1 ca978-09.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY APPLICATION NO.978 OF 2009 Garware Employee Union through Its General Secretary Sudhakar B. More .. Applicant Versus The Official Liquidator, Garware Nylons Limited .. Respondents Mr.Omkar Gupte i/b. Pradnya Dalvi for applicant Mr.Sachin Joshi i/b. Bank of Maharashtra Mr.Venkatesh Dhond, Senior Advocate with Mr.Sachin Chandarana, Shravanth Purochori i/b. M/s.Manilal Kher Ambalal & Co. for ICICI – Secured Creditor Ms.Pallavi Shriti i/b. Wadia Gandhy & Co. for respondent No.14 Mr.J.P.Sen with Dr.T.Pandian Official Liquidator Mr.D.M.Thakkar i/b. Pragna Thakkar for IDBI CORAM : S.C.DHARMADHIKARI, J. 29th September 2011. P.C.: 1] This Application is moved by the Applicant Garware Employee Union seeking a direction to the Official Liquidator to furnish true and correct status of all payments, including Gratuity, 2 ca978-09.doc required to be paid to the workmen of the Company in Liquidation, Garware Nylons Ltd. There are other reliefs viz., a direction to the liquidator to bring back a sum of Rs. 14,98,00,000/- along with accrued interest from the secured creditors for distribution to the workmen of the company. This application is taken out on 20th July 2009 and in the affidavit which is filed in support thereof, it has been stated by the General Secretary that Garware Nylon Ltd., is a company in liquidation. By an order dated 18th December 1998 this company was ordered to be wound up under the supervision of the Court and Official Liquidator (Liquidator), High Court, Bombay came to be appointed as Liquidator of the respondent company. On behalf of the workmen, applicant Union filed certain claims and various orders were made from time to time. Those are relied upon and it is urged that by a letter dated 5th June 2009, the Liquidator informed the applicant that a sum of Rs.9,50,00,000/- is lying as investment in various Nationalised Banks. Then, there is a reference to certain status report and it is contended that the Liquidator should bring back the sum of Rs. 14,98,00,000/- in pursuance of a status report of 11th July 2005. 3 ca978-09.doc The distribution should be made, according to the applicants, in terms of the rules in place and not as has been done by the Liquidator. It has also been urged by filing further affidavits by the applicant that there is a status report dated 15th October 2009 and in terms of the same, it appears that the Liquidator has paid a sum of Rs.34,63,48,405/- to the three secured creditors being Industrial Credit and Investment Corporation of India (ICICI), State Bank of India (SBI) and Industrial Development Bank of India (IDBI) in or about 2000 as and by way of deposits with a condition that they will pay Interest thereon. It is then stated that the Liquidator paid to Punjab National Bank (PNB) which is also a secured creditor a sum of Rs.2,17,21,000/- as and by way of deposit with condition that it will pay interest thereon. The IDBI has paid an interest at 5.25% on the amount deposited with it, while no rates are indicated by ICICI, PNB and SBI on the deposits made with them by the Liquidator. It is thus alleged that ICICI and SBI have with malafide intention not filed statement of dues in terms of the minutes and, therefore, the Union proceeds on the basis that when banks and financial institutions charge compound interest in the event of default, then, this compound 4 ca978-09.doc interest component has been added at the time of adjudication of their claims. The claims are highly inflated. Relying upon the prevalent interest rate, it has been urged that the four creditors have not only earned money between 10 to 13% per annum from the deposits and they have also received dividend, then, the Liquidator should have obtained maximum rate of interest and not settled on meager rates such as 5.25% p.a. In these circumstances, the rate of interest be fixed at 12% p.a. These are the statements which are made in the further affidavit of the applicant – Union. 2] It would be desirable to then refer to the affidavits which have been filed on behalf of the applicant, after certain orders and directions in this application have been passed. It is stated that on 11th August 2010, this Court directed the Liquidator to provide particulars and, thereafter, permitted the applicant to adopt appropriate proceedings. A reference is also made to the inspection which has been given to the Chartered Accountant and the Advocate for the applicant and according to them, the same reveal that ICICI has not paid any interest on the amount 5 ca978-09.doc of Rs.28,98,44,978 deposited by the Liquidator, but has falsely stated in the affidavit dated 25th March 2011 that it has paid interest. In fact a sum of Rs.99,57,989/- is payable by ICICI to the Liquidator. The other secured creditors with whom monies were deposited by the Liquidator i.e. IDBI and SBI have paid interest at the rate at which they though fit whereas PNB has refused to pay interest on the amount deposited. The Liquidator has failed to realise the liquid assets of the value of Rs. 22,17,62,421/-. In these circumstances by filing the affidavit affirmed on 29th November 2010 further directions have been sought by the applicant. 