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Pafco 2916 Inc vs Official Liquidator Of on 19 July, 2019

1

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 19TH DAY OF JULY, 2019

BEFORE

THE HON’BLE MRS. JUSTICE S.SUJATHA

C.A.No.95/2018 IN C.O.P.No.162/2013 c/w
C.A.No.88/2018 IN C.O.P.No.162/2013,
C.A.No.89/2018 IN C.O.P.No.162/2013,
C.A.No.92/2018 IN C.O.P.No.162/2013 AND
C.A.No.96/2018 IN C.O.P.No.162/2013

IN C.A.No.95/2018 IN C.O.P.No.162/2013:

BETWEEN:

PAFCO 2916 INC.
C/O PEGASUS AVIATION
FINANCE COMPANY
HAVING ITS PRINCIPAL PLACE
OF BUSINESS AT FOUR
EMBARCADERO CENTER,
35TH FLOOR, SAN FRANCISCO,
CA 94111
REP HEREIN BY ITS POWER OF
ATTORNEY HOLDER Mr. NIMISH VAKIL … APPLICANT

(BY SRI S.S.NAGANAND, SENIOR COUNSEL FOR
SRI S.SRIRANGA, ADV.)

AND:

OFFICIAL LIQUIDATOR OF
UNITED BREWERIES (HOLDINGS) LIMITED,
ATTACHED TO HIGH COURT OF KARNATAKA
CORPORATE BHAVAN,
NO.26-27, 12TH FLOOR,
RAHEJA TOWERS, M.G.ROAD
BENGALURU-560 001 …RESPONDENT

(BY SRI SHRISHAIL NAVALGUND, ADV. FOR OFFICIAL
LIQUIDATOR.)
2

THIS COMPANY APPLICATION IS FILED UNDER
SECTION 446 OF THE COMPANIES ACT, 1956, R/W RULE
117 OF THE COMPANY (COURT) RULES, 1959, PRAYING TO
GRANT THE APPLICANT LEAVE TO PROCEED WITH
EXECUTION CASE NO.1274/2014 PENDING ON THE FILE OF
THE ADDITIONAL CITY CIVIL JUDGE AT BENGALURU.

IN C.A.No.88/2018 IN C.O.P.No.162/2013:

BETWEEN:

JB 2443 INC.
C/O CORPORATION SERVICE COMPANY
HAVING ITS PRINCIPAL PLACE
OF BUSINESS AT 2711, CENTERVILLE ROAD,
SUITE 400, WILMINGTON, DELAWARE 19808
REP HEREIN BY ITS POWER OF
ATTORNEY HOLDER Mr. NIMISH VAKIL … APPLICANT

(BY SRI S.S.NAGANAND, SENIOR COUNSEL FOR
SRI S.SRIRANGA, ADV.)

AND:

OFFICIAL LIQUIDATOR OF
UNITED BREWERIES (HOLDINGS) LIMITED,
ATTACHED TO HIGH COURT OF KARNATAKA
CORPORATE BHAVAN,
NO.26-27, 12TH FLOOR,
RAHEJA TOWERS, M.G.ROAD
BENGALURU-560 001 …RESPONDENT

(BY SRI SHRISHAIL NAVALGUND, ADV. FOR OFFICIAL
LIQUIDATOR.)

THIS COMPANY APPLICATION IS FILED UNDER
SECTION 446 OF THE COMPANIES ACT, 1956, R/W RULE
117 OF THE COMPANY (COURT) RULES, 1959, PRAYING TO
GRANT THE APPLICANT LEAVE TO PROCEED WITH
EXECUTION CASE NO.1272/2014 PENDING ON THE FILE OF
THE ADDITIONAL CITY CIVIL JUDGE AT BENGALURU.
3

IN C.A.No.89/2018 IN C.O.P.No.162/2013:

BETWEEN:

AWAS IRELAND LEASING THREE LIMITED
A COMPANY INCORPORATED IN ACCORDANCE
WITH THE LAWS OF IRELAND
HAVING ITS PRINCIPAL PLACE
OF BUSINESS AT RIVERSIDE ONE,
SIR JOHN ROGERSON’S QUAY
DUBLIN 2 IRELAND
REP HEREIN BY ITS POWER OF
ATTORNEY HOLDER Mr. NIMISH VAKIL … APPLICANT

(BY SRI S.S.NAGANAND, SENIOR COUNSEL FOR
SRI S.SRIRANGA, ADV.)

