Bombay High Court
Ifci Limited (India) Ltd vs Rasendra Chemexport Pvt Ltd And 14 Ors on 4 August, 2025
IA(L)-22790-2025 (final).doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION (L) NO. 22790 OF 2025
IN
COMPANY PETITION NO. 907 OF 2005
IFCI Limited (India) Ltd. ...Applicant
In the matter between :
Rasendra Chemexport Pvt. Ltd. ...Petitioner
Versus
The Official Liquidator of Emtex India
Pvt. Limited (in liquidation) ...Respondent
AND
ShivprakasMaliran and Others ...Respondents/Secured
Creditors
------------
Mr. Rohan Savant, Kshitij Parekh, Mr. Vinod Kothari, Aradhya Dixit i/b Apex Law
Partners for Applicant.
Mr. Rohaan Cama, Mr. Rahul Raut for Respondent No. 5.
Mr. Charles De'souza, Apporva Kulkarni, Pragati G. and Rupak S. i/b SSB Legal
and Advisory for Respondent No. 14.
Ms. Akanksha Agarwal for OL.
------------
Coram : Sharmila U. Deshmukh, J.
Date : 4th August, 2025.
ORDER :
1. The present Interim Application filed by one of the secured
creditors of the Company (in liquidation) seeks condonation of delay of
474 days in submitting the Affidavit of proof of debt to the Official
Sairaj 1 of 16
IA(L)-22790-2025 (final).doc
Liquidator, for recall of order dated 30th June, 2025 passed in Official
Liquidator's Report No. 38 of 2025 in Company Petition No. 907 of
2005 and for direction to Official Liquidator to reconsider the process
of distribution of dividend and adjudicate the Applicant's claim on
merits before undertaking any disbursement from the available funds.
2. The Application pleads that Industrial Investment Bank of India
[for short, "IIBI"] (erstwhile Industrial Reconstruction Bank of India)
was one of the secured creditor and had sanctioned certain credit
facilities to the Company (in liquidation) by securing a hypothecation
and first charge over the movable properties in the name of the
Company (under liquidation). Vide Assignment Agreement dated 18 th
July, 2012, IIBI assigned the rights and interest in loan account of the
Company to the Applicant under Section 5 of the the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 [for short "SARFAESI Act"]. The Applicant lodged
the claim belatedly after delay of 474 days whereas the same was
required to be lodged on or before 29th March, 2024. The explanation
for delay is that Applicant had sanctioned other credit facilities to the
company (in liquidation) and was one of the secured creditor, and by
Assignment Agreement dated 31st March, 2010, the Applicant assigned
the right, title and interest along with the underlying security in
respect of loan account of the Company (in liquidation) to Invent Asset
Sairaj 2 of 16
IA(L)-22790-2025 (final).doc
Reconstruction Company Private Limited. Due to bona fide
misunderstanding within its internal department, it was assumed that
the Applicant no longer had any subsisting exposure to the Company
and it was subsequently discovered that the subject loan, which forms
basis of the present claim, had in fact been assigned to Applicant by IIBI
and is outstanding. It is pleaded that Applicant's Deed of Assignment
was executed at Kolkata in respect of 12 different loan accounts which
was then sent by Applicant's Kolkata Regional office to the concerned
office based on their securities and during the process of handing over,
the files of this case were misplaced and the claim filing of the
Applicant was inadvertently delayed which was a bona fide mistake.
The Compnay (in liquidation) is indebted to the Applicant in sum of Rs.
150,72,83,137/- and if the distribution of the available funds is
permitted without considering its claim, the Applicant will suffer
serious and irreparable loss and would render the Applicant's claim
nugatory and infructuous. It is pleaded that the notice inviting claims
and notice of hearing of Official Liquidator's Report were served upon
the Applicant, however, due to bona fide mistake, the Applicant could
not act upon the same.
