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In The Matter Of M/S U.P.State Cement Corporation Ltd. v. *** - MISC. COMPANY APPLICATION No. - 4 of 1997 [2007] RD-AH 16598 (11 October 2007)

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Court No. 30

Misc. Company Application No. 4 of 1997

In the matter of

M/s U.P. State Cement Corporation Ltd (In Liq.)


In the matter of

(Orders on Applications/Objections of the Secured Creditors, Unsecured Creditors and workmen to the Report No. 248 of 2007 of the Official Liquidator dated 9.10.2007, annexing therewith recalculated amount of admittance of claims of secured creditors in pursuance to judgment in Company Appeals dated 27.4.2007 and the order dated 28.9.2007.

Hon'ble Sunil Ambwani, J.

Objection No. 242222 of 2007 filed on behalf of Kotak Mahindra Bank Limited.

1. Heard Shri Om Prakash Mishra, learned counsel appearing for Kotak Mahindra Bank Limited, the assignee of the ICICI Bank Ltd; Shri Ashok Mehta, appears for Official Liquidator and Shri Anil Mehrotra for State of U.P.

2. By this application, the applicant has prayed for setting aside report of the Official Liquidator qua Kotak Mahindra Bank Ltd and for a direction to the Official Liquidator to accept recovery certificate of the Debt Recovery Tribunal Allahabad as final claim. By the third prayer the applicant seeks directions to the Official Liquidator to disclose the methodology adopted while calculating the respective claim amounts and sharing of the dividends.

3. The company was wound up on 8.12.1999 on the recommendation of Board of Industrial and Financial Reconstruction. The assets of the company (in liquidation) were advertised for sale by an 'Asset Sale Committee' after global tender on the basis of documents of sale prepared earlier by the Government of Uttar Pradesh. After three valuations and extensive bidding in which special appeals were filed, the details of which are given in the order dated 27.4.2007, the highest bid of M/s Jaiprakash Associate Ltd (JAL) of Rs. 459 crores was accepted on 31.1.2006. The last instalment was deposited by the highest bidder on 11.10.2006 within the extended time and the sale was confirmed in presence and with the consent of all the secured creditors and the workmen appearing through their Union leaders and representatives.

4. In this unique sale, the State Government agreed to provide extensive reliefs and concessions for those who will like to take the entire assets company (in liquidation) as a whole.

5. The Official Liquidator was directed to invite the claims even before confirmation of sale. The secured creditors; unsecured creditors and workmen (about 5900) submitted their 'Affidavits of Proofs'. The Court appointed a 'Liquidation Claims Committee' consisting of a retired District Judge; a Chartered Accountant and an Advocate of the Court with special staffs and office equipment. The Official Liquidator accepted the report of the 'Liquidation Claims Committee' and submitted his report. About 99 appeals were filed under Rule 164 of Companies (Court) Rules 1959 against rejection and part rejection of the claims communicated to the creditors. The report was published to the workmen. All these appeals were heard and decided by order dated 27.4.2007. The Official Liquidator recalculated the claims in accordance with the judgment. The IDBI and State Bank of India thereafter made applications for correction of recalculation which was accepted and was duly carried out and that the Official Liquidator's Report No. 248 of 2007 with re-calculation of claims is now under consideration.

6. Shri Om Prakash Mishra submits that Kotak Mahindra Bank Ltd as assignee of debt of ICICI Bank Ltd had submitted affidavit of proofs on 15.6.2006 for Rs. 46, 59, 51, 812.32 including 1st and 2nd facility agreement under the interest bearing account. The ICICI Bank Ltd pursued Original Application No. 291 of 2001 in Debt Recovery Tribunal, Allahabad and that on 6.12.2006 after the proofs of debts was submitted, the Debt Recovery Tribunal, Allahabad decreed the claim along with the interest for a total amount of Rs. 56, 41, 37, 770.00 along with pendentelite and future interest @ 12% per annum with half yearly rest. This decree was enclosed with the appeal filed on 8.10.2007.