3] In the affidavits that has been filed on behalf of the applicant to deal with the affidavits of the concerned secured creditors/ banks dated 16th March 2011 in addition to controverting the statements made on behalf of the banks by the concerned officers, it is requested that this Court should initiate suo motu proceedings for contempt against the officers of ICICI and Liquidator because of the alleged collusion on their part. 6 ca978-09.doc 4] My attention is also invited to the Liquidator's report. The Liquidator has from time to time clarified the position by filing his affidavit. It has been stated that the statements regarding details of payment/ receipts to and from ICICI have been placed on record. It has also been contended that the Liquidator cannot be charged with any civil contempt nor is there any substance in the allegations made against him. It is stated that there was a delay in filing the report but no information has been held back. The Liquidator has filed a comprehensive report on the basis of particulars furnished by secured creditors in their respective affidavits, by taking assistance of a chartered accountant appointed pursuant to the orders of this Court. The Liquidator has then made independent assessment and it is not as if there is any collusion. It is stated that pursuant to the orders of this Court dated 10th February 2011, enquiry was held and the chartered accountant has submitted his report on 30th March 2011. It is stated by the Liquidator that the amount paid towards the reimbursement of expenses of Rs.1,48,00,000/- and the balance amount due on account of the deposit and interest due thereon is set out in the complete statement. The Liquidator, 7 ca978-09.doc therefore, has abided by the orders of this Court. There is absolutely no question of the Liquidator misleading or misinforming the Court and far from suppressing anything, the final report of the Liquidator dated 3rd August 2011 indicates that a letter was sent to ICICI bank to deposit Rs.1 Crore with the Liquidator and, further, to indicate the Interest rate on fixed deposits provided by the bank for financial years 2000 to 2010. However, a cheque was forwarded by the Advocates for ICICI for Rs.1 Crore. The rate of interest on fixed deposits that was prevalent at that point of time has not been provided. The Liquidator has sent reminders to ICICI to provide details. It is stated that it is not as if the Liquidator has not made any effort but has reconciled the accounts with the assistance of the chartered accountants, who have concluded that an amount of Rs.92,57,889/- is due from the ICICI bank for the period from 30th March 2001 to 10th October 2005, in the absence of prevalent rate of interest paid by the said bank. The Liquidator has clarified that though ICICI has deposited an amount of Rs.1 Crore against the outstanding sum of Rs.92,57,889/-, it did not pay any interest on Rs.8,97,75,000/- for the period 30th March 8 ca978-09.doc 2001 to 10th October 2005 when the State Bank of India and IDBI had paid interest at 6% and 5.25% on the similar deposits. Therefore, the Liquidator has sought directions to ICICI to deposit an amount of interest payable at the rate prescribed by this Court. 5] There are affidavits which have been filed on behalf of secured creditors and what emerges from a reading of the same and particularly that of the ICICI bank is that the said bank has received the total amount of Rs.28,43,44,878 and not Rs. 28,43,44,879/-. This amount comprises an amount of Rs. 8,97,75,000/- being entitlement of ICICI from the sale proceeds as recorded by the order passed by this Court in its order dated 3rd August 2000 and 29th September 2000. ICICI is the first charge holder in respect of the Plot No.A-4 and an amount of Rs. 19,45,69,878/- was towards deposit with ICICI in its capacity as Bank. After adjusting dividend paid to ICICI pursuant to the order of D.R.T. Mumbai on 10th January 2005, an amount of Rs. 15,00,29,744/- was earmarked for ICICI. Accordingly, an amount of Rs.13,43,15,134/- was due and payable by ICICI to Liquidator, 9 ca978-09.doc as per the letter dated 10th January 2006 of the Liquidator. In the meanwhile, in the meeting held in the office of the Liquidator on 24th January 2006, it was decided that ICICI bank may be allowed to retain a further sum of Rs.1 Crores pending reconciliation of accounts. Therefore, ICICI was required to bring back Rs.12,43,15,134/-, including interest of Rs.48,42,111/- on the deposit vide its Advocate's letter dated 30th January 2006. The rate of interest offered by ICICI has been explained in the affidavit dated 25th March 2010. 