KOSTUB INVESTMENTS LTD. vs REINZ TALBROS LTD.

* IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment reserved on : 30 April 2024 Judgment pronounced on: 03 July 2024 + CO.PET. 222/2001 & CO.APPL. 1357/2015, CO.APPL. 2032/2017, CO.APPL. 713/2018, CO.APPL. 291/2022, CO.APPL. 197/2023 KOSTUB INVESTMENTS LTD. ….. Petitioner Through: Mr. B.B. Pradhan, Adv. for CO. APPL. 355/2024 Ms. Prem Lata Bansal, Sr. Adv. with Mr. Shivang Bansal, Adv. versus REINZ TALBROS LTD. ….. Respondent Through: Mr. Sumit K. Batra, SC for OL Mr. Ashim Vachher & Mr. Kunal Lakra, Advs. for Ex-Directors. CORAM: HON’BLE MR. JUSTICE DHARMESH SHARMA J U D G M E N T CO.APPL. 197/2023
1. This application has been instituted on behalf of the applicant – M/s. Kostub Investments Ltd., under Rule 9 of the Companies (Court) Rules, 1959 seeking modification of the order dated 03.02.2023 passed by this Court. The primary issue which is to be answered is: whether the claims of the applicant are to be adjudicated up to the date of the appointment of the provisional liquidator i.e., 25.02.2002 or up to the date of final winding up of the company (in liquidation) i.e., 09.08.2012?

2. Briefly stated, the claimant herein is a secured creditor of the company (in liquidation) by way of being a Debenture Holder, whereas

Bank of Baroda is the Debenture Trustee, besides being a secured creditor of the company (in liquidation).

3. On a perusal of the instant application, it is brought forth that Bank of Baroda initially filed a claim before the Official Liquidator, on behalf of the Debenture Holders of the company (in liquidation), to the tune of Rs. 12,00,21,599/- and vide letter dated 04.09.2008, the Official Liquidator adjudicated the claim for a sum of Rs. 8,34,04,285/-, rejecting a sum of Rs. 3,66,17,714/- on the ground that such amount sought by the Bank was in the nature of penal interest. Thereafter, Bank of Baroda instituted Company Appeal (SB) No. 08/2011 challenging the said adjudication, and this Court vide order dated 01.06.2011, set aside the adjudication thereby directing the Official Liquidator to adjudicate the claim afresh.

4. It is stated on behalf of the applicant that vide order dated 28.09.2012, this Court directed Bank of Baroda to adjudicate the claim of the applicant up to the date of winding up, that being 09.08.2012, and that such adjudication was to be carried out in terms of Rule 154 of the Companies (Court) Rules, 1959. However, the Official Liquidator filed an application bearing CO.APPL. 2451/2014 seeking modification of the order dated 28.09.2012 and the said application came to be decided in favour of the Official Liquidator vide the impugned order dated 03.02.2023, which inter alia held that the claim of the applicant shall be adjudicated up to the date of provisional winding up i.e., 25.02.2002.

5. In this regard, it is stated on behalf of the applicant herein that the order dated 03.02.2023 is misconceived and untenable in law

insofar as the conclusion arrived at by this Court therein, is based on the wrong assumption that the claims of the other secured creditors of the company (in liquidation), being Bank of Baroda as also the Workmen, were adjudicated up till the date of appointment of the provisional liquidator i.e., 25.02.2002. However, it is urged that while Bank of Baroda was already allowed a sum of Rs. 7,56,02,575/- up to the date of appointment of the provisional liquidator as full and final settlement of its dues, this Court subsequently allowed a sum of Rs. 6.50 crores to be released to the Bank of Baroda, vide order dated 31.01.2019. Thus, it is the case of the applicant that the basic premise of the impugned order dated 03.02.2023 is flawed, and therefore, the impugned order dated 03.02.2023 requires reconsideration and modification.

6. First things first, it would be apposite to consider the observations made and directions passed by this Court in the order dated 28.09.2012, which is reproduced hereinbelow:

