Karnataka High Court
M/S. Associated Duplicator Company ... vs M/S. Karnataka State Financial ... on 3 July, 2009
Author: B.V.Nagarathna
Bench: B.V.Nagarathna
ORDER
This application has been filed by the official"iiqu'id_ator'4 under Section 537[1]{b) of the Companies a declaration that the sale made by theipfirstpprespondent favour of the second respondent is voiAd"or to se3.t. a'side"*and ' direct the first respondent to conduct a fresh sale jointly with the official liquidator.
2. The reievantfacts '_th:ev.v"disposal of this application ifjmuplicator Company Pvt. by an order dated 13.7 Petition No.12/1987 and the official this court was appointed as the liquigjator of the "said" company. Accordingly, the official vvrote tomrespondent No.1 (KSFC) who is the A *securedTcrevditor-:'to know about the status of the company in 1iqui,_dat_ion_,n}'in response to which, the first respondent iinfotrriedfthe official liquidator that under Section 29 of the
--,.St-at_e5 Financial Corporations Act [SFC Act) on 7.5.1987 Wplossession of the assets of the company which were given as security for the loan granted by it, was taken over and that on 15.9.1994 there was a sale made in favour of the second respondent and sale consideration was received. 3*;
3.7;.
J' Subsequently; on 29.9.1994 possession was handed over to the second respondent and thereafter on 12.12.1994 thetsale deed was made by the first respondent in second respondent. According to the official,iid_u'idator;l United Commercial Bank, M.G.Road, i3_ariga'}ore, 'a. charge holder on the fixed assets 'first Cha1Tge"hlOld*.3lI."' the current assets of the companyin lie1u'idatio"n were under the custody of the that the said bank had initiated Debt Recovery Tribunal and -the never consulted at any point of sale of fixed assets which tlllovmmercial Bank. It is the furtherlealse of th.eA:_9;'o_ffi'eiaE'«tiquidator that the winding up petition was "presen'ted".on'" 27.1.1987 and that on 13.7.1995, V. orderedlWii'iding up of company in liquidation and titvereforeflithe_:ti'ansaction between the first and the second resplondentsli. herein is void.
3. In response to the said application the first .'1=es_nondent, KSFC appeared and filed its statement of "objections detailing the action initiated by it against the
-wiompany in liquidation and the sale deed made by it in favour of the second respondent and therefore, sought 2%
-at.
rejection of the said application, on the ground that it had exercised its statutory power under Section 29 of the___SFC Act.
4. The second respondent who is the pu.rchase'if.tofs-lithe assets of the company in liquidation firstfl it respondent got itself impleaded filed its statement of objections detailing which it had purchased the*.._.réssets "of. _the in V liquidation which were ¥"rIiortgaged KS'FC"'and that the official liquidator could ;'Vsee:}§-V.fapvlideclaration with regarditolllthe KSF.éWand it also stated that the entire sale «to Sections 529 and 529[A] of the Covmpanies Act: andliherefore, sought dismissal of the V' ..aPi3i1icaiiOn..l_ " ..... .. v objections the official liquidator filed a the stand it had taken in its application and W.,referre:1_t1o Section 529{a) of the Companies Act and sought x_f01_' prayers made in its application. I have heard Sri.Deepak the learned counsel for the official liquidator and Sri.S.G.Pandith learned counsel for the Q « E. first respondent and Sri.K.P.Kumar learned senior counsel for M/ s King 8: Partridge the second respondent.