6] It is stated that an order was passed by this Court in Company Application Lod.No.459 of 2000 on 29th September 2000, directing that ICICI should be paid Rs.1.48 Crores towards reimbursement of expenses (security and insurance) charges incurred by the bank. Out of the said sum, in the light of the objection of IDBI at that time an amount of Rs.1.48 Crores was paid to ICICI. Thus, in the light thereof only a sum of Rs.1 Crores remains to be brought back to ICICI which amount it will do so subject to clarification by ICICI as first charge holder on the properties of the respondent company in liquidation. 10 ca978-09.doc 7] As far as the amount of Rs.8,97,75,000 received earlier against an undertaking dated 6th February 2001 filed before this Court, it is stated that this forms part of the total amount of Rs. 15,00,29,744/- which was earmarked for ICICI, as per the order of DRT. Therefore, once the sale proceeds have been disbursed to the secured creditors and the dividend was declared, yet, in terms of the letter of the Liquidator dated 10th January 2006 asking ICICI to bring back the amount, all that is now required to be done is to discharge ICICI from the undertaking, to the extent of money brought back. It is also stated that ICICI will bring back the amount without any protest or demur provided the court is satisfied that the disbursement of sale proceeds to the secured creditors and workers after following due process of law and interest of the debenture holders for whom ICICI Bank is acting as a debenture trustee has been rightly protected. 8] It is on the basis of this material and considering the stand of the applicant and ICICI that the contesting parties were heard by me. 11 ca978-09.doc 9] It is also clear from the further report of the Liquidator dated 28th June 2011 that the Liquidator refers to the order passed on 18th February 2010 in Company Application No.1134 of 2010 and clarifies that the fund available to the credit of the company in liquidation was Rs.10,53,72,098 as on February 2010. In para 7 what has been pointed out are respective claims, including that of the workers and the dividend that the Liquidator proposes to declare. The summary of the same is also set out and there is a request to modify the earlier order and permit the Liquidator to pay interim dividend at 18% to those workers on the first supplementary list who were not paid earlier dividend at 12% and to workers, banks and financial institutions instead of 5%, an additional interim dividend at 27% only to the certified list and first supplementary list. The Liquidator has, therefore, prayed for certain directions in these terms and modifications or recalling of the order dated 28th July 2010 to the extent of declaration of dividend. 10] The grievance of the applicant is that the ICICI has not 12 ca978-09.doc abided by the court's orders and directions and rather has enriched itself by retaining the benefits on the deposit which have been made by the Liquidator. Once the ICICI was aware of the fact that it was required to bring in the monies which have been deposited by the Liquidator with interest thereon, then, its failure to disclose the applicable rate of interest for the aforementioned and aforestated years, amounts to withholding the sums that are due and payable and colluding with the Liquidator and depriving the applicants and other secured creditors of their legitimate dues. A serious view ought to be taken and my attention is invited to several statements and documents in that behalf. Firstly, it was urged that the order passed on 13th November 2009 by this Court directs making of a consolidated and proper report disclosing interest which has been allowed by the secured creditors on the amounts that have been deposited with them by the Liquidator. 11] This was because a status report dated 15th October 2009 was placed before this Court and after perusing the same and hearing parties, this Court was of the opinion that a proper 13 ca978-09.doc account may be taken of the monies that were deposited by the Liquidator with secured creditors and dues of the creditors that have been adjudicated upon and, therefore, opportunity would have to be granted to the secured creditors to explain the position to the Liquidator and, therefore, while permitting the chartered accountant to be engaged and assignment being carried out in terms of the directions, further report was directed to be placed. 