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KOTAK MAHINDRA BANK LTD Versus OFFICIAL LIQUIDATOR OF CLARISIS ORGANICS LTD AND 1

2016 (2) TMI 775 - GUJARAT HIGH COURT

Entitlement to proceed against the secured assets - SARFAESI Act - Held that:- In the present case, SBI has registered its charge under Section 125 of the Companies Act before ROC over the secured assets of company, the applicant is an assignee and, therefore, if the applicant has not registered its charge over the secured assets before the Registrar of Companies, it cannot be said that the applicant is not entitled to proceed against the secured assets. - Account of the company in liquidati .....

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the company in liquidation has not complied with the terms. SBI has, therefore, issued the notice on 7.9.2005 to the company in liquidation and called upon the borrower to make the payment. However, the borrower-company in liquidation has not made the payment as per the notice. Thereafter, the SBI assigned its debts in favour of the applicant-bank by Deed of Assignment dated 23.3.2006. Thereafter, the applicant-bank has issued the notice under SARFAESI Act on 15.11.2006. Thus, there is no delay .....

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dator or the intervenor has not placed any other material on record to show that the said appeal has been restored. Thus, the fact remains that the Liquidator did file an appeal before the DRT. It is clarified that if the said appeal is restored on file of DRT, it is open for the Official Liquidator to take all available contentions before the learned Tribunal. - Thus, the relief prayed for in this Judges' summons is required to be allowed. The respondent no.1 herein is hereby directed to ha .....

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assets. - COMPANY APPLICATION NO. 285 of 2011, COMPANY PETITION NO. 50 of 2011, COMPANY APPLICATION NO. 248 of 2011 - Dated:- 7-8-2015 - MR.VIPUL M. PANCHOLI, J. FOR THE APPLICANT : MR NAVIN K PAHWA, ADVOCATE FOR THE RESPONDENT : MR ASHOK L SHAH, ADVOCATE WITH MR PAVAN S GODIAWALA, ADVOCATE, MS AMEE YAJNIK, ADVOCATE 1. The applicant-Kotak Mahindra Bank Limited has taken out the Judges' summons in which the following relief is prayed: "1(A) That this Hon'ble Court may be pleased .....

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002 prior to the appointment of the Provisional Liquidator and permit the applicant to proceed further in relation thereto, in the interest of justice." 2. Heard learned advocate Mr. Navin K Pahwa for the applicant, learned advocate Ms. Amee Yagnik for respondent no.1-Official Liquidator and learned advocate Mr. Ashok L Shah with learned advocate Mr. Pawan C Godiawala for respondent no.2. 3. Learned advocate Mr. Pahwa for the applicant submitted that the State Bank of India (hereinafter ref .....

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strict Vadodara admeasuring 30,451 sq.mtrs. The Company had also hypothecated all its movables being raw materials, stock in progress, finished goods, packing materials, plant and machinery etc., except plant and machinery, other movables from 3.4.DCNB unit and 3.4 DCA project. The plant and machinery and other movables of the aforesaid unit and project have been hypothecated to Technology Information, Forecasting and Assessment Council (hereinafter referred to as 'TIFAC' for the sake of .....

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ty of all other charges over the immovable property. At this stage, learned advocate further submitted that on 23.3.2006, the Deed of Assignment was executed between SBI and the applicant-bank whereby SBI assigned its debts due and payable by the company and assigning out all the aforesaid credit facilities in favour of the applicant. Thus, in pursuance to the Deed of Assignment, applicant has become full and absolute owner of the debts payable by the company to SBI. Learned advocate, therefore, .....

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of Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI' Act for the sake of convenience). By way of the said notice, the company was called upon to repay the amount mentioned in the said notice together with interest. Learned advocate referred to the contents of the said notice which is produced at Annexure 'B' to the compilation. 3.3 Learned advocate, thereafter, submitted .....

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daily newspapers on 14.12.2007. The said possession notice was also affixed at the site of the secured assets on 19.12.2007. 3.4 Learned advocate Mr. Pahwa thereafter submitted that when the authorized officer of the applicant went to take physical possession of the secured assets, the representatives of the company prevented the authorized officer from taking physical possession. In the meantime, the company also filed application under Section 17 of the SARFAESI Act before Debts Recovery Trib .....

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, by an order dated 17.12.2007 abated the reference. The company, therefore, preferred an appeal before Appellate Authority for Industrial and Financial Reconstruction. (hereinafter referred to as 'AAIFR' for short). However, the said appeal was also came to be dismissed by the appellate authority by an order dated 4.2.2009. It is pointed out by learned advocate that the aforesaid orders were challenged by the company by filing Special Civil Application No.2361 of 2009 before this Court. .....

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fused to handover the actual and physical possession to the authorized officer. The said possession notice once again came to be published in local dailies on 4.2.2010. In the meantime, on 23.7.2009, learned advocate of TIFAC admitted before the BIFR that the applicant represents more than 75% of the secured debts of the company. Learned advocate Mr. Pahwa further submitted that BIFR recorded its opinion in terms of Section 20(1) of Sick Industries (Special Provisions) Act of 1985 (hereinafter r .....

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n 14 of SARFAESI Act whereby assistance of District Magistrate was sought for for taking over the possession of the secured assets. In the meantime, the applicant came to know that this Court has admitted the Company Petition No.50 of 2010 by an order dated 8.2.2011 whereby the Official Liquidator attached with this Court is appointed as Provisional Liquidator to take over the possession of the assets of the company. The applicant came to know about the said aspect when SBI forwarded a copy of l .....