7. It is submitted on behalf of the official ~ in the instant case, the date of presentation of"
petition is 2.7.1987 and the date oftpwiifdsig oifde1%"
by this court is on 13.7'l9.E}5 and it tlFl1e--.t"
interregnum i.e., on made the sale transaction in ;fa§fouI'l_fiof respondent that in terms of section 1-read' 44 of the Companies ll' and therefore, declaration. to rnade by this court. He has also relied 'of the Apex Court in the case of Rcgasthotn Corporation and another V/s. Ofiicial Liquidator andanlolther: [AIR 2006 SC 755) in support of his V co.1j1tent'1on.. ' A' ' ~._ it is submitted on behalf of the first res"p.ond'ent..«l'KSFC, that what has to be noticed in the instant pl ease is"tf1at even prior to the filing of the company petition if 07.5.1987 it exercised its right under Section 29 of _,V_t'l1e SF C Act and took possession of the assets given by way of security from the company in liquidation on account of non-payment of debts and that such power was exercised in 56 .:.%<,»/o terms of Section 29 of the Act and the subsequent acts which have been taken place is only as a consequenveethe proceeding initiated way back in the year 1987_.s,nd' . sale deed made on 12.12.1994» though afte;""prelsfentatioyn '*~ the company petition is before the:orde1<o§fWin.ding made and hence, the said action of._ the fiirst'jresponldelntje. cannot be impugned in this procleveyding. leie relied on the decisions of the Apex'C_o::«-irt the 1' <;a§e«.gr lsakerrlans Industries Pvt.Ltd., Mills & others [2008 AIR Corporation Ltd., and others. {AIR 2006 sc
755) Ltd. V/s. K.S.F'.C. (2003) 4]. He thererfore, submits that the power exercised the Financial Corporation in terms of Act niust""oyerride the powers that the official liqluidatoricoulvdeexercise under the Companies Act.
9; llearnezd Senior Counsel for the second respondent Purchaser has submitted that in the auction held by the first respondent which is the secured creditor of the company in liquidation, the 2*" respondent was the highest bidder of the lands in question, the bid was accepted by the first respondent and thereafter possession was handed over on 29.9.1994 and subsequently. the sale deed was made in F1 %/u favour of the second respondent, that since the year 1994 2nd respondent has been in possession of the land in question and has invested considerable amounts a.nd-.4_that the official liquidator cannot seek to _ transaction on the basis of Section 537 of_--~the..iCornpa.nies" it Act. In support of his subniissiorr he:-has decision in the case of Indusjtrial VCredit anciroplnvestrnent Corporation of India V/s. SrtntiiEis_v'Agencies. fdnottter (1996 (4) SCC 165); BPL Ltd. Technology Systems {Karnataka} and another (2001)107 Ccirnfiai"iy 3'i§%;'{r{ar).:_..V.T'NGEF Ltd., V/s. ChandvrdhdbéveioperspttU7'iLtd. andvvonother (2005)a sec 219); Intemational Cocgchfsptiiirié-;:.§..ttd., V/s. K.S.F.C. (2003 (114) Company Chases 614 and"aV}so Rcyasthan Finance Corporation ._& y/s. Vojjre--:c:i Liquidator & another (AIR 2006 sc T55} unreported judgments of this court. the counsei on both sides and on perusal of theprriaterial on record, the undisputed facts in the instant case. are that the company in liquidation had borrowed "'epe:i?tain sums of money from the first respondent on the basis providing the property in question as security and therefore, the first respondent KSFC was a secured creditor. % The company in liquidtion failed to repay the amount to KSFC and by exercise of its statutory power unde_rV~.S"ec_t1on 29 of the SFC Act, action was initiated even pI'io:*:_to' . of the company petition on 7.5.1987 yyhereby"p0ss'e.ss'ionwas taken over. The said action vv_vas:_-ta.1?;enes..to."its°1ogica1A conclusion by which the property was for ;a1u'c]tio_n and th > second respondent being the higtieest onfjreceipt of the bid amount KSFC of the property in question to and thereafter also executed ":the----sa1e deed which was executed wasfftvbfetween the date of preserltationt' i.e., 2.7.1987 and the date of on 13.7.1995. Therefore, the o_uvestioan* that.V"i-'ecffuirés to be conisdered in the instant ff'v.Acas'e."*is,---t.Aasi.to wh'ether the official liquidator can seek a dec:1'ar.a'Lion.fthats.the sale made by the first respondent in favour of th.e_second respondent on 12.12.1994 is Void.
