Karnataka High Court
Standard Chartered Bank A Banking ... vs Shivmoni Steel Tubes Ltd on 3 January, 2011
Bench: N.Kumar, Ravi Malimath
IN THE HIGH COURT OF KARNATAKA AT .
DATED THIS THE 3R9 DAY OF ..3Ah'E"}'rfi""fi':z.:¥:'.".:2'0::i:'j-"AV .4"
PRESENTEAEZ"
THE HON'BLE MR:,j'%"3~I,.JJsT1"CE._
_.A'A:fiC " '
THE HONBLEM§?.;JU.S.:f;I:CE:R:A§.!I"'MALIMATH
, c_)Mms_A_i._;\:'O.3,3;o'F 2905
C;/-vs'; osA.._cRo'B.A:o..1' OF 2005
V .::_1'g;,'1j_\xy;.{,j;_s_A~.V.i\:o;'5T3 OF 2005 C/W
TTTT _ ' :::i:OS/:'\wN'O.50'.GF2005 C/W
. "A A OSA«..i\__JO..38 OF 2005
osA.No.33 0r=%2o_o"5; '
BETWEEN: » A
STANDARD '~?_CHAP.TEREiD" BAN!-Q"
A B'AN"KINGT"CO'M*PA"N\{
INCGRPQVRATETT ]E~N"EN'G_LAND BY
A ROY'A.L c?_HATRT'ER'TQF'-1853 Am
1:"»..H_Avv1NG TTs1.~PRmC:--§>AL OFFICE
«AT ALDERMAMZ-!.}F<Y SQUARE ECZV
I338 ENGLAND AND ITS BRANCH
" 0'FFVi'€"§E"',53Tj 93, MAHATMA GANDHI RGAS,
FTC3vRT,..f4UfV!}£};AE 400 W C101
V"Tf';..R'EEE;ESE:x:TE£;} ETEREIN
"-§'%":':'..E'":""~"S' H'EAa--AT.TEAwATE
I§'«£%fE3.7f;M.ENT GROUP
'ER: 'vv:u\sA'{AL< BAHUGUNA.
MAPIQELLANT
(BY SR1 RANGARAJAN, ADVOCATE)
AND:
1
SHIVMONI STEEL TUBES LTD I *
(IN LIQUIDATION) REP 5&5 THE OIFFI_CIA'L__ '
LIQUIDATOR, 4TH FLOOR,"D AND F \'I'~.!Il'\If.3, I ~
KENDRIYA SADAN KORAMAN-GALA A ' '
BANGALORE - 560 o'3A:;'A---...V%
KARNATAKA STATE INDD_sTR~IAL INVE.STfY!'ENT AND
DEVELOPMENTCORPSRI LfIfD,._,_
NO 36, MSIL HCIUS-E,'a_ L
CUNNINGHAM ROAD, j
BANGALORE - S'6U'€).S?. *
BY ITS 'L3"{.s\T-.GEN_ERAt' M'AI\;Ac3ER_..{LAw).
_,.i{ARN;Af/A'F2A.._STI§\T_E FIN-ANCIAL CORPN
RAVIATD I_TS_HEAD_OFF_ICE
a._AT ND IIDIIITIHEIMAMAIAH ROAD,
BAN:3ALQ_R 5130" 0'52
REF1'..__B'{IITS_MAANA_GING DIRECTOR.
% O INDUS+R--IA.L..D5EVELOPMENT BANK OF INDIA LTD
?--.'{RR"E.vIousLY INDUSTRIAL DEVELOPMENT
._BANK"O__F INDIA)
-- 1DvE*3.IV_12ȣOUSE,
NO'."}:58',i= MISSION ROAD,
EAWQSALORE -M 560 027
.. Bf?' ITS MANAGER.
Ari'
VDANARA BANK
SHIVAEINAGAR BRANCH
COMMERCIAL STREET,
BANGALORE - 560 00$
BY ITS SENIOR MANAGER.
5%?