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fficial Liquidator proceeded with taking over the possession of the assets of the company including the secured assets. The physical possession of the assets of the company was taken over on 18.3.2011. 3.6 In the aforesaid background of the facts of the present case, learned advocate Mr. Pahwa would submit that the applicant is secured creditor of the company and is standing outside the liquidation proceedings. The applicant has already initiated measures under the provisions of SARFAESI Act, al .....

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uld contend that provisions of SARFAESI Act and more particularly Section 13(9) of the same provides that any amount realized from the sale of secured assets shall be distributed in accordance with the provisions of Section 529A of the Companies Act, 1956 and, therefore, the Official Liquidator cannot have any grievance against the reliefs prayed for in this application. The applicant is the sole secured creditor in respect of the secured assets and it has already taken over the symbolic possess .....

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mpany is in liquidation, and no permission from the Company Court is required before taking measures under the SARFAESI Act. At this stage, learned advocate referred to judgment and order dated 9.3.2006 rendered by this Court in Company Application No.177 of 2005 whereby this Court, after considering relevant provisions of SARFAESI Act vis-a-vis provisions of the Companies Act of 1956 has been pleased to allow the said application which was filed for direction against the Official Liquidator to .....

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tory valuation report. The applicant is also directed to deposit ₹ 15,750/- every month with the Official Liquidator towards security charges. He further submitted that on 17.7.2014, application filed by the Company under Section 17 of the SARFAESI Act is dismissed by the DRT. 3.10 Learned advocate Mr. Pahwa appearing for the applicant has placed reliance upon the decision rendered by the Hon'ble the Supreme Court in the case of ICICI Bank Ltd. v/s. Official Liquidator of APS Star Indu .....

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te Mr. Pahwa thereafter has placed reliance upon the decision rendered by this Court in the case of Bank of India V/s. O.L. of Phar East Laboratories Ltd.reported in 2006 JX (Guj.) 146 which is produced at page 53 of the compilation. Learned counsel has mainly relied upon the observation made by this Court in paragraphs 23, 25 to 29. 3.12 Thereafter, he placed reliance upon the decision rendered by the High Court of Delhi in the case of Kotak Mahindra Bank Ltd. V/s. Megnostar Telecommunications .....

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of Bombay in the case of Akola Oil Industries V/s State Bank of India, reported in (2006)66 SCL 147 (Bom.), and more particularly, observations made in paragraphs 10 and 11. 3.15 Thereafter, learned advocate has relied upon the order dated 21.7.2009 passed by this Court in Special Civil Application No.7979 of 2008 and submitted that the said order is confirmed by the Division Bench of this Court and passed an order on 3.11.2009 in Letters Patent Appeal No.1951 of 2009. He submitted that the SLP .....

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any. The applicant is an assignee and, therefore, such charge is not required to be registered. However, matter is pending before the Company Law Board. Learned advocate places reliance upon the decision rendered by High Court of Bombay in the case of IDBI Ltd., through its Authorized Officer, B.Srinivasa Rao, Deputy General Manager, Recovery Department V/s Official Liquidator of Maharashtra Explosives Ltd. (in liqn.), reported in 2011 vol.113(4) BLR 2213. He mainly relied upon the observation m .....

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or the intervenor mainly submitted that the intervenor is the creditor of the company in liquidation for an amount of ₹ 1,34,929/- by way of unsecured loan/deposit advanced to the company. He submitted that there are other creditors/deposit holders having claim against the company and they are also supporting the case of the intervenor. He further pointed out that the intervenor is a shareholder (contributory) of the company and holding 85,100 equity shares of the company. The intervenor i .....

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Deed of Assignment on the basis of which it is claiming to have acquired the rights from SBI. However, thereafter, such document was produced on record. He contended that from the Deed of Assignment received by the intervenor, it is revealed that the said deed is not duly stamped nor it is duly registered and, therefore, SBI cannot assign any claims or security interest in favour of the applicant. Thus, such Deed of Assignment creates no rights or security interest in favour of the applicant. He .....

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curitize and assign debts, loans along with security interest in case of 143 parties. However, stamp duty of an amount of ₹ 1,40,200/- is paid. In fact, the applicant is required to pay the stamp duty of at least ₹ 1,43,00,000/-. Such type of stamp duty is payable and required to be calculated on the basis of per loan securitized or per debts assigned and not on the basis of per borrower or per party. 4.2 He further contended that the Deed of Assignment is not duly registered under t .....

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istration in the office of the Sub-Registrar within whose sub-district the whole or any part of the property to which such document relates is situated. In the present case, it is pointed out by learned advocate that the immovable property is situated in sub-district of Baroda and, therefore, the same is required to be registered at the office of Sub-Registrar, Vadodara. However, the Deed of Assignment is registered in Paldi sub-district Ahmedabad. Learned counsel referred to and relied upon Sec .....

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he company as Non-performing Asset (for short 'NPA' for the sake of convenience) at all. He submitted that the entire credit facilities were restructured by SBI on 28.10.2003 pursuant to which fresh loan agreement was entered into between SBI and company on 29.1.2004. On the restructuring, old arrangement was replaced by the new arrangement. Thus, any default under the old arrangement was given a go-by on the restructuring of the credit facilities by entering into new agreement on 29.1.2 .....

