Holding

In a winding‑up proceeding under the Companies Act, any money received in respect of the debtor’s assets is deemed to belong to the court and must be deposited, and the court may direct such deposit even if the transaction arose from a private arrangement.

Summary

DCM Financial Services Ltd., a creditor of Pure Drinks Ltd., filed a winding‑up petition under the Companies Act, 1956, which initially restrained the debtor from alienating its assets. During the pendency, the debtor sold property in other proceedings and the purchaser agreed to pay Rs 1.95 crore to DCM, which was reported to the Company Court. Another creditor, Neel Kamal Plastics Ltd., sought a direction that DCM not retain the amount and that it be deposited with the court. The Punjab & Haryana High Court ordered DCM to deposit the sum, a direction the appellant challenged before the Supreme Court. The Supreme Court held that under ss. 433, 434, 529A and 530 of the Companies Act any money received in respect of the debtor’s assets is legally bound to the court and may be directed to be deposited, distinguishing liquidation proceedings from ordinary money suits. The appeal was dismissed.

Issues considered

Whether money received by a creditor from a purchaser in a liquidation proceeding is bound to be deposited with the court.
Whether the Company Court can direct such deposit despite the transaction arising from a private arrangement outside the winding‑up petition.
Whether a creditor in a winding‑up proceeding may accept payment outside the court, unlike in a money suit.
Whether a creditor who has also received a smaller sum from the debtor can object to the appellant’s receipt of a larger amount.

Legislation cited

Companies Act, 1956s. 433, s. 434, s. 466, s. 483, s. 529A, s. 530

Subjects

winding upliquidationCompanies Act 1956interim restraintpreferential paymentcourt jurisdictiondeposit of proceedscreditor rights

Judgment

[2008] 12 S.C.R. 40

A DCM FINANCIAL SERVICES LTD. i- ...-
v.
NEEL KAMAL PLASTICS LTD. & ANR.
(Civil.Appeal No.2801 of 2002)
AUGUST 13, 2008
B
[P. SATHASIVAM AND AFTAB ALAM, JJ.]
r
Companies Act, 1956 - ss. 433, 434, 529A and 530 -
Winding up petition - By one of the creditors of debtor com-
c pany- Interim order restraining sale of property of debtor- Nev-
ertheless. sale of property by the debtor and its sister cpncern
in different proceedings before Debts Recovery Tribunal and
in a suit in a different High Court - Out of court settlement be-
tween the debtor, purchaser and the creditor for payment of cer-
tain amount by the purchaser to creditor- Company Court was
D
informed that sale of the property was permitted in the proceed-
ings in the suit - Company Court vacating the interim order -
Pursuant to application by another creditor, Company court re-
.,.... [ 1--

calling its order vacating the restraint for sale and directing the
creditor to deposit the entire amount with the court - Order up-
E
held by Division Bench of High Court - On appeal, held: Com- i

pany court rightly directed the creditor to deposit the amount F
with the court since the money was legally bound to come to
the court- The payment was directly within purview of the Com-
pany Court - Proceedings for liquidation of company is distinct
F from intra-party suit for recovery of money - Unlike such suit, in
a liquidation proceeding, it is not open to the creditor to accept A-
money outside the court towards satisfaction of its_ claim - The
party initiating liquidation proceedings does not enjoy any pref-
erential claim - Proceeds from the sale of the assets of the
G company under liquidation should be disposed of in terms of
scheme provided under ss. 529A and 530.
The appellant, one of the creditors of respondent No. ~
2-debtor company filed a petition for putting the debtor

H 40
-.-

DCM FINANCIAL SERVICES LTD. v. NEEL KAMAL 41
PLASTICS LTD. & ANR.

