N.P.V.
Ramaswamy Udayar Vs. All India Subscriber Association & Ors
[1993] INSC 292 (14 May
1993)
Sahai,
R.M. (J) Sahai, R.M. (J) Venkatachala N. (J)
CITATION:
1993 SCR (3) 903 1993 SCC (3) 233 JT 1993 (3) 452 1993 SCALE (2)938
ACT:
%
Companies Act 1956 : Ss. 391, 433, 434, 443- Subsidiary company conducting
chits-Default in payment to subscribers- Winding up order by High Court-Revival
effort and undertaking of liability to pay crediters by Holding
Company-Compromise and arrangement approved by High Court- Winding up order
held in abeyance-Permission for sale of land by Holding Company to pay
Creditors-Offer by individual-Counter offer by Creditors association-High
Court's order for sale in favour of creditors association- Appeals by Holding
Company and other bidder-Directions by Supreme Court protecting creditors
interests.
HEAD NOTE:
A
subsidiary company of the appellant-holding company (C.A. No. 2866 of 1993)
diverted to the appellant rupees ten crores received by it by way of chit
subscriptions. It failed to pay the subscribers the prize money. When some of
the subscribers initiated winding up proceedings against the subsidiary company
the appellant appeared before the High Court and undertook the liability of the
subsidiary company to an extent of a sum of Rs 10.40 Crores to the subscribers.
The
High Court approved the scheme of compromise and arrangement under s. 391 of
the Companies Act and directed the winding up order to be held in abeyance on
the condition that the appellant-holding company would pay off the amount or Rs.
10.40 Crores to the subscribers, within five years.
It
also restricted alienation (of any property by the holding company. Without
obtaining prior permission (of the Court. Even ten %,Cars after the order of
the High Court, more than one third of the subscribers remained unpaid.
Meanwhile
the appellant company took steps to sell 20.79 acres of land to pay the
Creditors. The appellant in C.A.No. 2863-65 (if 1973 made an offer where as the
respondent-creditors' association made a counter offer.
The
High Court accepted the (offer of Creditors' association. Hence the appeals by
special leave.
Disposing
of the appeals, this Court gave the following 904 Directions : 1. The holding
company shall deposit with the official Receiver fir Assignee concerned a sum
equivalent to the deposited sum on which the High Court had directed sale deed
to be executed in favour of the creditors association together with 25%
interest minus the interest, if any earned by the deposit, made, calculated (in
the deposited amount, from the date of deposit till 31st. July, 1993, within a
period of three months.
2. Out
of the amount mentioned in condition (1) above, a sum equivalent to the amount
deposited by creditors Association, together with interest at 25% thereon from
the date of deposit upto 31st
July, 1993 shall be
refunded to the creditors association in lieu of their claim for the disputed
land being given up. The balance amount shall remain for the benefit of general
body of creditors of the subsidiary company.
3.
Tile holding company shall pay through the receiver the entire outstanding
debts payable to the subscribers who were members of the creditors association
on the date when their claim applications were decided by the High Court,
together with interest thereon at 12 per cent from the date of decision till 31st July, 1993.
4. In
case the above terms and conditions are complied with, within the period
allowed then the disputed land offered for sale by the holding company and
purchased by creditors' associations shall stand released in holding company's favour.
If such deposits are not made, the sale in favour of creditors company shall
stand confirmed
5. In
view of the offer made by the appellant in Appeals No. 2863-65 of 1993, the
land on its release shall be sold, for a price not less titan five lakhs per
acre. The amount so realised shall also be deposited of the holding company
with the receiver for distribution among general body of creditors of the
subsidiary, company.
6.1.
The receiver shall further take steps to see that the holding company fulfils
its obligations and pays the entire balance within a period of one year from 31st August, 1993.
6.2.
In case of failure to clear the dues of all tile subscribers it shall he open
to an%. unpaid subscriber to approach the High Court for recalling the order
passed by the High Court for in 1983 direction the winding up to be plot in
abeyance, as well as to the steps to get the amount realised front assets of
905 the holding company. If such an application is made it shall be disposed of
by the High Court expeditiously in accordance with law after hearing parties
concerned.