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e further submitted that even assuming without admitting that if the default is said to have taken place from the first day of the restructured arrangement dated 29.1.2004, the account would become NPA at the end of 90 days i.e. on 28.4.2004. He referred to the RBI guidelines and submitted that as per the said guidelines, a bank can sell its NPA only if the account has remained in its books as NPA for atleast two years. Under the new restructured financial arrangement, even if default has taken .....

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ssified as NPA even by SBI. Therefore, Section 13(2) of the SARFAESI Act is not applicable at all. Hence, the notice issued by the applicant on 15.11.2006 allegedly under Section 13(2) of the SARFAESI Act is not at all notice under the provisions of the said Act. Learned advocate submitted that for a notice to be qualified to be a notice under Section 13(2) of the SARFAESI Act, certain conditions are required to be fulfilled i.e. (1) it must be issued by secured creditor in respect of whom borro .....

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ngement by new credit facilities arrangement in the year 2004. Even the earlier classification of the account of the company as NPA was by SBI and if it is taken into consideration, only the secured creditor i.e. SBI alone can issue a notice under Section 13(2) of the SARFAESI Act. The applicant shall not be entitled to issue such notice and, therefore, on this ground also the applicant is not entitled to initiate any action under Section 13(4) of the said Act. 4.6 Learned advocate Mr. Shah furt .....

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ects and reasons of SARFAESI Act. He referred to the definition of 'Asset reconstruction' defined under Section 2(1) (b) of SARFAESI Act. It provides that: 2(1)(b) asset reconstruction means acquisition by any securitisation company or reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance. 4.7 Learned advocate Mr. Shah thereafter referred to the word "Securitization .....

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provides for the registration of Securitization companies or reconstruction companies. Then, he placed reliance on Section 5 of the said Act which provides that any securitization company or reconstruction company may acquire financial assets of any bank or financial institution. Then he referred to Section 10 of the said Act which provides for the other functions of the securitization company or reconstruction company. Section 12 gives power to Reserve Bank to determine policy and issue direct .....

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penalty in default or breach of certain provisions of the Act. 4.9 Learned advocate Mr. Shah thereafter referred to Section 15 of the SIC Act and more particularly 3rd proviso of the said section which provides that:- Provided also that on or after the commencement of the Securitisation and Reconstruction of 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 .....

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an opportunity of being heard to all concerned parties, is of opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court. 4.11 Learned advocate Mr. Shah thereafter .....

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ot; Clause-6 of the said guidelines further provides that:- "6. Prudential norms for banks for the purchase/sale transactions (A) Asset classification norms (i) The non-performing financial asset purchased, may be classified as 'standard' in the books of the purchasing bank for a period of 90 days from the date of purchase. Thereafter, the asset classification status of the financial asset purchased, shall be determined by the record of recovery in the books of the purchasing bank w .....

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e asset classification status of the financial asset in the books of the purchasing bank at the time of purchase shall be the same as in the books of the selling bank. Thereafter, the asset classification status will continue to be determined with reference to the date of NPA in the selling bank. (iv) Any restructure/reschedule/rephrase of the repayment schedule or the estimated cash flow of the non-performing financial asset by the purchasing bankshall render the account as a non-performing ass .....

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, SBI has not declared the account of the company as NPA. The applicant, after executing the Deed of Assignment with SBI, issued the notice under Section 13(2) of the SARFAESI Act on 15.11.2006. Therefore, after the account of company was declared as NPA in 2001, notice was issued after a period of more than 5 years and, therefore, the action under SARFAESI Act was initiated after a period of limitation. If no limitation is prescribed for initiation of action even then, the same is required to b .....

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d upon observation made in paragraph 9 of the said order. 4.14 Thus, learned advocate Mr. Shah submitted that after declaring the account of the company as NPA in the year 2001, SBI had not initiated any action under SARFAESI Act till March, 2006, when the Deed of Assignment was executed with applicant. It can be presumed that SBI has waived the statutory right to initiate action under the SARFAESI Act and, therefore, once the said right is waived, it cannot be assigned by executing deed with th .....

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Shah referred to the circular issued under Section 135 of the Companies Act which provides as under:- "A question has been raised as to whether the transfer or assignment of his rights by the charge-holder would amount to modification of charge within the meaning of section 135, requiring the filing of a return by the company to the Registrar of Companies in Form No.14 accompanied by the prescribed filing fee. The question has been examined in this Department in all its aspects. It is cons .....

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t of the prescribed fee by the company is about the persons entitled to the charge. Hence, if the particulars regarding the assignee of the charge are not duly entered by the Registrar in the register of charges on the transfer of rights by the original charge-holder, the creditors or shareholders, inspecting such register, would not be able to know who the present charge-holders are. The registration of this modification of share should, therefore, be effected by the company concerned in Form N .....

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given in the said section and submitted that no security interest is created in favour of the applicant. 4.19 Learned advocate Mr. Shah then submitted that the applicant has wrongly relied upon the decision rendered by the Hon'ble the Supreme Court in the case of ICICI Bank Ltd. (supra). The issue before the Hon'ble Court was in a narrow compass i.e. the question whether the bank can assign NPA or not. In paragraph 9 of the decision, the Hon'ble Supreme Court observed with regard to .....