12] It has been stated in one of the earlier affidavits, according to the applicants and which affidavit does not give a complete picture inasmuch as what it discloses to this Court, that the bank has received from the Liquidator a sum of Rs.28,43,44,978/- less dividend paid and balance due from the bank, then, the expenses which have been withheld, amount due to be paid to the Liquidator and less the amount actually returned to the Liquidator discloses interest of Rs.48,42,011/-. 13] On this the applicant had brought to the notice of the Court that the inspection reports indicate that ICICI has not paid any 14 ca978-09.doc interest on the amount of Rs.28,91,44,978/- deposited by the Liquidator but he has falsely stated in the affidavit that it has paid interest on this sum. A sum of Rs.99,57,989/- is payable by the ICICI to the Liquidator. Various pleas, therefore, have been raised to support the contentions and allegations, including that of collusion and contempt. My attention is invited to the Annexures to the affidavit which has been filed on 16th March 2011 on behalf of the applicant. 14] My attention is also invited to a report/ letter of the chartered accountant which states that the re-verification of the details mentioned in the affidavit of the Liquidator, confirm that ICICI is required to pay an amount of Rs.92,57,889/-. However, as directed by this Court the interest due from ICICI for the period 30th March 2001 to 10th October 2005 in the absence of prevailing rates of interest could not be computed. The bank has been sent reminders but still the interest has not been worked out. The bank has deposited Rs.1 Crore and that has been noted. 15 ca978-09.doc 15] My attention is also invited to the affidavit of 16th March 2011 and certain charts which have been placed on record. It is on this basis that it is urged that this Court should take strict view of the proceedings and the conduct of ICICI and initiate suo motu contempt proceedings. 16] Mr.Dhond, learned Senior Counsel appearing for ICICI submitted that there is no question of any contempt much less collusion with the Liquidator. What has been repeatedly emphasised on behalf of ICICI is that this Court has taken note of the proceedings initiated by ICICI before the DRT. Mr.Dhond invites my attention to the order dated 3rd August 2000 which has been passed by a learned Single Judge on Company Application Lod.No.459 of 2000 in Company Petition No.521 of 2000. It is submitted that this was a company application by the ICICI bank and which approached the Court with clear case that it has to recover a sum of Rs.83.34 Crores. It has filed a suit for recovery. This suit was transferred to DRT but has been brought back to this Court. This Court noted that the applicant ICICI along with two others viz., IDBI and SBI claim first charge over the property 16 ca978-09.doc coupled with the fact that amount due and payable to the applicant is substantial. As far as these applicants are concerned, they are entitled to appropriation of sale proceeds as per their share in the property which has been sold i.e. Lot No.4- A. The applicants and other financial institutions viz., IDBI and SBI are required to give and file an undertaking to the effect that they will bring back the amount as and when the Court directs them and they will pay interest as will be directed by the Court in the event of any orders being passed by which the applicants are directed to return the amount to adjudicate the claim of any other claimants or workers who rank pari pasu along with the applicants. Thus the submission of Mr.Dhond is that there is no question of any collusion or deliberate delay or a clandestine act. The orders of this Court permit the applicant to take monies and retain the same until they are directed to be brought back. 17] Mr.Dhond has handed over three statements and he submits that as far as the claim of ICICI bank as first charge holder is concerned it is Rs.8,97,75,000/- as on 30th March 2001 pursuant to the order dated 3rd August 2000 and 29th September 17 ca978-09.doc 2000 of two learned Single Judges of this Court. The share of ICICI in the sale proceeds is Rs.15.27 Crores as calculated by the Liquidator vide its letter, which may be ad hoc. However, as per the Liquidator's letter dated 10th January 2006, a sum of Rs. 8,22,54,744/- was received by ICICI, making in all Rs. 15,00,29,744/- . 