Gujarat HC Orders Interim Disbursement in Liquidation, Directs Independent CA to Re-Verify Workmen Claims [Read Order]

The Gujarat High Court has permitted interim disbursement of sale proceeds in the liquidation process, while directing fresh re-verification of certain workmen claims by an independent Chartered Accountant.

The matter came up before the Gujarat court from the winding-up of APS Star Industries Limited, ordered in 2008. Following the liquidation, assets of the company located at Vadodara, Nashik, Dharwad and Dombivli were sold under court supervision.

The claims of secured creditors, workmen and statutory authorities were earlier verified through a Chartered Accountant, and a distribution ratio under Sections 529 and 529A of the Companies Act, 1956 was approved by the Court in January 2023. Based on this, the Official Liquidator had already disbursed about ₹75 crore to various stakeholders.

The Official Liquidator informed the Court that an additional amount of around ₹58 crore is now available from the sale of assets at the Nashik and Dharwad units in 2024. It was proposed that this amount be released as an interim distribution to secured creditors and workers by applying the same ratio already approved earlier.

However, objections were raised by the Gujarat Engineering & General Kamdar Union, Vadodara, regarding the verification of claims of Vadodara-based workmen.

The union alleged discrepancies in wage components, allowances, adjustment of gratuity amounts, and inclusion of certain retired or deceased workers in the claims list.

The Official Liquidator stated that he had no objections to a new verification being carried out in order to guarantee transparency and justice in light of these concerns.

JusticeMauna M. Bhatt allowed interim disbursement of ₹50.22 crore to secured creditors and workers other than the Vadodara unions. The balance amount of ₹7.77 crore earmarked for Vadodara-based workers’ unions was directed to be kept aside for the present.

The Court clarified that the interim payments would be subject to undertakings by recipients to refund any excess amount along with interest, if so determined later.

Additionally, the Court directed the Official Liquidator to appoint a new and independent Chartered Accountant, other than the one involved earlier, to re-verify the claims of Vadodara workers and staff unions.

The Court ordered that all concerned unions be given a reasonable opportunity to submit documents and be heard during the re-verification process.

The Chartered Accountant has been asked to complete the exercise within a stipulated time, after which the Official Liquidator must file a fresh report before the Court.

The High Court clarified that the present disbursement is purely interim in nature and does not create any final rights or equities. All issues relating to final distribution will remain open and will be considered at a later stage upon sale of remaining assets of the company in liquidation

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