11. Before answering the said question it is necessary to h advert to Section 29 and Section 468 of the State Financial if "Corporation Act. and Sections 441, 456, 537 and 529 and " -'v--Section 529A of the Companies Act. recoverable from the industrial concern and the money. which is received by it shall, in the absence of contract to the contrary, be held by it in trust applied firstly, in payment of such costs, charges is expenses and, secondly, in discharge of the"d'eb:t*..due = to the Financial Corporation, and1:.lthel_lresi'(i_t1e'Aof:
money so received shall be paid to Athelperson"entitledn A thereto.] [5] {Where the Financial Corp-o'ra.tion*~--.1ias taisien .-any action against an industrial under the provisions of subfsectionwlll} , _l Fina;ncial._' _Corporation shall be deern_ed':.to*_- be the, ojéinerA"oli.'jjsuch'concern, for the ptirposexof by: or tiiewconcern, and shaii sue andbiesgued in..the' [the concernl."
"46~B.l\E_[,fect Iaws- The provisions of this Act androi orders made thereunder shall, i hayue evffectb "notwithstanding anything inc._onsis.tei1t therewithcontained in any other law for the. _t1rnen.b--eing_ in force or in the memorandum or '~~arti'_eles~.o'E._ass'ociation of an industrial concern or in any_other.ins_.'trnnient having effect by virtue of any law other than this Act, but save as aforesaid, the h provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being A applicable to an industrial concern.]"
537:» (1)!/l/here any company is being wound up by the Tribunal?
,,./"
» .13- 529:-{1} In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to-
(a} debts provable;
{b} the value of annuities and 'future. 'V' contingent liabilities and
(c) the respective rights"; ll ' secure-,d "cindvvl * unsecured creditors;
as are in forcefor the time«-being under theliiaurflf insolvency with respect tofthe estates. persons adjudged insolveritg ._ it [Provided that secured creditor shall be ltg to a part passu charge' inijavour ofV.i,vorkmen to the extent therein, and, 'ivherex al'lseVCured 'creditor, _' ins tead of relinquishing his debt, opts to realise his security,--_ the liguidator shall be entitled to represent the workmen and enforce such charge;
_ (b,Iy_:a:.iy.iarnount realised by the liquidator by way ll of'e7r'i,i'oiperrient of such charge shall be applied rateably for the discharge of worlcmens dues; ., and \ {C} so much of the debt due to such secured it creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen"s portion in his security, whichever is less, shall rank part passu with the workmen's with the worlcmerrs dues for the purposes of section 529A .... ..] ' /4 e .2' 529A:-- (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force. in the winding up of Company~ h
(a) workmen's dues: and _ A {b} debts due to secured creditors to_.theA4_extent ._ such debts rank under ciaiisehtcl of the--«tproo.iso.toV ' sub--section{ 1} of the Section passii 7A such dues, _ 'V V _ shalt be paid in priority toattotlter debts} . (2) The debts p'ag.abtetA"Liriderulctause tag' and <:iause(b) of sub--section{l_)fsh.1ltl'*VhQ:.I7aid in full, unless the sassetsvgareh_insLgfticient'to'nteet them, in which shatt abate :i'r1ff'e'q,i_,t_ai' proportions. "
E2. Under E-.F.C. Act the rights of the F'inancial~._Corporation of default is enunciated. Sec4.§29(1} states_th'at xivhere any industrial concern is under liability the Corporation, makes default in repa3&%1n.ent"ofi'lto:an or advance or any instalment thereof or oth.erw_ise to comply with the terms of agreement with the financial corporation, in that event, the Corporation has to take management or possession of both of the so ___lndustrial concern, as well as the right. to transfer, lease or sale and release the property pledged, mortgaged, hypothecated or assigned to the financial Corporation. The said right is the statutory right, found in the Act. which came tire _1§n into effect in the year 1951. Section 4613 of the act states that the provisions of this said Act and o_f..__any rules or orders made thereunder would notwithstanding anything inconsistent it other law or in the Memorandurn of oil' Association of an industrial concern or any instrument having effect byy.i:r't11e of also V states that the provisions of invaddition to, and not in derogation of,:_ for the time being app1ica'ble;.t:o indust1*ia1'--:conc.ern. Therefore, it is necessary. to theprovisions of the said Act with thatt of theVVVC:o;1njja.nies..~Act. 537 of the Companies Act states that where coinpaf1yyA'.ist'.:being wound up by the Court, any sale held wit1f_iout'the}1eave of the court of any properties assets of the Comnany after such commencement shaii be void. it Sec.4-41 of the Companies Act deais with commencement of winding up by a court and states that in case of winding up of a company by the court it shall be deemed to commence at the time of presentation of the pet:it.ion for wound up.