AND:

OFFICIAL LIQUIDATOR OF
UNITED BREWERIES (HOLDINGS) LIMITED,
ATTACHED TO HIGH COURT OF KARNATAKA
CORPORATE BHAVAN,
NO.26-27, 12TH FLOOR,
RAHEJA TOWERS, M.G.ROAD
BENGALURU-560 001 …RESPONDENT

(BY SRI SHRISHAIL NAVALGUND, ADV. FOR OFFICIAL
LIQUIDATOR.)

THIS COMPANY APPLICATION IS FILED UNDER
SECTION 446 OF THE COMPANIES ACT, 1956, R/W RULE
117 OF THE COMPANY (COURT) RULES, 1959, PRAYING TO
GRANT THE APPLICANT LEAVE TO PROCEED WITH
EXECUTION CASE NO.1275/2014 PENDING ON THE FILE OF
THE ADDITIONAL CITY CIVIL JUDGE AT BENGALURU.

IN C.A.No.92/2018 IN C.O.P.No.162/2013:

BETWEEN:

PAFCO 2919 INC.
C/O PEGASUS AVIATION
FINANCE COMPANY
HAVING ITS PRINCIPAL PLACE
4

OF BUSINESS AT FOUR
EMBARCADERO CENTER,
35TH FLOOR, SAN FRANCISCO,
CA 94111
REP HEREIN BY ITS POWER OF
ATTORNEY HOLDER Mr. NIMISH VAKIL … APPLICANT

(BY SRI S.S.NAGANAND, SENIOR COUNSEL FOR
SRI S.SRIRANGA, ADV.)

AND:

OFFICIAL LIQUIDATOR OF
UNITED BREWERIES (HOLDINGS) LIMITED,
ATTACHED TO HIGH COURT OF KARNATAKA
CORPORATE BHAVAN,
NO.26-27, 12TH FLOOR,
RAHEJA TOWERS, M.G.ROAD
BENGALURU-560 001 …RESPONDENT

(BY SRI SHRISHAIL NAVALGUND, ADV. FOR OFFICIAL
LIQUIDATOR.)

THIS COMPANY APPLICATION IS FILED UNDER
SECTION 446 OF THE COMPANIES ACT, 1956, R/W RULE
117 OF THE COMPANY (COURT) RULES, 1959, PRAYING TO
GRANT THE APPLICANT LEAVE TO PROCEED WITH
EXECUTION CASE NO.1276/2014 PENDING ON THE FILE OF
THE ADDITIONAL CITY CIVIL JUDGE AT BENGALURU.

IN C.A.No.96/2018 IN C.O.P.No.162/2013:

BETWEEN:

AWAS IRELAND LEASING THREE LIMITED
A COMPANY INCORPORATED IN ACCORDANCE
WITH THE LAWS OF IRELAND
HAVING ITS PRINCIPAL PLACE
OF BUSINESS AT RIVERSIDE ONE,
SIR JOHN ROGERSON’S QUAY
DUBLIN 2 IRELAND
REP HEREIN BY ITS POWER OF
ATTORNEY HOLDER Mr. NIMISH VAKIL … APPLICANT

(BY SRI S.S.NAGANAND, SENIOR COUNSEL FOR
SRI S.SRIRANGA, ADV.)
5

AND:

OFFICIAL LIQUIDATOR OF
UNITED BREWERIES (HOLDINGS) LIMITED,
ATTACHED TO HIGH COURT OF KARNATAKA
CORPORATE BHAVAN,
NO.26-27, 12TH FLOOR,
RAHEJA TOWERS, M.G.ROAD
BENGALURU-560 001 …RESPONDENT

(BY SRI SHRISHAIL NAVALGUND, ADV. FOR OFFICIAL
LIQUIDATOR.)

THIS COMPANY APPLICATION IS FILED UNDER
SECTION 446 OF THE COMPANIES ACT, 1956, R/W RULE
117 OF THE COMPANY (COURT) RULES, 1959, PRAYING TO
GRANT THE APPLICANT LEAVE TO PROCEED WITH
EXECUTION CASE NO.1273/2014 PENDING ON THE FILE OF
THE ADDITIONAL CITY CIVIL JUDGE AT BENGALURU.