“REPORT No. 536/2012 Report of the Official Liquidator dated 26.9.2012 is taken on record. Company M/s Reinz Taibros Ltd. had been provisionally ordered to be wound up on 25.02.2002 and finally on 09.9.2012. Publication of this petition has since been affected in the newspaper „Amar Ujala” (Delhi and Bareily edition). Claims were invited. 233 claims have been received from the workers; two claims have been received from the secured creditors. The Bank of Baroda is appearing in two capacities i.e. as of a secured creditor as also of a debenture trustee. The claim of the Bank of Baroda as secured creditor has been admitted for Rs.7.,56.,02.,757/- and in the capacity of debenture trustee for Rs.8, 34,04,285/- . In the first category a sum of Rs.7.,18,85.,000/- has been paid to the Bank of Baroda.
Since the fund position of the company as on date is Rs. 22,75,12,563.03, the Official Liquidator is in a position to satisfy
the entire claim of the Bank of Baroda. The balance amount shall be paid by the Official Liquidator to the Bank of Baroda within three weeks from today on his furnishing the usual undertaking. In the second capacity (as a debenture trustee) the claim of the Bank of Baroda (as noted supra) has been admitted for Rs. 8,34,04, 285/- out of which an amount of Rs.1,31,15,000/- has been disbursed to the Bank of Baroda. The Bank of Baroda shall furnish all the requisite details of the debenture trustee to the Official Liquidator who in terms of the fund position available with him is in a position to satisfy this entire claim of the debenture trustees as well. The petitioning creditor before this Court (M/s Kostub Investments Ltd.) is a debenture trustee; she had admittedly filed her requisite documents before the Bank of Baroda; her claim shall be adjudicated upon by the Bank of Baroda up to the date of the winding up i.e. up to 09.8.2012 in terms of the Rule 154 of the Company (Court) Rules 1959 and complete payment be made to the petitioning creditor within a period of three weeks.”
7. A modification of the above-mentioned order was sought at the behest of the Official Liquidator vide an application bearing CO.APPL. 2451/2014, consequent to which the impugned order dated 03.02.2023 came to be passed in favour of the Official Liquidator, and the relevant operative portion of which reads as under:

“10. In the instant case, Provisional Liquidator was appointed on 25th February, 2002, and the final winding up order was passed on 09th August, 2012 as there was no scope for revival of the Company. When the OL was appointed as the Provisional Liquidator on 25th February, 2002, he was also directed to take charge of books of accounts of the Company. However, no limitation or condition was imposed on his powers vide said order. Consequently, he took charge of the assets of the Company and thus commenced the liquidation process. A proclamation of sale of assets of the company was also ordered on 19th April, 2007. Later on 12th July, 2007, the company”s factory at Plot No.8 Site-B, Surajpur Industrial Area, Noida, Dadra Road, Greater Noida, Gautam Budh Nagar was auctioned to M/s. Pavas Chemicals P. Ltd. for Rs. 5,55,00,000/-. Vide order dated 03rd November, 2011, Court accepted the sale of plant, machinery and other miscellaneous fixed assets to Mis Rock International India, against the reserve price of Rs. 46,00,0001-. In compliance with the order dated 04th August, 2011, possession of the Company’s registered
office situated at Flat No. 203, R. 19, Shakarpur, Vikas Marg, New Delhi was handed back to its owner – Mr. Ram Kumar Sharma on 23rd November, 2011. Fresh sale proclamation for land and building (lease hold) bearing Plot No. 19, Site No. II, Loni Industrial Area, Ghaziabad, Uttar Pradesh was issued pursuant to order dated 23rd November, 2011, which was later accepted by M/s. Foggia Traders Pvt. Ltd. for Rs. 26,10,00,000/-. This rendered the Company an empty shell as all its assets were converted into corpus for the purpose of liquidation. From the above factual background, it is evident that the Provisional Liquidator was in control of the affairs of the Company since 25th February, 2002. This date (25th February, 2002) must be used as the reference point for determining the priority of claims and the outstanding debts owed by the Company. Therefore, for all intents and purposes, the relevant date for admitting claims, including that of the Petitioner, would be the date when the liquidation process commenced, which is from the appointment. of Provisional Liquidator. 11. Mr. Sharma’s reliance on Section 530(8)(c) of the Act which defines the expression ‘relevant date’ also possesses considerable merit. Although Section 530(8) begins with words ”for the purpose of this section” which suggests that definitions contained therein are applicable only to Section 530, nonetheless, definition of ‘relevant date’ under Section 530(8)(c) would also be applicable to Petitioner, whose claims are covered under Section 529A of the Act. Non-Applicants claim is based on the Debenture Certificate, a written instrument of debenture which is redeemable and partly convertible, thus, they fall under the definition of secured creditors. The claims of other secured creditor – Bank of Baroda, and also of the workers, have been adjudicated till the date of appointment of Provisional Liquidator. Thus, even though the impugned direction has been issued to the Bank of Baroda (Debenture Trustee) to satisfy the claims of debenture holders, and not to the OL, nonetheless, since Bank of Baroda’s own claims as a secured creditor have been adjudicated up to the date of appointment of Provisional Liquidator, unless a clarification is issued, it will result in anomaly and discrimination amongst various classes of creditors. The present application thus, deserves to be allowed.
12. Rule 154 of 1959 Rules is inapplicable to the present case as the valuation of original debt/ face value of debentures has already been fixed. The controversy herein pertains to fixation of the date for determination of priority of claims. Ms. Prem Lata’s reliance on the judgment in Vishwanath Namdeo Patil (Supra) is also misplaced as the Court in that case had, in an entirely different set
of facts and circumstances, decided the question of relevant date for calculation of workmen’s dues. Petitioner herein is a secured debenture holder, whose claim ought to be decided up to the date of appointment of Provisional Liquidator. 13. For the foregoing reasons, the present application is allowed and Paragraph No. 1 on page No. 3 of the order dated 28th September, 2012 is modified to the effect that the claim of petitioning creditor shall be adjudicated up to the date of provisional winding up, i.e., 25th February, 2002 and not up to the date of final winding up, i.e., 9th August, 2012.” SUBMISSIONS:
8. It has been submitted on behalf of the applicant that its claim must be adjudicated up to the date of final winding up of the company (in liquidation) i.e., 09.08.2012. In support of the said contention, reliance has been placed on Rule 154 of the Companies (Court) Rules, 1959 and it is argued that the value of all debts and claims against the company shall as far as is possible, be estimated according to the value thereof at the date of order of the winding up of the company. In this regard, in order to buttress their case, learned counsel for the applicant vehemently urged that as under the scheme of winding up envisaged under the Companies Act, 1956, the date of winding up of the company is the date when the Official Liquidator is appointed finally and not on the date when a Provisional Liquidator is appointed. It is further contended that per the provisions of Section 450 of the Companies Act, 1956, the date of winding up and the date of appointment of provisional liquidator are two distinct stages of the winding up process. However, this Court has wrongly observed in the impugned order that the winding up process begins from the date of appointment of the Provisional Liquidator, although the same is not stipulated in the scheme of winding up.

