Madras High Court
Jayanthi Ramachandra vs The Official Liquidator on 3 February, 2021
O.S.A.No.296 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 03.02.2021
CORAM :
THE HON'BLE MR.SANJIB BANERJEE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
O.S.A.No.296 of 2020
Jayanthi Ramachandra
Ex-Chairman of M/s.VTX Industries Ltd.,
W/o.A.L.Ramachandra
No.166-A, Tea Estate
Race Course, Coimbatore – 641 018. ... Appellant
Vs.
1. The Official Liquidator
High Court, Madras
as the Liquidator of M/s.VTX Industries Limited
(In Liquidation)
No.29, Corporate Bhavan
2nd Floor, Rajaji Salai
Chennai – 600 001.
2. The Authorised Officer
JM Financial Asset Reconstruction Company Limited
Register Office 7th Floor
Cnergy, Appasaheb Marathe Marg
Prabhadhevi, Mumbai – 400 025.
3. UCO Bank
1524, 1287, Trichy Road
Coimbatore – 641 018.
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4. United Bank of India
Coimbatore Branch
24/831-832, Oppanakara Street
Coimbatore – 641 001.
5. Indian Overseas Bank
Park Square Branch
Uppilipalayam, Coimbatore – 641 018.
6. Andhra Bank
Main Branch
No.17, Mill Road
Coimbatore – 641 001.
7. Yes Bank Limited
9th Floor, Nehru Centre
Discovery of India
Dr.Annie Besant Road, Worli
Mumbai – 400 018.
8. IDBI Bank Limited
Coimbatore Branch, City SME Centre
No.72, May Flower Castle
Dr.Balasundaram Road
Coimbatore – 641 018.
9. Indian Renewable Energy
Development Agency Limited
Core & # 126, 4A, East Court
1st Floor, India Babital Centre
Lodi Road, New Delhi – 110 003.
10.CITI Bank
No.2, Club House Road
Anna Salai, Chennai – 600 002.
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O.S.A.No.296 of 2020
11.IDBI Trusteeship Services Limited
Asian Building Ground Floor
17, R.Kamani Marg, Ballard Estate
Mumbai – 400 001.
12.ICICI Bank Limited
Coimbatore Branch
1090, 1st Floor, Cheran Plaza
Trichy Road
Coimbatore – 641 018.
13.HDFC Bank Ltd.
HDFC House, No.29
Kamaraj Road
Coimbatore – 641 018.
14.Tamil Nadu Industrial Investment
Corporation Limited
United Shopping Complex
1st Floor, No.94, Dr.Nanjappa Road
Coimbatore – 641 018.
15.S.E.Industries Limited
4 & 126, 547, 2nd Floor
Main Road, Shankar Pur
New Delhi – 110 092.
16.K.Rajendran
rep. by its Secretary of
Coimbatore Periyar District
Thravida Panjalai Thozilalar Munnetra Sagam
(M.L.F) No.2/189, Palladam Road
Puliampatti Post, Pollachi Taluka
Coimbatore District – 642 002.
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O.S.A.No.296 of 2020
17.The Directors (Purchaser)
Kovil Builders and Property
Developers Private Ltd.
Registered Office at No.99/20D
Chettipalayam Road
Easwar Nagar (Bus Stand)
Podanur, Coimbatore – 641 023. ... Respondents
Prayer: Appeal filed under Order XXXVI Rule 1 of the Original Side
Rules read with Clause 15 of the Letters Patent against the order dated
18.9.2020 passed in Company Application No.79 of 2020 in Company
Petition No.151 of 2013.
For Appellant : Mr.Om Prakash
Senior Counsel
for M/s.Ramalingam &
Associates
For Respondents : Mr.Bavisetty Sridhar
Deputy Official Liquidator
for 1st respondent
Mr.Srinath Sridevan
for 2nd respondent
Mr.P.V.Balasubramaniam
for 17th respondent
JUDGMENT
(Delivered by the Hon'ble Chief Justice)
The appeal is directed against a rather elaborate order of
September 18, 2020 passed on several company applications,
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O.S.A.No.296 of 2020
primarily brought by the former chairperson of a company in
liquidation.
