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2010 DIGILAW 626 (DEL)

In re India Capacitors Ltd v. .

2010-05-05

SUDERSHAN KUMAR MISRA

body2010
Sudershan Kumar Misra, J. (Oral) 1. This application has been moved by M/s Cygnus Developers India Pvt. Ltd., praying for refund of a sum of Rs. 10,00,000/- that had been deposited by it on 26th May, 2005 with the Official Liquidator and was kept in the account of the company in liquidation. 2. The company in liquidation, M/s. India Capacitors Ltd., was directed to be wound up pursuant to the BIFR's order dated 31.03.1997 under Section 20(1) of the Sick Industrial Companies Act, 1985. 3. The Official Liquidator attached to this Court was appointed as the liquidator on 23.10.1997. 4. In 2005, a scheme for revival/rehabilitation of the company in liquidation was propounded under Section 391 of the Companies Act, 1956 in an application being Co. Appl. No. 682/2005. On 12.05.2005, it was ordered, inter alia, that the propounder of the aforesaid scheme "deposit a reasonable amount to show its bona fide". The aforesaid amount of Rs. 10 Lacs was then deposited with the Official Liquidator on 26.05.2005 by way of cheque, along with an undertaking that the cheque would be honoured on presentation. This amount was to be kept in the account of the company in liquidation maintained by the Official Liquidator. On the same day, i.e., 26.05.2005, it was further directed that the applicant herein, who was also propounder of the aforesaid scheme, shall also deposit a further amount of Rs. 65 Lacs with the Official Liquidator within thirty days of that date. Mr.K.K. Singhania, Managing Director of the applicant company, was present in Court on that date and agreed that in case the aforesaid further amount of Rs. 65 Lacs was not deposited by the applicant, the amount of Rs. 10 Lacs that had already been deposited would be forfeited. It was also agreed that in case the scheme ultimately failed, any loss to the Official Liquidator, caused due to delay in or deferment of the sale, would be adjusted from this deposit. 5. In compliance with the directions passed on 26.05.2005, a cheque for an amount of Rs. 65 Lacs was, in fact, sent to the Official Liquidator by post. The Official Liquidator returned the aforesaid cheque by speed post on 29.06.2005, since the payment was not sent by way of a demand draft. 5. In compliance with the directions passed on 26.05.2005, a cheque for an amount of Rs. 65 Lacs was, in fact, sent to the Official Liquidator by post. The Official Liquidator returned the aforesaid cheque by speed post on 29.06.2005, since the payment was not sent by way of a demand draft. On 14.07.2005, counsel appearing for the applicant herein made a statement to the effect that he would ensure that the aforesaid amount of Rs. 65 Lacs would be deposited with the Official Liquidator within ten days from that date, by way of a demand draft. On 4.8.2005, while passing orders in Co. Appl. No. 682/2005, this Court noted that there had been no compliance with the order dated 14.07.2005. The scheme itself was dismissed, inter alia, for this reason on 4.8.2005. 6. In essence, the submission of counsel for the applicant is that whereas the total liabilities of the company in liquidation were approximately Rs. 4.38 Crores, ultimately, by the auction which came to be conducted after the scheme propounded by the applicant was rejected, the property of the company in liquidation was sold for Rs. 7 Crores. He submits that the dismissal of Co. Appln. No. 682/2005 by order dated 4.8.2005, meant that the scheme itself was rejected on merits, therefore, the occasion to forfeit the deposit of Rs. 10 Lacs does not arise. According to him, the occasion for its forfeiture would have arisen only if the scheme propounded had been accepted by this Court but the applicant failed to comply with it. In addition, he submits that since the property of the company was sold for Rs. 7 crores, all the secured creditors were eventually paid, therefore, in the circumstances, it would be unfair to forfeit the applicant's money. 7. This argument does not appeal to me for the simple reason that the deposit of Rs. 10 Lacs was a preemptory and conditional payment because of which the Court was persuaded to even enter into consideration of the propounded scheme and, for that purpose, to also defer the sale of the land, which process had already been initiated and was, in fact, nearing conclusion. 10 Lacs was a preemptory and conditional payment because of which the Court was persuaded to even enter into consideration of the propounded scheme and, for that purpose, to also defer the sale of the land, which process had already been initiated and was, in fact, nearing conclusion. Therefore, the fact that the proposed scheme was ultimately rejected on merits cannot be a ground for refunding the amount which was deposited only in compliance of a condition imposed by this Court, and on clear terms that this amount would be forfeited if the scheme was rejected. Not only that, a perusal of the order dated 4.8.2005 shows very clearly that the scheme was found not only to be inadequate and lacking in material particulars but that it also failed to demonstrate how outstanding creditors would be dealt with. 8. To my mind, the applicant's second submission also does not hold water for a number of reasons. Firstly, the amount of Rs. 10 Lacs was subject to forfeiture in case the scheme failed. There was, of course, a second aspect also mentioned by this Court in the order passed on 26.05.2005, i.e. that this amount may also be applied to make good any amount that the Official Liquidator may suffer on account of deferment of and delay in the sale process. Even if the amount received during the sale process exceeded the liabilities of the company (in liquidation), that does not automatically mean that the aforesaid amount of Rs. 10 Lacs that had been deposited by the applicant must be refunded since, ex facie, the condition of forfeiture was absolute. Secondly, to accept the applicant's submission that it would be unfair to retain this money in view of the fact that the amount received after the sale process exceeded the liabilities of the company (in liquidation), would amount to setting down a precedent which would enable any party to intervene in the liquidation process and to derail the same, causing delays in Court proceedings, and to thereafter claim its money simply because even though the scheme propounded had been found to be inadequate and lacking in material particulars, the property ultimately fetched more than the company's liabilities. 9. 9. For example, suppose the applicant had deposited the money on Monday, which led to a hiatus in the sale process and obliged the Court to consider the scheme on Tuesday; and the scheme was finally rejected on Wednesday. At the time of deposit, the condition was that if the scheme was rejected, the amount deposited would stand forfeited. Although, various reasons may be given for the rejection of the scheme after due consideration, could it then be said that simply because the scheme had been rejected within two days, therefore, there was no harm in giving the applicant's money back. In my view, the amount would still be forfeited. 10. If the applicant was aggrieved with the condition of forfeiture that had been imposed by this Court on 26.05.2005, it should have appealed against that order, on the ground that the scheme ought to be considered without the aforesaid condition. But the applicant remained silent and the order dated 26.05.2005 attained finality. 11. Under the circumstances, to hold otherwise, would amount to setting an unhealthy precedent and encourage opportunistic interference with the process of winding up by interested parties with little, or nothing, to lose. The application is dismissed in view of the above reasons.