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TMI Blog2009 (8) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... s :- 2. The Board of Directors of M/s. BST Ltd. (the Company in liquidation), made a reference dated 19-11-2003 to the Board of Industrial Finance and Reconstruction ("BIFR" for short) under section 15 of the SICA, which was received by the BIFR on 21-11-2003. The BIFR issued notices to all the secured creditors of the company including the 4th respondent Indian Bank, in that reference. The BIFR, after bearing the secured creditors, including the 4th respondent, by order dated 29-6-2005, held that the Board was satisfied that the company had become a sick industrial company and came to the prima facie conclusion that company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations. The Board felt that the company, as a result thereof, was not likely to become viable on a long-term basis and hence it was just, equitable and in public interest that it be wound up. But the Board gave the promoters an opportunity to formulate a viable rehabilitation proposal and to submit the same to the Operating Agency, who was in turn directed to consider such proposal in a joint meeting of the involved agencies and to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.P. No. 21/2005 held that the 74 workmen of the company who have filed the C.P. are entitled to receive a total amount of Rs. 56,16,987 and by virtue of the second proviso to section 13(9) of the Securitisation Act, the Bank can retain the proceeds of sale of the assets of the company only after depositing the workmen's dues with the official liquidator. 3. A counter affidavit has been filed by the 4th respondent bank taking the contention that the sale, pursuant to proceedings under section 13(4) of the Securitisation Act, was effected much before the order of winding up of the company on 2-11-2007 and the 2nd proviso to section 13(9) applies only if the sale is subsequent to the order of winding up. According to the Bank, the sale took place as early as on 29-6-2006, much before the order of winding up, and therefore, the 2nd proviso to section 13(9) is not applicable to such sale, in which case, they are not bound to deposit the workmen's dues in accordance with that proviso. They also take a contention that since possession of the property of the Company under section 13(4) of the Securitisation Act was taken by them on 13-2-2006, the proceedings under the SICA themselves ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the winding up order has been validly passed under section 20(2) of the SICA, which is binding on the 4th respondent bank notwithstanding the 2nd proviso to section 15(1) of the SICA. 5. The next contention raised by the Bank is that the proviso to section 13(9) of the Securitisation Act is not attracted in this case, since at the time of sale of the secured asset of the company, the company was not 'being wound up'. According to them, the proviso is attracted only in the case of a company 'being wound up' at the time of the sale under section 13(4). Since the sale was on 29-6-2006, much before the winding up order on 2-11-2007, the proviso is not applicable to that sale. 6. Firstly, I am of opinion that that contention is no more open to the 4th respondent bank in view of the judgment dated 12-4-2007 of the Karnataka High Court in W.P. No. 12749/2005 filed by another union of the company in liquidation, which filed C.A. No. 649/2007, in which the Bank was the 3rd respondent and which judgment is produced as Annexure I to C.A. No. 649/07 referred to above, wherein, the Karnataka High Court has held thus in paragraphs 4 to 8 :- "4. It is in this connection, 3rd respondent was im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale proceeds of his secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of section 529A of the Act. And the Official Liquidator shall intimate the secured creditors the workmen's due in accordance with the provisions of section 529A of the Companies Act, 1956 and in case, such workmen's due cannot be ascertained, the liquidator shall intimate the estimated amount of the workmen's due under section 529A of the Act to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing of the amount of such estimated dues with the official liquidator. 7. By reading the proviso to section 13(9) it is clear that the Legislature has taken care to protect the interest to the workman. 8. Now the question is whether any relief can be granted in this writ petition towards payment of closure compensation even though 2nd respondent has no objection. In this case 2nd respondent company has filed memo of calculation inter alia disclosing the amount due to the member of the petitioner union, inter alia stating that there are 143 workmen and their claims in all comes to Rs. 1,04,34,673 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having regard to the provisions of sub-section (4) of section 20, BIFR alone shall have jurisdiction as regards sale of its assets till an order of winding up is passed by a Company Court." (p. 15) Again in paragraph 42 thereof, the Supreme Court again held thus :- "42. ... The Scheme suggests that BIFR retains control over the assets of the company and in terms of the aforementioned provisions may either prevent any sale or permit any sale of the assets of the sick individual company. Such a power in BIFR remains till a winding up order is passed by the High Court and a stage arrives at for the High Court for issuing orders for distribution of the sale proceeds." (p. 16) Elaborate arguments have been advanced before me as to the meaning of the term 'being wound up' occurring in the 2nd proviso to section 13(9) of the Securitisation Act, as to when does the winding up in terms of section 20(2) of the SICA commence as to whether section 441(2) of the Companies Act regarding commencement of winding up can be applied to the fact situation etc. I am of opinion that I do not have to labour much on that issue, since the Supreme Court has in paragraph 50 of NGEF Ltd.'s case (supra) ans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g wound up. 9. In any event, although the secured creditor had the right to sell the secured asset in exercise of their powers under section 13(4) of the Securitisation Act, in view of my finding that on account of their failure to intimate the BIFR of their intention to sell the secured assets of the company, who, as held by the Supreme Court in NGEF Ltd.'s case (supra), is the custodian of the assets of the company and the BIFR alone has the jurisdiction as regards sale of its assets till an order of winding up is passed by the Company Court the sale made by the 4th respondent bank is at least voidable. The Supreme Court themselves had, in paragraph 52 in the NGEF Ltd.'s case (supra) indicated the powers of the Court in such cases thus :- "52. In Pankaj Mehra v. State of Maharashtra [2002] 2 SCC 756 whereupon the learned counsel appearing on behalf of the first respondent placed strong reliance, construction of sub-section (2) of section 536 of the Companies Act came up for consideration and it was held that having regard to the phraseology used therein, in transaction shall be void unless the court otherwise orders. It is interesting to note that in para 19 thereof, this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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