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cbs/vsv

Maddali Kameswara Rao, v. Sree Pujitha Chit Fund Pvt.Ltd.

Case brief

What is this about?

What did the court decide?

Maddali Kameswara Rao, v. Sree Pujitha Chit Fund Pvt.Ltd.

Case brief

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What did the court decide?

What the court decided

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