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ARFAESI Act, 2002 has no relevance in this case." However, from that it does not follow that the banks interse cannot transfer their own assets. Hence, the said SARFAESI Act of 2002 has no relevance in this case. He, therefore, submitted that the Hon'ble the Supreme Court has not considered in detail the provisions with regard to the SARFAESI Act. 4.20 Learned advocate Mr. Shah has relied on the provision of Sections 28 and 49 of the Registration Act, 1908.- "28.Place for registeri .....

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of documents required to be registered - No document required by section 17 [or by any provision of the Transfer of Property Act, 1882 (4 of 18820], to be registered shall - (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: [Provided that an unregistered document affecting immovable property and required by this Act or the Transf .....

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s part otherwise provided:- (a) Every document mentioned in clauses (a),(b),(c),(d) and (e) of sub-section (1) and sub-section (2) of Section 17 in so far as such document affects immovable property and in clauses (a),(b),(c) and (cc) of Section 18, shall be presented for registered in the office of a Sub-Registrar within whose sub-district the whole or some portion of the property to which such document relates is situate in the State of Tamil Nadu; and (b) any document registered outside the S .....

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signment dated 25.05.2011, are admittedly situated in Tamil Nadu and not within the jurisdiction of the Registering Authority at Calcutta. Therefore, it is very clear that the said assignment deed made at Calcutta in respect of property situated in Tamil Nadu and got registered before the Registering Authority, Calcutta was against Section 28 of the Registration Act as amended by the Tamil Nadu Act 19 of 1997 with effect from 29.03.1997, which reads as follows:- 28. Place for registering documen .....

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ny document registered outside the State of Tamil Nadu in contravention of the provisions of clause (a) shall be deemed to be null and void. 14. A perusal of the above said provision of law would show that the document registered outside the State of Tamil Nadu in contravention of the provisions of clause (a) of Section 28 of the Registration Act shall be deemed to be null and void. Therefore, there cannot be any doubt that the deed of assignment dated 25.05.2011 is deemed to be null and void, s .....

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tted that in the present case, from the Assignment Deed placed on record, it is clear that some of the properties which are described in the Deed of Assignment are situated in Tamil Nadu. Therefore, in absence of proper registration, the document namely Deed of Assignment itself is void. 5. Learned advocate Ms. Amee Yajnik appearing for the Official Liquidator referred to report filed by the Official Liquidator and mainly contended that the applicant is not a secured creditor and, therefore, it .....

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t the averments made in paragraph 12 of the affidavit in support of Judges' summons that during the hearing of 23.7.2009 before BIFR, the advocate for TIFAC admitted that the applicant represents more than 75% for secured debts. However, she submitted that no confirmation of the aforesaid statement is available from the other secured creditors like ICICI Bank Limited, IFCI Bank Limited and IDBI Limited. What is the claim of TIFAC is also not stated. Thus, in view of absence of details, this .....

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any Court. Learned counsel has placed reliance upon the decision rendered by the Hon'ble the Supreme Court in the case of Rajasthan State Financial Corporation and Another V/s Official Liquidator and Another, reported in 2005(8) SCC 190. 5.2 Learned counsel thereafter submitted that without prejudice to the aforesaid contention, if the securitization company seeks to sell or transfer the assets of the company in liquidation, opting the course under Section 13(4) of the SARFAESI Act could be .....

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529A of the Companies Act as accorded by different provisions of Section 13(9) of SARFAESI Act. In support of such contention, she placed reliance upon the decision rendered by the High Court of Punjab and Haryana in the case of Haryana State Industrial and Infrastructure Development Company V.Haryana Concast Limited & another reported in (2010)158 CC 168 (P & H). 6. Learned advocate Mr. Pahwa appearing for the applicant submitted that under the SARFAESI Act, secured creditor having sec .....

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submitted that the issue regarding substitution has already been concluded by the Apex Court. Mr. Ashok Shah, learned Senior Counsel has tried to contest this contention by submitting that the issue of substitution is not concluded by the Apex Court. We cannot accept this submission of Mr. Shah. A bare reading of the observations of the Apex Court in para 46 as extracted hereinabove makes it explicitly clear that the moment ICICI Bank Ltd. transfers the debt with underlying security, the borrowe .....

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ns made in paragraphs 2,10,11,12 to 14 and 15. 6.2 He, therefore, contended that the learned advocates for the opponents had not made any submissions with regard to registration or stamp duty as observed in the said order and, therefore, it is not open for them to challenge at this stage in these proceedings about the said issues. 6.3 Without prejudice to the aforesaid contention, learned advocate Mr. Pahwa would submit that Deed of Assignment is already registered by the competent authority and .....

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he applicant. Therefore, submissions canvassed by the learned advocates of the respondents are misconceived. 6.4 Learned advocate for the applicant referred to the definition provided in Section 2(1)(zd) and 2(1)(zf) in SARFAESI Act. He submitted that security interest is created in favour of the applicant. 6.5 Thereafter, learned advocate submitted that the account of the company in liquidation became NPA on 30.9.2001. As per the request of the borrower, the account of the borrower was restruct .....

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ies Act with Registrar of Companies, learned advocate Mr. Pahwa submitted that SBI registered the charge with Registrar of Companies under Section 125 of the Companies Act. Learned advocate has placed reliance upon the decision rendered by the High Court of Bombay in Company Application No.624 of 2010 and in Company Application No.1123 of 2009. Learned advocate, therefore, submitted that present application be allowed. 7. I have considered the submissions advanced on behalf of learned advocates .....