THESE COMPANY APPLICATIONS ARE COMING ON
FOR ORDERS THIS DAY, THE COURT MADE THE
FOLLOWING:

ORDER

These Company Applications involving similar

and akin issues, have been considered together and

are disposed of by this common order.

2. The applicants have sought for the leave

to proceed with the Execution Cases pending on the

file of the Competent Executing Court at Bengaluru,

the details of which are as under:-

6

Applicant Execution Date of
C.A.No. Amount
Name Pet. No. Decrees
13.12.2013
JB 2443
88/2018 1272/2014 75,76,84,714/-
INC.
23.06.2014
Awas
13.12.2013
Ireland
89/2018 1275/2014 80,85,28,351/-
Leasing
23.06.2014
Three Ltd.
13.12.2013
PAFCO
92/2018 1276/2014 84,78,18,865/-
2919 INC.
23.06.2014
13.12.2013
PAFCO
95/2018 1274/2014 91,97,44,093/-
2916 INC.
23.06.2014
Awas
13.12.2013
Ireland
96/2018 1273/2018 125,10,63,295/-
Leasing
23.06.2014
Three Ltd.

3. The applicants are claiming to be the

decree holders in the respective Execution Petitions

filed against the respondent – Company (in

liquidation) pending on the file of the competent

Executing Court at Bengaluru. It is submitted that

by the judgment and decree passed by the High

Court of Justice Queen’s Bench Division Commercial

Court, Royal Courts of Justice, United Kingdom (for

short ‘Court’), the Company (in liquidation) was

directed to pay the applicants certain amounts in

respect of the currently ascertained claims and the
7

said judgment passed by the Court has reached

finality. The applicants have instituted the Execution

Petitions before the competent Executing Court at

Bengaluru and the same are pending consideration.

It is submitted that the Company was wound up by

the order of this Court dated 07.02.2017 in Company

Petition No.162/2013. The Executing Court has

issued notice to the Official Liquidator pursuant to

the said winding up order passed by this Court.

However, the Official Liquidator has not entered

appearance in the said proceedings. In the

circumstances, these applications are filed seeking

leave of the Court to proceed with the respective

Execution cases.

4. Learned Senior Counsel Sri S.S.

Naganand, appearing for the Applicants submitted

that the order passed by the Division Bench in OSA

No.5/2017 inasmuch as requesting the Official

Liquidator not to precipitate the matter during the

pendency of the appeal has not been
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modified/clarified further. No doubt, the winding up

order passed by this Court on 07.02.2017 is the

subject matter of OSA No.5/2017, the Official

Liquidator has not taken any steps to seek for further

clarification inasmuch as the role to be taken by the

Official Liquidator in the cases of the present nature

where the decree holders are waiting to execute their

decrees, a legitimate right which they are entitled to.

On the other hand, the Official Liquidator is objecting

for the leave to be granted by this Court in terms of

the reply filed before this Court. Indeed, the Official

Liquidator is not competent to object for the leave

sought by the applicants as per Section 446 of the

Companies Act, 1956 (‘Act’ for short). The Official

Liquidator may participate in the execution

proceedings and raise objections if any, but not in the

Company Applications filed by the applicants under

Section 446 of the Act.

9

5. Learned Senior Counsel placed reliance on

the Division Bench Judgment of this Court in the

case of SectionBasavaiah and Others vs. Sri.

Krishnarajendra Mills Ltd., reported in ILR 2001

KAR 3158 in support of his contentions.

