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Kerala State Financial Enterprises Ltd. Versus Official Liquidator, High Court of Kerala

2006 (9) TMI 283 - SUPREME COURT OF INDIA

Whether if the properties are attached by a Revenue Recovery Court, section 125 of the Act would be applicable? - Whether sections 28, 31 and 46B of the State Financial Corporations Act shall prevail over sections 529 and 529A of the Companies Act? - Held that:- Appeal dismissed. The High Court has committed no error in refusing to exercise its discretionary jurisdiction under section 446 of the Companies Act. - CIVIL APPEAL NO. 4333 OF 2006 - Dated:- 29-9-2006 - S.B. SINHA AND DALVEER .....

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behalf in terms of section 71 thereof. 3. The properties belonging to the defaulting company were attached. In the meanwhile, the Company went for voluntary liquidation. A provisional liquidator was appointed. Appellant was informed thereabout. 4. In the pending company proceeding being C.A. No. 165 of 2001, Appellant filed an application seeking leave to proceed with the sale of the properties, which was objected to, inter alia, on the premise that the charge in respect of the alleged debt was .....

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ellant was dismissed by a Division Bench of the High Court. Appellant is, thus, before us. 6. The contentions raised in support of the appeal are : (i)In view of the fact that an order of attachment was passed by the Revenue Recovery Officer, the provisions of section 125 of the Companies Act, 1956 were not attracted; (ii)The provisions of the Kerala Revenue Recovery Act being a special statute, the same shall prevail over the Companies Act; (iii)The order of attachment passed in favour of appel .....

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nt company. Its dues are not Government dues. The provisions of the Kerala Revenue Recovery Act might have been made applicable, but only by reason thereof, dues of a Government company would not become the dues of the Government within the meaning of sub-section (2) of section 537 of the Companies Act. 9. Ordinarily a charge should be registered in terms of section 125 of the Act. If the charges are not registered, the same would be void against the liquidator or creditors. The question which a .....

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o the custody of the law the person or property of one already before the court, or of one whom it is sought to bring before it. It is used for two purposes : (i) to compel the appearance of a defendant; and (ii) to seize and hold his property for the payment of the debt. It may also mean prohibition of transfer, conversion, disposition or movement of property by an order issued by the court. 12. In Sardar Govindrao Mahadik v. Devi Sahai AIR 1982 SC 989, this Court held : 58. What is the effect .....

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s to give an assurance to the plaintiff that his decree if made would be satisfied. It is a sort of a guarantee against decree becoming infructuous for want of property available from which the plaintiff can satisfy the decree. The provision in section 64 of the Code of Civil Procedure provides that where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment-debtor of any debt, dividend or other monies co .....

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eedings must be allowed to continue with the leave of the court in terms of section 446 of the Companies Act. [See Ovation International (India) (P.) Ltd., In re [1969] 39 Comp. Cas. 595 (Bom.)]. 14. There, indisputably, exists a distinction between attachment before judgment in terms of Order XXXVIII of the Code of Civil Procedure and attachment for execution of a decree under Order XXI thereof. An order of attachment before judgment passed under Order XXXVIII seeks to safeguard the interests o .....

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noticed hereinbefore that sub-section (2) of section 537 will have no application in the instant case, inasmuch the recovery proceeding initiated by appellant cannot be said to be a proceeding for recovery of any tax or impost or any dues payable to the Government. 16. Section 125 of the Companies Act contains a special provision. It may not have any application in a case where a decree has already been passed, as was the case of Indian Bank v. Official Liquidator, Chemmeens Exports (P.) Ltd. [1 .....

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of the Kerala High Court in Kerala Financial Corpn. v. C.K. Sivasankara Panicker 1978 TAX. L.R. 1860, wherein in view of the fact that the State Financial Corporation had already taken recourse to section 31 of the State Financial Corporations Act. 18. The question therein was as to whether the order Ext. P18 has the effect of a decree creating a charge and section 46B of the State Financial Corporations Act has overriding effect over the provisions of section 125 of the Companies Act. It was he .....

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charge so created by the company will be invalid as against the liquidator and any creditor if it is not registered with the Registrar of Companies. This is inconsistent with the provisions of State Financial Corporations Act and therefore under section 46B of the latter Act which is a special Act the legal effect of the order passed will be binding on the Liquidator of the company also. This is further clear by sub-section (10) of section 32 of the State Financial Corporations Act. . . . It wa .....

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he terms of the decree and the decree creating a charge is not hit by section 125 of the Act (See Subrahmanyan v. Muttuswami AIR 1941 FC 47). If the charge has not matured in a decree, no doubt, section 125 will apply and the charge will be void against all creditors and the Liquidator. It is not possible to extend the scope of that section to cases where there are supervening events which are not covered by the section. Moreover, in this case in the light of section 46B of the State Financial C .....

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529A of the Companies Act came up for consideration before this Court in International Coach Builders Ltd. v. Karnataka State Financial Corpn. [2003] 10 SCC 4821, wherein this Court opined : We do not really see a conflict between section 29 of the SFC Act and the Companies Act at all, since the rights under section 29 were not intended to operate in the situation of winding up of a company. Even assuming to the contrary, if a conflict arises, then we respectfully reiterate the view taken by the .....

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t was stated : 18. In the light of the discussion as above, we think it proper to sum up the legal position thus : (i )A Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in-liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (ii)A Di .....

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