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oresaid issue, certain important aspects emerging from the record are required to be considered which are as under:- (a) SBI granted various credit facilities to the company in liquidation. Said credit facilities were renewed from time to time. The company had mortgaged certain properties, description of which is given in the schedule at Annexure 'A' of the compilation. (b) The company had initially created mortgage in favour of three other banks also by way of joint mortgage by deposit .....

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7.9.2005, SBI called upon the company to make the outstanding payment. (d) The Deed of Assignment was executed between SBI and the applicant-bank on 23.3.2006 whereby SBI assigned its debts due and payable by the company and assigned all the credit facilities in favour of the applicant. (e) On 15.11.2006, the applicant issued notice under Section 13(2) of the SARFAESI Act and on 3.1.2007, the company replied to the said notice. The objection of the company was considered and rejected. (f) On 12. .....

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cured assets. Thereafter, BIFR finally recorded its opinion under Section 20(1) of SIC Act and had recommended this Court for winding up of the company. This Court, therefore, on 8.2.2011 appointed Official Liquidator to take over the possession of the properties of the company. An order of winding up was passed on 23.3.2011. At the time of taking over the possession by the Official Liquidator, the applicant has already initiated the action under the SARFAESI Act. 10. In view of the aforesaid br .....

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any bank or financial institution; or (ii) securitisation company or reconstruction company, whether acting as such or managing a trust set up by such securitisation company or reconstruction company for the securitisation or reconstruction, as the case may be; or (iii) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created for due repayment by any borrower of any financial assistance.' Similarly, section 2(1)(zf) defi .....

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meaning of Section 2(1)(zf) of the said Act. 12. The applicant-bank has already initiated the measures under the provisions of the SARFAESI Act in November, 2006. The symbolic possession of the assets of the company in liquidation has been taken over on 29.1.2010. On the basis of the opinion of BIFR, this Court admitted Company Petition No.50 of 2010 by an order dated 8.2.2011 and thereafter pursuant to the order passed by this Court, the Official Liquidator has taken over the physical possessi .....

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e above exposition of law, we find that under the impugned deed of assignment only the account receivables in the books of ICICI Bank Ltd. has been transferred to Kotak Mahindra Bank Ltd. The obligations of ICICI Bank Ltd. towards its borrower(s) (customer) under the loan agreement secured by deed of hypothecation/mortgage have not been assigned by ICICI Bank Ltd. to the assignee Bank, namely, Kotak Mahindra Bank Ltd. Hence, it cannot be said that the impugned deed of assignment is unsustainable .....

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n enforce such obligations vis-a-vis the assignor Bank. It is these obligations which are referred to in the impugned deed of assignment. That, an account receivable becomes an NPA only because of the default committed by the borrower(s) who fails to repay. Lastly, it may be mentioned that the said SARFAESI Act, 2002 was enacted enabling specified SPVs to buy NPAs from the banks. However, from that it does not follow that the banks inter se cannot transfer their own assets. Hence the said SARFAE .....

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round, namely, assignment of debts by the banks inter se is an activity which is impermissible under the Banking Regulation Act, 1949. However, the Division Bench did not go into other issues which arose for determination before the Company Court, including applicability of the provisions of the Registration Act, 1908." 14. The Hon'ble Supreme Court in the case of Official Liquidator, Uttar Pradesh and Uttarakhand V/s. Allahabad Bank and Others reported in [2013] 4 SCC 381, considered t .....

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The Hon'ble Supreme Court, after considering the provisions of the Companies Act of 1956 and the provision of RDB Act, held that in view of Section 34 of the RDB Act, the Tribunal has exclusive jurisdiction and, hence, the Company Court cannot use its powers under Section 442 of Companies Act,1956 against the Tribunal/Recovery Officer. The special provisions made under the RDB Act have to be applied. In view of Section 34 of RDB Act, it overrides the Companies Act, 1956 to the extent there .....

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in consonance with the Rules framed under the RDB Act of 1993. It is further held that the Official Liquidator protects the interests of the workmen and the creditors and, hence, his association at the time of auction and sale has been thought appropriate. Thus, he has been conferred locus standi/standing to put forth his stand in the said matters. Therefore, anyone who is aggrieved by any act done by th Recovery Officer can prefer an appeal before the Tribunal. 15. In the case of Kotak Mahindra .....

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in the context of DRT Act and SFC Act, would not apply to a sale under the SARFAESI Act because while the sale under the DRT Act or the SFC Act is with the intervention of the court, i.e., the DRT or the District Judge, the sale under the SARFAESI Act is to be by the secured creditor, i.e., the bank/financial institution itself, without the intervention of the court. We also find express pointers in the SARFAESI Act against associating the official liquidator in such sale. The second proviso to .....

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te thereof in accordance with section 529A of the Companies Act. The fourth proviso to section 13(9) makes the secured creditor liable to pay the balance if any of the workmen's dues if the deposit earlier with the official liquidator is on an estimate. The sixth proviso to section 13(9) also requires the secured creditor to furnish an undertaking to the liquidator to pay the balance of the workmen's dues if any. We are of the opinion that were the official liquidator intended to be asso .....