CIVIL,
APPELLATE JURISDICTION: Civil Appeal Nos. 2863-65 of 1993.
From
the Judgment and Order dated 21.2.91 of the Kerala High Court in C.M.P. No.
2170/90, 596/91, 597/91 in M.F.A. No. 518 of 1981.
WITH Civil
Appeal No. 2960 of 1993.
K.K. Venugopal,
G. Ramaswamy, M.N. Krishnamani, K.P. Dandapani E.M.S. Anam, P.N. Puri, A.T.M. Sampath,
Pravir Choudhary for the Petitioner/ Appellant.
Shanti
Bhushan. Joshph Vellapall v. R.K.Jain, A Mariarputham, for M/s A. Mariarputham
and Mrs. Aruna Mathur for Mrs. Aruna Mathur & Co. for the respondents.
The
Judgment of the Court was delivered by R.M. SAHAI, J. How far could we protect
the interests of subscribers who had subscribed to a chit run by a subsidiary
company of the appellant ordered to be wound up when allegedly subscriptions
were made good by them not merely out of their hard savings but also of sums
got by even, pledging and selling the jewelleries and ornaments of their wives,
in the fond hope of getting a lumpsum amount on a future date, to meet the
expenses of marriages in the family or health hazards of family members and the
like, is the issue that really bothered us at the hearing of the appeals.
About
15 years ago the subsidiary company under winding up, diverted the amount of
rupees ten crores received by it by way of chit subscriptions to its holding,
company (the appellant) resulting in its inability to pay the subscribers, when
they became entitled to (yet the prize amounts. When some of the subscribers
approached the High Court and succeeded in getting the subsidiary company wound
up, the appellant holding company appeared in Court and prayed for an
opportunity to be given to it to revive its subsidiary company. That prayer was
accepted by a Division Bench of The Kerala High Court in the case of Suarshan
Chits (India) Ltd., v. G.S. Pilai ILR 1983 vol. 1 Kerala p. 700.
The
Division 906 Bench approved the scheme of compromise and arrangement under Sec.
391 of the Companies Act. Consequently, it ordered the winding up order to be
held in abeyance on condition that the holding company shall execute a security
bond to cover subsidiary company's liability to the extent of a sum of Rs.
10.40 crores owed to its subscribers. It also directed the holding company to
pay off that amount within a period of five years. Restriction was also placed
on alienation of any property by tile holding, company without obtaining prior
permission of the Court. Arrangement was made for managing, affairs of the
appellant-company as well. Apart from the Board of Directors an Additional
Director was nominated to supervise and keep a watch on the affairs of the
company. Since than the appellant company is run as directed by the High Court
but neither the subscribers are paid, as a body of creditors, not the entire
amount of rupees ten crores and odd is paid by the appellant to the subsidiary
company. True, that out of nearly one lakh subscribers. twenty nine thousand
and odd subscribers only remain unpaid. But, that is hardly satisfactory.
Regret
is that more than one third of the subscribers remain unpaid even after ten
years from the date the High Court ordered the winding up to be in abeyance.
Payment of rupees two crores and odd by the holding company which had the
benefit of ten crores and odd rupees for the last 15 years, which amount by any
standard is equivalent to fifty crores of rupees of today, we must state, is a
poor consolation, for the holding company to claim that all steps to discharge
its obligations is taken.
Having
noticed in brief, how matters have proceeded, we shall advert to the dispute
which has arisen in respect of an offer now made by the holding company to sell
20.79 acres of land for paying the creditors. Whatever that be, one situation
which has been brought about is, its successful attempt in involving, many
subscribers who had formed themselves into a creditors association and an owner
of a factory adjoining the disputed land, in litigation which has reached this
Court more than once. It is unfortunate that a company which had volunteered to
pay ten crores of rupees with in a period of five years has successfully evaded
the payment by offering a pittance. From the date of offer in 1987 six ears
have elapsed but no amount worth consideration, appears to have been paid to
the subscribers.