...... -t . company under liquidation in terms of ss. 433 and 434 of A
Companies Act before High Court of Punjab and Haryana ..
By an interim o·rder, the debtor company was restrained
from alienating or disposing of any of its properties with-
out the permission of the court. During the pendency of
the petition, the debtor company sold one of its proper- 8
ties pursuant to order in another proceeding before Debt
,\ Recovery Tribunal. In yet another suit pending before High
Gourt of Delhi, a sister concern of the debtor company
sold some property to the same vendee. At this stage
debtor company, the purchaser and the appellant came c
to an arrangement whereby the purchaser agreed to pay
to the appellant a sum of Rs. 1.95 crores out of the con-
sideration money. This arrangement was reported to the
company judge in Punjab and Haryana High Court and it
was also told that High Court of Delhi had permitted to
D
sell the properties of the debtor company and its sister
concern. The Company Court, in view of the fact that the
7'.
~
1
sale had been confirmed by High Court of Delhi and that
the purchaser had handed over two post dated cheques
of Rs. one Crore and Rs. 95 Lakhs respectively to the ap-
pellant, vacated its interim order restraining the debtor E
company from selling its property. However, High Court
of Delhi declined the request to allow the purchaser to
make any payment to anyone else other than the Income
Tax Department and directed to deposit the rest of the
amount with the court. F
-A
Thereafter respondent No. 1 (another creditor of
debtor company) filed an application before company
court in Punjab and Haryana High Court seeking a direc-
tion to restrain the debtor Company from making any
G
payment to any creditor in preference to other creditors
f--. and further direction to refund the amount of Rs. 1.95
Crores received by the appellant. The Company Court in
view of the facts brought to its notice, took the view that
the order vacating the interim restraint was obtained on a
H
42 SUPREME COURT REPORTS [2008] 12 S.C.R.

A complete misrepresentation of the orders passed by High i- ....,;.:-
Court of Delhi and directed the appellant to deposit the
entire amount with the court. In appeal, Division Bench
of High Court affirmed the order of company court. Hence
the present appeal.
8 Appellant contended that it was not open to the High
Court of Punjab and Haryana (company court) to ask the ~
appellant to deposit the amount received from the pur-
chaser since the whole transaction had taken place out-
side the purview of proceeding before the company court;
c and that such order cold not have been made on the ap-
plication of respondent No. 1 as it had received over Rs.
13 Lakhs from the debtor company.
Dismissing the appeal, the Court
D HELD: 1.1 Having regard to the provisions of the
Companies Act, 1956 it is plain and clear that the money
)';-
received by the appellant from the purchaser was legally
bound to come to the court. The court was in error in al- r
lowing the payment to the appellant by its earlier order
E and later it rightly recalled that order and directed the ap-
pellant to deposit the money in court. [Para 15] [52,E-F]
1.2 It is misconceived and fallacious to suggest that
the appellant received a sum of Rs.1.95 crores from the
purchaser in a transaction falling outside the purview of
F the Company Petition pending before the Punjab and
Haryana High Court. It is misleading to say that the money
,,__
received by the appellant was part of the consideration
money payable to the sister concern of the debtor Com-
pany, and it had no connection with the debtor company.
G In the facts and circumstances of the case, it is not the
source of money that is important but what is important
,...\,
is the cause on the basis of which the appellant was able . '
to get the money from the purchaser. The payment of the
large sum by the purchaser to the appellant was not gra-
H tuitous. It was evidently intended to patch up the brazen
DCM FINANCIAL SERVICES LTD. v. NEEL KAMAL 43
PLASTICS LTD. & ANR.

