State of Punjab vs Northland Sugar Complex Ltd.

Mehinder Singh Sullar, J.—The State of Punjab through the Punjab State Industrial Development Corporation Limited (for short "the PSIDC") has directed the present company appeal against the impugned order dated 24-8-2006 (Annexure A3), vide which, the learned Company Judge dismissed its application, to release the payment out of the amount deposited by sale of sugar stock of M/s. Northland Sugar Complex Limited, Dasuya (under liquidation) (for brevity "the Company").

The brief facts, relevant for disposal of the present appeal and emanating from the record, are that the Company was dealing in sugarcane products. The farmers/canegrowers had supplied the sugarcane to the said Company, but it did not make the payments to them. One Shalini Industrial Corporation supplied the pipe fittings and valves to the Company, but it also failed to make the payment of the articles, which necessitated Shalini Industrial Corporation to file a Company Petition, on 17-4-1996, for winding up the Company. The learned Company Judge ordered the winding up of the Company, vide order dated 9-10-1997, the operative part of which, is as under:

After hearing the counsel and going through the record, prayer made in this petition is allowed and the respondent-company is ordered to be wound up. Order of winding up of respondent-company be published in one issue each of the Daily Tribune, Punjabi Tribune and Punjab Government Gazette. Official Liquidator attached to the Court is directed to take forthwith in his custody or under his control all properties, books of account and papers etc., of the company. It would be the duty of the company to deliver the possession of the properties of the company to the Official Liquidator.

As regards the objection raised by Mr. Narang, it is directed that the Consortium of Banks shall give details to the Official Liquidator of the assets and securities charged to the Consortium of Banks and on verifying and having been satisfied, the Official Liquidator shall keep the assets and securities charged to the Consortium of Banks being secured creditors, out of winding up proceedings.

Let a formal order for winding up of respondent-company be drawn in accordance with the rules.

As is evident from the record that during the pendency of the Company Petition, the PSIDC filed a petition for directing the Official Liquidator to release the payment out of the amount deposited by sale of sugar, to the State of Punjab for the payment to be made to the canegrowers, invoking the provisions of Section 475 of the Companies Act, 1956 (hereinafter to be referred as "the Act") read with Rules 150, 151 and 9 of the Companies (Court) Rules, 1959 (hereinafter to be referred as "the Rules"), inter alia, with the following prayers:

(a) That the loan of Rs. 15.72 crores was released by the State of Punjab in public interest as this Hon''ble Court was dealing with the matter by taking suo motu action with regard to payment of dues to farmers; therefore, it has the first claim over the funds lying with this Hon''ble Court on account of sale of sugar.

(b) That the sugar and other bye-products were sold by a committee constituted by this Hon''ble Court which resulted in denying the right to the farmers to claim the amount through the Cane Commissioner in terms of the statutory rules concerning the purchase of sugarcane and thus the claim the State Government would be first charge on the amount lying in the fixed deposit with the State Bank of Patiala, High Court Branch, Chandigarh.

(c) That the State Government was under no liability to make the payment and the same has been done in public interest and to safeguard the interest of the farmers who had supplied sugarcane to NSCL but were not released their payment due to litigation pending in different Courts.

(d) That even otherwise it is in the interest of justice that the loan of the State Government should be paid back as the loan has been advanced by the Punjab Rural Development Board and non-return of the same is affecting other development programmes.

On the strength of aforesaid grounds, the PSIDC prayed for the release of the amount, in the manner indicated hereinabove.

The respondent-Official Liquidator contested the claim of PSIDC and filed the written reply, inter alia, pleading certain preliminary objections of maintainability of the petition and locus standi of the PSIDC. It was claimed that the PSIDC is claiming the amount, in respect of a claim, which has been incurred by the State of Punjab, allegedly on behalf of the Company, under liquidation, after the date of its winding up. According to the Official Liquidator that in terms of the provisions of the Act, the value of all debts and claims against the Company, have to be determined, as on the date of order of winding up of the Company. Resultantly, no claim can be allowed, after the date of winding up of the Company and, thus, the said claim of PSIDC is not maintainable, under the provisions of the Act and the Rules framed thereunder. It will not be out of place to mention here that the respondents have stoutly denied all other allegations contained in the petition and prayed for its dismissal.