2. There is no dispute that company VTX Industries Limited
went into liquidation in 2014 pursuant to an order of this Court.
The Official Liquidator attached to this Court was directed to take
possession of the company and its assets and it appears that the
Official Liquidator took possession of the registered office and
factory premises of the company in liquidation by or about August
7, 2015.
3. The company in liquidation had obtained credit facilities
from several banks and financial institutions prior to its liquidation.
Some of such secured creditors of the company in liquidation
transferred their securities and the debts due from the company in
liquidation to the asset reconstruction company which is arrayed as
the second respondent in the present appeal. Divers steps were
taken by or at the behest of the contributories of the company in
liquidation to thwart the secured creditors realising their dues.
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Even a writ petition is pending in this Court challenging the sales
conducted by the second respondent herein. The writ petition has
been filed by the present appellant.
4. In the detailed judgment impugned herein, the initial
consideration was as to the locus of the appellant herein to
complain of the matters pertaining to the company in liquidation.
The issue was answered substantially against the appellant,
particularly since the Official Liquidator had stepped in to take
control over the company and its assets and all matters pertaining
thereto. In the scheme of things as they stood under the
Companies Act, 1956, the Official Liquidator became the custodia
legis and all rights qua the company had to be exercised by or in
the name of the Official Liquidator. In such a scenario, the
chairman or the erstwhile chairman of the company in liquidation
could brandish the former designation in a decorative visiting card,
but it would be of little practical use in a court of law. Indeed, a
former director of a company or even its chairperson may only
assert such rights as are available to a contributory as an erstwhile
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O.S.A.No.296 of 2020
shareholder of the company in liquidation becomes upon the
company going into liquidation.
5. On the more practical side, given the huge debts of the
company in liquidation in the present case and where the secured
creditors of the company in liquidation may not be able to realise
the entire quantum of their dues, there would be little or nothing
left over down the line to hand over to the contributories of the
company after meeting the debts of the other persons who stand
ahead of the shareholders in the order of preference. Thus, the
element of financial prejudice suffered by the appellant in this case
has to be regarded as remote almost to the vanishing point.
6. The second aspect of the matter was that if the law as it
stands does not give the shareholder of a company the right to
proceed against a secured creditor of the company as a person
aggrieved, a contributory of a company in liquidation would have
almost no right. It is for the Official Liquidator of the company in
liquidation to protect the interest of all secured and other creditors
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and of the contributories of the company in liquidation. At the
highest, a contributory could approach the Company Court with a
request to direct the Official Liquidator to challenge anything
perceived to be wrong after, prima facie, establishing that there was
something remiss.
7. There are several creditors of the company in liquidation,
including secured creditors whose assets may not have been
assigned to the second respondent herein. Such secured creditors
and other creditors of the company in liquidation have more at
stake in the company in liquidation than the appellant herein and
such persons could also have approached the Company Court and
sought a direction on the Official Liquidator to pursue proceedings
against the second respondent herein. In the absence of any steps
being taken by such other persons, who had a much higher stake in
the company in liquidation than the appellant herein, the appellant's
approach has to be seen to be on rather infirm grounds.
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O.S.A.No.296 of 2020
8. It appears that a further grievance of the appellant was
that an undertaking had earlier been furnished by the second
respondent herein to the Company Court to keep the Official
Liquidator abreast of all that was happening pertaining to the
measures taken by the second respondent under Section 13 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002. The grievance aired by
the appellant before the Company Court was that notwithstanding
such undertaking, the Official Liquidator had been kept in the dark.
It further appears that the Official Liquidator attempted to add fuel
to the fire by indicating that the Official Liquidator may have not
been kept in the loop, so to say, by the second respondent herein.
However, the Company Court took a serious view of the matter,
particularly since an undertaking had been furnished and there was
no independent grievance by the Official Liquidator of such
undertaking having been breached. The Company Judge
appropriately perceived that in the rather weak action of the
appellant herein, the Company Court should not take cognisance of
the Official Liquidator's statement that the Official Liquidator may
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not have been kept informed at every stage by the second
respondent herein. The Official Liquidator was permitted to bring
an independent action against the second respondent if the Official
Liquidator perceived that the second respondent had breached the
undertaking furnished to the Court. It does not appear that the
Official Liquidator has carried a complaint in such regard to the
Company Court.