We
consider it unnecessary to recount in detail the offer made by Ramaswamy Udayar,
the appellant in the other appeal, counter offer made by the creditors
association, delay in payment by the association, extension of time by this
Court for payment by the association, withdrawal of offer by the holding
company in the meantime as the High Court had after detailed examination
accepted the offer of creditors association for purchase of disputed land and
rejection of the claim of Udayar. Nor do we consider it necessary to deal with
rival submission made by learned senior counsel appearing for respective
parties, although we heard them at length, as in our opinion that rupees fifty
two lakhs and odd the total amount for which the land 907 has to be sold could
hardly be sufficient to relieve the agony of the body of subscribers for whose
benefit the entire exercise was undertaken by the High Court.
As we
have understood the matter, there may be a grain of truth in the allegation
that it is Estate Dealers with vested interests who are interfering and in fact
the amount paid by the creditors association is of estate dealers. It may also.
be true that the total membership of the association is not even 5% of the
unpaid subscribers.
In the
said circumstances and taking into consideration the board consensus reached
among learned counsel as to what needs to be done, we decide the two appeals,
one filed by the holding company for release of the land and other by Udayar
for accepting his bid on the following terms and conditions:
(1)The
holding company shall deposit with the official Receiver or Assignee concerned
a sum equivalent to the deposited sum on which the High Court was pleased to
direct sale deed to be executed in favour of the creditors association together
with 25% interest minus the interest, if any earned by the deposit made,
calculated on the deposited amount, from the date of deposit till 31st July,
1993, within a period of three months from today.
(2)
Out of the amount of sale price of the land already deposited by the creditors
Association and the interest if any earned thereon plus the sums of money to be
deposited by the holding company under the above term and condition (1), a sum
equivalent to the amount deposited by creditors Association, together with
interest at 25% thereon from the date of deposit upto 31s t July, 1993 shall be
refunded to the creditors association in lieu of their claim for disputed land
being, given up. The balance amount shall remain the benefit of general body of
creditors of the subsidiary compa
(3)
The holding company shall pay the entire outstanding de (amounts) payable to
the subscribers who were members of creditors association on the date when
their claim applications w decided by the Kerala High Court, together with
interest there of 12 percent from the date of decision till 31st July, 1993,
within same period, namely, three months. This amount too shall deposited with
the receiver for immediate payment to those cre- 908 tors-subscribers for
giving discharge of their claims against the subsidiary company.
(4) In
case the above terms and conditions as to deposits to be made by the holding
company are complied with. within the period allowed, for which no extension of
time shall be granted, then the disputed land offered for sale by the holding
company and purchased by creditor's associations shall stand released in its
holding company's) favour. If such deposits are not made, the sale in favour of
creditors company shall stand confirmed.
(5) An
offer was made by the appellant in Appeal No. 6614 of 1991 that the land being
adjacent to its factory he was willing to pay even rupees five lakhs per acre.
Therefore, on release if the land is sold, it shall be sold, as and when such
occasion arises, for a price not less than five lakhs per acre. The amount so realised
shall also be deposited by the holding company with the receiver for
distribution among general body of creditors of the subsidiary company in
discharge of its obligations to pay of the creditors of the subsidiary company.
(6) (a)
The receiver shall further take steps to see that the holding company fulfils
its obligations and pays the entire balance within a period of one year from 31st August, 1993.
(b) In
case of failure to clear the dues of all the subscribers it shall be open to
any unpaid subscriber to approach the High Court for recalling the order passed
by the High Court in 1983 directing the winding up to be put in abeyance.
(c) It
shall also be open to the unpaid subscribers to approach the High Court for th
e aforesaid reasons mentioned in clause (b) to take steps to get the amount realised
from assets of the holding company. If such an application is made it shall be
disposed of by the High Court expeditiously in accordance with law after
hearing, parties concerned.
Both
the appeals are decided accordingly. The parties shall bear their own costs.
R.P
Appeals disposed of.
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