~t breach of the court's orders committed by the debtor com- A
pany and the purchaser in effecting the sale of the prop-
erty. The payment was thus directly within the purview of
the Company Petition pending before the Punjab and
Haryana High Court. [Para 13] [51,F-H; 52,A-B]
1.3 The proceedings for liquidation of a company B
under the Companies Act are not the same as an intra-
4 party suit for recovery of money. In a money suit it may
indeed be open to the plaintiff to accept any money out-
side the court from or on behalf of the defendant towards
the full or partial satisfaction of his claim in the suit and to c
report the payment to the court for passing appropriate
orders. But such is not the position in a proceeding for
liquidation of the company. Once a proceeding gets un-
derway under the Companies Act, the party at whose in-
stance the proceeding is initiated does not enjoy any pref- D
erential claim and any proceeds from the sale of the as-·
sets of the company must be disposed of in terms of the
scheme as provided under Sections 529A and 530 of the
Companies Act. [Para 14] [52,B-D]
2. As to the point that respondent No.1, the applicant, E
had itself received over Rs.13 lakhs from the debtor com-
pany and it was, therefore, not open to it to object to the
appellant too getting its due from the debtor company,
the obvious answer is that one wrong would not justify
another of the same kind. But the submission does not F
even appear to be factually correct as is evident from lhe
A
order of the High Court. [Para 16] [52,G-H]
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 2801
of 2002
G
From the final Judgment and Order dated 3.12.2001 of
t- the High Court of Punjab and Haryana at Chandigarh in Com-
pany Appeal No. 12 of 2000
Rajesh Srivastava for the Appellant.
H
,__
44 SUPREME COURT REPORTS [2008] 12 S.C.R.

A Mandeep Singh Vinaik, Vandana Sehgal, Rohan Thawani, i·
Hardeep Singh Anand and P.N. Puri for the Respondent.
The Judgment of the Court was delivered by
AFTAB ALAM, J. 1. This appeal is directed against the
B orders passed by the Punjab & Haryana High Court asking the
appellant to deposit in court the sum of Rs. one crore that it had
received in connection with the sale of the property of M/s. Pure '(- I
Drinks (New Delhi) Ltd. (respondent no.2), for the liquidation of t;·

which a proceeding remains pending in the High Court. The
c first order in this regard was passed by a le.arned Single Judge
on 14 March, 2000 on an application made by Neel Kamal Plas-
tics Ltd. (respondent no.1 ), one of the several creditors of the
second respondent, Mis.Pure Drinks (New Delhi) Ltd. (herein-
after referred to as 'the Debtor Company'). By this order the
appellant was directed to deposit the aforesaid amount in twelve
D.
equal monthly installments of Rs.8.5 lakhs beginning 15 April,
2000. Against the order passed by the learned Single, the ap-
';»-
pellant preferred an appeal before the Division Bench of the
Court under Section 483 read with Section 466 of the Compa-
nies Act, 1956. The Division Bench affirmed the order of the
E Single Judge and dismissed the appeal vide order dated 3
December, 2001 in Company Appeal No.12 of 2000. The r
present appeal is directed against the order passed by the Di-
vision Bench.

F 2. The Debtor Company has a number of creditors. Some
of its creditors instituted proceedings for recovery of their dues
fr-
•'
before different courts and authorities, including the Punjab &
Haryana High Court, the Delhi High Court and the Debts Re-
covery Tribunal, Delhi. The Oebtqr Company and the other par-
ties to those proceedings, apparently guided by expediency
G
and motivated by self interest did not consider it their duty to
report to the concerned Court/Tribunal about the analogous pro- -.4
ceedings before other Courts. As a result, orders came to be •

passed by courts that do not seem to be harmonious or com-
pletely consistent with each other. The overall picture, therefore,
H
DCM FINANCIAL SERVICES LTD. v. NEEL KAMAL 45
PLASTICS LTD. & ANR. [AFTAB ALAM, J.]

appears to be somewhat murky and confused. For disposing A
of this appeal, however, it is not necessary to go into all the
details and we shall take note of only certain facts which are
admitted by the parties or are, in any event, undeniable.
3. The appellant, not being successful in recovering its
dues from the Debtor Company, moved the Punjab & Haryana 8
High Court in Company Petition No. 16 of 1997 for putting M/s.
Pure Drinks (New Delhi) Ltd. to liquidation in terms of Sections
433 and 434 of the Companies Act. On 20 February, 1997, the
Court passed the following order in that case:
G
"Notice to show as to why the petition for winding up be
not admitted.
To come up on April 3, 1997
The respondents shall not alienate or dispose of nay D
property except in the regular course of business without
the permission of the Court."
(emphasis added)
4. On August 28, 1997 the court admitted the Company
Petition and directed for its advertisement in the Official Ga- E
zette of the State of Punjab besides two newspapers. The
Debtor Company, after unsuccessfully seeking review took the
order in appeal before a Division Bench. It is significant to note
that in that appeal (Company Appeal N. 25of1997), the Debtor
Company, also filed an application (CM No. 11 of 1998) seek- F
-~ ing permission to dispose of its assets at A-30, Mohan Coop-
erative Industrial Area, Mathura Road, New Delhi. The appeal,
along with the application for permission to sell was dismissed
by order dated 21 December, 1998. The Debtor Company then ·
brought the matter to this Court in SLP No.1032 of 1999. The G
SLP was dismissed as withdrawn by order dated 3 February,
t· 1998.