7. It is submitted that the Court did not take into consideration the decree which is binding upon the Official Liquidator as he was party to the proceedings. The Official Liquidator is bound by the decree and that he should have revised the affidavit of proofs of the Kotak Mahindra Bank Ltd which is assignee of the debts of ICICI Bank Ltd. The Official Liquidator could not have reduced the rate of interest.

8. In the last recalculation with claims of Kotak Mahindra Bank Ltd are admited to the extent of Rs. 4255.19, lacs including principal amount of Rs. 478.86 lacs and interest and penal interest of Rs. 3776.33 lacs. The Court has accepted the agreed interest upto the date of winding up. With this amount admitted for pari pasu dividend, the dividend of Kotak Mahindra Bank is worked out at Rs.1=0.7974340 i.e. Rs. 339324318.00

9. There is no doubt that the Official Liquidator was a party in Debt Recovery Tribunal and that there is a decree against the company (in liquidation) as well as the State Government as guarantor of the loans. The Official Liquidator, however at the time of declaration is bound by the provisions of the Companies Act 1956 and Companies (Court) Rules 1959. He would not award the interest at the rate of more than 4% after the date of winding up provided that the amount is available for awarding such interest. Further, the Official Liquidator has to adjust the priorities in accordance with the charges of the creditors and to declare the dividend along with workmen who are also overriding preferential claimants under Section 529-A of the Companies Act, 1956 and then declare pari pasu dividend.

10. In the present case, all the objections of the secured creditors with regard to interest were considered and decided in the judgment dated 27.4.2007. The applicants have not challenged the judgment. The Court partly allowed the appeals of all the secured creditors, who were allowed agreed rate of interest on compounded basis upto the date of winding up. The penal interest, however, was not allowed to be compounded. The interest was to be calculated only upto date of winding up and thereafter no further interest could be paid. The Debt Recovery Tribunal however has calculated the agreed rate of interest and penal interest on compounded basis upto 6.12.2006, resulting into difference in the claim.

11. The calculation of the Official Liquidator is valid and is in accordance with the judgment dated 27.4.2007. It is fully explained and does not require any change or modification.

12. Shri Om Prakash Misra has relied upon judgments in Allahabad Bank vs. Canara Bank AIR 2000 SC 1535; and Indian Bank vs. Official Liquidator AIR 1998 SC 2111 (para 12) . In the judgment in Allahabad Bank vs. Canara Bank (supra) the Supreme Court held that the Debt Recovery Tribunal has an exclusive jurisdiction and that those standing outside the winding up proceedings may pursue their decrees for the recovery of their debts. It also held that the permission of the Court is not required under Section 446 of Companies Act, 1956 to file or to continue with the application before the Debt Recovery Tribunal. In Indian Bank vs. Official Liquidator (supra) it was held that the priority of debt of a decree holder will not be lost on account of the fact that the charges are not registered under the Companies Act, 1956. Both these decisions do not help the applicant in support of their claim.

13. Before concluding it may be stated that it is a case of unique sale in which assets of the company (in liquidation) were sold along with reliefs and concessions. The secured creditors were party to the liquidation proceedings. They were members of the Asset Sale Committee and that the secured creditors were consulted at every stage of proceedings. In this unique sale, the question of recovery of remaining amounts from guarantees loses its significance. It is highly doubtful whether the secured creditors, who will be paid the amount much beyond and over and above the realisable value their charged assets, on account of reliefs and concessions included in the sale, can still claim remaining amount or invoke bank guarantees. The court however is not passing any final order or expressing any final opinion with regard to invocation of guarantees which have even otherwise not been produced before the Court.

14. The Official Liquidator has admitted agreed rate of interest under the agreement between the company (in liquidation) and ICICI Bank Ltd with regard to both the loans facility. The interest has been calculated upto the date of winding up of the company (in liquidation).

15. The prayers made by the applicant as such may not detain the court for any further adjudication. The application is accordingly rejected.

