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TMI Blog2015 (7) TMI 1442X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Petition No.12/1987 (titled as Registrar of Companies Vs. M/s. Shield Shoe Company Pvt. Ltd.). Under the said order, the powers under Section 457(1) of the Companies Act, 1956 (hereinafter "the Act of 1956") were conferred on the O.L. At the time of passing of the winding up order, the assets of the company in liquidation were under lock and key of a secured creditor i.e. Central Bank of India commencing the year 1986. Following the winding up order and the appointment of the O.L. as the liquidator of the company in winding up, the said fixed assets of the company in liquidation came into the O.L.'s custody by virtue of Section 456(2) of the Act of 1956 and also were taken possession by the O.L. putting his lock over the existing lock of the Central Bank of India on the unit in issue. RFC moved an application before this Court bearing Company Application No.22/1991 under Section 446(2)(b) & (d) read with Section 529(2) of the Act of 1956 read with Rule 9 of the Rules of 1959, praying that the Central Bank of India be directed to remove its lock over the unit of the company (in liquidation), the inventory of assets be prepared and the OL be directed to handover the assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of the permissions was again sought by way of misc. application No.28300 dated 23.12.2010 under Rule 9 of Rules of 1959 by RFC from the Company Court for reauctioning the assets of the company in liquidation. Vide order dated 10.02.2011 the Court granted the requisite permission making it clear that the sale however not confirmed without the permission of the Court. Finally on 10.05.2011 in the auction, the highest bid of Rs. 1,90,25,000/- was received. Subsequently for reasons of intervening events which are not material, the Company Court confirmed the sale of immovable assets of the company in liquidation for a sum of Rs. 221 lacs to the highest bidder. The said sale has since been confirmed by this Court vide order dated 28.07.2011. Vide its order dated 01.12.2011, the Company Court allowed the parties to file further applications. The auction amount was to be paid in installment as per the condition of sale and has since been received in full by RFC on 21.02.2013. Mr. Gaurav Sharma, appearing for the O.L. has submitted that RFC, having received the entire sum against the sale consideration of the fixed assets of the company in liquidation, in the statutory custody of the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 456(2) of the Act of 1956. RFC not being in custody of the assets of the company in winding up, even though it was a secured creditor, could not conceivably have exercised its powers to stay outside winding up, take possession of the mortgaged assets under Section 29 of the Act of 1951 and sell the same on its own account for the benefit of recovering its outstanding against the company in liquidation. However for reasons which are not clear, despite the final order dated 09.12.1991, passed by the Company Court in Company Application No.22/1991, the O.L. thought it fit to move an application before the Company Court in Company Application No.52/1995 to have the possession of the assets handed over to RFC to facilitate their sale. But as the orders of the Company Court passed from time to time, between 04.08.1995 to 01.12.2011 clearly show, the sale of the assets in issue was to be for and on behalf of the O.L. as would be evident from the fact that not only the RFC sought approval of the modalities of the sale from the Court but also acceded to the condition of the auction sale being subject to confirmation by the Company Court. This would not have been so if the sale by RFC was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 29 of the Act of 1951 before the winding up order was passed on 12.05.1989 and when the O.L., appointed as liquidator of the company in liquidation, came into custody/possession of the property with reference to Section 456(2) of the Act of 1956-the earlier attachment of the Central Bank of India since 1986 as a secured creditor notwithstanding. It is also on record that the O.L. also did indeed put his locks over the fixed assets of the company in liquidation. It was in this state of affairs that RFC moved an application under Section 446(2)(b) & (d) read with Section 529(2) of the Act of 1956 along with Rule 9 of the Rules of 1959 before the Company Court. The very act of RFC moving the application under Section 446(2)(b) & (d) read with Section 529(2) of the Act of 1956 along with Rule 9 of the Rules of 1959 was premised on the O.L.'s possession of the said assets. Vide order dated 09.12.1991 was rejected. It was held that RFC had been lethargic in exercising its rights despite notice by the Central Bank of India with regard to Shield Shoe Company Private Ltd-the company being defunct for all practical purposes since 1986. The Company Judge's unarticulated r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of Rajasthan State Financial Corporation & Anr. Vs. Official Liquidator & Anr. [(2005) 8 SCC 190] where a three judge Bench has endorsed the earlier two Judge judgments in the case of A.P. State Financial Corporation Vs. Official Liquidator [(2000) 7 SCC 291] and International Coach Builders Ltd. Vs. Karnataka State Financial Corporation [(2003) 10 SCC 482]. It has been held that in cases where a winding up order in respect of company in liquidation has been passed prior to the exercise of powers under Section 29 of the Act of 1951, by virtue of the workers' debts of the company in liquidation statutorily being deemed to be pari passu with the debt of the secured creditors and all assets, including fixed assets of the company in liquidation coming, in such a situation, in the custody of the O.L. on behalf of the Company Court, the O.L., aside of being mandatorily required to be associated with the sale of the assets in all aspects should hold the proceeds of the sale for distribution thereof amongst creditors in terms of the priorities detailed for the purpose under the provisions of Sections 528, 529, 529A & 530 of the Act of 1956. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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