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2016 (8) TMI 791 - BOMBAY HIGH COURT

2016 (8) TMI 791 - BOMBAY HIGH COURT - TMI - Proceeding under the SARFAESI Act - winding up proceedings - whether OLR cannot proceed because the Company (in Liqn.) is before the BIFR? - Held that:- In the facts of the present case also, the debts owed by the Company (in Liqn.) to IOB have been assigned to ARCIL [which admittedly is an ARC] long before the reference [on behalf of the Company (in Liqn.)] was filed before the BIFR. This being the factual scenario, as per the 2nd proviso to section .....

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erned, Mr Shetye points out that as far as the advertisement charges of ₹ 25,749/- are concerned [prayer clause (a)], the said directions have already been complied with. The representative of the Official Liquidator who is present in Court today, has also confirmed this fact. In this view of the matter, no directions in this regard are necessary save and except that the Official Liquidator is directed to pay the charges of the advertising agency out of the sum of ₹ 25,749/- already .....

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of the SARFAESI Act was allowed by the Magistrate vide his order dated 29 November, 2011 and appointed the authorized officer of IOB to take the physical possession of the factory premises. Thereafter, Mr Nikumbh Kanakiya and others filed a Securitisation Application No. 111 of 2011 before the DRT-III challenging the actions initiated by IOB. - Though, initially the DRT has passed an interim injunction restraining IOB from proceeding under the SARFAESI Act, on 8 December, 2012, the said SA .....

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he steps in that regard, the directions sought in prayer clause (b) of the OLR are rendered infructuous. As Company has already been ordered to be wound up and the Official Liquidator has already been appointed, there is no question of the Company and/or its Ex-Directors carrying on its business after the date of the winding up order. - OLR NO. 629 OF 2015/LIQN.V, OMPANY PETITION NO. 103 OF 2011, 104 of 2011, 375 of 2010 - Dated:- 11-8-2016 - B. P. COLABAWALLA J. Mr Sanjaya Verma Asst .....

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25,749/- with the Official Liquidator and permit the Official Liquidator to pay the same to the advertising agency; and (ii) to direct Indian Overseas Bank ( IOB ) to take physical possession of the factory premises situated at B-10, MIDC Industrial Area, Akkalkot Road, Solapur ( factory premises ), and to appoint Security Guards in relation thereto. In the alternative, it is prayed that the Official Liquidator be allowed to take physical possession of the factory premises. .....

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ings in winding up. 3. On the other hand, Ms Nupur Awasthi, appearing on behalf of ARCIL stated that the debts owed by the Company (in Liqn.) to IOB have been assigned in favour of ARCIL pursuant to a Deed of Assignment dated 12 November, 2014 and which was subsequently registered on 23 January, 2015. A reference, on behalf of the Company (in Liqn.), was filed before the BIFR only thereafter on 21 November, 2015. Looking to these facts, Ms Awasthi on behalf of ARCIL as well as Ms. Ja .....

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India) Pvt. Ltd. Vs. Phoenix ARC Pvt. Ltd.(2012) 6 Mah L J 427 : (2013) 2 Bom CR 371 as well as my decision in the case of ICICI Bank Ltd. Vs. S. Kumars Nationwide Ltd.Company Petition No.511 of 2014 and other connected Petitions decided on 1 July, 2016 present OLR. Relying upon the aforesaid two decisions, and the 2nd proviso to section 15(1) of SICA, 1985, the learned Counsel contended that there was no bar under section 22 of SICA, 1985 to proceed with the 4. I have hear .....

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, 2015. The reference of the Company (in Liqn) was filed before the BIFR only thereafter on 21 November, 2015. The 2nd proviso to section 15(1) of SICA 1985, clearly stipulates that no reference shall be made to the BIFR after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( SARFAESI Act ), where financial assets have been acquired by any securitisation company or reconstruction company under sub-section 1 of section 5 .....

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y, this proviso along with the 3rd proviso were inserted into section 15 of SICA, 1985 by section 41 of the SARFAESI Act. As can be seen from the said provision, once the debt has been assigned to a securitisation or reconstruction company, there is a complete bar from filing a reference before the BIFR. In the facts of the present case, two things are undisputed:- (i) Firstly, the debt owed by the Company (in Liqn.) to IOB has been assigned in favour of ARCIL, which is admittedly a s .....