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her hand being made liable for the dues of the workmen. The language of section 13(9) and provisos thereto is thus clearly suggestive of the role of the official liquidator being confined only to determination of the workmen's dues and receiving payment thereof and undertaking from the secured creditor. The Supreme Court in Rajasthan Financial Corpn. (supra) as aforesaid, has already carved out a difference between the "right to sell" and the "distribution of sale proceeds&quo .....

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liquidator in sale, of ensuring that a proper price is fetched for the assets, is concerned, we find the SARFAESI Act and the Rules framed thereunder to be a complete code in that respect. Rules 5 and 8 of the SIE Rules require the authorised officer of the bank/financial institution to obtain the estimated value of the asset from an approved valuer and in consultation with the secured creditor fix the reserve price of the property. The mode of sale has similarly been prescribed exhaustively pa .....

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measures taken by the bank/financial institution under section 13(4) of the Act is provided in section 17 of the Act. The Legislature in making the sale under the SARFAESI Act without the intervention of the court, constituted DRT only as the forum for redressal of grievances. We are of the view that if the debtor/borrower/mortgagor himself/herself/itself has not been given any right of participation in the sale except in the manner provided in section 17 of the Act, the question of our interpre .....

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in liquidation. 25. Though the language of section 17 of the SARFAESI Act suggests that the right to appeal thereunder is only against the measures under section 13(4) of the Act but the Supreme Court in Authorized Officer, Indian Overseas Bank v. Ashok Saw Mill [2009]94 SCL 73 has held that the remedy under section 17 is not confined to the stage contemplated under section 13(4) but is available qua action taken by the secured creditor after the stage contemplated under section 13(4) also. The .....

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ecured creditor and his authorised officer. Not only are the modalities of sale prescribed but a forum for redressal of grievances with respect thereto is also provided in the form of DRT. The official liquidator, thus if of the view that appropriate price is not being or has not been fetched or relating to issues of distribution, has the remedy before the DRT. 26. If it were to be held that the official liquidator (who acts under the dictates of the company court) is to be also associated with .....

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legislation to the incorporation of section 529A in the Companies Act thus prevails over the Companies Act and sale as provided for under the SARFAESI Act holds good during the pendency of winding up petition against the debtor/borrower/mortgagor and also after a winding up order is made and remains unaffected therefrom. 31. We are therefore, with respect, unable to agree with the dicta of the Punjab and Haryana High Court in Haryana State Industrial and Infrastructure Development Corpn. (supra) .....

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oyees Provident Fund Commissioner v. Official Liquidator of Esskay Pharmaceuticals Ltd. [2011] 110 SCL 520/15 taxmann.com 140(SC) has also held the dues under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, to be a first charge on the assets of an establishment and to be paid in priority to all other debts while distributing the sale proceeds." 16. The High Court Andhra Pradesh in the case of Indian Bank (supra) has observed and held in paragraphs 25 to 31, 36 and .....

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n Appellate Tribunal is empowered by or under the Securitisation Act to determine. The expression in respect of any matter referred to in Section 34 would take in the measures provided under sub-section (4) of Section 13 of the Securitisation Act. Consequently, if any aggrieved person has not any grievance against any measures taken by the borrower under sub-section (4) of Section 13, the remedy open to him is to approach the DRT or the Appellate Tribunal and not the civil court. The civil court .....

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en the legislature intends legality and validity of sale under the provisions of Section 13 of SARFAESI Act has to be brought for scrutiny before the Debts Recovery Tribunal, by virtue of Section 17 of SARFAESI Act the jurisdiction of the company court cannot be inferred to have been conferred rather by necessary implication, the same is held to be ousted. It is true that Section 34 mentioned the words Civil Court (not apparently company court), but in our view after winding up order is passed b .....

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al with the issues arising out of action of secured creditor under Section 13 of SARFAESI Act. 27. But, in this case, the learned trial Judge has not only exercised jurisdiction of the company court but also that of writ court. No one can debate now that writ court has jurisdiction within its own power as enshrined in Articles 226 & 227 of the Constitution of India to entertain any dispute and it cannot be taken away by way of simple legislation. 28. Now, we examine the third question. We ha .....

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of Company Court. We, accordingly, hold this is apparent inconsistency in two competing provisions in two different Acts on the same subject. Similar view is expressed by the Division Bench of the Bombay High Court in case of The Akola Oil Industries (under liquidation) through Official Liquidator v. State Bank of India 2006(1) Bom.CR.362. Therefore, the provisions of SARFAESI Act will prevail over the provisions of Section 537 of the Companies Act to the extent of inconsistency. We, accepting .....

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6) of Section 13 of the SARFAESI Act to find element of inconsistency on this issue. These provisions are set out hereunder: 13. Enforcement of security interest: (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease .....

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is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt. (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay .....

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e moment action taken under sub-section(4) by the secured creditor or any manager on his behalf of the secured creditor for transfer all rights shall vest in the transferee in relation to the secured assets. In other words, if action taken under Section 13(4) is found to be lawful and valid in accordance with SARFAESI Act, no other legal provision can invalidate it. Whereas Sections 531 & 531A provide otherwise if any transfer including sale is effected in violation thereof the same is inval .....