SUBMISSIONS :
3. Mr. Savant, learned counsel appearing for Applicant would
submit that by order dated 30th June, 2025, this Court had permitted
Sairaj 3 of 16
IA(L)-22790-2025 (final).doc
the Official Liquidator to declare and pay dividend at the rate of
1.8875% to three secured creditors and one worker from whom the
claims have been received from the sale proceeds available with the
Official Liquidator of Rs. 17,86,62,518/-. He submits that on 15 th July,
2025, the Applicant lodged the claim and present Application has been
filed on 23rd July, 2025. He has taken this Court through the
explanation which has been tendered in the Application and pleads
that there is sufficient explanation for condonation of delay, which has
occurred due to bona fide mistake. He submits that error occurred as
Applicant had assigned its debt in favor of Invent Asset Reconstruction
Company Private Limited and Applicant was Assignee of debt by IIBI,
India which was one of the secured creditor. He would point out to
necessary documents which are annexed to the Plaint to substantiate
its contention of being secured creditor by virtue of assignment of
deed in his favor by Industrial Investment Bank of India. He would
further submit that Delhi High Court in the decision of Re-M/s. Kamla
Syntex Ltd.1 considered the provisions of Section 474 of Companies
Act, 1956 read with Rule 178 of Companies (Court) Rules, 1959, where
the Delhi High Court considered the decision of Rajasthan High Court in
Ganeshilal Gupta vs. Bharatpur Oil Mills 2, the Patna High Court in the
1 2018 SCC OnLine Del 9396.
2 1972 SCC OnLine Raj 220.
Sairaj 4 of 16
IA(L)-22790-2025 (final).doc
case of Saroj Kumar Banarjee v. Gaya Sugar Mills Ltd. 3 and Madras
High Court in the case of T. R. Rajakumari vs. Official Liquidator,
Motion Picture Producers Combine Ltd.4 and would submit that
Section 454 of Companies Act, 1956 does not use the expression
"declaration" but "distribution." He would submit that upon proper
reading of Rule 178 of the Companies (Court) Rules , 1959, the Court
can direct the consideration of proof of debt till the actual distribution
takes place and what cannot be disturbed is the distribution and not
declaration of dividend. He submits that there has to be actual
distribution to deprive the Applicant of participating in the declaration
of dividend.
4. Ms. Agarwal, learned counsel appearing for Official Liquidator
submits that Section 474 of Companies Act, 1956 is not applicable in
the present case as the same deals with power of Court to fix the
timelines within which the creditors have to prove their debt or to
exclude them from benefit of any distribution made before the debt is
claimed failing which the amount is required to be transferred to the
public accounts. She submits that Rule 178 of the Company Court
Rules, 1959 applies which provides that distribution of dividend
declared shall not be disturbed by creditor who has not participated
and not proved the debt before declaration of dividend. She would
3 1964 SCC OnLine Pat 10.
4 1941 SCC OnLine Mad 379.
Sairaj 5 of 16
IA(L)-22790-2025 (final).doc
further submit that the funds are already transferred to the dividend
account and there is no warrant for recall of order dated 30 th June,
2025. She submits that Applicant had received notice in February, 2024
on the basis of the list which was extracted by the Official Liquidator
from the website of the Ministry of Corporate Affairs and despite
thereof, the Applicant did not lodge the claim within time.
5. Mr. Cama, learned counsel appearing for Respondent No. 5-one
of the secured creditor submits that as far as condonation of delay is
concerned, the same is essentially a matter between the Court and the
Applicant. He submits that this Court had sanctioned declaration of
dividend by order of 30th June, 2025 prior to the Applicant even
lodging the claim much less proving his claim and therefore, Applicant
is not entitled to share in the proceeds/dividend declared by this Court
vide order dated 30th June, 2025. He submits that Official Liquidator's
Report which lists the Applicant as secured creditor was in respect of
original loan which the Applicant has since assigned to the Asset
Reconstruction Company. He submits that under the statutory Rules,
the declaration and distribution of dividend are dealt with separately
under Rule 275 to Rule 280 of the Company Court Rules, 1959. He
submits that decision in the case of Delhi High Court which notes the
decision of various other High Courts supports the case of the
Respondents as the same holds that an Application for excusing delay
Sairaj 6 of 16
IA(L)-22790-2025 (final).doc
in filing proof of claim should be allowed so long as justice can be done
to a creditor without disturbing the dividend already declared or paid.