9. It is also submitted that the conclusion arrived at in the impugned order is misconceived as it is based on the incorrect premise that the claims of other secured creditors of the company, namely the Bank of Baroda and the Workmen, have also been adjudicated up till the date of provisional winding up. In this regard, it is submitted on behalf of the applicant that despite receiving a sum of Rs. 7.56 crores as full and final settlement, Bank of Baroda was subsequently granted a sum of Rs. 6.50 crores vide order dated 31.09.2019, which sum was in favour of the Bank up to the date of final winding up.

10. Reliance has been placed on the decision of the Bombay High Court in the case of Vishwa Nath Namdeo Patil v. The Official Liquidator of Mis Swadesh Mills1, dated 28.10.2013, wherein it is stated that the Court held that the relevant date for adjudication of claims made by workers is the date of final winding up and not the date of appointment of the Provisional Liquidator. In this regard it is submitted that since the claims of workers and secured creditors are on the same footing, the claim of the applicant herein, being a secured creditor, shall be adjudicated up to the date of final winding up.

11. Per contra, it is submitted on behalf of the Official Liquidator that the present application is devoid of any merits and liable to be dismissed. It is urged that the averments made by the applicant are incorrect. It is submitted on behalf of the Official Liquidator that the Bank of Baroda has dual claims against the company (in liquidation), firstly, in the capacity of a secured creditor, and secondly in the capacity of a Debenture Trustee; and therefore, the Bank and the

1 2013 SCC OnLine Bom 1816

applicant herein are not on an equal footing. In this regard, reference is invited to the order dated 28.09.20212, which specifically mentions the position of Bank of Baroda, insofar as it has admitted claims as both, a secured creditor as also a Debenture Trustee.

12. In this regard, it is submitted on behalf of the Official Liquidator, that contrary to the submissions advanced on behalf of the applicant, the sum of Rs. 7,56,02,275/- has been paid to Bank of Baroda against their dues in the capacity of being a Debenture Trustee and such amount has been adjudicated up till the date of appointment of the Provisional Liquidator i.e., 25.02.2002. Whereas, the amount of Rs. 6.50 crores which subsequently came to be released in favour of Bank of Baroda vide order dated 31.01.2019, is in respect of the recovery certificate issued by the Debt Recovery Tribunal2, in favour of the Bank in its capacity as a secured creditor, which amount was also upheld by the Debt Recovery Appellate Tribunal3 vide order dated 28.05.2015. Thus, it is submitted that since Bank of Baroda, in its capacity as a debenture trustee has received the adjudicated claim up till the date of appointment of the Provisional Liquidator, contrary to the averments raised by the applicant, there are no grounds for seeking modification of the order dated 03.02.2023, passed by this Court.

2 DRT 3 DRAT

ANALYSIS & DECISION:
13. Having given my thoughtful consideration to the submissions advanced by the learned counsels for the rival parties at Bar and on meticulous perusal of the relevant record, unhesitatingly, this Court

finds that the present application moved by the applicant is misconceived and bereft of any merits.

14. At the outset, the applicant while claiming parity with the determination of the claim period with interest, as done in the case of Bank of Baroda, has lost sight of the fact that Bank of Baroda had dual claims against the company (in liquidation); firstly, its claim as a secured creditor for lending and extending banking limits to the company (in liquidation); and secondly, in capacity as a Debenture Trustee.

