HIGH COURT OF PUNJAB AND HARYANA
Kundanmal Dabriwala
v/s.
Haryana Financial Corporation
CIVIL WRIT PETITION NO. 2713 OF 2009 (O & M)
DECEMBER 20, 2011
JUDGMENT
Hemant Gupta, J. – The challenge in the writ petition is to a show-cause notice dated October 7, 2008 (annexure P1) served upon the petitioner to pay a sum of Rs. 83,58,671 under section 32G of the State Financial Corporations Act, 1951 (for short “the SFC Act”). The challenge is on the basis that once the principal debtor has settled its loan account with the Corporation, the petitioner, who is a guarantor, cannot be made liable to pay any amount over and above the amount paid by the principal debtor. It is the case of the petitioner that the liability of the guarantor is co-extensive with that of the principal debtor and not exceeding the liability of the principal debtor. Once the Corporation has settled its loan account with the principal debtor, the guarantor cannot be saddled with any additional liability.
2. The facts leading to the issuance of the said show-cause notice are that the petitioner is a promoter-director of M/s. Dabriwala Steels and Engineering Co. Ltd. The aforesaid company had set up a mini steel plant at Faridabad. The company was the owner of two plots, i.e., Plot No. 136, Sector 24, Faridabad and Plot No. 142, Sector 24, Faridabad. The company stopped its production on April 27, 1985, due to financial constraints. The company invoked the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short “the SICA”). The Board for Industrial and Financial Reconstruction (for short “the BIFR”), constituted under the aforesaid Act, recommended the winding up of the company on May 25, 1993. The appeal against such recommendation of the BIFR was dismissed by the Appellate Authority for Industrial and Financial Reconstruction (for short “the AAIFR”) on December 6, 1994. The challenge to the aforesaid order before the Delhi High Court remained unsuccessful when the writ petition was dismissed on December 16, 1996. On the recommendation of the BIFR, this court passed an order of winding up on February 24, 1995, in C. P. No. 31 of 1995. The official liquidator attached to this court was directed to take into his custody or control all the properties and effects and all papers and books of the company.
3. The Haryana Financial Corporation (for short “the Corporation”) sought permission of this court to sell the land, building, fixtures, plants and machinery of the company situated at Plot No. 136, Sector 24, Faridabad as a secured creditor having first charge over the said plot, which was allowed on July 21, 1995. The State Bank of India was holding second charge against the said property. In pursuance of such permission, all movable and immovable assets lying at Plot No. 136, Sector 24, Faridabad was sold with the sale being affirmed by this court on September 17, 2004, for the total sum of Rs. 4.10 crores.
4. The State Bank of India sought sale of Plot No. 142, Sector 24, Faridabad, mortgaged to it to realise its dues. This court permitted the official liquidator to sell Plot No. 142, Sector 24, Faridabad in association with the secured creditors vide order dated February 9, 2006.
5. The petitioner along with the other shareholders of the company filed a petition under sections 391 and 394 of the Companies Act, 1956, before this court for revival of the company by submitting a rehabilitation scheme. The majority shareholders in the company in liquidation proposed to the State Bank of India for settlement in terms of one-time settlement scheme, as per the guidelines issued by the Reserve Bank of India. The bank agreed to accept Rs. 4,85,00,000 as against the total claim of Rs. 22,96,34,254. This court directed the official liquidator vide order dated November 2, 2007, to disburse an amount of Rs. 4,05,00,000 to the State Bank of India as full and final payment, i.e., out of sale proceeds of plot No. 136, Sector 24, Faridabad. Balance Rs. 80 lakhs were to be pumped in by the ex-management. On account of one-time settlement in the total sum of Rs. 4,85,00,000 which the bank received, the bank satisfied its claim. The petitioner also approached the Corporation for a settlement but the settlement proposal was rejected. In the aforesaid order dated November 2, 2007, the official liquidator was also directed to adjudicate the claim of the creditors and file his report before this court. It was in pursuance of such direction, the Corporation submitted its claim. The official liquidator submitted his report to the High Court relying upon the report of the chartered accountant (annexure P10). The official liquidator adjudicated such claim and found that a sum of Rs. 13,92,223 is due and payable as against the total claim of Rs. 60,69,525 of the Corporation. It was observed that no amount of interest can be charged by the financial institution after the date of winding up, i.e., February 24, 1995. Such report was accepted on May 8, 2008, by this court. This court granted liberty to any creditor aggrieved of adjudication of the claims by the official liquidator to prefer an appeal. No appeal was preferred by the Corporation. But on July 29, 2008, counsel for the Corporation made a statement that it has no objection for the revival of the company. This court passed the following order :
“Mr. Kamal Sehgal, counsel for respondent No. 4 (HSIDC) states that the Corporation’s liability has been discharged and the Corporation has no objection to the scheme of revival and withdrawal of the order of liquidation.