6 SYNDICATE BANK
GANDHINAGAR BRANCH
BANGALORE - 560 B09
BY IS CHIEF MANAGER. A
7 M/S.SHIVMOi\iI STEE!__TUBE--S
EMPLOYEES ASSOCIAT'I-ON O V ,
REPRESENTED BY ITS'S,ECRETA'RY,"'c
HOODY GARDENS, _
MAHADEvAPURA._ POST, V
BANGALORE ~'E"36GEO-4_8*;. 1 , .
* . 3 : .'.,.i',R.E1sPONOENTs
(By Sri P B i\!3?§,,E\iJUN-ATH,"AD'\/OC'ATE..w--FOR R2,
SR1 JAYAR.Li?§fi,'lADVO.CAT--E_ EOR;R.1,.
M/S. su'B_BA_ 'R»AO"B: c,;O.;, AOVOCATEB FOR R3 & R7,
SR1 .PAN'DI*t,. ..ADV'Q_CA'fE...F70~R R3,
SR1, URVALM.RA;MA.Ai'AAzOA, ADVOCATE FOR
R5 R6) A A ' ' A
=i<>i=>i<
'This is fiied under Section 483 of the
, VCom'»;§an'i'es Act, 1956 gt 11/5 4 Of the Karnataka High Court
' _"fx_,cf:,-v._19,6':_"against the order dated 16.12.2004 passed by
._thE' v.COr.r§pacn,y~~Judge in Campany Application NO694/2002
",C'Oi1nec*:;#;{i fiwith Company Application Nos.447/2004 in
£,'_Omvp-anylpetition No.15?/92 8: 49/94, etc.
'c<BA,cROB.RO.1/2Bo5:
EETWEEN:
M/SSHIVMONI STEEL. TUBES
EMPLOYEES ASSOCIATION
REPRESENTED BY ITS SECRETARY,
HQODY GARDENS,
THIGULARALPALYA,
MAHADEVAPURA POST,
BANGALORE - 560 048.
...CROSS OB3ECV;_I'f.');'R.._
(By M/5.Subba Rao & C0,, Advocates)
AND:
1
ICICI BANK LTD ..
(FORMERLY KNOWN AS IC1t_l__T'.Z} I =
SINCE MERGED WITH -ICICI RANK' L"II"[_))}j
A COMPANY INCORPORAT,ED UN-DE'RT=H
PROVISIONS OF THE COMRA,NIES'ACT 1013
HAVING ITS RE{';ISTERED._'OF"F-ICE ' A
AT "LANDMAR;<f'.T" RACE 2.jCO{3~R'SE'CIRCLE
VADODARA 390 007 AND'
RJE';*3ICINALfA3VOFE:I'C'E AT ICICI BANK TOWER
No.1', COjmIISS--A_RIA'I' ROAD,
'BA?-£GAL.QRE'-~V56_O"U25
REI?RESENTE._O EV ITS MANAGER
_MS.SA[_)AwN'AN'-SHINDE.
i#SH"IIVMONISTEEL TUBES LTD
SCWALSIQUIOATION) REP BY THE OFFICIAL
- I..: L.IQ§J_'ID_?ATOR, 4TH FLOOR, D AND F WING,
ORIVA SADAN KORAMANGALA
_.EAN.--I3ALORE « 560 034.
" uC§<ARNATAKA STATE INDUSTRIAL INVESTMENT AND
DEVELOPMENT CORPN LTD.,
NO 36, MSIL HOUSE,
CUNNINGHAM ROAD,
BANGALORE ~ 560 052
BY ITS DY: GENERAL, MANAGER (LAW).