15. Section 456 states t:hat the 1iquidator...._'jor:'_.":ti1e"
provisional liquidator can take into his custody oruunicier his control all the property, effects actionable.dVciaiVnfis"V't.o which the company is or appears to he entitled» Winding up order has been rn"ade.or iJ\fi".€3.i'I':'v liquidator has been appointed,=""In'. the 'property and effects of the company of the court from up of the company. or t.he provisional upon the winding up order been an order appointing a provisional liqtiioator isrriade by the court. i_'Or1" 8. harmonious reading of Section 456 with 441, it has to be interpreted that. the words any company is being wound up "in "a.,pSection'?:337" is reiatable to the words "where at winding 'f"u;;2 "order has been made or where a provisional ' ltquidator has been appointed in Section 45E; as a company is in the process of being wound up, only after a winding up order has been made or a provisional Iiquidator K egg.
is appointed. Although the commencement of the winding up of the company is by presenting a petition for Winding up of a company which is a deeming provision under."Se'et_i'o.n 44,~1{2),as already stated, the words "being wour_u;t..upA" . process of winding up put into ac_ti,o.n__by t.h"e"passing 'of winding up order or by appoint,ment..--'of',a-. provisiortale liquidator. Therefore. the subn'rission'ofllthe couniselwforl the official liquidator that any actiioni»ta}:(en_ after presentation of the winding up petitio.n:w_ou_1d lii_L".}'j.).y.E'}6CtlO1'1 537 of the Act cannot be accepted Companies Act states that wound up" by the Court; vvithotit thelvleave of the court of any properties assetsplofdjpthe'Company after such commencement shalplbe void. V. u "pertains to application of insolvency rules in Winding of insolvent. companies where there is reference to therespective rights of secured and unsecured creditors. Bjutjthe proviso to Sec. 529(1) states that the security of every secured creditor shall be deemed to be subject to a part passu charge in favour of workmen to the extent of the workrnerfs portion therein, and, in the event a secured creditor opts to realise his security. the interest of the t ,.««*"i workmen has been sought to be protected through the Official Liquidator. Similarly in Sec. 529A of the Act edeais with overriding preferential payments. The sectioni.sbe':g'ins with a norvobstante clause and states that the _ dues shall be paid in priority to all other that even debts due to the secured'».c1-eelitlorsl'hayeio the clues that have to be paid~to'«the uiorknien. ' A A
18. On a combined' _.;e:£'.dir;i_g of V1.th.e»_eAaforesaid provisions and considering the fact. the Companies Act begins t.he same has an over-- vl.5e_ffect_VV' against other provision of the CoInpanies'-- Act_ any other law which would obviously in'clude_t--he'*_Stat.e Financial Corporation Act. What beeonies apparent "is"that the dues of the workman would the first instance and to that extent Sec. /Q,' 295$ the Financial Corporation Act 1951 has to yield Xe sec. 52l9;--A of the Companies Act. Thus the workn1en's dues " rank pari passu with the dues of the secured creditors twill have t.o be paid from the proceeds of sale of the Cornpariys assets including security given to the secured creditors. The State Financial Corporation cannot. decide any dispute as to the apportionment between the wprkmen's dues and its own dues and therefore the right of the Corporation which is a secured creditor to sell the security by Itself and outside winding up proceeding is subject _(V)V1}_}f§'.'_[V'C) the pari passu claim of the unpaid workmen. 1t_;'fnusft _ the leave of the Company Court for the limited4_:'purpose "