Civil Misc. Application No. 243611 of 2007 filed by Shri P.K. Dalmia, C-81, Sector 19, Noida 201301

16. Heard Shri P.K. Dalmia, applicant in person and Shri Ashok Mehta for Official Liquidator.

17. Shri P.K. Dalmia claims that he was appointed authorised representative of the company (in liquidation ) for arranging coal supplies as del-creder Agent, as Coal Handling Agent & Joint Sampling Agent and for arranging G.I. Slag supplies from Bokaro Steel Plant and other services rendered on work contract basis. He was working as authorised representative of the company from 1956 to 1987. In the year 1987 he had claimed Rs. 3, 88, 464.00 against the company (in liquidation). An arbitrator was appointed. He spent Rs. 1.5 lacs towards advocates fees and other expenses in arbitration proceedings. It is contended by him that inspite of extending the time on the applications as well as intimation sent by registered post, the arbitrator rejected the claim on the ground that no one appeared on his behalf. The original claim of Shri P.K. Dalmia is Rs. 3, 88, 464.00 on which he has added interest and has compounded it to a highly excessive amount of Rs. 1, 72, 15, 360/-.

18. Shri P.K. Dalmia was communicated with the letter of the Official Liquidator on 8.12.2006 allowing claim of only Rs. 3, 88, 464.00. The interest amount was not payable and no proof regarding other debts was given.

19. The secured creditors and workmen had filed Appeals under Rule 164 of Companies (Court) Rules 1959. The appeals were heard and that by judgment dated 27.4.2007 the appeals of secured creditors and workmen of company (in liquidation) were partly allowed. The secured creditors were allowed agreed rate of interest to be compounded upto the date of winding up. Similarly the workmen's appeals were also allowed. After giving adjustment to these claims and secured creditors and workmen who are overriding preferential claimants under Sections 529 and 529A of the Companies Act 1956 nothing was left for the unsecured creditors. In para 140 of the judgment it was held that having partly allowing the appeals/objections of the secured creditors and workmen and having separated the amounts detailed in the order as liquidation expenses there will be no amount left to be paid to the department of the Government and unsecured creditors under Section 530 of the Act.

20. Shri Dalmia submits that his claim should be treated as claim of the workman as he was appointed as authorised representative of the company (in liquidation). Even if he was acting under a contract of the company, his services were always available and were comparable to workman. The company illegally and arbitrarily rejected his claim and that arbitrator acted grossly illegal in refusing to adjourn the matter. Shri Dalmia submits that this Court has sufficient powers to give directions to the Official Liquidator who steps in the shoes of the company which was a Government company and would fall under Article 12 of the Constitution of India to give directions to pay his debts.

21. The Official Liquidator can distribute the amounts available after sale of the assets only in accordance with the Companies Act 1956, and Companies (Court) Rules 1959. The Official Liquidator has no discretion nor the Court can overreach the law and allow the claims of unsecured creditors when no amount is left after allowing the affidavits of proofs of the secured creditors and the workmen.

22. It may be pointed out here that Shri P.K. Dalmia has earlier made an application through Shri J.G. Pandey, Advocate for condonation of delay for making his claim of Rs. 1, 72, 15, 360.33 on the basis of an arbitration award. The court in its order dated 7.3.2007 rejected the application for condonation of delay with the following orders:

"Shri Ashok Mehta appears for the Official Liquidator.

The application is filed on 7.12.2006 by Shri P.K. Dalmia son of Bhoj Raj Dalmia by Shri J.N. Pandey, Advocate for condonation of delay in filing the claim for Rs. 1, 72, 15, 360.33 on the basis of an arbitration award. The Arbitrator did not award any amount to the applicant. Shri V.K. Tandon, IAS was appointed as sole Arbitrator to decide the claims based on contract of M/s Bhoj Raj Dalmia with the company as coal handling agent. The matter was pending with Shri V.K. Tandon for several years. Shri Bhojraj Dalmia filed an application in Dhanbad Court for extension of time, which was rejected. He, thereafter, sought several adjournment from Shri Tandon for extension of time, which was not possible and thus the claim was rejected. The second claim of Shri Bhojraj Dalmia was as handling agent of Bokaro Steel Plant. He made a claim before the Managing Director of the Corporation in which written statement was filed by the Corporation. Shri Bhojraj Dalmia did not take any interest in continuing with the proceedings before Shri G. Patnaik, the Arbitrator and remained absent throughout. Consequently, on 31.5.1998 the claim was rejected.