4 KARNATAKA STATE FINANCIAL CORPN
HAVING ITS HEAD OFFICE
AT NO 1/1/ THIMMAIAH ROAD,
BANGALORE ~ 560 052
RER BY ITS MANAGING BIRAECTOR;--- "
5 INDUSTRIAL DEVELOPMENT B-ANK OF INDIA TIT
(PREVIOUSLY INDUSTRIAL'BE'V,ELORN_--ENT = ~
BANK OF INDIA) I ~
AT IOBI HOUSE, ,
NO 58, MISSION ROAD,'-._
BANGALORE +:"5B0 O27" - "
BY ITS MANAGER'. _
Big
6 CANARA.BANK_-~---.E V, a -
SHIVAETFNAGAFL BRANC-H 'V _
COm,,ER3:;IA:_..sTREET,__Y if,
BA:»"f\lGA'L.Q"R'E--..e:
BY ITS'~--SENIORMA-N>\Q_ER.,,§
7 SYNDICATE-..'BAN--K
GANBNINAGAR BRANCH
YT BANGALORE MA 560 009
BY IS C'HI.E.F...MvANAGER.
R. ...RESPONDENTS
..{;B$;*:éfRYI.,A.VRAN.I:.ARA3AN, ADV. FOR R1,
= SRI JA'Y'AjP-.A?=G, ADVOCATE FOR R2,
Pv_.S'.MANJUNATH, ADVOCATE FOR R3,
SR1 ,S".G.PANiZ3IT, ADVOCATE FOR R4,
AA ,CC)F-"r'-NOT SERVED FOR R5-R7)
This Q.S.A. Cross Qbjection is filed by Counsei for
EBB Objector Under Order 41 Ruie 22 of CPC in OSA
.:33/2803 filed against the Order dated 16.12.2004 passed
in Company Appfication NO.694/2002 and connected
appiications, being an objector,
//
%='1-/"
OSA.I\EO.53[2005:
BETWEEN:
INDUSTRIAL DEVELOPMENT BANK OF INDIA ,i,,T'D,.,,f7*
AT IDBI HOUSE, A CO., INCORPORf§.TE--ID UNDER "
THE PROVISIONS OF THE COMPANIES ACT,,I9'Iv3'«
HAVING ITS REGISTERED"O'F.EICE AT 'LANOD_MAA._R.K'VVV
RACE COURSE CIRCLE,
VADODARA&INTERALIA
A REGIONAL BRANC'I~§..,_OFFICE'A'lf O..,'58, '
MISSION ROAD, " _
BANGALORE ---- 560 027-1
REPRESENTED. BY ITS ; , ''
DEPUTY GE.NE.R'AL N:ANAc;ER«. _
SRI K.RAMAS\A{A_N\< }_ _ ,."."; APPELLANT
(3,: Sn' RAvNOAF€.A3A,,N*,v,.A_DVOCATE )
AND} 'V '-
1- SHEEIVMONI' ST-EEL TUBES LTD
"(IN LIQE-Hl3__AT,ION) REPRESENTED BY
:.'*THE,OEPICIAL LIQUIDATOR, 4TH FLOOR
WING, KENDRIYA SADAN
-- ,,,j"»!<_ORAM_ANOALA,
EANOALORE-560 034.
MARNATAKA STATE INDUSTRIAL INVESTMENT
" AND DEVELOPMENT CORPORATION LTD.,
M136, MSIL HOUSE, CUNNINGHAM ROAO
BANGAi,,ORE~S6O O52
BY ITS OY.C;ENERAL MANAGER (LAW)
PO" 4
3%?
3 KARNATAKA STATE FINANCIAL CoRRD'RATiD¥N' ~
HAVING ITS HEAD OFFICE AT NO.1._/.1V, "=.V
THIMMAIAH ROAD, s
BANGALoRE--56o 052 "
REPRESENTED BY ITS MAT-4AG_iNi3
4 ICICI BANK LTD ._ '- V A _ -
(FORMERLY KNOWN A'S_I'CIC1 i_TD_.,* -- _
SINCE MERGED WITH_..IC"IC_I'BANK LTD)
REGIONAL DEEICE AT :CIC.1j BANK TOWER
No.1, COMMISSARIAT Rc)AD,.';BANGAL0RE
REPRESENTED BY' f.TS"_MANA~GERj_'.v _
5 CANA.~vRA__B_'ANN_ 1 .
SHI.\j'A3I§S{A£3AR' _BR{\NC»i-if V
CC>MIV_i-EVRCIAL.
