Delhi High Court
Aryavarta Plywood Limited vs Rajasthan State Industrial And ... on 15 November, 1989
Equivalent citations: [1991]72COMPCAS5(DELHI)
ORDER S.N. Sapra, J.
1. By the present application filed under sections 456 and 457 of the Companies Act, 1956 (hereinafter called "the Act"), read with rule 9 of the Companies (Court) Rules, 1959, the applicant, namely, Aryavarta plywood Limited (in liquidation), through the official liquidator, has sought the following reliefs:
"(a) Issue ad interim ex parte stay injunction restraining the respondents from disposing of any goods of the company and/or land, building, plant and machinery and other goods housed at the factory situated at Biwandi, Distt. Alwar, Rajasthan.
(b) To confirm the stay ex parte on hearing motion.
(c) To order the respondents to hand over the factory consisting of land, building, plant and machinery, etc., etc., to the official liquidator of the company as those assets/properties are in the deemed custody of the Hon'ble High Court.
(d) To order the sale of those assets only under the supervision, guidance and orders of this Hon'ble High Court through it official liquidator."
2. Vide ex parte order dated February 1, 1989, notice was issued to respondents and they were restrained from disposing of any of the goods, land, building or machinery of the company, namely, M/s. Aryavarta Plywood Limited (in liquidation), lying at the Factory situated at Biwari, Distt. Alwar, Rajasthan.
3. For better appreciation of the respective contentions of learned counsel for the parties, it will be useful to refer, in brief, to the facts of the case.
4. One Mr. Dharam Bir, as creditor, filed a petition, being C.P. No. 53 of 1984, on May 14, 1984, for winding up the applicant, namely, Aryavarta Plywood Limited, hereinafter called "the company", on the ground that it was unable to pay it debts.
5. Vide order dated July 19, 1988, Mahinder Narain J. directed the winding up of the company and appointed the official liquidator attached to this court as the liquidator of the company.
6. In the present application, it is alleged that, on receipt of the order of winding up and his appointment as liquidator of the company, he proceeded to make inspection of the records of the company as maintained with the Registrar of Companies. Thereafter, notices were issued to the ex-directors, thereby calling upon them to surrender the records, books of account and to file the statement of affairs of the company as required under section 454 and 456 of the Act.
7. The official liquidator came to know, on inspection of the records, that the company was incorporated on November 24, 1975, and had its registered office in New Delhi. The company had its factory situated at Bhiwandi, Rajasthan. From the papers and correspondence, as handed over by one of the ex-directors of the company, namely, Shri I.J. Khosla, the official liquidator came to know that the company had started its production in Order, 1981, and that the business virtually closed down in 1984. Rajasthan State Industrial Development and Investment Corporation Limited, Jaipur, hereinafter called "the Corporation", a Government undertaking of the State of Rajasthan, was a secured creditor and all the land, building, plant and machinery were mortgaged/hypothecated to it. The entire factory was under the custody of the Corporation. Whatever records were available with the ex-directors were handed over to it. On perusal of the records, it was further found that it did not contain any statutory records and book of account. From the records, the official liquidator found a telegram dated September 15, 1984, purported to have been sent by the Corporation to the company, thereby intimating that it had taken over the factory of the company with immediate effect.
8. Vide letter dated October 10, 1988, the official liquidator informed the Corporation that the company had been wound up by order of this court and that, under provisions of section 456 of the Act, all the records, properties, assets and other claim were deemed to be under the custody and jurisdiction of the winding up court, and the same were liable to be delivered to the official liquidator. The Corporation was, accordingly, requested to hand over all the assets of the company.
9. In replay, the respondent, vide its letter dated October 13, 1988, alleged that, by virtue of the provisions of section 29 of the State Financial Corporations Act, 1951, hereinafter called "the said Act", the company had been taken over by the respondents, since the Corporation was a secured creditor. It was further stated that, by a Gazette notification dated March 21, 1987, section 29 of the said Act had been extended to the Corporation. It is further alleged by the official liquidator that the factory was illegally taken over by the Corporation of September 15, 1984. At that point of time, section 29 of the said Act was not applicable and available to the Corporation. The notification issued on March 21, 1987, could not have retrospective effect. More so, the Corporation could invoke the provisions of section 29 of the said Act after obtaining the necessary permission from this court. The Corporation could not assume the power of the court and determine its own liability.
10. The case of the official liquidator is that the Corporation was in the process of disposing of the assets and properties of the company which had been taken over by it illegally and in violation of law. The Corporation has sent a letter dated January 19, 1989, wherein it had stated that the Corporation was taking steps to sell the assets of the company in order to meet its demand, and that the corporation even rejected the request of the official liquidator that he should be allowed to participate and give consultation in the matter of sale of the assets of the company. If the assets of the company were sold by the Corporation, then the other secured preferential creditors and particularly the workers would suffer irreparable loss and injury.
11. In reply, the Corporation has alleged that it is a secured creditor of the company. The Corporation had advanced a term loan of Rs. 27.14 lakhs to the company in Installments, from August 2, 1980, bearing interest at the rate of 9.5% per annum with half-yearly rests and, in case of default in due payment of the principal amount and interest, liquidated damages at the rate of 5% per annum over and above the normal interest was agreed upon. The loan was secured by way of a joint equitable mortgage dated August 30, 1980, and a deed of hypothecation dated September 9, 1980. In addition to the term loan of Rs. 27.14 lakhs, a bridge loan of Rs. 2.924 lakhs was also granted to the company. A joint equitable mortgage was created in favor of the Corporation as well as in favor of the Industrial Finance Corporation of India, which was also a secured creditor of the company to the extent of the loan advanced by it to the company. The property mortgaged in favor of the Corporation and the IFCI comprised land, building, plant and machinery and other movable assets in the nature of spare parts, tools, etc.
