HC Allows Dissolution Plea as Company Had No Further Assets to Realize, Making Pending Winding-up Proceedings Purposeless
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- Last Updated on 3 June, 2024
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Case Details: Bank of India v. Sarvodya Paper Mills Ltd. - [2024] 163 taxmann.com 21 (HC-Delhi)
Judiciary and Counsel Details
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- Dharmesh Sharma, J.
- Amit Agrawal, Ms Reaa Mehta & Ms Sana Jain, Advs. for the Respondent.
Facts of the Case
In the instant case, the Respondent company was ordered to be wound up on the ground of non-payment of outstanding dues amounting to Rs.1.49 crore along with due interest and an official liquidator (OL) was appointed.
The OL invited claims from creditors and workmen of the company (in liquidation). Subsequently, a joint meeting was held between various secured creditors of the company (in liquidation) from whom claims were received, wherein it was agreed that the sale proceeds from factory premises as well as plant and machinery, amounting to Rs. 2.75 corers would be distributed amongst them on a pro-rata basis.
The disbursement was carried out accordingly. The fund’s position of the company (in liquidation) stood at Rs. 26.78 lakhs, and expenses on account of liquidation and statutory dues stood at Rs. 2.53 lakhs.
Therefore, after adjusting said expenses, a sum of Rs. 24 lakhs would be available for distribution to secured creditors. OL received two more claims: first, a claim from company 3A, who represented themselves as an equity shareholder of the company (in liquidation); and second, a claim from Trade Tax.
However, since the company (in liquidation) did not have sufficient funds and no further assets were available with OL from which any money could be realised and paid to any of the creditors of the company other than its Secured Creditors, an application was moved on behalf of OL. The application sought permission to make payment to the secured creditors and transfer the available balance to Common Pool Fund, after deducting liquidation expenses incurred by the office of the OL.
High Court Held
The High Court held that the company (in liquidation) had no further assets, either movable or immovable, from which any money could be realised. Therefore, an instant application had been filed under Section 481 for dissolution of the company (in liquidation), as no fruitful purpose would be served by keeping the winding up proceedings pending.
Keeping in mind the facts and circumstances of the instant case, these liquidation proceedings warranted to be brought to an end, and therefore, the instant application was to be allowed.
List of Cases Reviewed
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- Meghal Homes v. Shree Niwas (para 15) followed.
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