He submits that the use of the word "or" would indicate that dividend
can either be declared or paid. He has taken this Court through the
Official Liquidator's Report and extract of Ministry of Corporate Affairs
website and would point out that Official Liquidator's Report refers to
the list of secured creditors which includes the present Applicant at
Serial No. 3 and Industrial Reconstruction Bank of India at Serial No. 7.
He submits that if IIBI loan was assigned to Applicant, name of IIBI
would not appear in the list of names of secured creditor. He would
further submit that Section 125 read with Section 135 of the
Companies Act, 1956 would come in the way of the Applicant as the
modified charge has not been registered with Ministry of Corporate
Affairs which is required to be considered by the Official Liquidator. In
support, he relies upon the following decisions :
T. R. Rajakumari v. Official Liquidator, Motion
Picture Producers Combine Ltd. (supra)
Rajasthan Financial Corporation v. Official
Liquidator, Jaipur Spinning and Weaving Mills Ltd.
(In Liquidation)5
6. Mr. D'souza, learned counsel appearing for Respondent No. 14
would submit that Rule 178 of the Companies (Court) Rules, 1959 has
to be read in three parts, the first part sets out the threshold which is
5 1994 SCC OnLine Raj 105.
Sairaj 7 of 16
IA(L)-22790-2025 (final).doc
declaration of dividend and consequence is provided in the second part
that such creditor would be entitled to be paid out of money in hands
of Liquidator available for distribution of dividend, any dividend or
dividends which he might have failed to receive before that money is
applied to the payment of future dividend or dividends and third part
that such creditor shall not be entitled to disturb the distribution of
any dividend declared before his debt was proved by reason that he
has not participated therein. He submits that Courts have consistently
held that creditor may come in and prove his claim any time before the
Company is dissolved and penalty for not coming on the date fixed by
the Court is not exclusion altogether but exclusion is only to the extent
of for the benefit of any distribution made before the proof of debt. In
support, he relies upon the following decisions:
Isack Jesudasen Pillai v. Divan Bahadur Ramasamy
Chetty6
T. R. Rajakumari v. Official Liquidator, Motion
Picture Producers Combine Ltd. (supra)
Saroj Kumar Banerjee v. Gaya Sugar Mills Ltd.
(supra)
Ganeshilal Gupta v. Bharatpur Oil Mills (supra)
Re-Kamla Syntex Ltd. v. .... (supra)
Aryaman Construction Pvt. Ltd. v. Official
Liquidator7
6 1903 SCC OnLine Mad 92.
7 2019 SCC OnLine Cal 5946.
Sairaj 8 of 16
IA(L)-22790-2025 (final).doc
7. In rejoinder, Mr. Savant would submit that interpretation which
has been placed by him on Section 474 of the Companies Act, 1956 and
Rule 178 of the Company Court Rules, 1959 would inure to the benefit
of secured creditor by holding that Application would be maintainable
before distribution and not by reason only of declaration of dividend.
He submits that if same is permissible in law, there is no question of
any prejudice being caused to other secured creditors. He would
further submit that as far as registration of the modified charge is
concerned, there is charge created in favor of IIBI.
8. I have considered the submissions and perused the record.
9. The admitted position is that by order of 30 th June, 2025, this
Court had permitted the Official Liquidator to declare and pay dividend
at the rate of 1.8875% to three secured creditors and one worker from
whom the claim has been received. The order of winding-up was
passed on 2nd August, 2018, the claims were invited on 23 rd February,
2024 and the last date for submission of the claims was 29 th March,
2024. Thereafter, after the period of almost one year and three
months, the order of 30th June, 2025 was passed sanctioning the
declaration and payment of dividend.
10. The Applicant lodged its claim on 15 th July, 2025 and the present
Application has been filed seeking essentially two reliefs, one for
Sairaj 9 of 16
IA(L)-22790-2025 (final).doc
condonation of delay and second for recall of order dated 30 th June,
2025 for the purpose of considering the claim of the Applicant before
distribution of dividend as permitted by order of 30 th June, 2025. As
far as relief of condonation of delay of 474 days in lodging the claim is
concerned, the same has been filed under Rule 177 of the Company
Court Rules, 1959 which permits the Court to condone the delay and
direct the Official Liquidator to adjudicate the debt. There is no
opposition to the delay being condoned and in so far as the
explanation tendered is concerned, by adopting a liberal approach, the
delay can be condoned by accepting the explanation. It is well settled
that the penalty of not coming in before the fixed timeline is not
exclusion altogether. Accepting the explanation tendered, the delay of
474 days stands condoned.
