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2015 (8) TMI 434 - SUPREME COURT

2015 (8) TMI 434 - SUPREME COURT - TMI - Jurisdiction of Official liquidator - whether the Official Liquidator can claim any power or jurisdiction in itself to adjudicate and quantify the claim of statutory corporations such as respondents when the Company Judge has permitted them to stand outside the liquidation proceeding subject to certain conditions under which the respondent Corporations may pursue the powers available to them under Section 29 of the State Financial Corporations Act, 1959 - .....

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SFCs under Section 29 and the other relevant sections of the SFC Act but the impediment is indeed of a limited nature; its specific purpose being to protect the pari passu charge of the workmen’s dues. After ensuring that this purpose is achieved or ensured, the State Financial Corporations can continue to enjoy their statutory rights as secured creditors. They will not be reduced to the status of unsecured creditors and equally will not be required to prove their debts nor will be required to .....

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lter the status of State financial corporations as secured creditors and they will not be required to prove their debt which they are entitled to realize under the provisions of the SFC Act subject to right of the workers to receive their wages also as secured creditors on pari passu basis. The control of the Company Judge and the Official Liquidator if authorized, can extend only to ensure that the aforesaid purpose of Section 529A is effectively achieved. - no error in the impugned order of th .....

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he claim of statutory corporations such as respondent no.1, A.P. Industrial Development Corporation and respondent no.2, A.P. State Financial Corporation when the Company Judge has permitted them to stand outside the liquidation proceeding subject to certain conditions under which the respondent Corporations may pursue the powers available to them under Section 29 of the State Financial Corporations Act, 1959 (for brevity referred to as the SFC Act ). 2. The relevant facts are not at all under d .....

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ne of the conditions the corporation was required to obtain permission of the High Court for finalizing/confirming the sale. The Official Liquidator had already been allowed to inspect the properties and assets of the company and to take inventory as and when required. The valuer s report was also placed before the court before the properties covered under the mortgage deeds in favour of Corporation were put to sale. The respondent-corporation had also submitted to the order of the Company Judge .....

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e Rules. 3. On the application filed by the respondent-corporation seeking confirmation of sale of the mortgage assets of the company, the learned Single Judge vide order dated 19.11.2003 noted the contention of all the parties and finding that there was no objection to sale of the properties either by the second charge holder or by the Official Liquidator, confirmed the sale of land, buildings, plant and machinery in favour of M/s. Sri Venkataswara Industries represented by Sri Adarsha Gupta fo .....

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arning deposits till the Official Liquidator adjudicates and quantifies the claim of the applicant and 2nd respondent Corporations. The applicant and 2nd respondent shall deposit 1/4th of the sale proceeds with the Official Liquidator to enable him to proceed with the adjudication of the claims of the workmen and for distribution among themselves. They shall make over the excess sale proceeds, if any, to the Official Liquidator. After receiving the entire sale consideration only, the petitioner .....

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tor shall quantify the amounts liable to be paid to the workmen. The Division Bench accepted the objection raised by respondent-corporation that there could be no question of establishing the claim of the corporation before the Official Liquidator as the corporation was a secured creditor. 5. The Division Bench in our view came to a correct conclusion that the Official Liquidator does not have jurisdiction to ascertain or adjudicate the claim of a secured creditor who has been permitted by the C .....

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l Corpn. v. Official Liquidator (2005) 8 SCC 190 6. In A.P. State Financial Corporation this Court had the occasion to examine the extent of powers available to a Financial Corporation under Sections 29 and 46 of the SFC Act in the light of later amendments to the Companies Act incorporating proviso to Section 529(1) and Section 529A of the Companies Act through Amendment Act 35 of 1985. The object of the amendment was to protect the dues of the workmen. This Court held that the power available .....

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a creditor opting to stay outside winding up and one who opts to prove his debt in winding up. Para 31 of the judgment provides thus : 31. Finally, counsel for SFCs urge that the view we are to take would obliterate the difference between a creditor opting to stay outside winding-up and one who opts to prove his debts in winding-up. We are unable to accept it. As a result of the amendments made by the Act of 1985 in the Companies Act, 1956, SFCs as secured creditors, must seek leave of the Comp .....

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tatutory rights as secured creditors without being reduced to the status of unsecured creditors required to prove their debts in insolvency and stand in line with other unsecured creditors. Neither is the apprehension expressed justified, nor the contention sound. 8. It is clear from the aforesaid judgment that no doubt the changes brought about in the Companies Act through amendments of 1985 impede even the statutory powers available to a secured creditor like SFCs under Section 29 and the othe .....

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creditors. 9. A three Judges Bench in the case of Rajasthan State Financial Corporation (supra) approved and followed the earlier views in A.P. State Financial Corporation and in International Coach Builders Ltd. In paragraph 17 of this judgment it was again clarified that the right of a financial institution or of the Recovering Tribunal or that of a financial corporation or the Court which has been approached under Section 31 of the SFC Act to sell the assets may not be taken away, but the sam .....

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on 529A, only to a limited extent and for the limited purpose of securing the right of the workers for distribution of their wages as pari passu charge. But such limited impediment to their rights under the SFC Act will not alter the status of State financial corporations as secured creditors and they will not be required to prove their debt which they are entitled to realize under the provisions of the SFC Act subject to right of the workers to receive their wages also as secured creditors on p .....

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