Andhra HC (Pre-Telangana)
T. Rajive And Others vs State Bank Of India, Mumbai And Another on 9 December, 1999
Equivalent citations: 2000(2)ALD308, 2000(2)ALT335, [2001]104COMPCAS293(AP)
Author: P. Venkatarama Reddi
Bench: P. Venkatarama Reddi
ORDER P. Venkatarama Reddi, J.
1. By the impugned order passed in Company Application No.22 of 1999, the learned single Judge allowed the first respondent's (State Bank of India) application to grant leave to continue the proceedings in OA No.1301 of 1997 on the file of Debt Recovery Tribunal, Bangalore. The learned Judge also prescribed certain terms and conditions in order to ensure that the Official Liquidator is apprised of the result of the proceedings before the Tribunal and the information relating to Company's properties and more important that the dues of workmen are deposited by the applicant and the applicant seeks permission of the Court before the sale of any properties.
2. It is against this order respondents 2 to 10 in the Company Application filed the present appeal. Second appellant was the Managing Director of the Company and others were either Directors or Sureties.
3. The company was wound up by an order of this Court dated 16-11-1998. While winding up proceedings were pending, the first respondent bank which is a secured creditor filed OA No.1301 of 1997 before the Debt Recovery Tribunal, Bangalore in October, 1997 for recovery of sum of Rs.2.75 crores roughly, from the Company and its guarantors. It is not in dispute that the properties of the Company including plant, machinery and buildings were mortgaged to the first respondent Bank. The learned single Judge observed that it is open to the secured creditor to remain outside the winding up/liquidation proceedings and proceed against the mortgaged properties and the guarantors and there was no legal objection for allowing the applicant bank to continue the proceedings in OA No.1301 of 1997.
4. The learned Counsel for the appellants submits that the order was passed on a wrong assumption that the properties were still available. It is submitted that the assets were already sold out to M/s. Pennar Textiles Limited on 23-6-1997 by APSFC after seizing the Unit. It is not in dispute that a petition is pending to set aside the said sale. Moreover, the other secured creditor viz., State Bank of India has sought leave to pursue the action for recovery of the amount by continuing the proceedings in OA No.1301 of 1997. The question whether the mortgaged properties are available for purpose of enforcing the security is premature and need not be gone into.
5. The second contention of the learned Counsel for the appellants is that the respondent Bank should have sought permission of the Court to slay outside the liquidation during the pendency of the winding up petition and not after the Company is wound up. The learned Judge rightly held that Section 446 does not place any such limitation. We fail to understand as to why even before the winding up order is passed, the secured creditor should seek permission to continue the suits or other proceedings against the Company and to stay outside the liquidation process.
6. The last contention vehemently urged by the learned Counsel is that the principle laid down by the Supreme Court in Ranganathan v. Government of Madras, 1955 (25) CC 344, reiterated in ICICI v. Srinivas Agencies, 1996 (86) CC 255, no longer holds good after the introduction of Sections 529 and 529-A in the Companies Act of 1956. It is submitted that all the properties and effects of Company shall be deemed to be in the custody of the Court from the date of order of winding up and the Official Liquidator is the custodian on behalf of the Court and he will have exclusive right of disposal of assets. The Official Liquidator takes the interest of the entire body of creditors and more important he holds pari passu charge for the purpose of realising the workmen's dues. The learned Counsel submits that the properties cannot be sold by any secured creditor without reference to the Official Liquidator who is in the position of a co-mortgage and without obtaining leave of the Court. Reliance is sought to be placed on a well considered decision of Karnataka High Court in KSIIDC v. ITT Systems, 1998 (94) CC 166. We cannot accept this contention. The situation with which the Karnataka High Court was concerned in the said case was quite different. We are not on the question whether the first respondent creditor can be permitted to enforce the security by bringing the properties to sale without reference to Official Liquidator or without leave of the Court and whether any sale effected by the respondent creditor is or will be void. We are only concerned with the application to permit the applicant-Bank (1st respondent herein) to continue the proceedings in OA No.1301 of 1997 on the file of Debt Recovery Tribunal. After the decree is obtained therein, the question of realisation of mortgaged assets by sale thereof will arise. Whether such permission should be granted and if so, on what terms, need not be decided at this stage. In fact, the learned Judge prescribed necessary safeguards to ensure that the applicant bank on its own accord does not sell away mortgaged properties and also to see that the workmen's dues are discharged.
7. In fact, it is not open to the appellants to raise such contentions, if at all it is for the other creditors or the Official Liquidator to object to the modalities of recovery of debt. We see no merit in this appeal. The appeal is dismissed at the admission stage.