M/S. Godavarikhani Chit Fund (P) Limited (In Liqn.) vs. No Respondent

Facts

This matter concerns Company Application No. 444 of 2021 filed by M/s. Godavarikhani Chit Fund (P) Limited (in liquidation), represented by the Official Liquidator. The application was filed under Sections 457(1)(e) and 460 of the Companies Act, 1956, read with relevant Rules of the Companies (Court) Rules, 1959. The Official Liquidator sought permission to declare and pay a final dividend of 22 paisa in a Rupee to the unsecured creditors of the company, whose claims had been adjudicated. The application also sought authorization for various procedural steps, including opening a separate dividend account, dispensing with newspaper publication, sending individual notices, fixing a payment schedule, and allowing payment to legal heirs of deceased creditors upon production of a family member certificate and indemnity. The Official Liquidator also requested permission to incur incidental expenses, including GST, and for the costs of the application to be borne by the company's funds.

Held

The Court held that the Official Liquidator should be permitted to make payments to unsecured creditors. While the initial proposal was to pay a dividend at 22 paisa in a Rupee, the Court noted from the memo of calculation filed by the Official Liquidator that even after making this payment, a balance sum of approximately Rs. 7,139.39 would remain. The Court directed the Official Liquidator to utilize this balance amount for the payment of dividend to the unsecured creditors, thereby increasing the payout beyond the proposed 22 paisa in a Rupee. The Court disposed of the Company Application with this direction, stating that no costs would be awarded. The Court's reasoning was based on ensuring the maximum possible distribution of available funds to the creditors.

Key Issues

1. Whether the Official Liquidator should be permitted to sanction the declaration of a final dividend at 22 paisa in a Rupee to the unsecured creditors of the company (in liquidation), as per Annexure-A, and to incur necessary expenses, including GST, for this purpose? The Petitioner (Official Liquidator) argued that the company has available funds to pay a dividend to unsecured creditors and that the proposed dividend rate and incidental expenses are necessary for the proper distribution of assets. The Petitioner relied on Sections 457(1)(e) and 460 of the Companies Act, 1956, and Rules 9, 275, 276, 280, and 290 of the Companies (Court) Rules, 1959, to support the application. The Petitioner sought authorization for the payment and related administrative actions. The Revenue or State did not appear to have made any specific arguments recorded in the judgment.