5. While the matter in the Punjab & Haryana High Court
rested at this stage, in another proceeding instituted before the H
46 SUPREME COURT REPORTS [2008] 12 S.C.R.

A Debts Recovery Tribunal, Delhi at the instance of Punjab & Sind
Bank the Debtor Company was able to sell its property A-30,
Mohan Cooperative Industrial Estate, Mathura Road, New Delhi
to one Motor and General Finance Ltd. (hereinafter referred to
as 'MGF' Ltd.) on certain terms as to the disbursement of the
B sale proceeds as directed by the ORT. The sale of the property
by the Debtor Company was objected to by some interested
persons and the matter went to the Delhi High Court and in due
course the Company Petition pending before the Punjab &
Haryana High Court and the orders restraining the Debtor Com-
e pany from aliE;mating any of its properties also came to light.
6. In yet another suit instituted before the Delhi High Court
(Civil Suit No.2311/93) M/s. Pure Drinks (Calcutta) Limited, a
sister concern of the Debtor Company sold its property A-31,
Mohan Cooperative Industrial Estate, New Delhi to the com-
D mon vendee MGF Ltd. At this stage it appears that the Debtor
Company, MGF Ltd. and the present appellant came to some
sort of an arrangement and MGF Ltd. agreed to pay to the ap-
pellant a sum of Rs.1.95 crores out of the consideration money
for A-31, Mohan Cooperative Industrial Estate. It does not need
E much imagination to see that the Debtor Company and MGF
Ltd. agreed to pay the large amount to the appellant simply in
order to ward off the consequences that might arise from the
breach of the restraint order passed by the Punjab & Haryana
High Court on 20 February, 1997. This arrangement was re-
F ported to the Company Judge in the Punjab & Haryana High
Court and it finds mention in the order passed in Company
Petition No.16 of 1997 on 28 January, 1997.
7. On 17 March, 1999, the Punjab & Haryana High Court
was told that the Delhi High Court had permitted sale of the
G p'roperties of the DebtOr Company and its sister concern,
namely Pure drinks (Calcutta) Ltd. on condition that out of the
sale proceeds payment would first be made to the Income Tax
Department and the balance would be disbursed following the
· directions of the Delhi Court. It was further sfated that a request
H was made to the, Delhi Court for permission for payment of
DCM FINANCIAL SERVICES LTD. v. NEEL KAMAL 47
PLASTICS LTD. & ANR. [AFTAB ALAM, J.]
llr
Rs.1.95 crores from the sale proceeds to the appellant towards A
its dues against the Debtor Company and the matter was to
come before that Court on 24 March 1999. The Punjab and
Haryana High Court recorded the statements made before it in
the order passed on that date and then adjourned the matter as
prayed on behalf of the parties. 8
~ 8. Later on the Debtor Company filed applications both
before the Punjab and Haryana High Court and the Delhi High
J
\
Court seeking a direction allowing MGF Ltd. to pay the sum of
Rs. 1.95 crores directly to the appellant. The appellant filed an-
other application (Company Application No.441 /99) before th~ c
Punjab and Haryana High Court for vacating the restraint order
dated 20 February, 1997. On hearing the parties and taking
note of the fact that out of the sale proceeds of the property A-
31, Mohan Cooperative Industrial Estate, New Delhi, two post
dated cheques of Rs. one crore and Rs.95 lakhs respectively D
had been handed over to the appellant's counsel the Company
Judge vacated the interim order dated 20 February, 1997. On
1 September, 1999 the following order was passed in Com-
pany Petition No. 16 of 1997:
"In Company Petition No.16of1999 an order had already E
been passed for winding up of the Respondent but it was
deferred for final publication. This court had stayed the
sale of property including No.A-30, Mohan Cooperative
Industrial Estate, Mathura Road, New Delhi. It appears
that despite the said order the property had been sold F
-~
and the sale had since been confirmed by Delhi High
Court. M/s. Motor and General Finance is the purchaser
of the property.
Out of the total sale proceeds from A-31, Mohan
G
Cooperative Industrial Estate, Mathura Road, New Delhi,
t- two post dated cheques of Rs. one crore dated 3.9.1999
(No.719854) and the other dated 2.11.1999 for R~.95 lacs
(No. 719855) has. been handed over to the applicant's
counsel in Court. The applicant's counsel has accepted
H
48 SUPREME COURT REPORTS [2008) 12 S.C.R.