12. Whereas the company commenced its production some time in the year 1981, within a very short period of time, i.e., some time in the year 1984, the company shut down its production due to acute shortage of raw materials and not only did the company fail to repay the loan with interest to the Corporation, but, as a matter of fact, the then management of the company abandoned the entire project. It was under these circumstances that the Corporation addressed the telegram, annexed as annexure A-2 to the application to the Bhiwandi unit, wherein it was indicated that the Corporation and the IFCI would take over the assets secured in their favor at the factory premises of the company. However, the assets were taken over only as late as on April 25, 1988. prior to the taking over of the assets on April 25, 1988, the Corporation and the IFCI as well as the State Bank of Bikaner and Jaipur took necessary steps to protect the assets from pilferage, etc. However, it has been denied that the Corporation took over the factory of the company on September 15, 1984. The Corporation has denied that it had illegally taken over the possession of the factory on September 15, 1984, or, for that matter, on any other date. The Corporation was wholly within it power to take over the secured assets of the company under section 29 of the said Act, yet that apart, the Corporation, as a secured creditor, was wholly within its right to realise its security, without the intervention of the court, by taking over the secured assets and effecting sale of the assets by private private treaty, or by public auction. It is further alleged that the Corporation which had taken over the secured assets of the company, prior to the date of the order of winding up, as a secured creditor, is outside the winding up proceedings. It has been denied that, on the passing of the order of winding up, the assets taken over by the Corporation immediately came into the power and possession of the official liquidator by the deeming provisions of the Act.
13. The loan with interest had risen to a huge figure of Rs. 59,75,611,38 as on October 15, 1987. With a view to recover this amount, and in exercise of its powers and rights under the law, the Corporation issued an advertisement for the sale of the secured assets, as taken over by it, in the Economic Times dated September 9, 1988, thereby inviting offers for the purchase of the said assets. The advertisement was also published in a booklet by the Corporation which gave details of sick units taken over by the Corporation, and offered for sale. The advertisement was also issued in the monthly journal published by the Corporation and freely available.
14. Pursuant to the advertisement, Zoravar Vanaspati Ltd., a public limited company, offered to purchase the secured assets of the company for a total consideration of Rs. 90 lakhs. In view of the depleted condition of the assets, the Corporation accepted the offer.
15. The Corporation has further alleged that, at the first instance, the offer was made by a partnership firm under the name and style of Zorin Impex, New Delhi, but the transaction of sale of the assets was finalised by it with Zoravar Vanaspati Ltd., a public limited company, as the respondents felt that it was necessary to finalise that sale transaction with a public limited company rather than with a partnership firm. consequently, on January 17, 1989, the Corporation entered into an agreement to sell, with Zoravar Vanaspati Ltd., in terms of which the Corporation accepted the highest bid of Rs. 90 lakhs. A copy of the agreement to sell has been filed with reply. The other secured creditor, namely, the IFCI, has also given its consent to the respondents with regard to the sale of the secured assets to the intending purchaser on the terms and conditions as contained in the agreement to sell.
16. As regards the dues of the workers, if any, the respondents have alleged that, to the best of their knowledge, there are no outstanding dues to the workers of the company, which has ceased to do business as far back as in the year 1984. However, the respondents have undertaken to pay such dues as would be established from the records of the company to any of its workers.
17. In the first place, Mr. B.N. Nayyar, learned counsel for the applicant, has urged that, under section 68 and 69 of the Transfer of Property Act, with respect to the immovable properties, a mortgage can be enforced only through the court and that too under the procedure as laid down in Order 34 of the Civil Procedure Code. Even a financial corporation can not enforce a mortgage under section 29 of the said Act without following the procedure as laid down in Order 34 of the Civil Procedure Code. Once a mortgage, always a mortgage, is the law.
18. Mr. Lalit Bhasin, learned counsel for the respondents, on the other hand, has contended that, under section 29 of the said Act, the Financial Corporation has been given a statutory right to resort to the remedies as provided therein without approaching a civil court for enforcement of a mortgage. Besides that, even under the deed of hypothecation and mortgage, the Corporation was given the right by the company to take possession of its assets including the immovable properties and sell the same.
19. Section 69 of the Transfer of Property Act, 1882, reads as under:
"Power of sale when valid.-(1) A mortgage, or any person acting on his behalf, shall, subject to the provisions of this section have power to sell or concur in selling the mortgaged property or any part thereof,in default of payment of the mortgage money, without the intervention of the court, in the following cases and in no others, namely :-
(a) where the mortgage is an English mortgage, and neither the mortgage nor the mortgagee is a Hindu, Muhammadan or Buddhist or a member of any other race, sect, tribe or class from time to time specified in this behalf by the State Government, in the Official Gazette;
(b) where a power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage deed and the mortgagee is the Government ;
(c) where a power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage deed and the mortgaged property or any part thereof was, on the date of the execution of the mortgage deed, situate within the towns of Calcutta, Madras, Bombay, or in any other town or area which the State Government may, by notification in the Official Gazette, specify in this behalf.
(2) No such power shall be exercised unless and until -
(a) notice in writing requiring payment of the principal money has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal money, or of part thereof, for three months after such service; or
(b) some interest under the mortgage amounting at least to five hundred rupees is in arrear and unpaid for three months after becoming due.
(3) When a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorize the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorized or improper or irregular exercise of the power shall have his remedy in damages against the person exercising the power.
(4) The money which is received by the mortgagee, arising from the sale, after discharge of prior incumbrances, if any, to which the sale is not made subject, or after payment into court under section 57 of a sum to meet any prior incumbrance, shall, in the absence of a contract to the contrary, be held by him in trust to be applied by him, first in payment of all costs, charges and expenses properly incurred by him as incident to the sale or any attempted sale; and, secondly, in discharge of the mortgage money and costs and other money, if any, due under the mortgage; and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorized to give receipts for the proceeds of the sale thereof.
(5) Nothing in this section or in section 69A applies to powers conferred before the first day of July, 1882."
20. It will be appropriate to reproduce the provisions of section 29 of the State Financial corporations Act, 1951 :
"Rights of Financial Corporation in case of default.-(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any Installment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well as the right to transfer by way of lease or sale and realised the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(2) Any transfer of property made by the Financial Corporation, in exercise of its power under sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property.
(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.
(4) Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied, firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.
(5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern."
21. It is thus clear that, under section 69 of the Transfer of Property Act, 1882, a mortgagee, subject to its provisions, has the power to sell or concur in selling the mortgaged property or any part thereof in default of the payment in mortgage, without the intervention of the court in various cases as mentioned therein. Thus, there is no force in the argument of learned counsel for the applicant that the mortgage can be enforced only through the procedure as laid down in order 34 of the Code of Civil Procedure.
