TMI Blog2006 (3) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... dator of the said Company and he has been directed to take possession of the assets of the said Company in liquidation. It is also the case of the applicant bank that the applicant bank has advanced large scale credit facilities to the said Company from time to time and requisite security documents have been executed, signed and delivered to the applicant in whose favour equitable mortgage of the immovable properties of the Company situated at Shardavadi, Vavdi Bujarg, Godhra has been created and there has been hypothecation of certain assets of the said Company. The charges in favour of the applicant Bank have been registered with the Registrar of Companies, Gujarat, Ahmedabad. The applicant Bank therefore is a secured creditor of the said Company. The applicant Bank has filed O.A. No. 119 of 2000 in the D.R.T. at Ahmedabad for recovery of its dues, then aggregating ₹ 5,58,44,453/-, together with running interest @ 16.22% p.a. to be quarterly rests and also, penal interest @ 2% p.a. in addition, commencing from the date 10.03.2000, i.e. the date of the filing of the said application, until payment/satisfaction of the dues of the applicant Bank. While the said application has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended beyond its one year term, which expired on 05.11.2004. Ultimately, the interim relief granted in Special Civil Application No. 17959 of 2003 was vacated by an order dated 23.12.2004 and the main petition was withdrawn on 03.05.2005. The applicant Bank has also filed Special Civil Application No. 3670 of 2004 to challenge the order of attachment passed by the Tax Recovery Officer, Income Tax Department, Panchmahal Range, Godhra for dues amounting to ₹ 2.66 Crore + due interest, as outstanding, as also the public notice dated 01.03.2004 was issued in that regard. The said matter has been admitted by the Division Bench of this Court and had been pending. Despite all these litigations, the said Company has suppressed the factum of the pendency of winding up petitions before this Court. On the contrary, there was an averment to the effect that dues and liabilities incurred and pending with the Govt. Agencies, namely, Sales Tax Authority, Income Tax Authority, workers' dues, electricity dues, etc. and the same were either settled amicably or in pipeline for the settlement and the said authorities have shown their willingness to forgo the interest and penalty portion and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the same was not disturbed. However, the applicant Bank was directed to state on affidavit as to whether any inventory has been taken by the applicant Bank or security Guards have been deployed by them to safeguard the property. The applicant Bank was also directed to clarify as to whether insurance of the property in question was taken by the Bank. If the Inventory was not taken, in that case, the applicant Bank was directed to take help of the Official Liquidator. The applicant Bank was further directed to inform the Official Liquidator as well as the Court as and when the proceedings for sale of the properties in question would be initiated by the Bank. 9. Pursuant to the aforesaid order, one more affidavit was filed by the applicant Bank on 17.08.2005 wherein it is stated that inventory was made at the time of taking possession on 18.04.2005 in the presence of Panchas. The applicant Bank has got the property adequately insured and insurance policy for a total sum of ₹ 160 Lacs was taken for one year and it expired on 24.04.2006. The applicant Bank has employed a security agency to protect the property in question apart from getting the same insured. The applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale is confirmed by this Court, the possession of the property should not be handed over and hence, the applicant Bank was restrained from handing over the possession to the purchasers till further order. The Court has also directed the Official Liquidator to verify as to whether the statement of affairs is filed by the Ex-Directors of the Company and if it is not filed, he was directed to place on record as to what steps he has taken. If the statement of affairs is filed, the Court has directed the Official Liquidator to furnish the details of creditors of the Company and the details of the workers of the Company, if the same were available with him. 12. On behalf of Gujarat State Financial Corporation, an affidavit is filed on 09.12.2005 wherein it is stated that the Company in liquidation has already paid the dues of the Corporation and the respondent No. 2 has also issued No Due Certificate to the Company in liquidation on 14.05.1996 and 28.04.1996. After issuance of No Due Certificate, the respondent No. 2 has nothing to do with the matter and hence, the name of the respondent No. 2 from this proceeding is required to be deleted. 13. Pursuant to the order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter, the Official Liquidator shall disburse the same amongst the Secured Creditors and the Workers of the Company in liquidation as per the provisions of Section 529A of the Companies Act, 1956. 16. An affidavit is filed by one Mr. R.K. Modi, Senior Manager (Credit) of the applicant Bank on 31.12.2005 wherein it is stated that the decision of the Hon'ble Supreme Court relied upon by the Official Liquidator in the case of Rajasthan State Financial Corporation (Supra) is in relation to a state Financial Corporation, while the present case concerns action taken by a Bank under the provisions of the Securitisation Act. The Official Liquidator has been informed about all the steps in the process of sale, but has nevertheless not chosen to make even a whisper save by filing his report on 23.12.2005. The proviso to Section 13(9) of the Securitisation Act provides that in case of a Company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of Section 529A of the Companies Act, 1956. In case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercising powers under Section 13(4) of the Securitisation Act once the winding up order was passed by this Court and the Official Liquidator was directed to take over the possession of the other properties of the Company in liquidation. The applicant bank was further directed to inform as to whether before issuance of public notice on 21.04.2005 and before taking possession of the assets of the Company in liquidation on 18.04.2005, any notice was given to the Company. The Court has also directed the applicant bank to hand over the books of account, if any, lying in the factory premises to the Official Liquidator after preparing inventory of such books of accounts. 