As per the report of the official liquidator bearing No. O.L.R. No. 10 of 2008 filed in C. P. No. 740 of 2007 dated April 12, 2008, it is clearly mentioned that Shri Ashok Gupta, assistant general manager of the Haryana Financial Corporation and Rakesh Kumar, L. O. Head, who were present informed the official liquidator that the amount due on the date of winding up order was Rs. 2,41,044 as principal outstanding Rs. 4,41,843 as miscellaneous expenses and interest of Rs. 7,10,969, i.e., a total of Rs. 13,93,856. The official liquidator, after considering the claim held that an amount of Rs. 13,92,223 was due to the Haryana Financial Corporation, as an unsecured creditor. It is not denied that the aforementioned amount has been received by the Haryana Financial Corporation under orders of this court.
Mr. Puneet Gupta, counsel for the Haryana Financial Corporation, states that the Haryana Financial Corporation, has no objection to the revival of the company, but reserves its right upon revival to seek satisfaction of the mortgage deed, in accordance with law.
At the request of counsel for the parties, adjourned to July 30, 2008.”
6. The revival petition came up for final hearing on March 19, 2009, before this court and in a judgment reported as Dabriwala Steels and Engineering Co. Ltd. (in liquidation), In re [2010] 157 Comp. Cas. 530/[2011] 105 SCL 186 (Punj. & Har.), the claim of the creditor including that of the Corporation was adjudicated upon. The basic challenge was that the procedure prescribed, i.e., the meetings of the secured and other creditors have not been held. In respect of the claim of the Financial Corporation, it was observed as under (page 549) :
“XII. Answers as regards objection from HFC and in respect of all other sundry claims :
The objection coming from HFC, who is the third respondent, is with regard to the disbursement of Rs. 4.05 crores to the State Bank of India as including the claim by the State Bank of India against yet another company, even apart from the amount due by the company in liquidation to the State Bank of India. The contention by the ex-directors of the company that the HFC had itself admitted to OTS at Rs. 2.50 lakhs was specifically denied. HFC had made a demand for Rs. 85,57,600 with further interest with effect from October 1, 2007. The HFC was itself the first secured creditor in respect of Plot No. 136 and the State Bank of India was only a second secured creditor.
The report of the official liquidator records the fact that the court had directed the disbursement of Rs. 4.05 crores to the State Bank of India as full and final payment of the claims against the company and Rs. 10,82,255 as the amount payable in satisfaction of the award of the claims of the workmen by virtue of the order of the Industrial Tribunal/Labour Court-II. Drawing help from the report of the Chartered Accountant M/s. A. K. Chadda and Co., the official liquidator has examined the claims of HFC vide its claim dated May 26, 2005, Income-tax Department vide its claim dated March 23, 2006, Excise Taxation Office vide its claim dated March 31, 2008 and HSEB vide its claim dated May 27, 1996. The claim adjudicated has been tabulated as follows :
