TMI Blog1990 (4) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... Asup Synthetics and Chemicals Ltd., respondent-company. The said loans were secured by the respondent-company by mortgage and hypothecation of its existing and future assets with RIICO. The aforesaid loans were secured by equitable mortgage by deposit of title deeds of the lands and buildings together with fixtures, etc. The RIICO as per its case is a secured creditor. The prescribed particulars of the charge were filed with the Registrar of Companies for registration within the prescribed period as required by the provisions of section 125 of the Act. As per the case of the RIICO it has been conferred under section 46 of the State Financial Corporations Act, 1951 (for short, "the Financial Corporations Act"), with the powers under various provisions thereof including sections 29 and 30 thereof under Notification No. G.S.R. 191, dated February 27, 1987, issued by the Central Government and the same has been published in Part II, section 3( i ) of the Gazette of India, dated March 21, 1987 (annexure A-1). The respondent-company is said to have committed defaults in payment of instalments of three loans and as promised by it regular payments were not made and thereby an amount of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with the financial corporation, the financial corporation shall have the right to take over the management or possession or both of the industrial concern as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the financial corporation, and under sub-section (2) of section 29, any transfer of property made by the financial corporation in exercise of its powers under sub-section (1) shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property. A reading of section 46B of the Financial Corporations Act will show that the provisions of that Act and of any rules or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than the Financial Corporations Act, but save as aforesaid the provisions of the Financial Corporations Act shall be in addition to and not in derogation of any other law for the time bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for payment of the loan advanced by it to the respondent-company. According to learned counsel for the petitioner, not only the sale, but even auction taken by it under section 29, having been taken after the commencement of the winding up proceedings, shall be void and will have no effect. A look at clause ( a ) of sub-section (1) of section 537 of the Act will show that where any company is being wound up by or subject to the supervision of the court, any attachment, distress or execution put in force without the leave of the court, against the estate or effects of the company, after the commencement of the winding-up shall be void. Under clause ( b ) of sub-section (1) of section 537 of the Act during the pendency of the proceedings for winding-up of a company, any sale held without leave of the court of any of the properties or effects of the company after such commencement shall be void. In my opinion, within the ambit of the words "attachment, distress or execution" and "sale" as used in clauses ( a ) and ( b ), respectively, of sub-section (1) of section 537 of the Act, the exercise of statutory powers, if any, empowering bodies, like RIICO, to take possession of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 353 of 25 Comp Cas): "It follows, therefore, that the amendment could not have been intended to bring within the sweep of the general words 'or any sale held without the leave of the court of any of the properties' sales effected by the secured creditor outside the winding up." Even Mr. Kuhad, learned counsel for the petitioner, did not challenge the settled proposition of law that the secured creditor could opt to remain outside the winding-up proceedings, but his contention is that under section 529A of the Act a provision has been made for preferential payments and the dues of workmen and debts due to secured creditors to the extent such debts rank under clause ( c ) of the proviso to sub-section (1) of section 529 have been made pari passu . It is this court which can safeguard the interest of workers and, therefore, leave of the court is necessary even if the sale, etc., takes place without the intervention of the court. A look at sub-section (1)( c ) of section 32E of the Financial Corporations Act will show that in case the management of the industrial concern which is a company within the definition of the Act is taken over by the financial corporation, then notwithst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87] 61 Comp. Cas. 448, dealing with the provisions of the Financial Corporations Act, held that in regard to the property of the company in winding up taken over by a State financial corporation, as a secured creditor, under section 29 of the State Financial Corporations Act, which has been excluded by the court from the assets of which the official liquidator has to take custody, the winding up court cannot make directions regarding their sale by the State financial corporation. The property advertised for sale by the corporation would be subject to the limitations of section 29. In Damji Valji Shah v. Life Insurance Corporation of India [1965] 35 Comp. Cas. 755; AIR 1966 SC 135, the court was dealing with the provisions of the Act and the provisions of the Life Insurance Corporation Act. The court said that the provisions of a special Act, i.e., the Life Insurance Corporation Act, will override the provisions of the general Act. I am, therefore, of the opinion that RIICO, being a secured creditor, could opt to remain outside the winding up proceedings, more so, in view of the provisions of the Financial Corporations Act which is a special Act. It has already taken possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions Act, a sick industrial company. Thus, under the provisions of the Special Provisions Act, so far as this court is concerned, there is no provision for making reference to BIFR. That apart, as stated earlier, possession, in exercise of the powers under section 29 of the Financial Corporations Act, of the management of the company has been taken by the RIICO. Under section 32A of the Financial Corporations Act, when the management of an industrial concern is taken over by the financial corporation, the financial corporation, may by order, notified in the Official Gazette, appoint as many persons as it thinks fit ( a ) in any case in which the industrial concern is a company as defined in the Act to be directors of that industrial concern, or ( b ) in any other case to be administrator of that industrial concern. As and when directors are appointed as aforesaid, only they in view of sub-section (1) of section 15 of the Special Provisions Act, can make reference to the BIFR. But, in this case, it appears that no director has been appointed and the financial corporation wants to sell the property charged with it for realisation of its dues. RIICO is a public financial institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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