IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.11.2011 CORAM THE HON'BLE MRS. JUSTICE R.BANUMATHI and THE HON'BLE MS. JUSTICE R.MALA O.S.A.No.323 of 2010 M/s.S.M.S.Traders, represented by its Proprietor, S.M.Mohamed Sait, No.9, Alagar steet, Begampur, Dindigul-624 002. ... Appellant Vs. The Official Liquidator of the High Court, Madras as the Official Liquidator in South India Viscose Industries Limited (SIVIL), (In Liquidation) Kuralagam, Chennai-600 104. ... Respondent Original Side Appeal is filed under Order XXXVI Rule 1 of the Original Side Rules read with Clause 15 of the Letters Patent against the order dated 07.06.2010 made in C.A. No.968 of 2008 in C.P.No.17 of 2004 on the file of this Court. For Appellant : Mr.B.Kumar Senior Counsel for Mr.M.Santhanaraman For Respondent : Mr.Arvind P.Datar Senior Counsel for Mr.B.Dhanraj for Official Liquidator JUDGMENT R.BANUMATHI,J. Challenge in this appeal is the order dismissing the application C.A.No.968 of 2008 in C.P.No.17 of 2004 [07.06.2010] whereby the learned single Judge declined to issue direction to the Official Liquidator to pay a sum of Rs.49,20,061/- to the Appellant towards the value of 4500 MTs of pulpwood supplied by them. 2. Brief facts are that on 06.04.2000, Appellant had supplied pulpwood to the Company in liquidation – M/s.South India Viscose https://hcservices.ecourts.gov.in/hcservices/ Industries Limited, Coimbatore (SIV Industries) subject to the terms and conditions of supply. Both Appellant and the Company in liquidation entered into a contract for supply of 4500 MTs of pulpwood. Supply of pulpwood is subject to terms and conditions as per the enclosure to the letter dated 06.04.2000. Company reserved the right to reject the part/full load of pulpwood supplied if the supply was found to be nor in accordance with specification. The pulpwood supplied by the Appellant was not accepted. On 06.04.2002, Appellant wrote a letter to the Company in liquidation to return the pulpwood supplied, as the pulpwood supplied was not accepted. On coming to know about the proceedings before the Board for Industrial and Financial Reconstruction [BIFR], on 04.02.2004, Appellant is said to have preferred Application in Case No.71 of 2002 seeking for grant of permission to the Appellant to remove/lift the pulpwood supplied to the Company in liquidation which are lying in the premises of SIV Industries Limited in Sirumugai factory in Mettupalayam, Coimbatore. By the order dated 25.8.2004 in C.P.No.17 of 2004, the said Company – SIV Industries was ordered to be wound up and the Official Liquidator of the High Court became the liquidator of the said Company. Court issued further directions directing the Official Liquidator to take charge of all the assets and effects of the Company. 3. Earlier, Appellant had filed application to return the pulpwood in C.A.No.1721 of 2006. In C.A.No.1721 of 2006, learned single Judge held that it cannot be said that the Appellant continued to be the owner of the pulpwood supplied by them and that since Appellant was shown as creditor of the Company, as unsecured creditor, Appellant has to file only a Claim with the Official Liquidator. Observing that the Appellant is only an "unsecured creditor" and not owner of the pulpwood supplied by them to the Company in liquidation and that the entire pulpwood available in the factory premises were already lifted by the successful bidder, by the order dated 02.08.2007, the learned single Judge dismissed A.No.1721 of 2006. 4. Being aggrieved by the order of single Judge, Appellant has preferred O.S.A.No.309 of 2007. Setting aside the order of single Judge, by the judgment dated 25.02.2008, the Division Bench held that the pulpwood was not accepted by the Company and by letter dated 15.07.2002, SIV Industries has specifically rejected the pulpwood. 5. C.A.No.968 of 2008 was filed by the Appellant seeking to direct the Official Liquidator to pay a sum of Rs.49,20,061/- to the Appellant towards the value of 4500 MTs of pulpwood supplied by them stating that the Division Bench has concluded in effect that the Appellant's property had been wrongfully sold by the Official Liquidator and that the Appellant is not an ordinary creditor to file their Claim before the Official Liquidator and therefore, the Appellant is entitled to be paid the amount equivalent to the value https://hcservices.ecourts.gov.in/hcservices/ of 4500 MTs of pulpwood supplied. 6. Upon consideration of rival contentions, learned Judge held that the Division Bench has never held that Appellant is a secured creditor. Accepting the contention of the Official Liquidator, the learned Judge held that Applicant-Appellant has to file his claim with the Official Liquidator under Rule 151 of Companies (Court) Rules read with Form No.66 and if any such claim is filed, the same would be considered as per law. Being aggrieved by the order of learned single judge, Appellant has preferred this appeal. 