6. Learned counsel Sri. Shrishail Navalgund

appearing for the Official Liquidator would contend

that many creditors of the respondent – Company

have initiated legal proceedings against the

respondent – Company (in liquidation) before various

Forums. The applicants herein are such of the

unsecured creditors who are before this Court

seeking leave of this Court to continue the respective

execution proceedings pending before the Executing

Courts. Inviting the attention of the Court to Sections

447, Section456 of the Act, learned counsel submitted that

pursuant to the winding up order passed by the

Company Court, the said order shall operate in

favour of all the creditors and all the contributories of

the Company as if it has been made on the joint
10

petition, of a creditor and of a contributory. On

passing of the winding up order, the Official

Liquidator shall take into his custody or under his

control, all the property, effects and auctionable

claims to which the Company is or appears to be

entitled. It is, thereafter, the Official Liquidator is

required to call for the claims of the creditors and the

workmen in terms of Section 529, Section529A and Section530 of

the Act. The status of the decree holder has become

equivalent to that of a creditor who has no overriding

the effect above the rights of the secured creditors as

defined under Section 125 of the Act. It is further

submitted that pursuant to the order dated

25.04.2017 passed in OSA No.5/2017, I.A.No.3/2019

has been filed by the Official Liquidator seeking for

vacating the interim order and the same is pending

consideration. By virtue of the interim order passed

in OSA No.5/2017, the proceedings to be initiated by

the Official Liquidator pursuant to passing of the

winding up order is suspended but not the winding
11

up per se. In support of his contentions, the learned

counsel has placed reliance on the judgment of the

High Court of Judicature at Madras in Company

Application No.73/2013 in C.P.No.303/2010

(D.D.12.04.2013).

7. I have carefully considered the rival

submissions of the learned counsel appearing for the

parties and perused the material on record.

8. The factual aspects inasmuch as the

applicants being the decree holders of the decrees

awarded by the High Court of Justice Queen’s Bench

Division Commercial Court, Royal Courts of Justice,

United Kingdom is not in dispute. Now the epicenter

of the dispute revolves round the leave to be granted

under Section 446 of the Act to proceed with the

Execution Petitions filed by the applicants which are

pending consideration before the competent

Executing Court pursuant to the winding up order
12

passed by this Court on 07.02.2017 in COP

No.162/2013.

9. Section 446 of the Act reads thus:-

“Sec 446 – Suits stayed on winding up
order.

(1) When a winding up order has been made
or the Official Liquidator has been appointed as
provisional liquidator, no suit or other legal
proceeding shall be commenced, or if pending at
the date of the winding up order, shall be
proceeded with, against the company, except by
leave of the 4[Tribunal] and subject to such terms
as the 4[Tribunal] may impose.

5[(2) 4[Tribunal] shall, notwithstanding
anything contained in any other law for the time
being in force, have jurisdiction to entertain, or
dispose of

(a) any suit or proceeding by or against the
company ;

(b) any claim made by or against the
company (including claims by or against any of its
branches in India) ;

(c) any application made under Sectionsection 391
by or in respect of the company ;

(d) any question of priorities or any other
question whatsoever, whether of law or fact,
which may relate to or arise in course of the
winding up of the company ;

13

whether such suit or proceeding has been
instituted, or is instituted, or such claim or
question has arisen or arises or such application
has been made or is made before or after the order
for the winding up of the company, or before or
after the commencement of the SectionCompanies
(Amendment) Act, 1960 (65 of 1960).]
7[****]

1[(4) Nothing in sub-section (1) or sub-section
(3) shall apply to any proceeding pending in
appeal before the Supreme Court or a High
Court.]”

10. In terms of the said provisions, it is

mandatory to seek leave of the Company Court when

winding up order has been passed or provisional

Official Liquidator has been appointed to proceed

with the legal proceedings pending at the date of the

winding up order.

11. Now the question would be whether this

Court exercising Section 446(1) of the Act can permit

the applicants to proceed with the execution

proceedings. There is much difference between the
14

proceedings related to the original suit and the

execution. In the case of original suit, it is the debt

which has to be quantified whereas in the execution

proceedings the crystallized quantification made by

the Court requires to be executed. In the case of

Basavaiah, supra, the Division Bench of this Court

in the context of the proceedings initiated under

Section 33C(2) of the Industrial Disputes Act, 1947

(‘SectionI.D. Act’ for short) qua the leave sought under

Section 446(1) of the Act has observed that

proceedings under Section 33C(2) of the I.D. Act are

in the nature of execution proceedings and therefore

do not require leave of the Company Court under

Section 446(1) of the Act, proceeds on an

misconception that execution proceedings are not

legal proceedings and that leave of the Company

Court under Section 446(1) of the Act is not required

for initiating or continuing an execution proceedings.

In paragraph Nos.15, 18 and 19 it is observed thus:-
15

“15. Courts have consistently held that
if any execution proceedings are to be initiated
or proceeded with after the order of winding up
(even in regard to decrees obtained prior to the
order of winding up), the leave of the Company
Court is required for such initiation or
continuation of the execution proceedings [See
Bank of Bihar Limited, Patna v Secretary of
State and Others , Official Liquidator, Calicut
Bank Limited v Nekkat, Ram Achhyavar Singh
v J.K. Manufacturers, Industrial Finance
Corporation of India v Century Metals Limited
and Sarju Thakur v Registrar of Companies].
Therefore proceedings under Section 33-C(2) of
I.D. Act, even if they are in the nature of
execution proceedings, requires the leave of the
Company Court, under Section 446 of
Companies Act.