TBSAN'GAt@:;RE-5.60'001;..S. V
" BY" ITS SE1%§JIO_R'»D{1'A.NAGER.
6 -SYN D1C,A'i"E~ R.AN_K»»«.
GA_N"D,H1NAc3AR.E»RANCH
._, SAN:-:ALDRE--56C> 009,
'av ITS"-CHIEF_MANAGER.
'% LSH.IV~MONI STEEL TUBES
R. ,"'4..EMR;;..0'x{EES ASSOCIATION
«.Rgp.'3v"'THEIR SECRETARY,
_!~.~iD{;DY GARDENS,
"11AM;é-MADEVAPURA POST,
" _ *3AI\£Gf\LORE.
" RESPONDENTS
(Ey Sri v JAYARAM, ADVGCATE FOR R1,
M/s, SUBBA RAD & C0,, ADVOCATES FOR R2, R3 8: R7,
SR1 F3i§.MANJUNATH, ADVOCATE ?OR R2,
SRI S.G.PANDIT, ADVOCATE FOR R4, '
SR1 URVAL KRAMANANDA, AEDVOCATE FOR R5 & R6)
Petition No.15?/1992 & 49/1994, *
This O.S.A. is fiied under Sectior-{"483t-Qofftheé
Companies Act, 1956 read with Section 4..oVf:'the*~.E§iarnatai<a
High Court Act, 1961 against time' o.rder'_ ciate'ci..'416'.]._.?,A..2i004' - "
passed in Company Applicatiori No..A6934/2O'02'--._in~..{Zom,pa'.1y
OSA.I\£O.50g2005:
BETWEEN:
1
-- .0 A. RM, BRA't\iC'H
i'm:sTRi'<:T._C.C)E.:RT COMPLEX, No.2 as per the
ROAD,
~ BANVGA'-\__LORE 560 009
it E3.'(_}iTS CHIEF MANAGER
CANARA BANK--Qij
FORMERLY SHIVAJINAGAR B.Ri'§:fV§CF§__
NOW A.R..M BRANCH, _ 0
SPEN_CE':i§ 'fifoWiERs,.i'i.rxio.V8:s',~11: Eftooirz,
M'G1'iROAD%? 0 _
BA-'N G._fXLO'R S60;-0Ao--1.__ "
Q Rapio-uéseiiiife DV444VBi\{"IT_S 'MANAGER.
Sm oicii rs 'aAi\:':;%:;w
amended as appellant
order dated 8.06.2006
APPELLANTS
{By so GRVAL N RAMANAND, ADVOCATE)
SHEVAMONI STEEL "mass LTD
(IN LIQUIDATION)
REPRESENTED av THE OFFICIAL LIQUIDATQR
4TH FLOGR, 'o' AND 'F' WING;
KENDREYA SADAN,
%%
KORAMANGALA, M 9 M
BANGALORE ~ 560 034.
2 KARNATAKA STATE INDUSTRIAL INvE,S;*'I";v3«i;%N??§fj _
DEVELOPMENT CORPORATION LTD., *
NO 36, MSIL HOUSE,
CUNNINGHAM ROAD,
BANGALORE ~ 560 052 '
REPRESENTED BY ITS , S
DY. GENERAL MANAGER (E_AW_)."
3 KARNATAKA STATE FINANCIAL CORPORATION
HAVING ITS HEEAD OAE-F'Ir:'B=A'E,._
NO 1/1/ THIMNIAjé:AH_ ROAD',-.__'».,,
BANGALORE - S6{3{'O52...* " .
REPRESENTE DA,E.5Y, ITS' MATNAGING, DIRECTOR.