18] Mr.Dhond then submits that ICICI bank has received deposits from Liquidator and they are of Rs.2 Crores on 14th December 2004, Rs.50,27,405 on 23rd March 2005 and Rs. 16,95,42,473/- that is received on 27th August 2005. The interest that accrues on these sums amounts to Rs.55,81,310 and actually the interest that is paid is Rs.48,42,211/-. Beyond the difference of Rs.7,39,199/- nothing more is due and payable. The amount of Rs.1 Crore was to be retained by the bank pursuant to the directions of Liquidator in the meeting dated 24th January 2006. An amount of Rs.12,91,57,245/- was paid to Liquidator on 30th January 2006 and an amount of Rs.1 Crore was paid to him on 27th July 2011. Mr.Dhond, therefore, invites my attention to the fact that the statements indicating rates of interest on the 18 ca978-09.doc deposits made by the Liquidator and the interest that accrued thereon for the respective time periods would reveal that the ICICI has not paid anything which is lower than what has been disbursed by IDBI and SBI. There is no question, therefore, ICICI enriching itself as has been falsely alleged far from there being any collusion leave alone contempt of the Court's order and directions. 19] Mr.Dhond therefore, submits that it is not as if the ICICI has not given interest on the deposits. The rate of interest that has been applied on the deposits is in tune with the applicable rate. If no material is brought forward in this behalf, then, the allegation of contempt has no basis. 20] After hearing learned Counsel for the applicant Union, Liquidator and ICICI, I am of the view that there is no basis to proceed and accept the allegations insofar as collusion or contempt on the part of the Liquidator and the ICICI bank. This is a case where the amounts which are lying with the three banks as investments were to be brought back in terms of the orders of 19 ca978-09.doc this Court, if called upon. However, after the order passed in the year November 2009, it has been clarified in the status reports that the ICICI did not mention in the affidavit interest provided on various deposits. The Liquidator's report of 18th February 2010 states that the ICICI paid Rs.51 Crores. In addition to the amount the undisclosed portion of the interest on various investment is to be added. Repeatedly, ICICI accordingly to the Liquidator, has not forwarded the details of the rate of interest prevailing between March 2001 to January 2006. The affidavit of ICICI bank in reference to this report states that in view of the table that has been mentioned in the affidavit dated 25th March 2010 no amount is due and payable from Bank to Liquidator and the Bank has complied with directions of this Court vide 13th November 2009. 21] The applicant would still urge that the ICICI bank has failed to clarify the position with regard to the stipulations of interest. In fact, for any defaults by its constituents and borrowers, the bank would charge compound interest. It is the grievance of the Union that such compound interest be levied because the bank has 20 ca978-09.doc failed to disclose the fact that it was to indicate the total amount plus interest which has been allowed. The ICICI bank had in fact admitted at one stage that Rs.51,57,989 was due and payable by ICICI to the Liquidator. 22] To my mind, in the application that has been filed by the Union seeking diverse reliefs, it will not be possible to issue any directions or proceed in contempt against the said bank and particularly, alleging violation of the order passed by this Court on 13th November 2009. 23] After hearing both sides and perusing with their assistance the statements which are Exh.”1” to the affidavit of Liquidator dated 8th February 2011 and those produced by the ICICI so also bearing in mind that SBI has brought back monies with 6% interest and IDBI with 5.25%, interest of justice would be served if ICICI is directed to bring the additional sum of Rs.1.25 Crores within four weeks from today, which sum shall be deposited with the Liquidator. This will conclude the issue as to the rate of interest that accrues on the sums which ICICI is stated to have 21 ca978-09.doc retained from 30th March 2001 till 30th January 2006. 24] The Company Application is disposed of with these directions but without in any manner initiating any proceedings as desired by the applicant. If the applicant who is stating to be representating workmen desires of pressing other claims and particularly in relation to gratuity payment, it is at liberty to raise such pleas before the Liquidator / appropriate authority at an appropriate stage. It can also initiate such proceedings as