19. Pursuant to the aforesaid order, an affidavit is filed by one Mr. R.K. Modi on behalf of the applicant bank reiterating the same facts which were earlier placed on the record of this case in the form of affidavits. It was stated that because of the pendency of the writ petition before this Court, the Company in liquidation being declared as Relief Undertaking under the Bombay Relief Undertakings (Special Provisions) Act, 1958, stay granted by this Court and talks of settlement, the possession could not be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment. The Court has, therefore, granted the application to proceed with under Section 13(9) of the Securitisation Act. 21. Mr. Trivedi has further relied on the decision of this Court in the case of Indian Bank v. O.L. of Satnam Export (India) Limited decided on 09.03.2005 in Company Application No. 14 of 2004 wherein this Court has held that when a specific prayer is made to direct the Official Liquidator to hand over the possession to the Recovery Officer appointed by the Debts Recovery Tribunal, this Court is bound to follow the judgment of the Hon'ble Supreme Court in the case of Allahabad Bank v. Canara Bank (2000) 111 CompCase 64 (SC) as in no uncertain terms, it is held that only Section 529A is attracted to adjudication, execution and working out priorities, the Special Provisions made in the RDB Act have to be applied. The possession of the entire assets movable as well as immovable of the Company in liquidation will have to be handed over to the Recovery Officer appointed by the Debt Recovery Tribunal. The Recovery Officer shall undertake the task of sale of the properties of the Company in liquidation by following due procedure of law and in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in accordance with the provisions contained in the Companies Act, 1956. 24. Taking all these points into account, the Official Liquidator has submitted that either this Court should not confirm the sale or in the alternative sale proceeds realised by the applicant bank may be directed to be deposited with the Official Liquidator. 25. After having heard learned advocate appearing for the applicant bank and the Official Liquidator and after considering their pleadings, affidavits, reports and other documents which have been placed on record, the Court is of the view that the applicant bank has taken possession of the Company in liquidation on 18.04.2005 by exercising its powers under Section 13(9) of the Securitisation Act. It is true that this Court has passed the winding up order on 15.04.2005 and the Official Liquidator was directed to take possession of the assets of the Company in liquidation. However, these directions have not been carried out. Possibly the order might have not been communicated to the Official Liquidator. It is difficult to express any opinion on the fact as to whether the applicant bank was aware about the winding up order passed by this Court on 15.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assets of a borrower Company in liquidation, but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (iii) If a financial corporation acting under Section 29 of the SFC Act seeks to sell or otherwise transfer the assets of a debtor Company in liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the Company Court and acting in terms of the directions issued by that Court as regards associating the Official Liquidator with the sale, the fixing of the upset price or the reserve price, confirmation of the sale, holding of the sale proceeds and the distribution thereof among the creditors in terms of Section 529A and Section 529 of the Companies Act. (iv) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the creditor concerned is to approach the Company Court for appropriate directions regarding the realisation of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the Company in liquidation. 27. Even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red creditor may take recourse to one or more of the following measures to recover his secured debt, namely, take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset. Section 13(4) of the Act, therefore, empowers the secured creditor not only to take possession but also empowers for sale of the assets of the borrower. It has come on record that the applicant bank is the sole secured creditor of the Company in liquidation and hence, there is no embargo contemplated in Section 13(9) in relation to joint financing of a financial asset by more than one secured creditors or financing of a financial asset by more than one secured creditors and straightway the assets can be sold by the applicant bank subject to the proviso to Section 13(9) of the Act. The first proviso says that in case of a Company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of Section 529A of the Companies Act, 1956. The second proviso empowers the applicant bank to retain the sale proceeds of its secured assets after depositing the workmen's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce, or an instrument having effect by virtue of any such law. 30. In the above view of the matter, the Official Liquidator is hereby directed to inform the applicant bank about the workmen's claim under Section 529A of the Act and if it is not determined, at least to inform about the estimated claim of the workers. 31. On receipt of this information from the Official Liquidator, the applicant bank shall deposit the said amount with the Official Liquidator. Till then, entire amount should be kept in a separate account except the actual expenses incurred by the applicant bank for undergoing the sale and realizing sale proceeds thereof. The applicant bank shall also file an undertaking before the Official Liquidator that the applicant bank shall deposit the amount of workmen's claim as soon as the same is communicated by the Official Liquidator to the applicant bank. If there is any dispute about the amount of claim of the workers or secured creditors, if any, or any other matter, it shall be open for the parties to approach this Court for necessary clarification and/or order. 32. Subject to the aforesaid direction and observation, this application is accordingly al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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