7. Mr.B.Kumar, learned Senior Counsel for Appellant has contended that once the pulpwood was not accepted, the Company must be said to be holding the property in interest of the Appellant and in view of the findings in O.S.A.No.309 of 2007, Appellant is entitled to receive the amount of Rs.49,20,061/-. It was further submitted that the learned Judge failed to appreciate that by the letter dated 15.07.2002, the Company has rejected 4500 MTs of pulpwood and also permitted the Appellant to take the pulpwood and while so, the learned Judge erred in saying that Appellant is not a secured creditor and that he has to make the claim before the Official Liquidator. 8. Mr.Arvind P.Datar, learned Senior Counsel appearing for the Official Liquidator has submitted that the Division Bench does not state to pay the amount to the Appellant treating them as secured creditor. Drawing our attention to the terms and conditions of the purchase of pulpwood, the learned Senior Counsel would further submit that Appellant is only an unsecured creditor and the learned Judge has rightly dismissed the application. Learned Senior Counsel would further submit that when there is specific provision under Rule 151 of Companies (Court) Rules, 1959 and that the claim is to be filed before the Official Liquidator as per Form No.66, Appellant cannot invoke Rule 9 – inherent power of the Company Court and seek for the relief. 9. We have given our anxious consideration to the contentions of the parties and also perused the records and the impugned order. 10. The Company – M/s.SIV Industries ordered to be wound up by the order dated 25.08.2004. Appellant had filed application C.A.No.1721 of 2006 only on 26.09.2006, after the order came to passed in respect of M/s.Moulana Traders in C.A.No.1509 of 2004. In C.A.No.1721 of 2006, Appellant prayed for permission for lifting the pulpwood and the same was dismissed [02.08.2007] on the findings:- ●In their reply dated 16.4.2002, the then Vice President (Finance) of M/s.SIV Industries Limited informed the Appellant that as on 31.03.2002, a sum of Rs.42,46,264.09 is the credit balance towards the Applicant-Appellant. https://hcservices.ecourts.gov.in/hcservices/ In the light of the terms and conditions of the supplies made and the correspondence exchanged between the parties, it cannot be said that Applicant-Appellant continued to be the owner of the pulpwood supplied by them. ●Applicant-Appellant was only an unsecured creditor and not the owner of the pulpwood supplied by them to the Company in liquidation. 11. As against the said order in C.A.No.1721 of 2006, Appellant has preferred appeal in O.S.A.No.309 of 2007. Referring to the Purchase Order dated 06.04.2002 and in particular Clause 16 and in the light of the rejection letter dated 15.07.2002, the Division Bench of this Court held that there was no transfer of right in the pulpwood to the Company in liquidation. After extracting the letter dated 15.07.2002 and setting aside the order of single Judge, the Division Bench held as under:- "... From the aforesaid letter it will be evident that the supply of pulpwood, as claimed by appellant was not accepted by the company and by their letter dated 15th July, 2002, they have specifically rejected the same. There is nothing on the record to suggest that the Company assured the appellant to pay the amount of supply of such pulpwood nor there is anything on record to show that the amount was accounted for. In view of our finding, the order passed by learned judge cannot be upheld. We accordingly, set aside the order dated 2nd Aug., 2007, passed by learned judge in C.A. No.1721/06 in C.P.No. 17/04. So far as prayer for lifting of pulpwood is concerned, as the pulpwood in question has already been auction sold, we reject such prayer as made by the appellant. However, it will be open to the appellant to seek for appropriate relief in the pending case. The appeal stands disposed of with the aforesaid observation, but there shall be no order as to costs." By reading of the above, it is made clear that "with reference to the letter dated 15.07.2002, the Division Bench stated that the pulpwood was not accepted by the Company". The Division Bench has not specifically stated that the Appellant is to be treated as secured creditor. In O.S.A.No.309 of 2007, the Division Bench while saying that the pulpwood was not accepted has not given finding regarding payment. 