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fer must be by the company (ii) it must be voluntary (iii) such transfer must be within one year before presentation of winding up petition. In this case admittedly transfer is not made by company not even on behalf of the company, but by secured creditor, appellant herein, by virtue of power coupled with right under sub-section (4) of Section 13 of the SARFAESI Act. This could have been decided by the Debts Recovery Tribunal itself since writ court has decided on the admitted fact. Thus the dec .....

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537 of the Companies Act in view of provisions of SARFAESI Act, however dwelt upon applicability of Sections 529 and 529A of Companies Act. While doing so it was held amongst others that sale proceeds fetched by sale under this Act are subject to the claims, if any, under Sections 529 and 529A of the Companies Act. 37. Punjab and Haryana High Court in case of Haryana State Industrial and Infrastructure Development Company V.Haryana Concast Limited & another (2010)158 Company Cases 168 while .....

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rs challenging the threatened action of the respondent of the said petition i.e. Kotak Mahindra Bank under Section 13(4) of the SARFEESI Act wherein it was prayed that the Court may declare that the respondent-bank (Kotak Mahindra) has not acquired any right pursuant to the Deed of Assignment dated 23.3.2006 and, therefore, not entitled to take action under the provisions of SARFAESI Act and to quash and set aside the public advertisement issued in the newspaper and with further prayer to restra .....

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ra Bank. It does not bear proper stamp duty. The assignments of debts by SBI to Kotak Mahindra Bank is a novatio and it is not binding to the borrowers. Kotak Mahindra Bank is not a securitization company or a reconstruction company and either original lender or a securitization company to which the debt is assigned by the original lender only can take measure under the SARFAESI Act. The said petitioner is not a borrower of Kotak Mahindra Bank within the meaning of Section 2(f) of SARFAESI Act r .....

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n'ble Division Bench has observed as under: "3. In view of the aforesaid assignment, the respondent-Bank filed Company Application No.318 of 2007 and 100 of 2008 seeking permission to proceed with sale of the assets of the company in liquidation. By order dated 29.2.2008, the Company Court, after hearing the learned Counsel for the parties, allowed the above two Company Applications in the following terms: 8. Having heard the learned advocates appearing for the respective parties and ha .....

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pany Application No.239 of 2005 on 17.02.2006 whereby this Court has issued direction to constitute sale committee comprising of applicant, GIIC and the Official Liquidator for finalizing the value of the property and the modalities on which the property is required to be sold. 9. In the above view of the matter, since all other secured creditors except GIIC have assigned their debts in favour of the present applicant they are not required to be joined as the member of the sale committee as thei .....

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alled and in the said meeting, reserved price and other modalities shall be set out. After the offers are received, and auction is held, the applicant may submit fresh application for acceptance of any of such offers and confirmation of sale in favour of highest bidder. 10. Granting of these two applications, however, may not be construed as granting of status of secured creditor to the applicant-Bank. 11. Subject to the aforesaid observations and directions, both these applications are accordin .....

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SLP No.7887 of 2010 filed by the aggrieved party was dismissed by the Hon'ble Supreme Court and, therefore, I am of the opinion that in the present proceedings which is filed by the Kotak Mahindra Bank i.e. the applicant-the intervenor cannot raise such type of contentions before this Court. If they have any grievance, they can approach before the appropriate authority/forum/Tribunal but the said issues cannot be agitated in the proceedings filed by the applicant. 19. The contention of the i .....

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ot challenged the said aspects before this Court which is clear from the order passed by this Court in Company Application No.489 of 2006 rendered by the learned Company Judge on 28.1.2015. This Court observed in paragraphs 10 to 15 as under:- "10. Mr. Roshan Desai, learned counsel for the Official Liquidator submitted that the relief claimed in the applications has already been granted by the Supreme Court and the Division Bench and hence, these applications for substitution stand decided. .....

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e Official Liquidator. 12. Mr. A.L. Shah, learned counsel appearing with Mr. D.S. Vasavada, learned advocate for the Textile Labour Association, submitted that the Supreme Court has held that assignment of debts is a permissible activity and has permitted substitution. Accordingly, the applications for substitution stand allowed. As regards the other issues which were raised before the Company Court when the previous decision came to be rendered, it was submitted that once the applications stand .....

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t as well as the order passed by the Supreme Court in the above-referred matter as well as the order dated 30.9.2014 passed by the Division Bench remanding the matter to this court. 14. From the submissions advanced by the learned counsel for the respective parties, it is apparent that the common refrain of the learned counsel is that these applications are limited to the prayer for substitution, which stand allowed by the Supreme Court as well as by the Division Bench by holding that such subst .....

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ties that the applications being limited to substitution, which relief stands granted in terms of the above decisions of the Supreme Court and the Division Bench and that though the matters have been remanded to the Company Court by permitting the parties to raise issues other than the issue of substitution, none of the parties deem it fit to raise any other issues before this court on the ground that such issues do not fall for consideration by this court at this stage and that such issues are .....

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of Assignment is already registered by the competent authority and no objection is taken by the said authority while registering the said document. The said document is registered in the year 2006 and, therefore, now the respondent/intervenor herein cannot challenge the same after more than five-six years that too in the proceedings initiated by the applicant-bank. Similarly, it is also clear from the record that stamp duty authority adjudicated the stamp duty. Accordingly, the applicant-bank h .....

