TMI Blog2004 (1) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be out of the winding up proceedings. It was held to the following effect : "As regards the objection raised by Mr. Narang, it is directed that the consortium of Banks shall give details to the Official Liquidator of the assets and securities charged to the consortium of Banks and on verifying and having been satisfied, the Official Liquidator shall keep the assets and securities charged to the Consortium of Bank being secured creditors, out of winding up proceedings." 3. Prior to the winding up, the stock-in-trade i.e. finished crystal sugar and molasses were sold in pursuance of the directions of this Court under the directions of a Committee constituted by this Court in Criminal Misc. No. 13130-M of 1996. 4. Applicant in C.A. No. 881 of 2002 is a body corporate constituted under the State Bank of India (Subsidiary Banks) Act, 1959. As a lead member of the Consortium of Banks, it advanced various credit facilities to the company in liquidation. There was an agreement of pledge of goods and assets dated 6-1-1995, Exhibit A/23, and an agreement of hypothecation of goods and assets dated 6-1-1995. Exhibit A/24, wherein a sum of Rs. 360 lacs and Rs. 410 lacs respecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 per cent per annum with quarterly rests from the date of filing of the suit till its realization. ( ii )pay the cost of litigation; and ( iii )pay the above amount within 30 days from the date of receipt of this order." 6. Similarly, the applicant in respect of C.A. No. 845 of 2002 is a body corporate constituted under the State Bank of India Act, 1955. It has been stated that the assets charged to the applicant has been ordered to be sold by the Court on the application filed by sugarcane growers. The sale proceeds of the said stocks hypothecated to the applicant were ordered to be deposited with State Bank of Patiala, High Court Branch, where the amount is lying in fixed deposit receipts. It has been further pointed out that as per judgment of the Debts Recovery Tribunal dated 27-6-2002 the applicant is a secured creditor and the amount due and payable by the respondents, jointly and severally, to the applicant is Rs. 4,05,11,044 as on 31-8-2002. The Debts Recovery Tribunal has passed the following order: "The application for recovery of Rs. 1,93,23,904.53 is allowed and defendants Nos. 1 to 11 are ordered to pay : ( i )A sum of Rs. 1,93,23,904.53 (Rupees one c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement filed on behalf of the Official Liquidator, it was stated that the applicant has not submitted the details of the movable assets over which it had charge or which were pledged with the applicant-Bank to show that the entire sale proceeds are those which have come out of the sale of movable assets pledged with the applicant-Bank. It was further stated that workmen s claims have not yet been settled on account of the fact that statement of affairs has not been filed. The fixed assets and other movable assets of the company in liquidation were taken over by the Punjab State Industrial Development Corporation under section 29 of the State Financial Corporation Act, 1951, and were sold to M/s. Chadha Papers Ltd. on 9-10-1997. Thus, the right of the applicant-Bank to stand outside the winding up proceedings in order to realise its security stands extinguished. It was further submitted that the security itself has been lost, the applicant-bank has no right to realize such security. The claim of the applicant-bank would be satisfied by treating the Bank as unsecured creditor. 10. In replication, the applicant-Bank attached an agreement of pledge of goods and assets as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the State Bank of India as per order passed by the Debts Recovery Tribunal is Rs. 1,93,23,904.53. As per arguments raised by Sh. Puneet Kansal, learned counsel for the Official Liquidator, an amount of Rs. 5,28,50,963.41 can be said to be payable to the State Bank of Patiala and an amount of Rs. 53,66,582.73 can be said to be payable to the State Bank of India and that too subject to the condition of furnishing of bank guarantee to pay the amount to the Official Liquidator to the extent of the dues of the workmen as and when determined by the competent Court. 15. On the other hand, Sh. P.D. Mehta, learned counsel for the applicant-Bank, has argued that the applicant-Bank is entitled to recover the entire decretal amount along with interest thereon on pro rata basis as per the ratio of advances given by the consortium of Banks. Once the applicant-Bank is a secured creditor and stand outside the winding up, the applicant-Bank has a right to satisfy its claim out of the security pledged irrespective of the nature of the account i.e. whether the amount is amount due under Term Loan or Cash Credit Account, in view of the terms of the agreement as well as in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Bank under any letter of credit opened or guarantee or indemnity issued by the Bank for the Borrower or otherwise in respect of any account at any office of the Bank (whether in India or elsewhere and whether accrued, accruing or contingent and whether solely or jointly with other and any bills of exchange, promissory notes or instrument or any time drawn, made, accepted or endorsed by the Borrower solely or jointly with other which the Bank may discount or become interested in together with all interest, discount commission charges, costs (between Advocate and Client) and expenses payable to incurred by the