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2013 (5) TMI 7 - HC - Companies LawMaintainability of Winding up petition – Petition for winding up was filed before the Company Court on the ground that the company(appellant) was unable to pay its debts - In affidavit opposing admission was filed contending that since the Respondent was a secured creditor, a Company Petition for winding up at its behest was not maintainable. – This defense was rejected by the Company Judge, while relying upon a judgment of a Division Bench of this Court in Bharat Overseas Bank Ltd. v. Shree Arcee Steels P. Ltd. [1985 (3) TMI 191]. Held that - Having regard to the position in law as consistently followed in the judgments of the Madras High Court in Karnatak Vegetable Oils and Refineries Ltd. v. Madras Industrial Investment Corpn. [1953 (12) TMI 14] and in Calcutta High Court in Techno Metal India (P.) Ltd. v. Prem Nath Anand [1973 (8) TMI 65] and as reiterated in the judgment of the Company Court in Canfin Homes Ltd. v. Lloyds Steel Industries Ltd. [2001 (3) TMI 933].,it is not possible to accept the submission which was urged on behalf of the Appellant. The law does not impose an unreasonable condition of requiring a secured creditor to forsake his security before he asserts a right to urge that a company which is unable to pay its debts should be wound up. The Respondent has stated before the learned Company Judge, when the petition for winding up came up for hearing that it was not possible for the Respondent to recover her dues by the sale of the land in respect of which a security has been created in favour of the Respondent. The claim of the Respondent is still to be proved in the course of the winding up proceedings. A secured creditor who has a mortgage, charge or lien on the property of the company as security for her debt may either: (a) enforce the security and prove in the winding up for the balance of the debt after deducting the amount realised; or (b) surrender the security to the Liquidator and prove for the whole of the debt as an unsecured creditor; or (c) estimate the value of the property subject to her security, and prove for the balance of the debt after deducting the estimated value; or (d) rely on the security and not prove in the winding up proceedings. A secured creditor has the option of relinquishing his security and/or proving the entirety of his debt in the course of winding up. If the secured creditor does so in the course of winding up proceedings, the security will ensure for the benefit of the body of creditors. On the other hand, it is open to a secured creditor to prove in the course of winding up proceedings to the extent of his debt which has not been realised outside proceedings for winding up by either accounting for the amount that has been so realised or by estimating the value of the property subject to security so as to enable him to prove in respect of the balance of the debt. On either view of the matter, that stage is still to arrive. For these reasons, we are of the view that the learned Company Judge was not in error in initially admitting the Petition and thereafter making the Company Petition for winding up absolute. No case for interference in appeal.
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