The order of the Official Liquidator rejecting the claim of the applicant does not suffer from any illegality. The appeal, which is numbered as O-1 is, accordingly rejected."

23. Shri P.K. Dalmia appearing in person has then contended that the Official Liquidator has committed errors in calculating the amounts due to the secured creditors. He submits that the same may be considered and sent to the Comptroller Auditor General of India for the purposes of verification of the claims. I do not find any substance in the submissions. The calculation sheet of Shri Dalmia is not annexed to his affidavit. It is not verified by any chartered accountant. In the present case the calculations have been made and revised three times by the Liquidation Claims Committee including a reputed Chartered Accountant. The application is rejected.

CIVIL MISC. APPLICATION NO. 246165 OF 2007 filed on behalf of Rama Shankar Dubey and 8 others

24. Heard Shri K.C. Vishwakarma, learned counsel for applicants and Shri Ashok Mehta appearing for Official Liquidator.

25. The applicants no. 1 to 8 are primary school staff and applicant no.9 is Lecturer of the Cement Factory Inter College Chunar unit. By this application, they have prayed to pay modified claims/dividend as the Official Liquidator submitted his report before the Court on 24.9.2007. The applicants are facing severe financial crisis for nine years and they are ready to accept the modified claim upto date of winding up without raising any objection.

26. The court is fully conscious with the plight of the workmen and other staffs of the company (in liquidation) and is making serious efforts in settling all the disputes in the computation of dividend. The applications are being heard on day-today basis. The court expects that the amount calculated by the Official Liquidator will be available for disbursement without any further delay.

27. The application is accordingly disposed of.

Misc. Application No. 246113 OF 2007 filed on behalf of Cement Workers Union and 15 others (respondent nos. 9 to 24)

28. This application is supported by affidavit of Shri Harendra Kumar Pandey. It is filed by Shri Saumitra Singh and is to be argued by Shri Umesh Narain Sharma, Senior Advocate. They have not appeared. In the affidavit accompanying with this application some objections have been taken to the computation of interest on the amounts due towards bank and financial institutions as secured creditors. It is contended that there are some mistakes in calculation of amounts of IDBI, Kotak Mahindra Bank Ltd (ICICI), LIC, Allahabad Bank and IFCI. The principal contention is that the Court should have taken into account the dues towards the bank and financial institutions in the 'Statements of Affairs' filed on the basis of audited balance sheet as on 31.3.1996.

29. Shri Harendra Kumar Pandey has appeared in person for the workmen. He submits that according to his calculation made in Annexure No. 2 on the basis of 'Statement of Affairs' and as per loan agreement including penal interest the dues of all the secured creditors could only be Rs. 29427 lacs as on 8.12.1999 when the company was wound up. The Official Liquidator with the help of the Liquidation Claims Committee has incorrectly calculated it at Rs. 38327.73 lacs.

30. Before the matter could be heard in detail, Shri Harendra Kumar Pandey made a statement in the Court in presence of Shri Ashok Mehta, learned counsel for Official Liquidator; Shri Om Prakash Misra; Jayont Banerji; Shri P.N. Tripathi, learned counsel for secured creditors and other counsels and a large number of workmen present in Court that the application may be kept pending for consideration at the time of declaration of final dividend and disposing of the matter finally. At present the workmen are waiting for disbursement of their dues for more than nine year. The sale was confirmed about a year ago. The workmen are on the verge of starvation. About 5900 workmen are waiting for their dues after the winding up order dated 8.12.1999. They can no longer wait for disbursement of the amount.

31. Prima facie the Court does not find that there is any such calculation error which may detain the Court for declaring dividend. However, taking into account the plight of the workmen and requests made by Shri Harendra Kumar Pandey, the hearing of this application is deferred for declaring final dividend or making any adjustment. The court as such proceeds to decide remaining applications for calculation of interim dividend.

Misc. Application No. 241307 of 2007 filed on behalf of M.L. Singh son of Sri M.P. Singh and two others.

32. When the matter was taken up, no one appears to press the application. Shri Ashok Mehta appears for the Official Liquidator.