i-
A the said cheques without prejudice to its contentions
against M/s. Pure Drinks Limited, New Delhi-Respondent.
Keeping in view the above said fact and the events referred
to above that the sale has been confirmed by the Delhi
High Court and that the parties namely the applicant, M/
B s Motor General Finance Ltd. and the Respondent have
no objection, it is directed that the stay that had been )..-

granted against the Respondent would stand vacated as
against the above said property only in GP No. 16 of -.::I"' _ _ ,.
~
1997. In view of the confirmation by the Delhi High Court,
c of the sale, there is no need thus to pass any order."
(emphasis added)
9. It is significant to note here that the Delhi High Court
declined the request to allow MGF Ltd to make any payment to
D any one else other than the Income Tax Department and insisted
that after payment to the Income Tax Department the balance
amount of Rs.3,66,64,995/- be deposited with the Registrar of *
that Court within two weeks from its order dated 7 October,
1999. Against the order dated 7 October, 1999 MGF Ltd. filed
E an appeal before the Division Bench of the Delhi High Court
t
and by an interim order it was directed to deposit
Rs.2,66,69,995/- apparently because Rs.one crore was already
paid to the appellant. It is not clear from the records what final
order was passed in the appeal by the Division Bench.
F 10. This bilateral arrangement between the parties was
thus formalized by the Punjab and Haryana High Court and the f.-
appellant, at whose instance the proceedings for liquidation of
the Debtor Company had commenced was able to secure from
it a very substantial amount under a private arrangement, in-
G volving the breach of the Court's order and at the expense of
the creditors of the Debtor Company. At this stage, however, M/ ~+
s. Neelkamal Plastics, respondent No.1, put a spanner in the
neat arrangement arrived at between the appellant and the
Debtor Company. It filed an application (Company Application
H No.459/99) under Section 433 of the Companies Act seeking
DCM FINANCIAL SERVICES LTD. v. NEEL KAMAt 49
PLASTICS LTD. & ANR. [AFTAB ALAM, J.]
-r
a direction to restrain the Debtor Company from making any A
payment to any creditor in preference to the creditor making
the application. It also sought a direction to the appellant to re-
fund the amount of Rs.1.95 crore paid to it for and on behalf of
the Debtor Company and further to restrain the appellant from
encashing the cheques received by it from MGF ltd. In its ap- B
--'\ plication respondent no. 1 tried to point out to the Court that the
payment of Rs.1.95 crore by MGF Ltd. to the appellant was not
sanctioned by the Delhi High Court and it was in fact contrary to
the Delhi High Court order dated 4 March, 1999. On notice being
issued both the Debtor Company and the appellant filed their c
rejoinders resisting the prayers made by respondent no. 1 on
all conceivable grounds. On hearing the parties the Company
Judge first passed order dated 26 October, 1999. By this order
the Company Judge directed that the appellant would encash
the cheque of Rs.95 lakhs only on the condition that the money
D
would be immediately deposited in the Delhi High Court. (The
"f<
other cheque of Rs.1 crore had already been encashed by then).
The Court also issued notice to the parties in Company Peti-
tion no. 16 of 1997 and MGF Ltd. to show cause why order
dated 1 September, 1999, lifting the earlier restraint order, be
not recalled; parties were permitted to file supplementary re- E
plies. As an interim measure MGF Ltd. was restrained from
selling, alienating or creating any charge on A-30 Mohan Co-
operative, Industrial Estate, Mathura Road, New Delhi. The or-
der dated 26 October, 1999 makes it clear that the Punjab &
Haryana High Court, on being apprised of all the facts, took the F
view that the order dated 1 September, 1999 was obtained from
it on a complete misrepresentation of the orders passed by the
Delhi High Court. On 14 March 2000 the Company Judge
passed the final order in the matter. The relevant extract from
the order is as follows: G
~}
"As regards the rest of the amount of Rs. One crore, it is
abundantly clear from reproduced paragraph above that
when Company Application 441 of 1999 was preferred in
this Court, reference was made to the statement made by
H
50 SUPREME COURT REPORTS [2008] 12 S.C.R.