Bank in relation thereto." [Emphasis supplied] "(10) That this agreement shall operate as a continuing security for all moneys, indebtedness and liabilities aforesaid notwithstanding the existence of a credit balance on the account or accounts at any time or any partial payments or fluctuations of accounts." [Emphasis supplied] 18. Section 171 of the Indian Contract Act reads as under : "171. General lien of bankers, factors, wharfingers, attorneys and policy-Brokers . Bankers, Factors, wharfingers, attorneys of a High Court and policy-brokers may, in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditors; so too, the workmen s dues, which rank pari passu with debts due to secured creditors. This is brought home not only by section 529A, which was inserted by the Companies (Amendment) Act, 1985, but also by the proviso to sub-section (1) of section 529 inserted by the same Amendment Act. The winding-up Court does these acts through a liquidator, who has been given wide powers by section 457 of the Act. As against this, a receiver appointed by a civil Court on being approached by secured creditor would basically look after the interest of that creditor, whose interest may in many cases be in conflict with that of the liquidator, as was acknowledged in Karamelli and Barnett Ltd., In re [1917] 1 Ch. 203. We feel no difficulty in stating that in case of such conflict, the interest of liquidator has to receive precedence over that of the receiver inasmuch as the former looks after the interest of a large segment of creditors along with that of workmen, whereas the latter confines his concern to the interest of the secured creditor on whose approach the receiver has been appointed. This view cannot also be and has indeed not been contended by the learned counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ankers, factors, wharfingers, attorneys of a High Court and policy brokers, none else have a right to retain, as a security for such balance. 23. Hon ble Supreme Court in the case of the Board of Trustees of the Port of Bombay v. M. Sriyanesh Knitters , AIR 1999 SC 2947, has interpreted the provisions of section 171 of the Contract Act wherein it has been held that section 171 of the Contract Act is in two parts. The first part gives statutory right of lien to four categories including Banker. The second part of section 171 applies to persons other than the categories therein. It was held to the following effect : "This section is in two parts. The first part gives statutory right of lien to four categories only, namely, bankers, factors, wharfingers and attorneys of High Court and policy-brokers subject to their contracting out of section 171. The second part of section 171 applies to persons other than aforesaid five categories and to them section 171 does not give a statutory right of lien. It provides that they will have no right to retain as securities bailed to them unless there is an express contract to that effect. Whereas in respect of the first category of person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of these cases a lien was not permitted; but the law has been enunciated very clearly in both these cases following the principle laid down in the English case in (1876) 1 AC 554. Relying on the case law referred to above I am of the opinion that the plaintiff in this case was entitled to a banker s lien on all the moneys of the defendant in his hands and had even the right to combine the two accounts and transfer one from the other if he so chose..." (p.116) 25. A Division Bench of this Court in the case as Punjab National Bank Ltd. v. Arura Mal Durga Das , AIR 1960 Punj. 632 has the occasion to consider the general lien of the bank contemplated under section 171 of the Contract Act, 1872. The rule of English law that the bank has a lien or more appropriately, a right to set off against all monies of his consumers in his hands has been accepted as a rule in India. It has been held that when monies are held by the Bank in one account and the depositor owes the Bank on another account, the Banker by virtue of his lien has a charge on all monies of the depositor in his hands and is at liberty to transfer the monies to whatever account, the banker may like to set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness and has a right to use the proceeds in respect of any balance that may be due from the customer by way of reduction of customer s debit balance. Such a lien is also applicable to negotiable instruments including FDRs which are remitted to the Bank by the customer for the purpose of collection. There is no gain saying that such a lien extends to FDRs also which are deposited by the customer." (p. 1069) 28. In view of the discussion above, I am of the opinion that the applicant Bank has general lien over the money realized on account of sale of sugar and molasses etc. which was secured under one agreement. The applicant-bank has a right to appropriate the surplus out of such sale proceeds towards the money due to the bank in the other account. In fact, such was the terms of agreement apart from the fact that such right is recognized under the law as well. Learned counsel for the official liquidator could not show any term of the agreement wherein the general lien of the applicant-bank has been curtailed in any manner. Consequently, the consortium of banks are entitled to first appropriate the sale proceeds in the agreed ratio in respect of the outstanding against Cash C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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