4 ,,v----I--NDUVSTR1'A£, DE'v.ELO'R--N.ENT BANK OF INDIA LTD
(PREvI,OI,JSLY-INVDVUSTRIAL DEVELOPMENT
BANK OE.j'INDAIA}..__ _
NO-.58. MISS'IO"N...ROAD,
» _BAN'G..ALORE 4- 560 027
_ BY ITS 'NA..NAGER,
' 5; ICI«::I"BANI< LTD
- ' vv.,'z.O?IIAL.,.OFFICE,
RAN E}:1A TOWERS
_~2S/.27, M.G. ROAD
, VBANGA;_ORE ~ 560 OBI
REPRESENTED BY ITS NANAGER.
RESRONDENTS
{By Sri v.3A'~rARAN, ADVOCATE FOR R1
"j SR1 RSNANIUNATH, ADVOCATE FOR R2,
SRI SUBRAMANYA, ADVOCATE FOR R3,
SR1 RANGARAJA, ADVOCATE FOR R4 & R5)
mlofi
TTHS QUSKAE isffied undeH'SecUon 4 ofthe Karnataka
High Court Act, 1961 against the order dated ..16,§;1..2';'-2004
passed in Company Application 930.220/20.03f_;cQ'nneCted
xmfih Conwpany Appficafion runL694/2OO4"dn_"Cbnipany
Petition no.1S7/1992 & 49/1994 andH_'c '
Conapany'AppHcaUon no.22O/2O03._4 3' '
OSA.NO.38[2O05:
BETWEEN:
KARNATAKA STATE FINANC_I__AL~CORPORATIQN
NC 1/1, THIMMAIAHQOAD' " " "
BANGALORE - 560 052 _
REPRESENTED BY ITS
MANAGING DIRVECTQR, jg V
V. . QAPPELLANT
(By? 85' l_1?;vEVv§i¥Kl'L3I.T,"..';.'-v'v«_DVCWQXTE)
AND":
'f._
sH'i'v.AMo.N: STEEL TUBES LTD
'(IN LIQ'L'-IDATION)
BY THE OFFICIAL LIQUIDATOR
47':e1"FLQ0R, 'D' AND 'F' WING,
' v..:"":=gEs\1[3.;:;_1~YA SADAN
'K{:--RAMANGALA
_'>BANGALC)RE » 560 034.
' VLKARNATAKA STATE INDUSTRIAL INVESTMENT AND
DEVELOPMENT CORPORATION i.TD.,,
MSIL HOUSE
€63.36 CUNNINGHAM ROAD,
BANGALORE -~ 560 S32,
REPRESENTED BY ITS GENERAL MANAGER.
onmiquéent ' ~ by
....]_1._
3 THE CANARA BANK ---
ASSETS RECOVERY MANAGEMENT_B.RAi\.|,Ci~!_" _
3RD FLOOR, SPENSER TOwER_.S', " . =
NO 86, NLG. ROAD, ;.
BANGALORE --- 550 001 Q '
REPRESENTED BY ITS MANAGER.
4 THE INDUSTRIAL DE\'/VE»!..VV:C)»PMENT~.VBl3ki'.'V.F( O'; INDTA
IDBI HOUSE, No.58, MISSION ROA'D,._
BANGALORE --','5~5o 027%,» ., ,
5 THE INDUSTRIAL-CRE'DIT Imv/EvS:Tf$'E_'ENT
CORPORAT1OI\JUF-- IjND'1A*,-_ , ., " A
REGD.'O.FF--ICE:_AT; LAND :v:_ARK_,_i'
RA'C.E-..CC*IU.RS~ECIRCLE, 1;, ,
vADO,DAR'A-VZONAL,"O.E§i1CE,=-
,_ Afr R_Ar---: T'O'w_ERS, ,2"? EAST WING
ROAD,
BAi*JGVAL€§.E{E ;e*5§'@__O297. RESRONDENTS
(By Sm:3'AvA'R.AEv:,. ADVOCATE FOR R1,
SE11-P_.S.W3\NJU~N'ATH, ADVOCATE FOR R2,
SeWeG'>« ,,,,, .. -
>§<*»=E<
Th':§".";O;,S'.'A, is fi¥ed under Section 4 of the High Court
Act _r@ad,i'~~'with Section 483 of the Companies Act, 1956
agairést the Order dated 16.12.2004 passed in Company
' AA ,Ap;:>E'i..r.:atiOn NQ.741/2003 in Company Petition No.15?/1992
V 'and 49/1994.
