TMI Blog2004 (8) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... t the spot on the date of auction and Rs. 2.70 lakhs, to cover 15 per cent, of the bid amount, after receipt of letter dated November 26, 2001. On January 23, 2002, an agree ment to sell was entered into between the applicant by which time total payment of Rs. 4.50 lakhs was made by the applicant which was recorded in the agreement and it represented 25 per cent, of the total consideration. Remaining 75 per cent, amount was to be paid in twelve instalments along with interest on the total outstanding amount. The applicant made certain payments from time to time in the following manner : Rs. 1,12,500 + Interest before 1-5-2002 Rs. 1,12,500 + Interest instalment on 1-8-2002 Rs. 1,12,500 + Interest 3rd instalment on 1-11-2002 Rs. 1,12,500 + Interest 4th instalment on 1-2-2003. Besides Rs. 50 thousand was deposited on April 10, 2003, in advance to be adjusted against instalment falling due on May 1, 2003. However, before full payments could be made and sale deed could be executed in favour of the applicant, because of the winding up orders passed in this petition, the official liquidator visited the premises in question on April 6, 2003, pursuant to the orders passed by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging Industries Pvt Ltd. which was allowed, vide order dated December 4, 2000. The petitioner also filed C. A. No. 1339 of 2000 praying for a restraint order against the respondent-company not to auction the property. Therefore, the prayer of the petitioner is also to the same effect, i.e. , the HFC could not sell the property. Before we deal with the legal issue, some of the important dates as flow from the aforesaid narration of facts may be noticed again. The company petition was filed on August 30, 1994, which was admitted on February 21, 1997 and citations were published. However, the provisional liquidator was not appointed at that time. This appointment came vide order dated February 28, 2003. Since the HFC had also finance the respondent-company, taking action under section 29 of the SFC Act for non-payment of its dues, it took over the factory premises in its possession on February 27 1997, which was put to auction on November 26,2001 and agreement to sell was entered into between the applicant and the HFC on January 23, 2002. By-that-time the applicant had paid 25 per cent, of the purchase price. The balance amount was to be paid in twelve instalments out of which fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial corporation, may apply to the District Judge for an order for the sale of the property pledged/mortgaged/hypothecated/assigned, etc. Section 46B is a non obstante clause and stipulates that provisions of the SFC Act and of any rule or orders made thereunder shall have effect notwith standing anything inconsistent therewith contained in any other law for the time being in force, etc. Sections 529 and 529A of the Act on the other hand, inter alia , stipulate 10 the respective rights of the secured and unsecured creditors and are in the following terms : "Section 529. Application of insolvency rules in winding up of insolvent companies. -(1) In the winding up of an insolvent com pany, the same rules shall prevail and be observed with regard to ( a )debts provable ; ( b )the valuation of annuities and future and contingent liabilities; and ( c )the respective rights of secured and unsecured creditors ; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent: Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitibala Debi v. Dharae Sundari Debt AIR 1919 PC 24). The same principle would be substantially true and applicable in the case of a mortgagee and a pari passu charge-holder over the same security for realising the security. The realisation of the security can only be done by both the charge-holders, joining and realising the security simultaneously. If a sale takes place, it can only be simultaneously for recovery of the claim of all pari passu charge-holders and sale proceeds are required to be divided proportionately in the same proportion as their dues. Para. 23 : In support of their respective contentions, parties have referred to and relied upon judgments of different High Courts. The view taken by the Bombay High Court commends itself to us. The Division Bench of the said High Court pointed out that, like a secured creditor, the official liquidator as a pari passu charge holder cannot independently bring the security to sale ignoring the secured creditor. He must, therefore, either obtain concurrence of the secured creditor for sale and take the court's sanction, or he can apply for sanction of the court after notice to the secured creditor. In either event, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor, if a company, only so long as there is no order of winding up ; 2. The SFCs cannot unilaterally act to realise the mortgaged properties without the consent of the official liquidator representing workmen for the pari passu charge in their favour under the proviso to section 529 of the Companies Act, 1956 ; 3. If the official liquidator does not consent, the SFCs have to move the company court for appropriate directions to the official liquidator who is the pari passu charge holder on behalf of the workmen. In any event, the official liquidator cannot act without seeking directions from the company court and under its supervision." We may now apply the aforesaid legal position to the fact situation of the present case. Here the order for provisional winding up was passed on February 28, 2003. However, the HFC had taken over the factory premises in its possession under section 29 on February 22,1997 and put to auction several times but failed. The successful auction, which is the subject-matter before this court, was held on November 26, 2001, and agreement to sell was entered into between the parties on January 23, 2002. This before the passing of the winding up orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured creditors, must seek leave of the company court for the limited purpose of ensuring that the pari passu charge in favour of the workmen is safe guarded by the imposition of suitable conditions under the supervision of the company court. Subject to the protection of this pari passu charge of the workmen's dues, SFCs can continue to exercise their statutory rights as secured creditors without being reduced to the status of unsecured creditors required to prove their debts in insolvency and stand in the line with other unsecured creditors. Therefore, what is required to be done is to protect the pari passu charge of the workmen, in the present case. Otherwise as noted above, 16 attempts were made to sell the property in question by the HFC which failed and the HFC succeeded only in 17th attempt. Fur ther, the reserved price was Rs. 15.13 lakhs which was fixed after getting the property valued and the property was auctioned at Rs. 18 lakhs. After-all, the HFC is also a statutory body and public authority and has followed proper procedure for inviting the tenders. Acceptance of bid of the appli cant for Rs. 18 lakhs, in these circumstances, was nothing but a reasonable an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
