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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.)
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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.
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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
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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.)
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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:-
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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
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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.
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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
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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
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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
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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 ;
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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
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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:-
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“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
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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.
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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
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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
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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.
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However, the applicants are entitled to enforce
their rights along with other creditors in accordance
with law.
Sd/-
JUDGE
PMR.