ensuring that the pari passu ch_arge.glAi_jn workmen is safeguarded by.' the imposition.v'lV*e-of suitable conditions under the supervisioiioi' the Court, as held in the case of Intiernati-_5na1lVA iC.oa.c'r1_Bui1dersl Limited. Though there Is no non-obstarlitébicla--.L1se~l;in__'Sec. 29 of the State Financial 'Cpifporation 46--B of the said Act gives over1*iding:l'§eite.ct' allacts. However, what is to be noticed that Sec; ='the Companies Act contains a non _0bstant€~clatzse. The". said provision was inserted by ' '''v..v"irtae' amelridinent made in the year 1985 and e__'therefor'e.a.the amendment in the Companies Act would preyail 29 of the State Financial Corporation Act to lgthat extent only.' Therefore, the resultant position is that zvhen. sale of the assets of the company in liquidation is naade by a secured creditor it should be with the approval of the Company Court only so as to enable it to ensure that the workers dues are taken care of. Having stated this the question that would arise can the peculiar facts of thfl present 2 y ,//7/'
--20- case is as to whether the action initiated by the KSFC 'even prior to the presentation of the Company petition and to its 10 ical concl ion durin the pendenc 8 U3 3 Y ._ _ _ ._ petition but before /the passing theppwinding"u.pforder«.ganl4 be declared to be void on account. it the Companies Act. Before an;s:w-epringlthis' ques'tio1p1.iyhatl;has A. to be noticed is that under seetivoiiéllliitippof Cornpariies Act, where a winding up tyhere the provisional Liquidator liquidator or provisional Liq_ulild;a,tor astliercaseliniayvbeflshall take into his custody or property. effects and actionablell is or appears to be entitled;--TI'l'iereforei.j'the'Cifici.al.Liquidator would step in to take custody» of the. pi";)pe'rty of the Company in liquidation the Pro'vi-sional Liquidator has been appointed or 'fwher. order is made by the court. However, if piiorlto a'l'Vi&'fcriding up petition is filed a secured creditor, such as 'State Financial Corporation is in possession of the A apssets of the Company in exercise of its power U/ 5.2901" the and the same are sold and latter a winding up order is made in a winding up petition ithen} in that case Sec. 5323:} of the Companies Act cannot. have an over-«riding effect *2:
fig,»-V'. -
oflthe powers U/s.29of the S.F.C. Act. particularly in Vl€W of 4 i.w*' M33,"
Karnataka Stat) Financial Corporation reported in 2003(Vo1.
114) SC 614 in which the provisions dealing mtftfthe winding up as well as See. 29 and 4643 of the SEC. considered along with See. 529 and 529-A _ it Act and it was held as follows:
1. The right unilaterally: exereisahle urlctipteifp'seC'tion'29V'--
of the SFC Act is axfatiijable agatnstta= i.f a V company 0n1y*Wso lozigt th'e.1.fe is no "order of winding up:
2. The _SI'--':Cs---_Caifinot_:'t.:iriii1ate';'a11y to realise the n1oi'tgVage'd~7Ipfope--ijties 'ivit*hoa:: the consent of the reptesenting workmen for the their favour under the proviso _ V t0i4s'eo_tion..52t£3. Companies Act, I956;
V I1'vi.the o'1;fie'i'a'itliquidatoi' does not Consent, the SFCS move the company court for appropriate to the cifficfzial 1iqui.c;1atoi.' who is the pan' .. Hpassu charge hoider on 'oehalf of the workmen. In any event, the official 1iq1.1idE1tOI" ctazmot, act without seeking directions from the company court and under its supervision.