These appeais Coming OD fer hearing this day,
NKUMAR 1., dehvered the fonoweng:-- 3
~12...
JUDGMENT
These four appeals and Cross object'io*n_§..are. d--irer:te'd. against the order passed by:a__t:he~e..Corr1.pa.ri$r "3ii'cf_ge::Va_ion ' 16"' December, 2004} gin E\io.69-'-'i/2002 and other con_ir1"'ec_te.;i ap'pi«!cavtiorts. As the question involved Vinfifail'tthese"=--a:pi§ea»ls and the Cross objection is one arid-~-the sa.n1'e,".i"t_hVe3}»,."are taken up for consideration __r.4£is«p'osVeti""off by this common The ._b4Vrief'ifa'cts leading to this appeai are as tvJ~n5r:.'ieVr_f '-- V ..::'E*§i,Xvs.Si"i,i}ramor:i Steei Tubes Ltd., is a Company Aii".i.(;Oi"p€)'?Eiut€3ACi uncier the provisions of the Companies Act, _ the year 1974~7S (hereinafter referred to as 'the The Company had avaiied loans from ir<§IIDC on the "security of their assets. They had also axzaiied working capitai facilities from the Canara Bank and the Syndicate
-13..
Bank, The Company became a sick industryVVa:nicl,_ the matter was referred to errrz. The BIFR_.réCo'rn:~rt1_et:ir;i'ed winding up of the Company. The appeai"'fiv--!e:d. :a'gairnvst,,:tl1e,fl"'~-_,V said order, came to be dis:=rnisf-5reéd3 'loyal' authority. Thereafter, Compegny Petition registered, seeking windingléllor) by th'e..:I3'I"FR.V}One more Company Petition rtfira'3_'gal.Aé:'o registered after the receipt of commueieettiorn'~-fro,n"i&°th:e.l_"i31FR. Both the Company4_,F¥.etitiron's_:clu_ob:ed'together and notice was ordehredly. _theWparties, the Company Court, on order of winding up, accepting the..reconfirnernrdrationsivof the BIFR. The Karnataka State A_i»'nciu3etria'iQinveietrnent and Development Corporation (in .ehe.§t1i'ft.h,ehieeriroc') filed Company Application Ne.535/1995 iseeki__rtg.perVrnission of the Company Court to stand outside _ Vgtheiieancling up order, to enforce security and sell the V."'--..V'V'-eeieets taken over by it under Section 29 of the State F Firaancéai Corporation Act. The said appiication was alioweci. "thereafter, the assets of the Company were sold ea $14..» in favour of M/slnsotex India Limited, finally approved by the Court. In the Industrial Development Bank joflH'I'ndi_a"-,y ai3o:"'«s_ou'ghtn'f.or T. V permission to stand outside the upandrvenfiozrceth-eL security by filing CA. r»io.i3=i.£}V:1~e996 areLenu.ia\;;as°'a$;i§c$' allowed' by the Company Court lr~sp'ecliIfjica'ilyA dillrevctinagvj that the Officiai Liquidator and the to jointly sell the assets 'i:n":liq.IJidaftivon in terms of the order Further, the secured creditors outside the winding up procevedings claim of the workmen under Sectlyon 5fl2"9._:and'.'--529-a"..of the Companies Act. Thereafter, a,i<.SI"IDC "l"iV!'e'dlV one more Company Application C for a fresh sale advertisement which allloyeedilon 26-11~1997. Yet another application was filed" Company Application i\lo.332/1998 seeking V.p»elf';°nissIen to re~adve-rtise, which also came to be allowed C 'Eon :l.1~«9~1998. The Company Court directed the KSIIDC to sell the fixed assets C0mpl'i$lI'ig of the land, building and it ~15"