22. Moreover, under section 29 of the said Act, in case of default in repayment of any loan or advance or otherwise, such industrial concern fails to comply with the terms of the agreement, the Financial Corporations has been given the following three options :
1. the right to take over the management;
2. or possession or both of the industrial concern; and
3. the right to transfer by way of lease or sale and realise the property pledged, mortgaged or assigned to the Financial Corporation.
23. If I accept the argument of Mr. Nayyar that, even for enforcing a mortgage under section 29 of the said Act, a Financial Corporation is to approach the civil court, then it will amount to defeating the very objects and reasons for which the said Act in general and section 29 in particular were enacted by the Legislature.
24. So, in my view, a Financial Corporation can enforce a mortgage under section 29 of the said Act without approaching a civil court.
25. In the second place, Mr. Nayyar has contended that section 32(10) of the said Act clearly provides that where the proceedings for liquidation, in respect of an industrial concern, have commenced before an application is made under sub-section (1) of section 31 of the said Act, then nothing shall be construed as giving to the Financial Corporation any preference over the other creditors of the industrial concern, and conferred by any other law. He has thus urged that, as in the present case, the petition for winding up was filed on May 14, 1984, and, admittedly, the respondents took over possession of the secured assets of the company during the pendency of the liquidation proceedings, under section 32 of the said Act, the respondents have no preference over the other creditors of the company. Section 32(10) of the said Act reads as under :
" 32.(10) Where proceedings for liquidation in respect of an industrial concern have commenced before an application is made under sub-section (1) of section 31, nothing in this section shall be construed as giving to the Financial Corporation any preference over the other creditors of the industrial concerns not conferred on it by any other law."
26. Mr. Bhasin, on the other hand, has urged that the Corporation has exercised it power of taking over possession of the company, under section 29 of the said Act. The rights conferred under section 31. Section 32(10) applies only to a case where a Financial Corporation makes an application under section 31 of the said Act. There is a clear distinction between the two provisions as contained in sections 29 and 31. He has placed reliance upon the judgment in Srinivasa Kandasari Sugars v. Government of Andhra Pradesh, .
27. In Srinivasa Kandasari Sugars, , the question for consideration before the Division Bench was whether the State Financial Corporation had the choice to resort to either of the procedures as laid down in section 29 and 31 of the State Financial Corporations Act, 1951. The Division Bench held as under (para 15 at pages 100, 101) :
"In the light of the aforesaid principles, the constitutionality of section 29 of the Act has to be examined. The State Financial Corporations Act, 1951, was enacted in order to provide immediate and long-term credit to industrial undertakings which fall outside the normal activities of commercial banks, etc. As seen from the Statement of Objects and Reasons, the intention is that the State Corporations will finance medium and small scale industries. One of the main features of the Bill was that the Corporation will be managed by a Board consisting of directors nominated by the Government, Reserve Bank and the Industrial Financial Corporation of India. It is also mentioned that the Corporation will have special privileges in the matter of enforcement of its claim against borrowers. Section 3 of the Act deals with the establishment of State Financial Corporations. Sub-section (2) of section 3 is in the following terms :
"(2) The Financial Corporation shall be a body corporate by the name notified under sub-section (1), having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property and shall by the said name sue and be sued."
From the Objects and Reasons and section 3(2) of the Act, it is clear that the Financial Corporation is a responsible body vested with power to discharge the various functions under the ACt. Section 9 deals with 'management of Financial Corporation' and lays down that the general superintendence, direction and management of the affairs and business of the Financial Corporation shall vest in the board of directors and shall be assisted by an executive committee and the managing director. As we find in section 10, very responsible and highly placed persons will be the directors of the Board. Section 24 deals with the 'general duty of the Board' and lays down that the Board in discharging its functions under the Act shall act on business principles, due regard being had by it to the interests of industry, commerce and the general public. Again, under section 25, it is the Corporation as managed by the Board that is empowered to grant loans or advances to an industrial concern , repayable within a period not exceeding 20 years. Section 27 empowers the Financial Corporation to impose such conditions as it may think necessary or expedient for protecting the interest of the Financial Corporation and securing that the accommodation granted by it is put to the best use by the industrial concern. Now having regard to the scheme of the Act and these general provisions, sections 29 and 31 are incorporated for safeguarding the interests of the Corporation. As already mentioned, the two procedures mentioned in sections 29 and 31 are different and there are no provisions by way of guidelines in these two sections as to when a particular procedure can be resorted to. The choice is left to the Corporation. It may also be noted that under section 29, the Financial Corporation shall have the right to take over the management of the defaulting industrial concern as well as the right to transfer by way of lease or sale. Normally, one would expect a responsible body like the Financial Corporation to take action under this section when it becomes necessary depending on the circumstances. From a combined reading of the Objects and Reasons and section 8, 9, 10, 24, 25, and 27, the requisite guidance can be inferred and a very responsible authority is vested with the power of selecting either of the procedures under section 29 and 31 respectively. So the statute itself disclose a definite policy and objective and it confers authority on the Corporation to make selection of the procedure. When that is so, a responsible body like the Financial Corporation will act in a realistic manner keeping in view the interests of the Corporation, industry, commerce and the general public. For these reasons, we are of the opinion that there is a guiding policy and principle available from the statute for the Corporation to act in this regard and accordingly we hold that section 29 is not violative of article 14 of the Constitution. Further, we are also of the view that in this case the Corporation acted with due care and caution and that it did not act arbitrarily or capriciously, and we will be be considering this aspect in detail at a later stage."
28. I am in respectful agreement with the view expressed by the Division Bench in the aforesaid case. I am of the view that the remedies available under section 29 and 31 of the said Act ar independent and entirely different. Section 32, sub-section (10), specifically provides that where proceedings for liquidation in respect of industrial concern have commenced before an application is made under section 31(1) of the Act, then nothing in the section shall be construed as giving to a financial corporation any preference over other creditors of that industrial concern. So, I am of the view that section 32(10) of the said Act is not applicable to a case where a financial corporation exercise nay of its options under section 29. In fact, the Legislature has drawn a clear distinction between section 29 and section 31.