-33-
20. A Division Bench of this court in the case of BPL Limited Vs. Inter Model Transport Technology Stisterrts [Kamataka) Lt'd.,{In Liqutdatiort) 82. Others, reported (Vol.No.107) Company Cases, 313 was dealing the' V' impact of the proceedings before theMB'l'FR Wit5:i up proceedings under the Companies andheld principle that the winding up'~v..§bmmehces' from 'date of V' filing of the petition :"app1ies"'"o'riIy Viv-here «v'vV1'iidi'ng up is ordered, pursuant to pet,iti_o'n"fot* by a Company Court and nof;.-iivhere toirdered pursuant to recommendationlof In 'theV_said case a reference has hveen "i'rfia.Vde .j'f{:c'_trnate¢:ttcct Industrial Development Corporat1'on-- V/35'.f§'hi?#frEQ:fi£">S£eeE Tubes Ltd.(1998]94 Comp Cas V1 _wherein_VVi'tvhes Abeendheid with regard to amendment to 5998] "Va'nd"'Vinsertion of Section 529A in the e§f_i~iipaiai§:ig,"A:¢'t'-that Section 537 (1){b) of the said Act will to the secured creditor, in a case where the sale is after the date of winding up. It has been further held A f_" tha'I':..the deemed pari passu charge does not exist before the order of winding up. Having regard to the fact that Section w"E'>37 of the Act is inapplieabie to a sale of the assets by the secured Creditor, without intervention of court and the fact that the deemed part passt: charge in favour of orkrnen
- jg-_ comes into effect only when the order of winding up is passed, any sale by the secured creditor standing outside the winding up proceedings, before the passing of the«j"wi'i1ding up order will not be rendered void, on the ~ order of winding up. The only effect iofthe proyiso'.':vtol'€~e'ction 529(1) of the Companies Act is that oiiiazli oii'c1e'r:of up being made, the officiziilliguidatolr Vreplrlesentingl the-it' workmen having pari passu ch:arg_e-for will be entitled to apportionn:1e_ni_oi7_ thevvhsale proceeds, from the secured creditoivin acclordancle. 529(1) of the Companies l
21. llTAhe'- ;tid.g.,§nerit'l was afiirrned by the Apex court in ih__e" c_ase_ Ltd... Vs Chandra Developers[P) Ltdtglpilcind Ano't1ie=:r{l200:('5) 8 Supreme Court Cases 219. The .A "these two authorities is also to the effect that Wheii enactment such as Sick industrial Co"rn_paIni.es"lAct, is invoked in a particular case then the provisions of the special enactment would override the l'gprovisions of the Companies Act, which is a general it * -enactment. -- x';
_u-
22. In Rcyasthan Finance Corporation and Another Vs. Ojjicial Liquidator <3», Another AIR 2006 Supreme Court--.__755, the Apex Court considered the effect of section on Section 529 and 529-9; of the Companies: it matter of recovery of debt from the Company in the context of meeting of the wor°km'e.n'"s duesA'and..a't_?para.. 18 of the said judgment, the leg:a1'r..positi'Cn_ is .« 1] A Debt. ReCoVAer3r':\'r»frib11nalhdactingyunder the Recovery of and Financial 'entitled to order __to._sel__}~ properties of the debts. it .co.rh.pany;Vineliquidation. through its * but only after notice to the Official Liquidator or the liquidator appointed by the Company Court and after hearing him. C 'District Court entertaining an application A Section 31 of the SFC Act will have the power to order sale of the assets of a borrower company--in--liq'uidation, but only after notice to the Official Liquidator or the liquidator appointed by the Company Court and after X/'° hearing him.
iii) ' iv).
If a Financial Corporation acting under section 29 of the SF C Act seeks to sell or transfer the assets of a debts i':r:.1_--_x' . liquidation, the said power could"be---exercsiused C' "
its only after obta4ining..:' the permission fromi'thr; cornpany Cou'rtf_an_d a9::ting_u> in terms of the directions issi;1e.dl that Court as regards. ~-._th_e ' . Official Liquidator withthe sa1e.._t_h--e ofjupset price or the the sale holding of Z: distribution of the sale : thereof among the * of Section 529--A and Section it 'o.f'--thev.Cott1panies Act.