15. A bare perusal of the order dated 28.09.2012 passed by this Court would substantiate the aforesaid dual claims of the Bank of Baroda, which had submitted its claim for Rs. 7,56,02,275/- as secured creditor and claim for Rs. 8,34,4,285/- as Debenture Trustee. Insofar as the plea by the applicant is concerned, that a sum of Rs. 7,56,02,275/- was paid towards full and final settlement of its claim and that it was paid another sum of Rs. 6.50 crores towards its claim upto the date of final winding up i.e. 09.08.2012, the said aspect appears to be factually incorrect as the applicant overlooks that the DRT-II, New Delhi in O.A. No. 54/2002 passed an order thereby making the Bank of Baroda entitled to recover a sum of Rs. 7,57,77,191/- plus interest towards loan defaults, which order was also upheld by the DRAT vide order dated 28.05.2015. It was in respect of the aforesaid claim of Bank of Baroda being in the nature of a secured creditor, that a sum of Rs. 6.50 crores was paid towards full and final settlement of its claim.

16. Learned Standing Counsel for the Official Liquidator (OL) has alluded to the order dated 31.01.2019 passed by this Court wherein

such facts were recorded and approved, which reads as under: –

„CA 713/2018 1. This order is passed pursuant to order dated 22.3.2018 and 2.5.2018. On 22.3 .20 18 this court had noted that CA 416/2018 is filed seeking release of Rs.6.50 crores in favour of Bank of Baroda in full and final settlement of the entire outstanding dues. This court also noted submission of learned counsel for the Ex. Directors that the debenture trustees have so far been able to establish a claim of Rs.2,50,88,760/-. This court directed the Official Liquidator to release Rs.6.5 crores to Bank of Baroda before 31.3.2018 as full and final settlement of all claims as a secured creditor. A direction was issued to the debenture trustee/Bank of Baroda to take steps regarding the claims of the debenture trustees. This court had also noted that fund position of the company was Rs.27 crores and there were only two claims pending, namely, of Bank of Baroda and debenture trustee. 2. On 2.5.2018 the court dealt with the application CA 549/2018 filed by the Official Liquidator seeking recall of the order dated 22.3.2018 stating that the Bank of Baroda had earlier filed a claim before the Official Liquidator which was accepted for a sum of Rs.7,56,02,575/-. This amount was duly released to Bank of Baroda. In contrast learned counsel appearing for the Ex.Directors and for Bank of Baroda had pointed out that DRT vide order dated 28.5.2015 had passed a recovery certificate in favour of Bank of Baroda for a sum of Rs.7,57,77,191/- plus interest. The claim now comes to Rs.30 crores. This court hence had directed NOCs of 75% of the shareholders to be filed for release of the said sum of Rs.6.50 crores to Bank of Baroda. Today, learned counsel appearing for the Ex. Directors states that there are about 5000 shareholders and it is not possible to trace the shareholders and get an NOC from 75% of the shareholders. 3. Learned counsel appearing for Bank of Baroda, however, states that this amount be released to the bank in terms of the order dated 22.3.2018 subject to an undertaking to be given by the bank that in case this court is of the opinion that the amount has been wrongly released to the bank, the Bank of Baroda would return the same. In that eventuality the right to recover from the respondents in the OA filed before DRT would continue to survive. 4. Now, the Official Liquidator states that there are more claims pending including one of EPFO for Rs.3,21,50,387 and from the Commercial Tax Department of Rs.l,17,27,026 approximately. There are six other claims which the Official Liquidator is assessing to be total of about Rs.l.5 crores.
5. Keeping in view the fact that the total claims which are pending/in process by the Official Liquidator is below the amount of Rs.27 crores and also keeping into account the undertaking given by Bank of Baroda it would be in the interest of justice and also in the interest of the contributors that the amount of Rs.6.50 crores be released to Bank of Baroda within seven days subject to the undertaking furnished by Bank of Baroda to repay back the said amount to the Official Liquidator with reasonable interest as applicable to the savings bank account if this court subsequently comes to a conclusion that this amount was wrongly paid to Bank of Baroda.”
17. Evidently, the above order dated 31.01.2019 has not been assailed by the applicant and the same has attained finality. It goes without saying that a sum of Rs. 7,56,02,575/- has further been paid to Bank of Baroda in respect of the claims in the capacity of being a Debenture Trustee, which has been assessed up to the date of provisional winding up of the company vide order dated 25.02.2002.

18. In view of the foregoing discussion, this Court finds no merit in the present application. There is no error apparent on the face of the record to seek review of the order dated 03.02.2023 passed by this Court.

19. The application is dismissed.

CO.APPL. 355/2024
20. Renotify on date already fixed i.e., 20.08.2024.

DHARMESH SHARMA, J. JULY 03, 2024 sp