18. Section 446 of the Act makes it clear
that no suit or other legal proceeding shall be
commenced or proceeded with after a winding
up order is made, without leave of the
Company Court. We have already held that
proceedings under Section 33(2) is a legal
proceeding, for purposes of Section 446. Even if
the said proceeding had been initiated prior to
the order of winding up, as the order of
winding up was passed during the pendency of
such proceeding, it was mandatory for the
16

applicants to have obtained leave of the
Company Court. A statutory mandate cannot
be avoided on the ground of ignorance or
hardship. It should also be noticed that the
order was obtained ex parte without
impleading the Official Liquidator who
represented the company in liquidation. The
Official Liquidator has refused to accept the
order of the Labour Court. It is therefore not
valid and unenforceable. The fact that in some
other matters, the relevant contentions were
not urged or that the Official Liquidator did not
challenge the validity cannot be a ground for
ignoring the requirements of Section 446(1).
Consequently, these applications are liable to
be rejected.

19. The learned Counsel for the
applicants submitted that to avoid further
delay leave may be granted under Section
446(1) of the Act to enable the quantification of
their claim against the company by the Labour
Court, after due notice to the Official Liquidator.
The learned Counsel for Official Liquidator
[respondent] has no objection for such
permission being granted in these applications.
As applicants, who are workmen, have been
litigating for nearly two decades, interests of
justice would be served if leave to proceed with
the applications under Section 33-C(2) of I.D.
17

Act is granted in these applications, instead of
driving them to file fresh applications for leave
under Section 446.”

12. It is true that this Court has placed reliance

on the judgments of the Hon’ble Apex Court to

declare that the proceedings under Section 33C(2) of

the I.D. Act even if they are in the nature of execution

proceedings requires leave of the Company Court

under Section 446 of the Act. This judgment would

rather support the Official Liquidator than the

applicants for the reason that even in the execution

proceedings, leave of the Company Court under

Section 446 of the Act is necessary. Consequently, in

the proceedings under Section 33C(2) of the I.D.Act,

the leave granted under Section 446 of the Act would

enable the quantification of the claim of the

employees against the Company by the Labour Court

after due notice to the Official Liquidator. The

workmen who were litigating for nearly two decades

were entitled to the quantification of their claim
18

against the Company. Moreover, the claim of the

workmen stands on a different pedestal in view of

Section 529A of the Act.

13. This Court finds force in the submissions

of the learned counsel for the Official Liquidator that

the applicants cannot be treated as secured creditors

to be out of the liquidation proceedings and the

applicants cannot seek priority over the claims

breaking the queue to recover the amount, merely

based on the decree obtained from foreign Courts and

the execution proceedings pending before the Indian

Courts. SectionThe Companies Act provides a

machinery/mechanism for the Official Liquidator to

consider the claims of the creditors and the said

proceedings have to be in consonance with the

provisions of the Act. In the present scenario,

granting permission to the applicants would

adversely affect the rights of other creditors and all

the contributors of the Company, who are standing in

the queue. This appears to be the essence of
19

Sections 447, Section456, Section529, Section529A and Section520 of the Act,

permitting the applicants to proceed with execution

proceedings would amount to giving a preferential

right to such decree holders finally disturbing the

rights of the secured creditors. The resultant factor,

i.e., disturbing the rights of the secured creditors if to

be avoided or interest of all the creditors should be

uniformly safeguarded or maintained, this Court

must exercise the power under Section 446(1) with

circumspection while considering the permission

claimed by the decree holders in the execution

proceedings to execute their decrees. No doubt, the

judgment of the Hon’ble High Court of Judicature at

Madras has no binding effect on this Court, certainly

it has some persuasive value and the view of this

Court as aforesaid is fortified by the decision of the

High Court of judicature at Madras referred to supra.

In the circumstances, the Company

Applications being devoid of merits stand dismissed.
20

However, the applicants are entitled to enforce

their rights along with other creditors in accordance

with law.

Sd/-

JUDGE

PMR.

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