11. The matter of considerable debate is the relief of recall of order
of 30th June, 2025 sanctioning declaration and payment of dividend in
which the Applicant has not participated. Whether the Applicant has
the right to get his debt adjudicated and be entitled to participation of
dividend for the reason that as of date the dividend has not been
distributed. That takes us to Section 474 of the Companies Act, 1956
read with Rule 178 of the Company Court Rules, 1959 which reads as
under:-
Sairaj 10 of 16
IA(L)-22790-2025 (final).doc
"474. POWER TO EXCLUDE CREDITORS NOT PROVING
IN TIME
The Tribunal may fix a time or times within which
creditors are to prove their debts or claims, or to be
excluded from the benefit of any distribution made
before those debts or claims are proved."
R. 178. Right of creditor who has not proved debt
before declaration of dividend -
Any creditor who has not proved his debt before the
declaration of any dividend or dividends shall be entitled
to be paid out of any money for the time being in the
hands of the Liquidator available for distribution of
dividend, any dividend or dividends which he may have
failed to receive before that money is applied to the
payment of any future dividend or dividends, but he shall
not be entitled to disturb the distribution of any dividend
declared before his debt was proved by reason that he
has not participated therein."
12. Section 474 of Companies Act, 1956 deals with the power of the
Court to fix the timelines within which the creditors are required to
prove their debts or claims, or to be excluded from the benefit of any
distribution made before those debts or claims are proved. In exercise
of the powers conferred by sub-section (1) of Section 643 of the
Companies Act, 1956, the rules have been framed and Rule 178
prohibits a creditor who has not proved his debt before declaration of
dividend to disturb the distribution of any dividend declared before his
debt was proved by reason that he has not participated therein.
13. Upon plain reading of Rule 178, the said Rule deals with right of
a creditor who has not proved its debt before declaration of dividend.
The Rule commences with the words "Any creditor who has not proved
Sairaj 11 of 16
IA(L)-22790-2025 (final).doc
his debt before the declaration of any dividend or dividends" and
entitles such creditor to be paid out of money available in the hands of
Official Liquidator for distribution of dividend, any dividend which he
may have failed to receive before that money is applied to payment of
any future dividend or dividends. The right which such secured creditor
gets is priority to payment of dividend, before the money in hands of
Official Liquidator earmarked for payment of dividend is applied for
payment of future dividend. The prohibition is that such creditor is not
entitled to disturb the distribution of any dividend declared before his
debt was proved by reason of non participation. The consequence of
the interpretation placed by Mr. Savant, if accepted, is that the
dividend already declared but not distributed can be permitted to be
disturbed. If the declared dividend is permitted to be disturbed, there
would be re-adjudication by considering the debt of such secured
creditor who is still at the stage of lodging his debt and is far from
proving the debt, which is not the intention of the Rule as the Rule only
permits the secured creditor to get advantage before payment of
future dividend. Mr. Savant would read the expression "distribution"
occurring in Rule 178 in isolation to interpret the Rule to mean that till
the dividend is distributed, such secured creditor is entitled to
participate in the dividend declared. I am unable to subscribe to the
interpretation placed by Mr. Savant when Rule 178 is read in its
Sairaj 12 of 16
IA(L)-22790-2025 (final).doc
entirety, which provides for the right of such creditor who has not
proved his debt before declaration of dividend. Inherent in the
declaration is the distribution of dividend and disturbing the
declaration would amount to disturbing the distribution of dividend
declared. The reliance placed on Section 474 of Companies Act, 1956
to submit that the same refers to distribution and not declaration is
misplaced as the said provision is an enabling provision for providing
the timelines within which the debts are required to be proved or to be
excluded from the benefit of distribution. The interpretation placed by
Mr. Savant would amount to introducing a stage after declaration of
dividend and before distribution of dividend in the Rule, while dealing
with rights of such creditor and if the intention was to secure the rights
of such secured creditor who belatedly files its claim after declaration
of dividend and before distribution of dividend, the Rule would have
been framed accordingly. The rule would in such case would have
commenced with the words "any creditor who has not proved his debt
before the distribution of any dividend.........".