29. Now, the questions arising for consideration are whether the respondents could sell the properties of the company which were mortgaged with it without the permission of the company court; as, admittedly, no permission was obtained by the respondents, whether the sale by respondents to Zoravar Vanaspati Ltd. is void under section 37 of the Act; and whether during the pendency of the winding up petition, the respondents could not take possession of the assets of the company, under section 29 of the said Act, without the permission of the court.
30. Mr. Nayyar has contended that when a company goes into liquidation, then, the said (the State Corporations Act, 1951) becomes a general law and the Act (Companies Act, 1956) becomes the special law which alone is applicable to the present case. He has placed reliance upon the judgment in Life Insurance Corporation of India. v. Asia Udyog (P.) Ltd. [1984] 55 Comp Case 187 (Delhi) [FB]. He has further argued that section 29 of the said Act is applicable only when the directors of the company are in charge of and have control over the assets of the company, but when the assets of the company come under the control and custody of the company court in chamber under section 456 of the Act, then section 29 of the said Act has no application. Reference has been made to Mysore Surgical Cottons (P.) Ltd. (In liquidation) v. Karnataka State Financial Corporation [1988] 1 Comp LJ 63, Kharavela Industries Pvt. Ltd. v. Orissa State Financial Corporation, , Rajasthan Financial Corporation v. Official Liquidator, Bharatpur Oil Mills (P.) Ltd. [1963] 2 Comp LJ 309, Munnalal Gupta v. Uttar Pradesh Financial Corporation, and Gleitlargor (India) P. Ltd. and H.S. Kamlani, Official Liquidator v. Mazagon Dock Ltd. [1985] 57 Comp Case 742 (Bom).
31. His next contention is that, under the principle of relation back, any distress sale or execution without the permission of the court, from the date of presentation of the petition for winding up, onwards, becomes void, within the meaning of section 537(1) of the Act. According to him, taking over of possession by the respondents of the assets of the company, without the permission of the court in the present case, is void under section 537(1) of the Act. The word 'distress' means taking delivery of a personal chattel out of possession of a wrongdoer into the custody of a party injured to procure satisfaction for the wrong committed. Thus, Mr. Nayyar has urged that the taking over the assets of the company by the respondents and the subsequent sale of the same are not only illegal, but also void.
32. While distinguishing the judgment in M.K. Ranganathan v. Government of Madras [1955]25 Comp Case 344 (SC), Mr. Nayyar contended that the Supreme Court did not take into consideration or discuss the mortgagee's right, with regard to the enforcement of his interest in the mortgage which, according to section 69 of the Transfer of Property Act, could be enforced only through court. Thus, Mr. Nayyar argued that when the Supreme Court omits to take into consideration the obvious provisions of the Indian law, the law laid down in that case does not have the binding sway of a precedent, to be followed, qua immovable property. He relied upon the judgments in Municipal Corporation of Delhi v. Gurnam Kaur, , Mamleshwar Prasad v. Kanahaiya Lal, and Potharaju Pardhasaradhi Rao v. potharaju Srinivasa Sarma, .
33. Mr. Bhasin, on the other hand, contended that, admittedly, under the various documents executed by the company, the respondents took possession of the assets of the company and the factory located at Bhiwandi on October 13, 1984. This is evident from the order dated July 19, 1988, wherein Mahinder Narain J. specifically mentioned this fact and then passed the order of winding up on this ground. The said Act was made applicable to the Corporation by means of a notification dated March 21, 1987. The Corporation issued an order under section 29 of the said Act, on April 25, 1988, for taking over the possession of the industrial concern, namely, M/s. Aryavarta Plywood Ltd. This order was issued before the passing of the order of winding up. In pursuance of the said order, respondents took possession of the assets of the company on April 27, 1988. Therefore, the property of the company at Bhiwandi stood validly transferred to respondents, both under the loan agreements as well as under section 29 of the said Act. Thus, the official liquidator could have no legitimate claim over the assets which had been taken over and were in the possession of the respondents prior to the passing of the order of winding up.
34. Mr. Bhasin further contends that the respondents had full legal rights under the various agreements as well as under section 29 of the said Act to take over the company in payment of its dues to the respondents. The mortgage was created by the company in favor of the respondents and also in favor of the Industrial Finance Corporation of India on August 13, 1980. In addition, a power of attorney was executed by the company in favor of the respondents to execute a first legal mortgage in the English form for and on behalf of the company. According to Mr. Bhasin, the respondents were secured creditors and as such, outside the winding up and the respondents could realise their security without the intervention of the court, by effecting sale of the mortgaged property by either private treaty or by public auction. It is only when the intervention of the court is sought, either by putting into force any attachment, distress or execution, that the leave of the company court was required. He has placed reliance upon the judgment in M.K. Ranganathan [1955] 25 Comp Case 344 (SC).
35. Mr. Bhasin has further argued that the respondents being secured creditors, were under no legal obligation to seek permission of the court before taking possession of the assets of the company either under the agreements or under section 29 of the said Act. Similarly, the respondents were not legally bound to seek permission of this court for selling the secured property to Zoravar Vanaspati Ltd. Mr. Bhasin has placed reliance upon the judgments in Srinivasa Kandasari Sugars v. government of Andhra Pradesh, , Thressiamma varghese v. Kerala State Financial Corporation [1988] 64 Comp Case 64 (Ker), State Industrial and Investment Corporation of Maharashtra Limited v. Maharashtra State Financial corporation [1988] 64 Comp Case 102 (Bom), Maharashtra State Financial Corporation v. Official Liquidator, Sidhu Tyres (P.) Ltd. [1988] 64 Comp Case 641 (Bom), Hrushikesh panda v. Orissa State Financial Corporation [1987] 61 Comp Case 448 and Mamleshwar Prasad, .
36. The next contention of Mr. Bhasin is that the action taken by the respondents could not be questioned in proceedings under the Act as, by necessary application and by express enactment, the provisions of general law like the Act, the Code of Civil Procedure or the Transfer of Property Act hardly apply.