A the learned Senior Counsel for MGF. It only conveyed that
Delhi High Court has no (sic) conveyed otherwise. The
order of Delhi High Court has been reproduced above. It
reveals otherwise. There was a clear direction by Delhi
High Court that entire amount has to be deposited with
B the Registrar of Delhi High Court. The same had not to be
)-- .- .
paid to DCM Company. A copy of order passed by Delhi
' 1
High Court dated 2.9.1999 has also been appended .. It
indicates that before the Delhi High Court it was stated on
behalf of MGF that order dated 4.3.1999 had not been
c correctly understood by MGF. The Delhi High Court
recorded that it is difficult to accept the submission. These
facts clearly show that the payment that was made to
DCM Company was contrary to the direction of the Court.
It was undue preference given to one creditor.
D ***** ***** ***** *****

The position that emerges is that the amount of Rs. One
crore has been utilized. Obviously correct facts were not
brought to the notice of the Court. The result is that DCM
company cannot take/advantage and retain the amount. It
E is true that the amount is stated to have been utilized for
clearing certain liabilities. But while striking a balance,
direction has to be issued to deposit the said amount in
this Court. Keeping in view the difficulty, it is directed that
w.e.f. 15.4.2000 DCM Company will deposit the entire
F amount in twelve equal installments of Rs.8.5 lacs. It should
continue to deposit the said installments month by month
till the entire amount is deposited with the Registrar of the
Court." ·

G The order was taken in appeal. The Division Bench ex-
amined the whole matter in all its myriad detail and by order +
dated 3 December, 2001 firmly affirmed the order passed by
the Company judge.
11. We hav·e before us the appeal against this order of the
H Punjab and Haryana High Court.
DCM FINANCIAL SERVICES LTD. v. NEEL KAMAL 51
PLASTICS LTD. & ANR. [AFTAB ALAM, J.]
-t
12. Mr. Rajesh Srivastava, learned counsel appearing for A
the appellant, submitted that the direction asking the appellant
to deposit the amount of Rs.one crore in Court was quite ille-
gal, unjust and unreasonable. Learned counsel assailed the High
Court's direction mainly on two grounds. He first submitted that
under a private arrangement between the two, the appellant had B
~ received the amount from MGF Ltd. which was not even a party
to the Company Petition pending before the Punjab & Haryana
High Court. Further, the amount that was paid to the appellant
was a part of the consideration money that MGF Ltd. was to
pay to Mis. Pure Drinks (Calcutta) Ltd. which too was not a partyc
before the Punjab & Haryana High Court. Thus, the whole trans-
action had taken place outside the purview of proceedings be-
fore the Punjab and Haryana High Court. It was, therefore, not
open to the High Court to ask the appellant to deposit in Court
the money received by it from MGF Ltd. Learned counsel next
D
s·ubmitted that in any event such a direction could not be made
on an application by respondent No.1 because MIS Neelkamal
PfaStics Ltd. had received over Rs.13 lakhs from the Debtor
Company and it was thus itself extended a fraudulent prefer-
ence by the Debtor Company.
E
13. We see no substance or merit in either of the two sub-
missions. The submissions made by Mr. Srivastava tend to
present the matter in an over simplified way and completely
overlook the provisions of the Companies Act. It is misconceived
and fallacious to suggest that the appellant received a sum of F
Rs.1.95 crores from MGF Ltd. in a transaction falling outside
the purview of the Company Petition pending before the Punjab
& Haryana High Court. It is misleading to say that the money
received by the appellant was part of the consideration money
payable to Mis. Pure Drinks (Calcutta) Ltd. and it had no con-
G
nection with the Debtor Company. In the facts and circumstances
-1
of the case, it is not the source of money that is important but
what is important is the cause on the basis of which the appel-
lant was able to get the money from MGF Ltd. The payment of
the large sum by MFG Ltd. to the appellant was not gratuitous.
H
52 SUPREME COURT REPORTS [2008] 12 S.C.R.