14. The declaration of dividend is step-in-aid to distribution of
dividend and the Rule specifically provides that distribution of dividend
declared shall not be disturbed. In T.R. Rajakumari vs Official
Liquidator, Motion Picture Producers Combine Ltd (supra), the Madras
High Court held that so long as justice can be done to a creditor
Sairaj 13 of 16
IA(L)-22790-2025 (final).doc
without disturbing the dividend already declared or paid, there is no
reason why he should be prevented from getting his dividend.
15. In the decision of Re-M/s. Kamla Syntex Ltd. (supra), the Delhi
High Court considered the decisions of various High Courts and
particularly, referred to the treatise by A. Ramaiya "Guide to the
Companies Act", Seventeenth Edition, where in respect of Section 474
of the Companies Act, the learned Author noted as under:-
"The object of the section is that the assets of the
company in liquidation should be realized and distributed
pari passu among the creditors as expeditiously as
possible. It is, therefore, only proper that creditors who
want to claim the benefit of any distribution of the assets
should prove their debts and claims as soon as possible.
The section provides for the Court fixing a time or
times within which the creditors are to send their proofs.
The fixing of a date does not mean that a creditor who
fails to prove within the time is excluded altogether. He
may come in and prove at any time, before the company is
dissolved. The only penalty is that he disentitles himself
from participating in any dividend declared before he
comes in. That is to say, he will not be allowed to disturb
or reopen dividends already declared."
16. Though Mr. Savant has relied upon the judgment of Delhi High
Court in support of his proposition that it is the actual distribution
which cannot be disturbed and not declaration of dividend, upon
reading of the said decision, there is no such legal principle formulated
by the Delhi High Court. In facts of that case, the dividend declared was
already distributed and prayer was for recall of the distributed
Sairaj 14 of 16
IA(L)-22790-2025 (final).doc
dividend which was negated by the Delhi High Court by relying upon
the decisions of various Courts.
17. Mr. Cama has rightly pointed out from the Official Liquidator's
Report No. 38 of 2025 and extract of Ministry of Corporate Affairs
website that the name of Applicant as secured creditor is not in
respect of assigned loan and therefore, it cannot be said that the
Official Liquidator was aware of the claim of Applicant and should have
factored in the claim while seeking sanctioning of declaration and
payment of dividend and Mr. Savant has rightly not put forth such a
case. As far as the absence of modified charge being created, the same
is an issue which is required to be decided by the Official Liquidator
while adjudicating the claim of the Applicant.
18. The proper relief to be sought by the Applicant was direction to
the Official Liquidator to make payment out of monies lying in the
hands of Official Liquidator available for distribution of dividend
before that money is applied for payment of future dividend. The
Applicant gets a priority over the future dividend but is not entitled to
participate in the dividend already declared or paid.
19. In light of the explanation tendered in the Application delay of
474 days stand condoned and the Official Liquidator to adjudicate the
claim of the Applicant in its own merit and in accordance with law and
uninfluenced by the observation made in the present order. The relief
Sairaj 15 of 16
IA(L)-22790-2025 (final).doc
of recall of order dated 30th June, 2025 passed in Official Liquidator's
Report No. 38 of 2025 in Company Petition No. 907 of 2005 and
reconsideration of process of distribution of dividend and adjudicating
the Applicant's claim on merits before undertaking any disbursements
from the available funds stands rejected.
20. Interim Application is partly allowed in the above terms.
[Sharmila U. Deshmukh, J.]
21. At this stage, request is made by Mr. Savant for stay of the
proceedings. Considering that issue is as regards the distribution of
dividend to the secured creditors and workers, this Court is not
inclined to grant any stay.
[Sharmila U. Deshmukh, J.]
Sairaj 16 of 16
Signed by: Sachin R. Patil
Designation: PS To Honourable Judge
Date: 04/08/2025 20:57:28