12. Now while considering the claim of the Appellant for payment of Rs.49,20,061/- being the value of 4500 MTs, latches on the part of the Appellant need to be noted. As is seen from the letter dated 15.07.2002, the pulpwood was rejected way back in 2002. As pointed https://hcservices.ecourts.gov.in/hcservices/ out earlier, the Company in liquidation was ordered to be wound up by the order dated 25.08.2004. After passing winding up order, the Court was incharge of the assets and effects of the Company through the Official Liquidator. When the Court passes the order of winding up, the Company ceases to carry on its normal business. It continues its business for the limited purpose of winding up affairs. Appellant had not chosen to file application seeking permission to lift 4500 MTs of pulpwood. Only after the application filed by M/s.Moulana Traders in C.A.No.1509 of 2004 in C.P.No.17 of 2004 was allowed on 01.02.2006, Appellant has filed the application C.A.No.1721 of 2006 on 26.09.2006. No reason is forthcoming for the delay in making the claim. The delay in making the claim is to be taken note of. 13. As per the enclosure to the Purchase Order dated 06.04.2000, it is seen that the purchase of pulpwood is subject to the terms and conditions indicated in the enclosure. Clause 16 deals with right to reject the pulpwood supplied which reads as under:- "16. The company reserves the right to reject part/full load of the pulpwood supplied, if the same is found to be not in accordance with the specification mentioned above. Penalty is liable to be levied for such supplies as considered fit. On such rejection the rejected goods shall be taken back by the supplier at his risk and cost. The company shall not be responsible for any damage or deterioration in quality when once the goods are rejected." Clause 16 makes it clear that on rejection of goods, the Appellant is to take back the goods at his risk and cost. Thus the rejected pulpwood was lying at the risk of the Appellant. 14. As per Section 43 of Sale of Goods Act, 1930, it is not the duty of the purchaser who refuses to take delivery to return the goods to the seller from the place of delivery at his cost. Section 43 reads as under:- "43. Buyer not bound to return rejected goods. - Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he intimates to the seller that he refuses to accept them." When the buyer refuses to accept the goods, it is sufficient if he intimates to the seller about his refusal to accept the goods. By a reading of Section 43 of Sale of Goods Act read with Clause 16 of the Purchase Order, it cannot be said that the Company in liquidation is bound to pay the amount for the rejected pulpwood. https://hcservices.ecourts.gov.in/hcservices/ 15. As rightly pointed out by the learned single Judge, the Division Bench had not specifically held that Appellant is to be treated as "secured creditor". The Division Bench has only held that supply of pulpwood was not accepted by the Company and that by the letter dated 15.07.2002, they have specifically rejected the same and there is nothing on record to suggest that the Company assured the Appellant to pay the amount of supply of such pulpwood. 16. We may also note that for the claims made by the secured creditors/bankers as against the amount of claim, only a proportionate amount was admitted. Like wise, the Court has ordered dividend at 12 paise in a rupee on four occasions to the workmen creditors of the Company in liquidation, totalling dividend at 48 paise in a rupee. When that is the position of the secured creditors and the workmen, Appellant is not justified in claiming payment for the entire pulpwood supplied. 17. In its judgment, the Division Bench observed that it would be open to the Appellant to seek for appropriate relief in the pending case. Once the Court passes the order of winding up, as per Rule 151 of Companies (Court) Rules, affidavit proving a debt showing particulars of debt shall be filed before the Official Liquidator in Form No.66. When there is a specific provision for filing the claim before the Official Liquidator, Appellant is not justified in invoking Rule 9 – inherent powers of the Court. Rule 9 of Companies (Court) Rules is analogous to Section 151 of Code of Civil Procedure. It is well settled that inherent power of the Court under Rule 9 of Companies (Court) Rules cannot be invoked where express provision is made for the relief by conferring power upon other authorities. The Division Bench only directed the Appellant to make a claim as per law. Appellant ought to have made claim only before the Official Liquidator. 18. Learned single Judge has rightly held that the Division Bench has never held that the Appellant is a "secured creditor" and that Appellant must only make its claim with the Official Liquidator under Rule 151 of Companies (Court) Rules in Form No.66. We do not find any reason warranting interference with the order of learned single Judge and the appeal is bound to fail. 19. In the result, the appeal is dismissed. Consequently, connected M.Ps. are closed. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ bbr To The Sub Assistant Registrar, Original Side, High Court, Madras. Copy to: The Official Liquidator 1 CC to Mr.B.Dhanraj, Advocate, SR.71878 1 CC to Mr.M.Santhanaraman, Advocate, SR.71789 O.S.A.No.323 of 2010 JP(CO) SRA(9/12/2011) https://hcservices.ecourts.gov.in/hcservices/