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TMI Blog2012 (8) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... mmons the applicant has filed affidavit wherein the applicant has stated, inter alia, that:- "(a) The company (in liquidation) is ordered to be wound up vide order dated 20.1.2000 passed in Company Petition No. 18 of 1999. (b) In pursuance of the order dated 20.1.2000 the OL took possession of the assets of the company and on 28.2.2008 issued advertisement in the newspapers for disposal of the specified assets of the company (c) Sale of some of the properties/assets was confirmed, vide order dated 14.10.2008 in favour of the highest bidder viz. M/s. Setco Automotive Limited who offered Rs. 1.90 Crores during the inter-se bidding. (d) In the recovery proceedings initiated by present applicant (i.e. Original Application No. 293 of 2000) learned tribunal passed order dated 12.3.2004 and thereafter also issued Recovery Certificate. On the basis of the Recovery Certificate, the Recovery Officer commenced proceedings under R.P. No. 2060/A to recover the amount awarded by learned Tribunal (i.e. Rs. 12,87,76,858/- with running interest @ of 12% per annum)." 3. In response to the notice by the Court, the OL filed his report dated 20.3.2010 stating, inter alia, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant bank on 28.7.2010 to the said charted accountant. A copy of letter dated 28.7.2010 is annexed hereto and marked as Annexure-R1 to this affidavit in reply. In this letter, the applicant bank has clearly stated that rupee term loan of Rs. 164 lakh was sanctioned and disbursed by three creditors viz. IFCI Limited, IDBI and ICICI Bank Limited under Project Finance Participation Certificate Scheme and the said amount of Rs. 164 lakh was shared by three institutions as under:- IFCI Limited Rs. 17.92 lakh IDBI Rs. 84.26 lakh ICICI Bank Limited Rs. 44.82 lakh The certificate of registration of the charge is placed on record at page No.37 which tallies with figure shown in the letter of IFCI Limited." 6. The said opponent No. 2 IDBI claimed that the Chartered Accountant committed mistake in considering the claim by ICICI bank inasmuch as the Chartered Accountant considered the claim of ICICI Bank at Rs. 4,65,24,121/- as on 20.1.2000 i.e. date of winding up whereas according to the judgment of the learned tribunal, the claim of ICICI bank was to the extent of Rs. 1,05,27,945/- only, as on 1.3.2000 and that therefore on 20.1.2000 i.e. date of winding up it could not be Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (pages 173 to 175) and opponent No. 8 ARCIL filed its affidavit/objection dated 21.7.2011. The said opponent ARCIL has tried to present bifurcation of the sale consideration of Rs. 1.90 Crores so as to demonstrate as to what amount was received from disposal of which particular property and on that basis what would be the percentage amount received from disposal of the particular property vis a vis the total amount received from disposal of the properties. The details mentioned by opponent No. 8 read thus:- Sr. No. Particulars Realisable Value Percentage (%) Bifurcation of sale proceeds Immovable Properties 1. Land (28,983 sq. mtrs) 28.98 24.30% 46,17,000 2. Compound Wall 2.00 1.65% 3,13,500 3. Building 85.89 72.00% 1,36,80,000 Sub Total (A) 116.87 97.95 1,86,10,500 Movable Properties Sub Total (B) 2.25 1.89% 3,59,100 Movable Property (Misc. Items) 5. Stores - - - 6. Electrical 0.11 0.10% 19,000 7. Furniture/Equipments 0.05 0.05% 9,500 8. Misc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 125 of Companies Act, 1956, the aforesaid Financial Institutions can not claim the status of secured creditors qua immovable property of the Company." [Emphasis supplied] 8. Thus, what has ultimately emerged from the reports by the Chartered Accountant is the fact that so far as the immovable properties of the company are concerned, any charge over any immovable properties of the company has not been registered in accordance with the provisions contained under section 125 of the Act either by the applicant - IFCI or the other creditors and in that view of the fact - situation, the Chartered Accountant has reported that the said financial institutions cannot claim status of "secured creditors". 8.1 In this context, it is pertinent to note that in reply to Court's query during hearing of present application, even learned Counsel Mr. Parmar for the applicant has not disputed the fact that the applicant did not get the charge against immovable properties (which the applicant is presently claiming against immovable properties of the company) registered within 30 days with the Registrar of Companies in accordance with section 125 of the Act and that it does not hold "registered c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act registration of charge is compulsory and any charge which is not registered with the Registrar of the Companies in accordance with the said provision will be void against the liquidator and the workmen or other secured and unsecured creditors can raise objections against claim made by a creditor on the basis of unregistered charge. He also contended that since the order by the learned tribunal is not registered with the Registrar in accordance with the said provision neither the applicant can claim status of secured creditor on the strength of the order by the learned tribunal nor their claim made on the basis of such order can be considered as secured claim and that therefore, such claim cannot be entertained under Section 529A read with Section 529 of the Act and such claim cannot be included or taken into account for determining the total eligible claim of all secured creditors and for determining the disbursement ratio for preferential and priority disbursement on pari-pasu basis amongst the secured creditors and the workmen. The learned counsel for the workmen contended that the claim made by the applicants on the basis of the said order is rightly excluded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and other financial institutions for disbursement by presetting their claim as claim by secured creditors. (j) In the report dated 21.9.2011 by the chartered accountant or in the report filed by OL including the aforesaid last report dated 12.10.2011 the position related to charge, if any, against movable property of the company is not clarified with reference to the requirement prescribed and contemplated under Section 125 of the Act. (k) It is not disputed by the creditor/s - applicant/s that the charge of the applicant is not registered in accordance with Section 125 of the Act. So as to come out of the said difficulty, reliance is placed on the order dated 12.3.2004 passed by the learned tribunal. (l) In the application No. 293 of 2000 (wherein the said order dated 12.3.2009 is passed) present applicant - IFCI as well as IDBI and ICICI Bank Ltd. were party applicants and Official Liquidator of the company was impleded as one of the defendants along with the Directors of the company. 