37. The admitted facts are that the Corporation and the Industrial Finance Corporation of India, another secured creditor, advanced various loans to the company in August/September, 1980. In consideration thereof, the company executed various documents and also created a mortgage of its immovable properties and also executed a deed of hypothecation in favor of the Corporation and the Industrial Finance Corporation of India.
38. As the company committed defaults in repayment of the loan, in October, 1984, the Corporation took possession of the secured assets of the company, under the agreements. This fact is specifically mentioned by this court in its winding up order dated July 19, 1988, which reads :
".......Mr. Tyagi states that the assets of the said company and the factory located at Bhiwandi have been taken over by the State Financial Corporation (Rajasthan Industrial and Investment Corporation ) on 13th October, 1984, and everything has been locked up. It is further stated that all his efforts to get back the company from the State Financial Corporation have failed."
39. Thus, while passing the order of winding up, this court was conscious of the fact that no assets worth the name remained in the company. The Corporation issued a notice dated March 8, 1988, to the company, thereby demanding payment of its dues, failing which action under section 29 of the said Act was to be taken. As no payment was made, on April 25, 1988, the Corporation issued an order and took over possession of the industrial concern of the company along with its factory.
40. Order of winding-up was passed on July 19, 1988. In this case, during the pendency of the winding-up proceedings, no liquidator was appointed. Though the winding-up petition was presented on May 14, 1984, under section 456(2) of the Act, all the properties and effects of the company are deemed to be in the custody of the court, as from the date of the order for the winding-up of that company. Section 456 reads as under :
"(1) Where a winding-up order has been made or where a provisional liquidator has been appointed, the liquidator or the provisional liquidator, as the case may be, shall take into custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled.
(1A) For the purpose of enabling the liquidator or the provisional liquidator, as the case may be, to take into his custody or under his control, any property, effects or actionable claims to which the company is or appears to be entitled, the liquidator or the provisional liquidator, as the case may be, may by writing request the Chief Presidency Magistrate or the District Magistrate within whose jurisdiction such property, effect or actionable claims or any books of account or other documents of the company may be found, to take possession thereof, and the Chief Presidency Magistrate or the District Magistrate may thereupon after such notice as he may think fit to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator. (1B) For the purpose of securing compliance with the provisions of sub-section (1A), the Chief Presidency Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary.
(2) All the property and effects of the company shall be deemed to be in the custody of the court as from the date of the order for the winding up of the company."
41.Thus, the properties and effects of a company are deemed to be vested in the court on the date when the order of winding up is passed. In my view, the principle of relation back cannot apply to the vesting of the property of the company in the court. Thus, in the present case, it cannot be held that the property and effects of the company were deemed to be in the custody of the court as from the date of the presentation of the petition, i.e., May 14, 1984.
42. In Potharaju Pardhasaradhi Rao, , the Andhra pradesh High Court held that every decision is an authority only for what in actually decides and the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. Learned counsel for the applicant relied upon this judgment to show that the decision in M.K. Ranganathan [1955] 25 Comp Case 344 (SC) does not cover the facts of the present case. However, the judgment in this case is not applicable, because the judgment of the Supreme Court is very express.
43. In first National Bank Ltd. v. Om Prakash Sharma [1963] 33 Comp Case 1043 (Punjab), the facts are different from the facts of the present case, because in this case, during the pendency of the winding up proceedings, the company court had appointed a provisional liquidator of the company, and, after this appointment, the directors of the company disposed of the property. Under these circumstances, it was held, and rightly so, that, after the appointment of a provisional liquidator or liquidator of the company, it was not open to the directors of the company to dispose of the property of the company.
44. In Rajasthan Financial Corporation [1963] 2 Comp LJ 309, the Rajasthan High Court was concerned with the exercise of power by secured creditors under section 31 of the said Act. The High Court did not interpret the provisions of section 29 of the said Act. So, this judgment is not applicable to the facts of the present case.
45. In Munnalal Gupta, , the Full Bench of the Allahabad High Court was considering a proposition whether the property of the surety could be a subject-matter of proceedings under the State Financial Corporations Act, 1951, and made certain observations regarding the scope of sections 29, 31 and 32 of the said Act. Their Lordships, with regard to section 29, held as under (para 9 at page 419) :
"The learned Advocate-General who appeared for the Corporation, laid emphasis upon section 29. Section 29, no doubt, defines the rights of the Financial Corporation to take over the management of the industrial concern or realise the mortgage property by way of lease or sale. As we have already mentioned, the right given to the Corporation under section 29 will extend to the property of the surety also. But, such a right can be enforced by taking recourse to the ordinary law contained in the Transfer of Property Act and the Code of Civil Procedure. The special and speedy remedy contained in section 31 of the Act cannot be availed of by the Corporation. There is no conflict between the two provisions. Section 29 defines the general right of the Corporation in cases of default and section 31 provides for a speedy and summary remedy. From the scheme of the Act, it is clear that the speedy remedy contained in section 31 is available not against the surety but against the borrower only. Now, in the instant case the Corporation has sought to avail of the special remedy contained in section 31. As is evident from section 32, the reliefs contained in section 32 can only be granted against the borrower and his property mortgaged with the Corporation. If the Corporation wants to proceed against the property of the surety also, it may do so by taking recourse to the ordinary law."
46. Thus, the Full Bench observed that the right given to the Corporation under section 29 could not extend to the property of the surety, but such a right could be enforced by taking recourse to the ordinary law, as contained in the Transfer of Property Act and the Civil Producer Cod. This judgment is distinguishable as it relates to the surety only. As already held, in case a provisional liquidator has been appointed during the pendency of the proceedings and also in a case where the order of winding up has been made, the Financial Corporation cannot invoke the provisions of section 29 of the said Act, without the permission of the company court.
47. In Life Insurance Corporation of India [1984] 55 Comp Case 187 (Delhi), a Full Bench of this court was considering the question whether, for initiating legal proceedings for recovery of the arrears of rent and possession against a company which is in the process of winding up, under section 4 and 7 of the Public Premise (Eviction of Unauthorised Occupants) Act, 1971, the permission under section 446(1) of the Act was required or not. The Full Bench held that the Companies Act was a special Act, while the Public Premises (Eviction of Unauthorised Occupants) Act was a general Act, and the landlord was required to obtain permission under section 446(2) of the Act, for initiating proceedings for recovery of damages and possession against the company under the said Act. This case is of no help to the applicant, as the case related to an unsecured creditor who wanted to initiate proceedings under the Public premises (Eviction of Unauthorised Occupants) Act, 1971.