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the intervenor is that in view of Sections 125 and 135 of the Companies Act of 1956, when the applicant has not registered charge or modified the charge registered with the Registrar of Companies, the applicant is not having any right against the Official Liquidator or the Company. 22. However, the said contention is required to be considered in view of the decision rendered by the various High Courts. In the case of Pridhvi Asset Reconstruction & Securitization Co. Ltd. v. Pennar Peterson .....

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anks in whose favour, the charge of the assets of the respondent-Company was created. However, it does not appear that the applicant, in whose favour the charge of assets of the respondent-Company is assigned, has sent the particulars of the assignment of the ROC and got the same registered. On a close reading of Section 135 of the Act, I am unable to accept the submission of the learned Counsel for the petitioner and the Official Liquidator that a deed of assignment falls within the provisions .....

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ired to be registered with the ROC once again, nothing would have been prevented it from using the words 'transfer' or 'assignment' in the said provision. Absence of these words would indicate that once a charge is registered with the ROC, a subsequent assignment need not be once again registered. The reason for this is not far to seek. The main purpose of registration of charge with the ROC is to prevent the Companies from indulging in creation of fake charges with intent to def .....

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petitioner or the Official Liquidator that the transfer or assignment made by the Banks, which held charge, is mala fide or that the same is intended to defeat the interests of the unsecured creditors. But for the assignment, the nine banks, in whose favour the adjudication has been made, would have been entitled to receive the money. Hence, from the point of view of the unsecured creditors, it hardly makes any difference whether the nine banks, which held the charge, or the applicant herein get .....

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against the Official Liquidator can be declared as void in view of the provisions of Section 125 of the said Act? The Hon'ble Bombay High Court held in paragraphs 44 to 46 as under:- "44. The questions whether the charge is registered or there is a non-compliance of Section 125(1) of the said Act, are the disputed questions of fact. In fact, the determination by the Official Liquidator under Rule 163 of the said Rules by the communication dated 20th February, 2009, impugned in the appea .....

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recording the finding that the charges of out standings have been secured by the deeds of hypothecation and the mortgage of the property. It has also decided the question as to what extent the secured creditors are entitled to recover the out standings. It has been held that the Official Liquidator's liability shall be restricted to the extent of available estate, workmen's dues and claims of other secured creditors. The ICICI Bank Ltd. (Kotak Mahindra Bank Ltd.), IDBI and IFCI Ltd. are .....

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ks and financial institutions and there can be no interference by any Court under Section 442 read with Section 537 or under Section 446 of the Companies Act. In Para 31 of the said judgment (which is reproduced in Para 32 above), it has been held that the Company Court cannot use its powers under Section 446 of the said Act against the Tribunal/Recovery Officer and Sections 442,446 and 537 cannot be applied against the Tribunal. In view of this, the matter is completely determined by the Debts .....

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ming it comes into existence on account of documents that are executed, yet, there is no compliance with section 125(1) of the Companies Act. It is pertinent to note that it is not the company which is raising this objection but it is the applicant who is a ex-director, has raised this objection. The company in liquidation has no objection to the second respondent proceeding on the basis that the property was equitably mortgaged to it. That the documents evidencing title are deposited with an in .....

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tion 1 to be attracted, there must be a charge to which section 125(1) applies. That must be sofar as any security on the company's property or undertaking, that charge is void against liquidator and any creditor of the company. Unless the prescribed particulars of the charge together with instruments, if any, by which the charge is created or evidenced or a copy thereof verified in prescribed manner are filed with the Registrar for registration, in the manner required by the Act within 30 d .....

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125(1) applies has not been clarified at all. Further, it is the argument of the applicant that the charge is void as against the liquidator or creditor unless registered. Therefore, that is for the purpose of Companies Act and that it is clear that the same is qua the liquidator and the creditor of the company. In these circumstances, one cannot hold on the strength of this provision that the security interest in a later enactment is in any way affected because of non compliance with section 1 .....

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then, I do not see how that sale can be questioned or nullified at the instance of a person like the applicant and only because in his opinion section 125(1) of the Companies Act is not complied with. For the sale to be nullified, it must be demonstrated that there is something in the Securitisation Act which makes Section 125 applicable to the security interest created in the said Act and as understood by the Securitisation Act. A perusal of the relevant provisions of both enactments leave me i .....

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he applicant is an assignee and, therefore, if the applicant has not registered its charge over the secured assets before the Registrar of Companies, it cannot be said that the applicant is not entitled to proceed against the secured assets. 26. Another contention of learned advocate of the intervenor is that the account of the company in liquidation was declared NPA in the year 2001 by SBI. Thereafter, credit facilities were restructured by SBI and fresh agreement was entered into in January, 2 .....

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at the request of the company in liquidation, the SBI has restructured the credit facilities. However, so far as that facility is concerned, also, the company in liquidation has not complied with the terms. SBI has, therefore, issued the notice on 7.9.2005 to the company in liquidation and called upon the borrower to make the payment. However, the borrower-company in liquidation has not made the payment as per the notice. Thereafter, the SBI assigned its debts in favour of the applicant-bank by .....

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r dated 17.7.2014 passed by DRT below Exh.23 whereby the said appeal was disposed off as dismissed for default due to want of prosecution. The Official Liquidator or the intervenor has not placed any other material on record to show that the said appeal has been restored. Thus, the fact remains that the Liquidator did file an appeal before the DRT. It is clarified that if the said appeal is restored on file of DRT, it is open for the Official Liquidator to take all available contentions before t .....

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