11. In light of the facts of present case and in view of rival submissions, as well as the report of Chartered Accountant and the said order dated 12.3.2004, it is appropria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appendix D to the Code of Civil Procedure 1908 read with relevant rules and regulations applicable under the Act." 11.3 So far as the relevant provision under said Section 125 of the Act is concerned, the said provision reads thus:- "125. Certain charges to be void against liquidator or creditors unless registered. - (1) Subject to the provisions of this Part, every charge created on or after the 1st day of April, 1914, by a company and being a charge to which this section applies shall, so far as any security on the company's property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the instrument, if any, by which the charge is created or evidenced, or a copy thereof verified in the prescribed manner, are filed with the registrar for registration in the manner required by this Act within [thirty] days after the date of its creation: Provided that the Registrar may allow the particulars and instrument or copy as aforesaid to be filed within thirty days next following the expiry of the said period of thirty days on payment of such additional fee not exceeding ten t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. - (1) In the winding up of an insolvent company, 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 to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security,- (a) the liquidator shall be entitled to represent the workmen and enforce such charge; (b) any amount realised by the liquidator by way of enforcement of such charge shall be applied ratably for the discharge of workmen's dues; and (c) so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company; (iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company; (c) "workmen's portion", in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of- (i) the amount of workmen's dues; and (ii) the amounts of the debts due to the secured creditors. Illustration The value of the security of a secured creditor of a company is Rs. 1,00,000. The total amount of the workmen's dues is Rs. 1,00,000. The amount of the debts due from the company to its secured creditors is Rs. 3,00,000. The aggregate of the amount of workmen's dues and of the amounts of debts due to secured creditors is Rs. 4,00,000. The workmen's portion of the security is, therefore, one-fourth of the value of the security that is Rs. 25,000. 529A. Overriding preferential payment. - Notwithstanding anything contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge in this Part. - In this Part, the expression "charge" includes a mortgage." Section 100 of the Transfer of Property Act defines the term "charge". The said section reads as follows:- "100. Charges. - Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained [which apply to a simple mortgage shall, so far as may be, apply to such charge]. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, [and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge]." Thus, according to Section 100 charge can be created against immovable property either by act of parties or by operation of law. 12.3 So far as the provision under Section 529-A is concerned, it confers right of overriding pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company but if the charge in respect of such security is not registered within 30 days with the Registrar of Companies then such charge cannot be considered "secured charge" or secured debt for the purpose of Section 529 and 529-A of the Act and therefore while determining the aggregate of workmen's due and debt of the secured creditors the claim/debt in respect of which the charge is not registered, should be excluded. 12.7 When the facts of present case are examined in light of the above mentioned provisions it emerges from the record that in present case the dispute is with reference to the immovable properties because the applicant and other two creditors claim that by virtue of order of learned tribunal they are secured creditors in respect of immovable properties as well. Whereas the chartered accountant has mentioned in his report that any creditor has not got registered with the Registrar any charge against any immovable property - assets of the company. 12.8 In present case even if it is assumed that charge was created against immovable properties (as claimed by the applicant) then also mere creation of charge (assuming it was created) against immovable propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property: Provided ........... [(1A) ........." 14. According to clause (b) non-testamentary instruments which purport to or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest in immovable property of the value of Rs. 100/-; are required to be registered; and according to clause (c) the non-testamentary instruments under which payment of consideration on account of creation, declaration, assignment, limitation or extinction of any right, title or interest is acknowledged or the non-testamentary instrument which acknowledge the receipt of any consideration on account of creation, declaration, assignment, limitation or extinction of any right or interest, are required to be registered and according to clause (e) non- testamentary instruments transferring or assigning any decree or award or order of a Court which create, declares assigns, limits, or extinguishes right, title or interest, are required to be registered. In present case there is no transfer or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.3.2004 passed by the learned Tribunal it emerges that OL was impleaded as party defendant in the application before the learned tribunal. It also appears that the said order dated 12.3.2004 is not challenged by OL. Not only this, but it also appears from the record that even during proceeding before the learned tribunal OL did not oppose the claim of the bank that the documents of title of four immovable properties (bearing survey number 23, 25/1, 24/2 and 30/2) were deposited with it and that they were deposited by one of the Directors of the company. 