9. The other aspect of the matter that the appellant
emphasises on is the perceived undervalued sales apparently
conducted by the second respondent. Such matters can scarcely be
gone into at the behest of the appellant and the remote or
imaginary financial stake that the appellant has in matters of such
kind. There is an Official Liquidator in place who ought to be
following how the assets of the company are being dealt with by the
second respondent, albeit the second respondent standing outside
liquidation. There may be other secured creditors whose interests
run pari passu with the security interest assigned to the second
respondent that the Official Liquidator must necessarily protect.
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There is no doubt that if the Official Liquidator perceived that the
second respondent was upto some games or the second respondent
was compromising the interest of the company or selling its assets
cheap to the detriment of the other creditors, whether secured or
not, the Official Liquidator would have jumped into the fray. The
Official Liquidator, however, does not seem to have reacted.
10. The Company Judge has referred to the applicable law,
has traversed the entire gamut of the grievances aired by the
appellant herein and has arrived at the conclusion that the exercise
was in futility. Since relevant considerations have been taken into
account and the very locus of the appellant was called into question,
the matters appear to have been appropriately dealt with in the
judgment and order impugned herein.
For the reasons aforesaid, the judgment and order impugned
do not call for any interference. O.S.A.No.296 of 2020 is dismissed.
As a consequence, the completely unreasonsed ad-interim
protection given at the receiving stage of the appeal stands vacated
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O.S.A.No.296 of 2020
with immediate effect. There will be no order as to costs.
Consequently, C.M.P.No.14145 of 2020 is closed.
(S.B., CJ.) (S.K.R., J.)
03.02.2021
Index : Yes
sasi
To:
1. The Official Liquidator
High Court, Madras
as the Liquidator of M/s.VTX Industries Limited
(In Liquidation)
No.29, Corporate Bhavan
2nd Floor, Rajaji Salai
Chennai – 600 001.
2. The Authorised Officer
JM Financial Asset Reconstruction Company Limited
Register Office 7th Floor
Cnergy, Appasaheb Marathe Marg
Prabhadhevi, Mumbai – 400 025.
3. UCO Bank
1524, 1287, Trichy Road
Coimbatore – 641 018.
4. United Bank of India
Coimbatore Branch
24/831-832, Oppanakara Street
Coimbatore – 641 001.
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O.S.A.No.296 of 2020
5. Indian Overseas Bank
Park Square Branch
Uppilipalayam, Coimbatore – 641 018.
6. Andhra Bank
Main Branch
No.17, Mill Road
Coimbatore – 641 001.
7. Yes Bank Limited
9th Floor, Nehru Centre
Discovery of India
Dr.Annie Besant Road, Worli
Mumbai – 400 018.
8. IDBI Bank Limited
Coimbatore Branch, City SME Centre
No.72, May Flower Castle
Dr.Balasundaram Road
Coimbatore – 641 018.
9. Indian Renewable Energy
Development Agency Limited
Core & # 126, 4A, East Court
1st Floor, India Babital Centre
Lodi Road, New Delhi – 110 003.
10.CITI Bank
No.2, Club House Road
Anna Salai, Chennai – 600 002.
11.IDBI Trusteeship Services Limited
Asian Building Ground Floor
17, R.Kamani Marg, Ballard Estate
Mumbai – 400 001.
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12.ICICI Bank Limited
Coimbatore Branch
1090, 1st Floor, Cheran Plaza
Trichy Road
Coimbatore – 641 018.
13.HDFC Bank Ltd.
HDFC House, No.29
Kamaraj Road
Coimbatore – 641 018.
14.Tamil Nadu Industrial Investment
Corporation Limited
United Shopping Complex
1st Floor, No.94, Dr.Nanjappa Road
Coimbatore – 641 018.
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O.S.A.No.296 of 2020
THE HON'BLE CHIEF JUSTICE
AND
SENTHILKUMAR RAMAMOORTHY, J.
sasi
O.S.A.No.296 of 2020
03.02.2021
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