M/S India Capacitors Ltd. vs
2010 Latest Caselaw 2409 Del

               IN THE HIGH COURT OF DELHI AT NEW DELHI

                            COMPANY JURISDICTION

        CO. APPL. NO. 839/2010 IN CO. PET. NO. 238/1997

                                               Date of Decision : 05-05-2010

In the matter of:-

M/s India Capacitors Ltd.
                                      Through : Mr. Adarsh B. Dial, Sr. Adv.
                                                with Mr. Vishal K. Kaushik,
                                                Adv. for the petitioner

                                                    Ms. Manisha Tyagi, Adv. for
                                                    the Official Liquidator

CORAM :

        HON'BLE MR. JUSTICE SUDERSHAN KUMAR MISRA

1.      Whether Reporters of local papers may be allowed to see the
        judgment? Yes
2.      To be referred to the Reporter or not? Yes
3.      Whether the judgment should be reported in the Digest? Yes


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 bonafide".

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. 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. 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. 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.

12. The application is dismissed in view of the above reasons.

SUDERSHAN KUMAR MISRA, J.

May 05, 2010 rd