48. In Kharavela Industries Pvt. Ltd., , the Division Bench of the Orissa High Court was dealing with two writ petitions whereby the action of the financial institutions under section 29 of the said Act was challenged. In this case, the Division Bench was also considering the question whether the taking over of the assets of the company by the Financial Corporation was arbitrary and in violation of the principles of natural justice or not. Thus, this authority is of no help to learned counsel for the applicant, because the questions involved in the present case are different from the questions involved in that case.
49. The facts in Gleitlargor (India) P. Ltd. [1986] 57 Comp Case 742, are quite different from the facts of the present case. As such, this case does not help learned counsel for the applicant.
50. The facts in Mysore Surgical Cottons (P.) Ltd. (In liquidation) [1988] 1 Comp LJ 63 (Kar) are clearly distinguishable from the facts of the present case. In that case, the secured creditor, under section 29 of the said Act, took possession of the assets of the industrial concern, after the order of winding up was made by the company court. As I have already held, the properties and effects of a company vest in the court on the day when the order of winding up is passed against a company. Thereafter, the secured creditor or the Financial Corporation as a secured creditor, as the case may be, cannot proceed under section 29 of the said Act, against the properties of the company, without the permission of the company court. In the present case, the order of winding up was passed on July 19, 1988, while the Corporation had already taken possession of the industrial concern.
51. Section 46B of the State Financial Corporations Act, 1951, reads as under :
"Effect of Act on other laws - The provisions of this Act and of any rules or orders made there under shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern"
52. The Division Bench of the Kerala High Court in Thressiamma Varghese [1988] 64 Comp Case 64, held (at page 71) :
"It is in this background that we have to consider the relevant provisions of the Act. The provisions of the Act override any inconsistent provisions in other laws. At the same time, they are in addition to and not in derogation of any other law applicable to an industrial concern. In other words, in the area of remedies and reliefs, this would mean that the provisions of the Act would apply even thought they are inconsistent with the provisions of the Transfer of Property Act or the Code of Civil Procedure; at the same time, they provide additional remedies and reliefs in addition to those provided in the Transfer of Property Act or the Code of Civil Procedure."
53. I am in respectful agreement with the judgment of the Kerala High Court. In my view, the provisions of the said Act and any of the rules or orders made there under shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force, or the memorandum or articles of association of any industrial concern.
54. In State Industrial and Investment Corporation of Maharashtra Limited [1988] 64 Comp Case 102, the Division Bench of the Bombay High Court held that this sale by the State Industrial and Investment Corporation of Maharashtra Ltd., in exercise of its power of sale, as a secured creditor and having been effected outside the winding up and without the intervention of the court was not void as section 537 of the Act did not apply.
55. In Maharashtra State Financial Corporation [1988] 64 Comp Case 641 (Bom), it has been held that the State Financial Corporations Act being a special enactment, the effect of an order passed under section 29 of the said Act would be binding on the liquidator of the company notwithstanding what is mentioned in section 125 of the Act.
56. Mr. Nayyar placed reliance upon the judgment in Municipal Corporation of Delhi, , in support of the contention that precedents 'sub silentio' are of no importance. In this case, their Lordships of the Supreme Court held (para 10 at page 42) :
"It is axiomatic that when a direction or order is made by consent of the parties, the court does not adjudicate upon the rights of the parties not lay down any principle. Quotability as 'law' applies to the principles of a case, its ratio decidendi. The only thing in a judge's decision binding as an authority upon a subsequent judge is the principle upon which the case was decided. Statements which are not part of the ratio decidendi are distinguished as obiter dicta and are not authoritative. The task of finding the principle is fraught with difficulty because without an investigation into the facts, as in the present case, it could not be assumed whether a similar direction must or ought to be made as a measure of social justice. That being so, the direction made by this court in Jamnadas'case (WP Nos. 981-982 of 1984-dated 29-4-1985) could not be treated to be a precedent. The High Court failed to realise that the direction in Jamnadas' case (WP Nos. 981-982 of 1984-dated 29-4-1985) was made only with the consent of the parties but there was an interplay of various factors and the court was moved by compassion to evolve a situation to mitigate hardship which was acceptable to all the parties concerned. The court no doubt made incidental observations with reference to the Directive principles of State Policy enshrined in article 38(2) of the Constitution and said :
'Article 38(2) of the Constitution mandates the State to strive to minimise, amongst others, the inequalities in facilities and opportunities amongst individuals. One who tries to survive by one's own labour has to be encouraged because for want of opportunity destitution may disturb the conscience of the society. Here are persons carrying on some paltry trade in open space in the scorching heat of Delhi sun, freezing cold or torrential rain. They are being denied continuance at that place on the specious plea that they constitute an obstruction to easy access to the hospitals. A little more space in the access to the hospital may be welcomed but not at the cost of someone being deprived of his very source of livelihood so as to swell the rank of the fast growing unemployed. As far as possible this should be voided which we propose to do by this short order.' This indeed was a very noble sentiment but incapable of being implemented in a fast growing city like the metropolitan city of Delhi where public streets are overcrowded and the pavement squatters create a hazard to the vehicular traffic and cause obstruction to the pedestrians on the pavement."
57. In this case, the judgment was passed on the basis of a direction given with the consent of the parties and with the reservation that it would not be treated as a precedent. As the judgment was passed on the basis of the consent of the parties, it was held that it could not be treated as a precedent for the future. In my view, this case does not support the contentions raised by Mr. Nayyar.
58. In M.K. Ranganathan [1955] 25 Comp Case 344, the Supreme Court was interpreting the provisions as contained in section 171, 229 and 232 of the Indian Companies Act, 1913, as well section 232(1), as amended by Act 22 of 1936. In this case, the facts were that, by an indenture made in England on October 13, 1924, the company charged by way of first charge, in favor of the trustees, all its undertakings, properties and assets, for the time being, both present and future, including its uncalled capital with the payment of all moneys for the time being, owing on the security of debentures. By two subsequent deeds made at Madras on March 26, 1925, and July 6, 1950, certain immovable properties belonging to the company were mortgaged in favor of the same trustees. The trustees appointed respondent No. 2, the managing director of the company, in day-to-day management of Tramway Service, and of the business of the company, as their receiver. He took possession as a receiver from the midnight of April 11, 1953, of all the assets of the company.
