TMI Blog2001 (8) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... with the prayers as follows : "... to declare the proposed sale of assets of the R2 company by the R1 bank in pursuance of the notice dated 23-5-2001 as void and accordingly restrain the respondent bank from effecting sale of the said property without obtaining the permission of the Hon'ble Court; and pass such other orders as are deemed fit and proper." "... to stay all the sale proceedings initiated by the R1 bank including the proposed advertisement of sale of assets on 6-6-2001 or any subsequent date; and pass such other orders as are deemed fit and proper in the circumstances of the case." 3. The case of the above mentioned Suresh, is that the first respondent in all the three above mentioned applications i.e., A.P. Mahesh Co-operative Urban Bank Limited caused an advertisement in 'Eenadu' daily on 23-5-2001 informing the public that all the movables etc., belonging to Ismit would be put to auction on 14-6-2001, and such sale would be detrimental to the interests of the applicant, and other unsecured creditors. 4. As it appeared from the tenor of the advertisement that some of the assets of a company against which a petition to wind up is pending in this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce the said award in accordance with the provisions of the Andhra Pradesh Co operative Societies Act. The respondent further submitted that the applications 310, 311 and 312 are collusive in nature, as according to the first respondent, the petitioner therein is a very close associate of the company against which winding up proceedings are pending and the applications 310 to 312 are mere abuse of process of this court and that the applicant has not produced any material whatsoever to show that he is in fact a creditor of the company which is sought to be wound up; therefore, he does not have the requisite locus standi to approach the court, therefore the above mentioned applications are required to be dismissed and interim order granted earlier is required to be vacated. 7. The second respondent also filed a counter wherein the company admitted the averment made by the applicant that the company had borrowed an amount of Rs. 10 lakhs from the applicant. The petitioner in C.P. No. 219 of 1998 also filed a counter objecting for the grant of any relief sought in the three applications mentioned above. Various allegations are made in the affidavit, the details of which may not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y event, leave to proceed with the execution of the decree passed by the arbitrator could still be granted by this court even at this stage upon his oral application. 10. The learned counsel for the applicant submitted that notwithstanding the assertion made by the first respondent-bank that it is a secured creditor, in view of the fact that the Bank chose to obtain only a money decree from an arbitrator constituted under the Andhra Pradesh Co operative Societies Act, it is not open for the first respondent Bank now to claim that it is a secured creditor and it must be deemed to have waived its security. Therefore, the first respondent bank has no option, but to go before the Official Liquidator as an unsecured creditor and stand in the queue for the recovery of the amounts due to it. 11. To examine these rival contentions, an analysis of the scheme of sections 446, 537 and 441 of the Act is required. 12. Section 446 mandates that whenever an order of winding up is passed with reference to a company or a provisional liquidator is appointed by the court even before a formal winding up order is passed no suit or other legal proceeding shall either be commenced or if alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany by itself or a sale brought about by third parties in execution of an adjudicated right. 15. Section 531A of the Act deals with certain sales or transfers of the properties by the company held within a period of one year before the presentation of the winding up application. That section only has application to the sales voluntarily made by a company within a limited period of one year immediately preceding the date of the presentation of the winding up application. So, the expression 'sale held' occurring in section 537 takes within its sweep whether it is voluntary sale by the company or a sale brought by a third party for whatever reason, to be void if made without the leave of the company court during the pendency of the winding up proceedings. Thus, the distinction between sections 446 and 537 is that while a person can proceed to have his rights against the company that is being wound up/adjudicated with the leave of the company court, no person is entitled to enforce such rights against such company during the pendency of the winding up proceedings although such rights have been determined by a competent court or Tribunal without once again obtaining the leave o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he presentation of an application for winding up of a company. Therefore in my view it must be understood that a company is undergoing the process of winding up from the date of the presentation of the company petition in all these cases where section 441(2) applies. 18. The next submission of the learned counsel for the first respondent is that since the first respondent is a secured creditor, his oral application for leave to proceed with the execution of the award made in his favour, may be considered by this court even at this stage, requires some examination. 19. It cannot be said that as a matter of an absolute rule that an application for grant of leave of the court either under section 446 or 537, should be rejected only on the ground that it is not a written application. The fact that the first respondent is a secured creditor is disputed and from the award made in favour of the first respondent creditor, which is already extracted above, it appears to me, to be, purely in the nature of a money decree. The award does not indicate that any specific liability created against any one of the assets of the company. In fact, the last sentence of the award, which reads : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must rank as an unsecured creditor along with the other creditors of the company, and prove its claim before the Official Liquidator at the appropriate time. See AIR 1933 Bom.51 and AIR 1933 Bom. 437. The Bank is itself to blame for the course that it chose to adopt." (p. 257) 20. In my view, the same legal position applies to the facts of the present case also. In which case, the first respondent bank remains only an unsecured creditor. 21. No doubt, even an unsecured creditor who obtained a decree for the recovery of amounts due to him, may proceed against a company in liquidation with the leave of the company court as can be seen from the language of section 537, but having regard to the overall scheme of the Act, more particularly, the provisions dealing with the liquidation of a company and the various competing claims in the context of liquidation of a company and the priorities created in favour of certain claims by the law, it is required to first ascertain as to what are the claims against a company in liquidation and what is the nature of those claims and whether they are secured or unsecured. Without ascertaining the same permitting an unsecured creditor to en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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