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reference so filed, would be in the teeth of this statutory provision [namely the 2nd proviso to section 15(1) of the SICA, 1985], and would therefore be non-est in the eyes of law. The protection as contemplated under section 22 of SICA 1985, would get attracted only if a valid reference has been made before the BIFR. If no reference in law could have been filed before the BIFR, the question of claiming protection under section 22 of SICA, 1985 cannot and does not arise. 7. This issu .....

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nts (India) Pvt. Ltd. to pay its dues. Since, Paper Prints (India) Pvt. Ltd. failed to comply, the Bank moved the Debt Recovery Tribunal ( DRT ) for recovery of an amount of ₹ 2.46 Crores together with interest. Thereafter, by a Deed of Assignment dated 9 December, 2009, DBS Bank Ltd. assigned its debt in favour of Phoenix ARC Pvt. Ltd. (which is an ARC), whereas the reference to the BIFR was made by Paper Prints (India) Pvt. Ltd. only on 26 November, 2010. In these circumstances, the Divi .....

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anding have taken measures to recover their secured debt under section 13(4). 7. There is no merit in the submission. The first proviso to section 15(1) of the SICA, 1985 as introduced by the provisions of the Securitisation Act applies specifically to a situation where financial assets have been acquired by any securitisation company or by a reconstruction company under sub-section (1) of section 5 of the Securitisation Act. The second proviso applies to a situation where a reference .....

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lds. The first proviso is a specific provision made in relation to a securitisation company or reconstruction company, which has acquired financial assets after the commencement of the Securitisation Act, 2002 under section 5(1). The expression financial asset is defined in section 2(1) as follows: (1) financial asset means debt or receivables and includes- (i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or (ii) any debt or r .....

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assistance. Sub-clause (i) of clause (1) includes a claim to any debt or receivables whether secured or unsecured. Therefore, the intent of Parliament when it introduced the two amendments to section 15(1) is clear. A special provision has been made in case of securitisation and reconstruction companies, where a financial asset within the meaning of section 2(1) has been acquired after the enactment of the Securitisation Act of 2002. In such a case, no reference can lie before the BI .....

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struction company which as noted earlier includes among other things a debt or receivables whether secured or unsecured. As a matter of fact, it may be noted that an express provision has been made in sub-section (4) of section 5 of the Securitisation Act in respect of suits, appeals or other proceedings which are pending on the date of the acquisition of the financial asset. Section 5(4) reads as follows: (4) If, on the date of acquisition of financial asset under subsection (1), any .....

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may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the securitisation company or reconstruction company, as the case may be. 9. In the present case, the order of the learned Single Judge admitting the Company Petition for winding up was passed on 21 October, 2010. Prior thereto on 9 December, 2009 the Respondent had acquired the financial assets in question being the debts and receivables of DBS Bank Ltd. under section 5(1) of th .....

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aforesaid decision is factually incorrect and should be read as the 2nd proviso. The 1st proviso to section 15(1) inter alia stipulates that if the Board of Directors had sufficient reasons, even before the finalisation of the duly audited accounts of the company, to form the opinion that the company had become a sick industrial company, the Board of Directors had to, within sixty days after it has formed such opinion, make a reference to the BIFR for determination of the measures which ought t .....

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Company India Pvt. Ltd. Vs. Shamken Spinners Ltd. & Ors. AIR 2011 Delhi 17. and another decision of the Andhra Pradesh High Court in the case of M/s SVPCL Ltd. Vs. State Bank of India and Anr. 2015 SCC OnLine Hyd 111 : (2015) 191 Comp Cases 214 (AP), I have, in my decision in the case of ICICI Bank Ltd. Vs. S. Kumars Nationwide Ltd., Company Petition No.511 of 2014 and other connected Petitions decided on 1 July, 2016 considered the law on this subject and thereafter held that a reference ca .....

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ference [on behalf of the Company (in Liqn.)] was filed before the BIFR. This being the factual scenario, as per the 2nd proviso to section 15(1) of SICA, 1985, the reference itself was not maintainable and non-est in the eyes of law. Consequently, there is no question of the Company (in Liqn.) and/or its Ex-Directors contending that the Company (in Liqn.) gets protection under section 22 of SICA, 1985. In view of this clear enunciation of the law, I have no hesitation in rejecting the argument .....

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ary save and except that the Official Liquidator is directed to pay the charges of the advertising agency out of the sum of ₹ 25,749/- already deposited with the Official Liquidator. 12. In addition to the above directions, the Official Liquidator has also sought a direction against IOB to take the physical possession of the factory premises and appoint security guards for the same [prayer clause (b)]. Ms Awasthi, appearing on behalf of ARCIL states that symbolic possession of t .....

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