..In a casedvvhere proceedings under the Recovery 'A "4Vdof:vl'_:..Debts Due to Banks and Financial Efinstitutions Act, 1993 or the SF C Act are not set in motion, the concerned creditor 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 Cornpany--in--liquidation.. M1271
23. From the said decisions it becomes appare_n:t"tiia1;- _ if Financial Corporation is acting u/s 29 seeking to sell or otherwise transfer a'rldebto_rl company in liquidation the sai«':l.power.can be exercised only A. after obtaining appropriate appro'»r.al' from the Court and acting in terms of issnied bvyrlthat court. The approval which has be understood only after the;~'orde.r passed or a provisional in respect of the compar1j}in'lid; forlthepzurpose of distribution of the 'Sec. 529-A and 429 of the Companies Act." In_i"act--,_ irrboth decisions of the Apex Court, .__r1arnely,5_Initernationval-Coach Builders Limited and Rajasthan 'Financev._Corpo'ration and Another. the emphasis is on an orderlofv up at which stage the Official Liquidator would beeappointed to take charge of the company. it Invflthe case of M/s Bakemans Industries Pvt. Ltoi, us. . /'s."A?ew Cawnpore Flour Mills & Ors. reported in 2008 AIR 4507 wherein Sec. 29 oi' the SFC Act has been considered in the context of section 446 of the Companies "to, .»/5' against the company after winding up order is made depends upon the facts and circumstances of each.-.___case, having regard to the position of the plaintiff of the"se_"cure'd creditor in relation to other secured creditors. winding up order being made, a secured if to realise his security in a suit p..rei'e'r1'ei:l in a _Civii:l'iCoViirt without leave of Company CoLfl1_rt.,_p
26. On a combined "J"C'-'.lCll1""i'g .afo_resaid judgments, what emerges is that... right exercisable exercise by C_orporat,ion'fU"/'s 29 of the SFC Act is availabwiellagfaiinstytiie'debtor which is a company, so long as there--.is no orderA:_fjoffvm'_1:iAding up. Once there is an order of Winding provisions of Sec.456 and other vwou1d"c'om'e into play. When the said ratio is facts of the present case, it is held that since thelaction' 'VfiI'§_1'itiated 1.1/5 29 of the SFC Act was even before the ordeij of winding up, infact_,even prior to the date of if lffppresentation of the Company petition for winding up, the ' same requires to be saved from the provisions of the "Companies Act, except to the extent that section 529 and 529--A of the Companies Act would have an over riding effect ft!
4.-r W39- on the said action taken in terms of Section 29 of the SFC Act.
27. In Rajasthari Financial Corporation case, were that the Financial Corporat.io_n...h_ad if any proceeding under the Ae_t.=.:V 'The'~ proceedings were pending befo_r'e.._the company' the 2 . C' winding up order had been pas_sie'd:and thesec_iired? creditor, the Financiai Corporatiof3's_ appI;oache'dTthpe company court for permission to stand..,:outsi.de:._ the up to sell properties of" The company court saleuhe held in association with the offic-iai «.iit1u'idator.representing the workmen under the proceeds wiii be heid Abyffthe official liquidator until they are «.._Adis.t;ri'btitedv.i.in tennswoiv Section 529~A of the Companies Act V1iT1fIt','Ij i'fts_«s',ipervision. The said directions were confirmed by the However, in the instant case. the action for recoyerytwas initiated by the first respondent~«KSFC even if to the filing the company petition and in fact ' possessiori was also taken prior to the winding up order mheing passed. Under the circumstances, the requirements stated in Rajasthan Finance Corporation case are not applicable to the present; case. In fact, the ratio of Rajasthan Zia ~31. --
Finance Corporation is consistent with the ratio laid down in International Coach Builders Ltd.
28. At this stage it is of relevance to refer_ decisions of this court in the case of M/s .. LTD. (in liqun.] dated 28.7.2006 Eiild in4rtlfie'__Cas'e'-of Panel Works Ltd., [In IiqLiid_ation)'----Adated and another order dated 17.2.2O'Oi§"»i11 respelétihv-Zof same company. In all the 1}-iuglférence hvasflheen made to decisions of Apex Coiii-itAppirifIhternat'ivo.n.al_i.Coach Builders Ltd., Vs. KSF:C< intaiicemfiorporation referred to above a.'nd:_iti tlvtat.-- action initiated under Section 29' 'Cannot be held to be void or invalid linmtliel 'ey_é" Said decisions are squarely appiicabie to the.._facts and circumstances of the present case p' also.
29."«. Irtvieiiv of the above reasoning and the dicta of the r'Ap(€§;'X coiirt on the controversy raised in the present iappiication and following the orders of this court passed _,v_L1nder simiiar circumstances, I am of the considered View that the application is without merit and therefore the same is dismissed. No costs. > "32,
30. However Respondent No.1 is required to cornpiy with the provisions of See 529-529-A of the Companies Act a.iid in that regard the officiai Iiquidator is at liberty is _:"s.eekv compliance with the said provisions to meet :i;e~w;;x1§e*rg' clues paripasu.
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