59. One Mr. J.B. Beardsell, one of the directors of the company, filed a petition for winding up the company on the ground that it was unable to pay its debts and further that it had ceased to run its business. An order for winding up of the company was made by the court on January 20, 1954, and the official receiver, High Court, Madras, was appointed the official liquidator. since all the assets, including moneys of the company, were in the possession of respondent No.2, the official receiver was unable to take charge of anything except the records of the company.
60. Soon after the passing of the order for winding up, respondent No.2 advertised for the sale of the properties and assets of the company. On July 16, 1954, respondent No.2 agreed to sell and respondent No.3 agreed to buy the movable properties of the company the particulars of which were set out in the agreement, for a price of Rs. 4,01,658.
61. On July 23, 1954, the official receiver filed an application for setting aside the aforesaid sale of the assets of the company on the ground, inter alia, that it was prejudicial to the interest of the general body of unsecured creditors, that the same had been concluded with undue haste and without adequate publicity and in violation of respondent No.2's undertaking to the court.
62. The Supreme Court held (at page 351) :
"The position of a secured creditor in the winding up of a company has been thus stated by Lord Wrenbury in Food Controller v. Cork [1923] AC 647 (HL) :
"The phrase "outside the winding up" is an intelligible phrase if used, as it often is, with reference to a secured creditor, say a mortgagee. The mortgagee of a company in liquidation is in a position to say "the mortgaged property is to the extent of the mortgage my property. It is immaterial to me whether my mortgage is in winding up or not. I remain outside the 'winding up' and shall enforce my rights as mortgagee". This is to be contrasted with the case in which such a creditor prefers to assert his right, not as a mortgagee, but as a creditor. He may say "I will prove in respect of my debt". If so, he comes into the winding up.' It is also summarised in Palmer's Company precedents, Volume II, page 415 :
'Sometimes the mortgagee sells, with or without the concurrence of the liquidator, in exercise of a power of sale vested in him by the mortgage. It is not necessary to obtain liberty to exercise the power of sale, although orders giving such liberty have sometimes been made.' The secured creditor is thus outside the winding up and can realise his security without the leave of the winding up court, though if he files a suit or takes other legal proceedings for the realisation of his security, he is bound under section 231 (corresponding to section 171, Indian Companies Act) to obtain the leave of the winding up court before he can do so although such leave would almost automatically be granted.
Section 231 has been read together with section 228(1) and the attachment, sequestration, distress or execution referred to in the latter have reference to proceedings taken through the court and if the creditor has resort to those proceedings, he cannot put them in force against the estate or effects of the company after the commencement of the winding up without the leave of the winding up court.
The provisions in section 317 are also supplementary to the provisions of section 231 and emphasise the position of the secured creditor as one outside the winding up, the secured creditor being, in regard to the exercise of those rights and privileges, in the same position as he would be under Bankruptcy Act."
(At page 353) "Even apart from this intendment there are certain canons of construction which also tend to support the same conclusion. Prior to the amendment the law was well-settled both in England and in India that the secured creditor was outside the winding up and he could realise his security without the intervention of the court by effecting a sale of the mortgaged premises by private treaty or by public auction. It was only when the intervention of the court was sought either by putting in force any attachment, distress or execution within the meaning of section 232(1) as it stood before the amendment or proceeding with or commencing a suit or other legal proceedings against the company within the meaning of section 171 that leave of the court was necessary and if no such leave was obtained the remedy could not be availed of by the secured creditor. The sale of the mortgaged premises was also brought by the amendment on a par with the attachment, distress or execution put in force at the instance of the secured creditor and having regard to the context, such sale could only be construed to be a sale held through the intervention of the court and not one effected by the secured creditor outside the winding up and without the intervention of the court."
(At pages 354 and 355) "If the construction sought to be put upon the words 'or any sale held without leave of the court of any of the properties' by the appellants were accepted it would effect a fundamental alteration in the law as it stood before the amendment was inserted in section 232(1) by Act 22 of 1936. Whereas before the amendment the secured creditor stood outside the winding up and could if the mortgage deed so provided, realise his security without the intervention of the court by effecting a sale either by private treaty or by public auction, no such sale could be effected by him after the amendment and that was certainly a fundamental alteration in the law which could not be effected unless one found words used which pointed unmistakably to that conclusion or unless such intention was expressed with irresistible clearness. Having regard to the circumstances under which the amendment was inserted in section 232(1) by Act 22 of 1936 and also having regard to the context we are not prepared to hold that the Legislature in inserting that amendment intended to effect a fundamental alteration in law with irresistible clearness. Such a great and sudden change of policy could not be attributed to the Legislature and it would be legitimate, therefore, to adopt the narrower interpretation to those words of the amendment rather than an interpretation which would have the contrary effect."
63. Section 232 of the Indian Companies Act, 1913, is identical to section 537 of the Act, which is reproduced as under :
"(1) Where any company is being wound up by or subject to the supervision of the court, any attachment, distress or execution put in force without leave of the court against the estate or effects or 'any sale held without leave of the court of any of the properties' of the company after the commencement of the winding up shall be void.
(2) Nothing in this section applies to proceedings by the Government."
"537. Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of court. - (1) Where any company is being wound up by or subject to the supervision of the court-
(a) any attachment, distress or execution put in force, without leave of the court, against the estate or effects of the company, after the commencement of the winding up; or
(b) any sale held, without lave of the court, of any of the properties or effects of the company after such commencement;
shall be void.
(2) Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government."