33. This application supported with an affidavit of Shri Babua Singh has been filed to direct the Official Liquidator to rectify the mistake and ensure that the balance amount due to the applicants which includes interest payable as per direction of the Court is paid to the applicants immediately.

34. It is contended in paragraph-3 that while deciding the Appeals under Sections 164 of Companies (Court) Rules 1959 on 27.4.2007 this Court issued directions allowing objections/appeals of the workmen to the extent that after correction of the mistakes those in their claims and those which have crept in on account of preparing the data, the Official Liquidator will admit to the workmen all the wage board arrears in term of paragraph no. 39 to 46 of the judgment. The Official Liquidator will admit retrenchment compensation under Section 25 FFF of the Industrial Disputes Act, 1947 calculated at 15 days salary for every completed years of service and one months notice pay, leave encashment to the extent which was admissible under the Rules/Notifications/Orders of the Corporation (in Liquidation) and 4% interest after the date of winding up till the declaration of final dividend by the Official Liquidator.

35. It is contended that the Official Liquidator has not included 4% interest on the re-calculated amount. Though the admitted salary of applicant no. 1 was increased from Rs. 6500/- to Rs. 7461/- the interest column has disappeared.

36. Shri Ashok Mehta, learned counsel for Official Liquidator states that the interest is admissible under Rule 179 of the Companies (Court) Rules 1959, in the event in case there is any surplus amount after payment in full all the claims admitted. In the present case after admitting the claim of the secured creditors and the workmen who are overriding preferential payments, and the liquidation expenses there is no amount left to give 4% interest to the workmen after the date of winding up of the Company i.e. After 8.12.1998. In the earlier computation, there was surplus amount on account of non-admittance of agreed rate of interest to secured creditors, on account of which 4% interest was added, but now after taking into account the admitted and agreed rate of interest of the secured creditors upto the date of winding up, and corresponding increase in the amount admitted proof for workmen and after adjusting liquidation expenses, there is no amount left to award the interest.

37. The application is accordingly disposed of.

Dt. 11.10.2007


Hon'ble Sunil Ambwani, J.

Heard Shri R.P.Singh for applicant and Shri Ashok Mehta for the Official Liquidator.

By this application, Harmuna Devi, widow of Anrudh Singh workman (Token No. C-643) has prayed for condonation of delay in accepting her claim. In her affidavit it is stated by her that she is 71 years old. Her husband had worked as Civil Mazdoor in the Corporation at its Churk and Chunar unit for 28 years. His dues have not been accepted as the Official Liquidator wanted the applicant to file affidavits of her children. She is now annexed these affidavits which may be considered by the Official Liquidator.

Shri Ashok Mehta appearing for the Official Liquidator submits that the applicant never filed the affidavits of proof. He however has not denied the fact that she was asked to bring the affidavits of her children.

It is contended by Shri Ashok Mehta that in all the cases where this Court had condoned the delay in filing the affidavits of proofs after submission of the report of the Official Liquidator and even after the judgment dated 27.4.2007, the Official Liquidator admitted those claim and has included them in his report for accepting the interim dividend. According to Shri Ashok Mehta, the claim of Shri Harmuna Devi has been left out for consideration.

There is no explanation of delay in making the claim at all. According to the applicant, the claim was presented in January 2007. Let a proper affidavit be filed for considering the delay in submitting the affidavits of proofs.

Dt. 11.10.2007

RKP/- 242240-07

Hon'ble Sunil Ambwani, J.

For orders see order of date passed on order sheet.

Dt. 11.10.2007


Hon'ble Sunil Ambwani, J.

For orders see order of date passed on order sheet.

Dt. 11.10.2007


Hon'ble Sunil Ambwani, J.

For orders see order of date passed on order sheet.

Dt. 11.10.2007


Hon'ble Sunil Ambwani, J.

For orders see order of date passed on order sheet.

Dt. 11.10.2007


Hon'ble Sunil Ambwani, J.

For orders see order of date passed on order sheet.

Dt. 11.10.2007


Hon'ble Sunil Ambwani, J.

For orders see order of date passed on order sheet.

Dt. 11.10.2007



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