The learned Company Judge dismissed the application of the PSIDC, vide impugned order dated 24-8-2006 (Annexure A3).

The State of Punjab through the PSIDC did not feel satisfied with the impugned order (Annexure A3) and filed the present company appeal.

We have heard the learned Counsel for the parties and have gone through the record of the case with their valuable help.

Assailing the impugned order, at the very outset, learned Counsel for the PSIDC has contended with some amount of vehemence that once this Court ordered in Crl. Misc. No. 13130-M of 1996 that the amount of sale consideration of Sugar, Molasses and Burgesses would be deposited directly by the Chairman of the Committee or by its authorized representative in the State Bank of Patiala, High Court Branch in the name of Registrar of this Court and since it is proved that the State of Punjab sanctioned a loan of Rs. 15.72 crores for payment to the canegrowers, so, the learned Company Judge ought to have directed to release the amount to the State of Punjab in this regard.

Hailing the impugned order, on the contrary, it has been urged on behalf of the Official Liquidator that as all orders of this Court passed in Crl. Misc. No. 13130-M of 1996 were subject to the orders of learned Company Judge, therefore, the provisions of the Act will prevail.

The argument of learned Counsel for the PSIDC, at the first instance, appeared somewhat attractive, but when the same was scanned, in relation to the present controversy, then we cannot help observing the same is not only devoid of merit but misplaced as well.

The bare perusal of the record would reveal that in the wake of [Crl. Misc. No. 13130-M of 1996] titled as Court on its Own Motion v. State of Punjab issued certain directions on different dates, in order to protect the interest of the canegrowers and the public at large. In pursuance of the order, a Sale Committee was constituted and the hypothecated stocks were sold. On 25-2-2005, the following order was passed by this Court in Court on its Own Motion''s case (supra):

Vide this application filed by State of Punjab, it has been prayed that the sum of Rs. 8 crores (approximately) that has been deposited under the orders of this Court, should be released to the State of Punjab. It is conceded before us by Mr. Bains and Mr. Takkar that in the meanwhile, the farmers for whose benefit this sum had been deposited, have been disturbed their dues. We accordingly, issue a direction that the sum of Rs. 8 crores (approximately) which was deposited with the Registry of this Court be returned to the State Government of Punjab, forthwith.

It cannot possibly be denied that the abovesaid order came to be passed, because pendency of company petition was not brought to the notice of the Hon''ble Bench, but as soon as, it came to the notice that a winding up petition was pending, then it was made clear in the order dated 18-10-1996 that all the directions issued by this Court in this case would be subject to the orders, which may be passed by the learned Company Judge in winding up petition. Meaning thereby, the earlier order dated 25-2-2005, on which the PSIDC is basing its claim, was subject to the orders, that may be passed by the learned Company Judge. Therefore, the provisions of the Act would prevail and PSIDC cannot claim preference to the release of the said amount over and above the secured creditors in this relevant connection.

Again, it is not a matter of dispute that at the time, when the winding up order dated 9-10-1997 was passed, the proceedings for recovery of dues by the secured creditors i.e., the State Bank of India and State Bank of Patiala were pending before the Debt Recovery Tribunal under Recovery of Debts Due to Banks & Financial Institutions Act, 1993. This Court permitted to secured creditors to continue with those proceedings. The claims of recovery of the banks were accepted and recovery certificates have been issued in favour of the secured creditors. This Court held that the banks have lien over the amount lying deposited under the orders of this Court. Once it is proved that the secured creditors had lien and preference over the indicated amount, then the PSIDC cannot claim preference over and above the secured creditors to release the indicated amount in any manner. As the earlier orders of this Court passed in Court on its Own Motion''s case (supra) were subject to the orders that may be passed by the learned Company Judge, therefore, the provisions of Companies Act would prevail. Thus, the contrary arguments of learned Counsel for the PSIDC "stricto sensu" deserve to be and are hereby repelled, in the obtaining circumstances of the case.

We are of the view that the learned Company Judge has rightly negatived the claim of PSIDC, vide the impugned order Annexure A3. As no legal infirmity has been pointed by the learned Counsel for the PSIDC, therefore, the impugned order is hereby maintained.

No other point, worth consideration, has been urged or pressed by the learned Counsel for the parties.

In the light of the aforesaid discussion, this company appeal is hereby dismissed, with no order as to costs.