64. In the present case, admittedly, the company took loans from the Corporation and the IFCI in the year 1980 and mortgaged and hypothecated its assets and properties in their favor, by executing various documents. The winding up petition was filed on May 14, 1984. No provisional liquidator was appointed during the pendency of the winding up proceedings. In October, 1984, under the loan documents, the Corporation took possession of the secured assets. Again, on April 25, 1988, the Corporation took possession of the assets of the company, under section 29 of the said Act. The winding up order was passed on July 19, 1988. Admittedly, all the assets of the company were, at that time, in possession of the Corporation. The Corporation has also sold the properties. In taking possession and selling the assets of the company, the Corporation did not seek the intervention of any court.
65. So, I have no hesitation in holding that the present case is fully covered by the judgment of the Supreme Court in M.K. Ranganathan [1955] 25 Comp Case 344.
66. In addition, it may be noted, after the decision of the Supreme Court in M.K.Ranganathan [1955] 25 Coms Case 344, the position of the financial institutions as secured creditors has been further strengthened by the enactment of the State Financial Corporations Act, 1951, and more particularly, section 29.
67. Thus, following the dictum of the Supreme Court in M.K. Ranganathan [1955] 25 Comp Case 344, taking into consideration the provisions of section 29 of the State Financial Corporations Act, 1951, and the facts and circumstances of the present case, I hold that the Corporation was justified in taking over possession of the assets of the company, during the pendency of the winding up proceedings, without the permission of the court. I further hold that, as the Corporation did not take the aid of the court for Realizing its dues or for enforcing its right, and as it was already in possession and control of the assets of the company, prior to the passing of the winding up order, the Corporation was within its legal rights under section 29 of the said Act, to sell the assets of the company to Zoravar Vanaspati Limited, without seeking the permission of the court. In my view, section 537 of the Act is not applicable to the present case.
68. The next contention of Mr. Nayyar is that the company had a right of redemption and the sale by the Corporation was effected in unusual haste and as such, the same is vitiated, irrespective of the fact whether it was fraud or not. He further contends that the sale was not duly advertised and the price is not an adequate price and so, the company is not bound by the sale.
69. Mr. Bhasin, on the other hand, has urged that the Corporation had exercised its power under section 29 of the said Act and had taken over the management and possession of the company and the mortgaged property. A due and proper notice was given by the Corporation to the company on March 8, 1988. Thereafter, the Corporation started to explore the possibility of disposing of the assets of the company to recover its dues. As part of its established practice, advertisements were taken out in newspapers, including the Economic Times, giving details of the various project including the project of the company at Bhiwandi. The Corporation also issued its pamphlet containing all details of the sick projects. In respect of the company, complete details were given in the pamphlet. Mr. Bhasin also contended that, vide letter dated January 10, 1989, the legal adviser of the Corporation informed the official liquidator that the assets including land, building plants and machinery, etc., in the possession of the Corporation, were being sold to a third party for a sum of Rs. 90 lakhs. Reference has been made to Warner v. Jacob [1882] 20 Ch 220 and Hrushikesh Panda [1987] 61 Comp Case 448 (Orissa).
70. In Warner [1882] 20 Ch 220, it was held that if a mortgagee exercises his power of sale bona fide for the purpose of Realizing his debt and without collusion with the purchaser, the court will not interfere even though the sale be very disadvantageous, unless the price is so low as in itself to be evidence of fraud. A mortgagee in exercising his power of sale is not, except as to the balance of the purchase money after a sale, a trustee for the mortgagor, even if the mortgage is in the form of a trust for sale.
71. In Hrushikesh panda [1987] 61 Comp Case 448, the High Court of Orissa held that, with regard to the property of a company in the process of winding up, which had been taken over by a State Finance Corporation, as a secured creditor, under section 29 of the said Act, and which had been excluded by the court of it assets, the winding up court could not make any direction regarding their sale by the State Financial Corporation. it was further held that the property advertised for sale by the Corporation would be subject to the limitation of section 29. Whether the property satisfied the condition under section 29 was not to be taken into consideration by the winding up court, exercising power under the Act.
72. The contention of learned counsel for the applicant has no force. In this case, two financial institutions, namely, M/s. Rajasthan State Industrial Development and Investment Corporation Limited and the Industrial Finance Corporation of India, were involved as the secured creditors. Both are Government undertaking. Thus, their bona fides in dealing with the assets of the company which had been mortgaged with them cannot be doubted by this court, unless, sufficient material is placed on record by the official liquidator to the contrary. So, in my view, these institutions must have decided to dispose of the assets for an amount of Rs 90 lakhs. It was in the interest of the financial institutions to get a higher price, if possible. From the correspondence placed on record by the Corporation, and more particularly, by a letter dated January 10, 1989, it becomes clear that the Corporation was not hiding anything from the official liquidator. Rather, the Corporation informed the official liquidator about the steps being taken by the Corporation for sale of the assets of the company. Even the price of Rs. 90 lakhs was mentioned as being the consideration price. Advertisement for the sale of the mortgaged properties was effected in the Economic Times. A pamphlet containing all the details with regard to the assets of the company was also issued. The advertisement and the pamphlet have been placed on record and the same have not been disputed. Therefore, there was not haste in selling the mortgaged properties of the company by the Corporation. The applicant has failed to show that the mortgaged properties could fetch a price higher than Rs.90 lakhs. Nothing has been alleged by the application. In my view, the Corporation and the IFCI, appear to have acted reasonably, both with regard to the price and the mode of disposal of the assets to a third party. No allegation of corruption or collusion or fraud has been made by the applicant against the Corporation or the other secured creditor. There is no evidence of any mala fides on the part of the Corporation.
73. In the application, it is alleged that there must be dues of the workers. So far, not a single worker has come forward, nor has the official liquidator been able to place on record any material to show that there are any dues to the workers of the company. Admittedly, the business of the company did not pick up and was closed in the year 1984. Under section 529A of the Act, in the winding up of the company, the dues of the workers and debts due to the secured creditors are to be treated pari passu, and have to be paid prior to all other dues. The Corporation, in its reply, as well its counsel, during the course of argument, has given an undertaking to the court that, if any amount is found payable to any worker of the company, then, the same shall be paid by the Corporation in accordance with law immediately.
74. The applicant has failed to make out any case for interference by this court into the sale already effected by the financial institutions in favor of the purchaser.
75. Under the facts and circumstances, the application, being C.A. No. 89 of 1989, filed by the official liquidator, is dismissed. No order as to costs.