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JURISDICTION OF OFFICIAL LIQUIDATOR TO ADJUDICATE THE CLAIM OF SECURED CREDITOR

Corporate Laws / Banking / SEBI / LLP - By: - Mr. M. GOVINDARAJAN - Dated:- 14-9-2015 - In Laxmi Fibres Limited V. A.P. Industrial Development Corporation Limited and others 2015 (8) TMI 434 - SUPREME COURT the official liquidator has taken over the charge of the company by virtue of Section 445 of the Companies Act, 1956. The respondent seized the property of the company under Section 29 of the State Financial Corporation Act, 1959. The respondent sold the company as per conditions imposed by t .....

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o deposit workmen s dues with the official liquidator as and when quantified by him as per the provisions of Section 529A of the Companies Act, 1956 with interest. The surplus that would remain after the sale and realization of the dues of the secured creditors and the workmen could be made available to the official liquidator for dealing with as per the Act and the Rules. The High Court, noting the contention of all the parties and found that there was no objection for the sale of the propertie .....

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the sale of the properties shall be kept in interest earning deposit till the official liquidator adjudicates and quantifies the claim; One fourth of the sale proceeds shall be deposited with the Official liquidator to enable him to proceed with the adjudication on the claims of the workmen and for distribution among themselves; Excess sale proceeds, if any, shall be made over to the official liquidator; After receiving the entire sale consideration only, the properties are to be handed over th .....

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ed by the Company Judge to stand outside the liquidation proceedings with liberty to pursue its remedy as per statutory rights available under the State Financial Corporation Act subject to the conditions imposed by the Court. Against this order appeal was filed before the Supreme Court. The Supreme Court upheld the findings of the Division Bench. The Supreme Court, while coming to the above said conclusion relied on three judgments of Supreme Court as detailed below: In A.P. State Financial Cor .....

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to sell the property of a debtor company under liquidation is not absolute but is subject to the proviso to Section 529(1) and non obstante clause in Section 529 A of the Act providing for pari passu charge of the workmen. In International Coach Builders Limited V. Karnataka State Financial Corporation - 2003 (3) TMI 529 - SUPREME COURT OF INDIA the Supreme Court not only followed the view taken in A.P. State Financial Corporation case (supra) but also explain as to how the view adopted would no .....

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ts to impeding their unimpeded rights so be it. This impediment is of a limited nature for the specific purposes of protecting the pari passu charge of the workmen s dues and subject thereto, SFCs can continue to exercise their statutory rights as secured creditors without being reduced to status of unsecured creditors required to prove their debts in insolvency and stand in line with other unsecured creditors. In Rajasthan State Financial Corporation V. Official Liquidator - 2005 (10) TMI 280 - .....

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proviso to Section 529(1) of the Companies Act, 1956 provides that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favor 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 realize his security- the liquidator shall be entitled to represent the workmen and enforce such charge; any amount realized by the liquidator by way of enforcement of su .....

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