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Kemrock Industries And Exports Limited (In Liqn.) Versus Official Liquidator Of Kemrock Industries And Exports Ltd. (In Liqn.)

2015 (12) TMI 524 - GUJARAT HIGH COURT

Winding up proceedings - application for to in abeyance the winding up proceedings against the company including impugned action of taking physical possession of the running company by the Official Liquidator as informed vide letter dated 26.10.2015 till the reference case/appeal is finally disposed of by the authorities under the SICA - maintainability of application - Held that:- As per Section 445 of the Companies Act, 1956 when the order of winding up passed by this Court, all the officers o .....

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s in May, 2014. However, admittedly after the order of winding up is passed by this Court, applicant is having no authority from the concerned Board of Directors to initiate the proceedings before this Court, therefore, in absence of valid authority given to the Chief Financial Officer, this application is not maintainable and therefore also the same is required to be dismissed.

Symbolic possession of the properties of the applicant – company in liquidation has been taken over by the .....

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ed with or not is also not gone into by this Court in detail as it is not required in the present proceedings.

In view of the aforesaid facts, as a Company Judge, this Court cannot modify the order passed by the Hon'ble Division Bench and therefore the applicant is required to approach before the Hon'ble Division Bench for the relief prayed for in the present proceedings, the impugned communication dated 26.10.2015 is nothing but an action taken by the Official Liquidator in pursuance .....

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permission to circulate this application at 2:30 P.M. The Registry has therefore placed papers of this application for hearing. 2. The applicant Kemrock Industries and Exports Limited(in liqn.) moved the judges summons, wherein, the applicant has prayed for the following relief: (A). Your Lordships may be pleased to stay and keep in abeyance the winding up proceedings against the company including impugned action of taking physical possession of the running company by the Official Liquidator as .....

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he petitioning creditors as party respondents in the present proceedings. 4. Learned advocate Mr.Panesar mainly submitted that the applicant company has filed reference under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1986 ('SICA' for short) before the Board for Industrial and Financial Reconstruction (hereinafter referred to as the BIFR, New Delhi for short). The said reference was filed on 06.10.2015. The same is duly registered as BIFR Case No.138 of 2015. I .....

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on 30.10.2015, that reference is registered before BIFR and therefore, Official Liquidator may not take over the possession of the premises of the applicant company. However, applicant is having apprehension that on 03.11.2015 the Official Liquidator will take over the possession of the premises and therefore immediately this application is filed. 5. Mr.Panesar thereafter referred to provisions contained in Section 22 of SICA and submitted that when the reference is pending before BIFR, an inqu .....

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ant company and therefore, this Court may restrain the Official Liquidator from taking physical possession of the premises of the company in pursuance to the communication dated 26.10.2015. 6. In support of the said contention, learned advocate has placed reliance upon the decision rendered by the Hon'ble Supreme Court in the case of Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., reported in (2000) 5 SCC 515. Learned advocate has mainly relied upon the observations made by the .....

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ion to move the BIFR by passing a resolution. Such a submission cannot be accepted. In a winding up petition the liquidator is appointed to protect the assets of a company for the benefit of its creditors, secured and unsecured and others. It is not the function of the Official Liquidator to start the process of rehabilitation of the company as is aimed at under the Act. Despite appointment of the Official Liquidator, the Board of Directors continue to hold all residuary powers for the benefit o .....

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1. It may also be noticed that winding up order passed under the Companies Act is not the culmination of the proceedings pending before the Company Judge but is in effect the commencement of the process. The ultimate order to be passed in such a petition is the dissolution of the company in terms of Section 481 of the Companies Act. The words "shall be deemed to commence" in Section 441 of the Companies Act clearly show the intention of the legislature that although the winding up of a .....

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t be sustained. The appeal is accordingly allowed by setting aside the order of the High Court with a direction that the proceedings pending before the Company Judge shall remain in abeyance till the disposal of the application/appeal before the authorities under the Act. 7. Learned counsel thereafter has placed reliance upon the decision rendered by the Hon'ble Supreme Court in the case of KSL and Industries Limited v. Arihant Threads Limited and others, reported in (2015) 1 SCC 166 and ref .....

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1993 [RDDB Act] should prevail, in view of the non obstante clause contained in both, one of the important tests is the purpose of the two enactments. It is important to recognize and ensure that the purpose of both enactments is as far as possible, fulfilled. 27. Plainly, the purpose of laying down that no proceedings for execution and distraint or the like or a suit for recovery shall not lie, is to protect the properties of the sick industrial company and the company itself from being proceed .....