15.1 However it does not become clear from the order as to whether the said four immovable properties are properties of the company or not and as to whether the said Director (viz. Mr. Mankodi) was duly authorized by appropriate resolution passed by the company to deposit the title deeds of the said four properties with the bank, or not. 15.2 So far as the issue regarding authority of said Mr. Mankodi is concerned, the company Court at this stage, cannot go behind the learned tribunal's order and examine the said issue afresh. More so when OL, despite being party to the proceeding, neither opposed the said details nor took care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has, by the said order, granted declaration that the applicant bank is entitled to recover a sum of Rs. 1,79,00,000/- with cost and further interest @ 12% per annum. 18.2 The learned Tribunal granted one month's time for such payment and further directed that in the event of failure to make payment within prescribed time the bank may proceed to sell the movable assets and mortgaged and other immovable properties of the respondents and that period of one month will not bar the Recovery Officer to issue demand Notice. Learned Tribunal also directed to issue Recovery Certificate. The relevant part of the said order read thus:- "(A) The applicant bank is entitled to recover from the respondents 1 to 3, jointly and severally, a sum of Rs. 1,79,00,000=00 p. with cost and further interest at the rate of 12% per annum, from the date of filing of the application till realization. (B) Respondent are given one month's time to settle the claim of the applicant bank; failing which, the bank may proceed to sell the movable assets and mortgaged and other immovable properties of the said respondents and adjust the sale proceeds towards the amount due. This period of one month will not bar t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to make payment and settling the Bank's claims within one month the amount/dues can be realized by sale of movable assets and other immovable assets. It is directed therein that:- "(A) ............. (B) Respondent are given one month's time to settle the claim of the applicant bank; failing which, the bank may proceed to sell the movable assets and mortgaged and other immovable properties of the said respondents and adjust the sale proceeds towards the amount due............ (C) and (D)**" ** ** 18.5 Thus the said observations and directions in the said order has extinguished the unregistered charge and the said unregistered charge, upon expiry of period of one month after the date of the order merged in the order of the Court. Accordingly as a result of and in view of the above noted observations and directions, the bank became entitled to realise its dues by sale of the immovable properties in question. The charge created by act or conduct of the parties/by a contract was kept alive for one month. During the said period the charge continued to be matter of contract but after one month the charge travelled into the realm of order of Court and merged into the order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of limitation of thirty days on payment of specified additional fees, on being satisfied that there has been sufficient cause for not filing the particulars and instrument or a copy thereof within the specified period. Sub-sections (2) and (3) deal with repayment of money secured by the charge. Sub-section (2) provides that the provision of sub-section (1) shall not prejudice the contract or obligation for repayment of money secured by the charge and sub-section (3) says that when a charge becomes void under the section, the money secured shall become payable immediately. Though as a consequence of non-registration of charge under Part-V of the Act, a creditor may not be able to enforce the charge against the properties of the company as a secured creditor in the event of liquidation of the company as the charge becomes void against the liquidator and the creditor, yet he will be entitled to recover the debt due by the company on par with other unsecured creditors. It is also evident the Section 125 applies to every charge created by the company on or after the Ist day of April, 1914. But where the charge is by operation of law or is created by an order or decree of the court, Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iquidator filed application on March 21, 1983 seeking to declare the decree as void. By that date what was operative in the decree as void. By that dates what was operative in the decree was not a mere unregistered charge but an order for sale of mortgaged property for realisation of decree amount. The preliminary decree cannot therefore be said to be void and inoperative." 18.8 The Apex Court observed that according to sub-section (1) of Section 125 of the Act if a company creates a charge on its properties and fails to have the charge together with instrument, if any, by which the charge is created, registered with the Registrar of Companies within 30 days, it shall be void against liquidator and any creditor of the company, subject to provision of part-(v) of the Act. However what is important for the issue on hand is that the Apex Court has observed in the said decision that:- "But where the charge is by operation of law or is created by an order of decree of the Court, Section 125 has no application" 18.9 Having held so, the Apex Court made reference of the decision in case of Overseas Aviation Engg. (G.B.) Ltd., In re [1963] 33 Comp. Cas. 315 (CA) in which case the Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the date of the order merged in the order of the Court. Accordingly as a result of and in view of the above noted observations and directions, the bank became entitled to realise its dues by sale of the immovable properties in question. The charge created by act or conduct of the parties/by a contract was kept alive for one month. During the said period the charge continued to be matter of contract but after one month the charge travelled into the realm of order of Court and merged into the order. Thus, as held by the Apex Court, the non-registration of charge against the immovable properties of the company is not hit by the requirement under Section 125 of the Act and is not rendered void. 20. In this view of the matter, OL shall have to re-examine the claim and/or the objections of the applicant and other creditors as well as by workers, in light of the legal position declared by the decision in case of Indian Bank (supra). 21. The OL will also have to ascertain as to whether the four properties of which reference has been made in the order passed by the learned tribunal are personal properties of the directors/guarantors or they were properties of the company. 22. The OL ..... X X X X Extracts X X X X X X X X Extracts X X X X
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