i--
A It was evidently intended to patch up the brazen breach of the
Court's orders committed by the Debtor Company and MGF
Ltd. in effecting the sale of A-30, Mohan Cooperative Industrial
Estate, Mathura Road, New Delhi. The payment was thus di-
rectly within the purview of the Company Petition pending be-
B fore the Punjab & Haryana High Court.
14. In this connection it should also be borne in mind that ....
the proceedings for liquidation of a company under the Com-
"'
paniesAct are notthe same as a intra-party suit for recovery of
money. In a money suit it may indeed be open to the plaintiff to
c accept any money outside the court from or on behalf of the
defendant towards the full or partial satisfaction of his claim in
the suit and to report the payment to the court for passing ap-
propriate orders. But such is not the position in a proceeding
for liquidation of the company. Once a proceeding gets under-
D way under the Companies Act, the party at whose instance the
proceeding is initiated does not enjoy any preferential claim
and any proceeds from the sale of the assets of the company
must be disposed of in terms of the scheme as provided under
Sections 529A and 530 of the Companies Act.
E 15. Having regard to the provisions of the Companies Act
it is plain and clear to us that the money received by the appel-
lant from MGF Ltd. was legally bound to come to the court. The
Court was in error in·allowing the payment to the appellant by
its earlier order dated 1 September, 1999 and later it rightly
F recalled that order and directed the appellant to deposit the
money in court.
16. As to the other point that respondent No.1, the appli-
cant, had itself received over Rs.13 lakhs from the Debtor Com-
pany and it was, therefore, not open to it to object to the appel-
G
lant too getting its due from the Debtor Company, the obvious I

answer is that one wrong would not justify another of the same +-
kind. But the submission does not even appear to be factually
correct. In the order coming under appeal the High Court dealt
with the point and made the following observation :
H
DCM FINANCIAL SERVICES LTD. v. NEEL KAMAL 53
PLASTICS LTD. & ANR. [AFTAB ALAM, J.]
-r ''The argument of Shri Ranjit Kumar that Respondent No.1 A
could not have questioned the payment made by Mis.
MGF ltd. to the appellant because it had received Rs.13.20
lakhs from Respondent No.2 after filing of winding up
petition sounds attractive but does not merit acceptance
because perusal of the record shows that Respondent B
- "\ No.1 had received payment fro'm Respondent No.1 (sic
Respondent No. 2) between November 1998 and
19.7.1999 amounting to Rs.10,95,000/- (last cheque dated
11.8.1989) of Rs.2,25,000/- was not encashed by
Respondent No.1 before the passing of the second order c
of advertisement. We are further of the view that the
acceptance of payment of Respondent No.1 from
Respondent No.2 is not sufficient to preclude it from
bringing to the notice of the learned Company Judge that
order dated 1.9.1999 had been obtained by the parties
D
by suppressing material facts and playing fraud with the
+ Court."
17. This is the complete answer to the submission made
on behalf of the appellant.
18. We thus find no substance or merit in this appeal. It is E
accordingly dismissed. In the facts and circumstances of the
case, there shall be no order as to costs.
K.K.T. Appeal dismissed.

-~