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or continued with the consent of the Board or the Appellate Authority. In the Section as originally enacted, the words and no suit for the recovery of money or for the enforcement of any security …………… were not there. These words appear to have been inserted to expressly provide, rather clarify that no suits for the recovery of money etc. would lie or be proceeded with against such a company. 53. Having answered the reference, we hold that the provisions of SI .....

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he recovery proceedings under the RDDB Act had been concluded, the writ petitions would have to be dismissed and are accordingly dismissed. The present appeal is allowed. 8. Lastly learned counsel has relied upon the decision rendered by the Hon'ble Supreme Court in the case of Gram Panchayat v. Shree Vallabh Glass Works Ltd., reported in AIR 1990 secured creditor 1017 and more particularly, paragraph No.10 of the said decision, which reads as under: 10. In the light of the steps taken by th .....

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the aforesaid provisions of SICA and the decision rendered by the Hon'ble Supreme Court, learned advocate for the applicant submitted that once the proceedings are pending before the BIFR under SICA, the Official Liquidator under the Companies Act is not empowered to take possession of the assets and properties of the company, and the proceedings pending under the Companies Act are suspended in view of the aforesaid provisions and therefore this application be allowed. 10. On the other hand, .....

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Learned advocate has referred and relied upon the observations and direction given in the in the said order in paragraphs No.10 to 14, which reads as under: 10. Be that as it may. The Court is of the considered view that the statement made on behalf of counsel of the company, though are full of substance, qua the ultimate eventuality being thrust upon all the concerned, but that ultimate eventuality is unavoidable as counsel of the company could not answer to the quarry of the Court that assumi .....

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ion 13(4) of the SARFAESI Act. 11. The Court is also of the considered view that even independent of the submission canvassed on behalf of the bank, this Court is also more than convinced for passing the order as this eventuality may affect 500 personnels but company's consistent failure in raising the funds to fulfill its all secured creditors and discharging its liabilities since August, 2014, would rather make it incumbent upon this court to pass appropriate order of winding up, in the pr .....

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uidator and is directed to take possession of the company and while taking possession, keep with him the bank personnel i.e. officers of Allahabad bank and other bank consortium, as submitted by counsel of the bank. Let they take the possession of the company jointly and complete the formalities on or before 6.5.2015. (ii) The possession be taken over and inventory be prepared and said inventory be signed by Allahabad Bank as well as OL as well as company's representative, who are present in .....

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fore 25.5.2015 and highest valuation be accepted for placing the upset price. (v) The advertisement be released in terms of Company (Court) Rules, whereunder, it may be specifically mentioned the time of inspection, time for receiving the tender form and last date of accepting the offer. The valuation report be prepared till 25.5.2015. (vi) The advertisement be released on 1.6.2015 in the local daily newspapers inviting offers, having wide circulation being 'Gujarat Samachar' in Gujarati .....

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) Thereafter, the auction will be taken in the open court and the parties will be at liberty to raise their offers at the time of auction. (xi) The bank is at liberty to open the bank Account in the name of O.L for Kemrock Industries and Experts Ltd. (company in liquidation) and maintain it as per Rules and keep all the money in said account. 13. The Court is also inclined to pass final winding up order by exercising the powers under Section 434 with following directions in case of Kemrock Agrit .....

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site at their own cost. (iv) The Sale Committee be formed in accordance with law and said valuation report be received on or before 25.5.2015 and highest valuation be accepted for placing the upset price. (v) The advertisement be released in terms of Company (Court) Rules, whereunder, it may be specifically mentioned the time of inspection, time for receiving the tender form and last date of accepting the offer. The valuation report be prepared till 25.5.2015. (vi) The advertisement be released .....

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he offered amount. (ix) The said offers be invited in sealed cover and same will be opened in the open court on 23.6.2015. (x) Thereafter, the auction will be taken in the open court and the parties will be at liberty to raise their offers at the time of auction. (xi) The bank is at liberty to open the bank Account in the name of O.L for Kemrock Agritech Private Limited (company in liquidation) and maintain it as per Rules and keep all the money in said account. 14. At this stage, Shri Soparkar, .....

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stay of order is rejected. The OL and all the parties are directed to act according to directions issued hereinabove. 11. At this stage, learned advocate Mr.Yadav has also referred the order dated 10.09.2015 passed by the Hon'ble Division Bench of this Court in OJ Appeal No.18 of 2015 and allied matters and submitted that the order dated 04.05.2015 passed by learned Company Judge was challenged before the Hon'ble Division Bench and by way of the aforesaid order, Hon'ble Division Ben .....

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espondents of the said appeals. Learned advocate Mr.Yadav has placed on record orders passed by the learned Company Judge as well as the Hon'ble Division Bench. 12. Learned advocate Mr.Yadav submitted that the Official Liquidator has earlier issued letter on 09.10.2015 for taking possession of the assets of the applicant company. However, at that time, workers of the applicant company filed an application which was subsequently withdrawn and therefore possession of the assets could not be ta .....

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cant has not produced the aforesaid important aspect of the matter before this Court and therefore this application be dismissed only on this ground. 14. Learned advocate Mr.Yadav for the Official Liquidator thereafter submitted that Managing Director of the company is out of India since more than one and half year as per the submission canvassed by the learned advocate for the applicant in the aforesaid proceedings. Concerned officers who have remained present before the Company Judge as well a .....

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the documents produced by the applicant alongwith this application and from the said record, it is contended that all the material aspects were not disclosed before the BIFR. He therefore submitted that this application be dismissed. 15. Learned advocate Mr.Sandeep Singhi appearing on behalf of one of the creditors mainly contended that the applicant has not joined all the creditors who are affected parties in the present proceedings. Copy of this application is also not given to the concerned a .....

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f Financial Officer of the applicant. The said officer is not having any authority or power to file the present proceedings in view of the provision contained in Section 445(3) of Companies Act of 1956. 16. At this stage, this Court has inquired from the learned advocate Mr.Panesar, who is appearing for the applicant that whether the applicant is having any authority or power to file the present proceedings or not. On the basis of the instructions of the officer who is present in the Court, Mr.P .....

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her resolution passed by the Board of Directors after 10.09.2015 (i.e. the date on which the Hon'ble Division Bench has passed the order) to file the present proceedings. 18. Learned advocate Mr.Singhi thereafter referred to the provision contained in Section 15(1) of the SICA and submitted that conditions laid down in the said section are not satisfied and therefore BIFR cannot register the reference. 19. At this stage, learned advocate Mr.Pranav G. Desai appearing for the Allahabad Bank i. .....

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of the company, shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial years as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company: Provided that if the Board of Directors had sufficient reasons even before such finalisation to form the opinion that the company had become a sick industrial company, the .....

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n company or reconstruction company under subsection (1) of section 5 of the Act: Provided also that on or after the commencement of the Securitization and Reconstruction on Financial Assets and Enforcement of Security Interest Act, 2002, where a reference is pending before the Board for Industrial and Financial Reconstruction, such reference shall abate if the secured creditors representing not less than threefourth in value of the amount outstanding against financial assistance disbursed to th .....

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erence in respect of such company to the Board for determination of the measures which may be adopted with respect to such company: Provided that a reference shall not be made under this subsection in respect of any industrial company by (a) the Government of any State unless all or any other industrial undertakings belonging to such company are situated in such State; (b) a public financial institution or a State level institution or a scheduled bank unless it has, by reason of any financial as .....

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aterial fact before the BIFR and therefore the applicant cannot rely upon the pending reference before the BIFR. 21. Learned advocate Mr.J.S.Yadav further contended that symbolic possession has already been taken by the Official Liquidator when the order of appointment of provisional liquidator was passed by this Court in August 2014. Inventory was also prepared by the Government Approved Valuer, GITCO. Report was also filed by the Official Liquidator before this Court in the winding up petition .....

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half of learned advocates for the parties. I have also gone through the provisions of law relied upon by the learned advocates as well as the decision relied upon by the learned advocate for the applicant. I have also gone through the order dated 04.05.2015 passed by the learned Company Judge in Company Petition No.83 of 2013 and allied matters as well as order dated 10.09.2015 passed by the Hon'ble Division Bench in OJ Appeal No.18 of 2015 and other allied matters. 23. The first question wh .....

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ry is pending before the BIFR and therefore as per Section 22 of the SICA, the Official Liquidator be restrained from taking over the possession of the assets of the company in liquidation in view of the communication dated 26.10.2015. Learned advocates appearing for the Official Liquidator as well as the concerned secured creditors are right in making their submissions that the creditors who are affected and in whose favour the order is passed by the learned Company Judge and Hon'ble Divisi .....

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he officers of the company in liquidation shall be deemed to be discharged except when the business of the company continued. It is an admitted fact that the Chief Financial Officer, who has verified the present application has not produced the authority given by the Board of Directors for filing the present proceedings, when inquired it is stated that the Board of Directors had given the authority to Mr.Sanjeev Jain, Chief Financial Officer to file the proceedings before this Court and to file .....

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y the provisional liquidator in August 2014, inventory has been prepared. Lead secured creditor of all consortium bank has already initiated proceedings under Section 13 of the SARFAESI Act and therefore also as per further proviso of Section 15(1) of SICA, the reference itself is abated. However, I may not decide that issue at this stage. But, primafacie, this contention is required to be kept in mind while considering this application. Further, all the preconditions of Section 15 of SICA are c .....

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