pfant and machinery heieiiging to the Company. After receipt of severa! bids from the intending purchasers, negotiations were heid and a sum of Rs.<iA,76«V,5.F3.Q',»fV3':('3iC4}1;f'~--:"was reaiised from the saie. The saie was confirmed vin=.favoi'ui.* _of the purchaser Sri Ramaiah F-f§etiHd'y"hy._ti:ieAt.:_"er_e'e'r'Teavted 1-2-2002 in c.A.No.a23/2001. isgasiequeniityi a "airman was issued to the KSIIDC,"te:h.andVhove_r"tihVe ef the fand and bui!dir}g~..é_to 'V';:;:i3ife'Vh'a_ser. dviitectioii was aiso issueé to pay a -- to the Officiafi LiqujidatcfVfforw the statutory dues, fevies, ESE conttibutiens,v.V_i§ve'r!<iei's}'tiles and dues payabfe to K.E.B., etc... x payment was made. The KSIIDC . ~a sunn tttt 'ef Rs.1,36,S0,000/-- and adjusted the :Tc'}VF:"'£.'*¥t§}1.§fi'€ towards the amount due te them. The Aélfficvfai tjiquidator fifed a memo before the Company Court, AA Ireqiueating the Ceurt to direct the transfer af the baiance "--»ar.§*:eunt at F«:s,1,9G,OG,00G/---- are the ihterest accrued eh as.3,2s,5o,eee,/-- with effect from 5-+2002 an the date of transfer, The KSIIDC afae fifecf a meme ta the effect that a i §% ....15.,, sun': of Rs.i89i45 iakhs has been appropriated by them consisting of Rs.161.48 Iakhs towards the principal and interest as on the date of the winding Rs.2"7,97,000/- towards other expenseslws.C3fi'i€%i_§'v5"*i_._ Liquidator aiso realised a the L sale of stocks. It is in this b'aci<'g.round:,.'1th'a't "th'eé"0th'er creditors aiso fiied appiiea.tVio»ns se'e.ii_<i'n§.V-Idiitections for payment of amounts wQ_hicti'V.a'rehsgaiiy.due to them.
3.': aii "these creditors, the iearned Compa,Vny' Judge impugned order hoiding that, if the--vsecured.v;:ieditoi's opt to remain outside the winding up A_v§toc3eiedi'n.gs, snveniésvecured creditors cannot come back and if the secured creditors opt to join the Au._tieag_'e;--it:'~"Cou|d only mean giving up of the security. That x the. dties of the Crediters or the financiai institutions or the V' *»ba'ink is ene which is required to be determined by the Debi:
F Recovery Tribunai under the provisions of the Recovery of Debts Due to the Banks 8: Financiai Institutions Act, 1993. ';
rs i ...l7__ As laid down by the Supreme Court in the case of ALLAHABAD BANK vs. CANARA BANK reported""---in AIR 2002 SC 1535, the Official Liquidator qr-j4;:hji"g'tj'ricciia-t determining such an entitlement in Wi_in.diingi' proceeding, does not arise. ._a~l.l_ such'-_a.vV'cr'edi'tor7.__ L produces the proof of entitlv:-3A:ria_e»1rit_,A. ingchee». recovery certificate issued *r"rro-qnaiii i-lecovelry Officer himself, 'forth'.«*t'he'ii{'jgasie.on'l§eha'lf of secured creditors before winding' perhaps to that extent adrnitted and such a creditor is perrnittVe'dp%to'"in the declaration of dividend. i-irgweggx/er,4"ira., Athrepresennt case, having regard to the factual _ Vp'oVsit.i}:;n'll'and havxililng regard to the position that they have saie of assets of the Company under i~i..quidva*ti,o.ir'i; such a situation may riot pose for pg gfclet.e-m?*iination at all as the Officiai Liquidator may not be with any amount once the proceedings under Section F 529 of the Companies Act is closed, It is only when the Official Liquidator in terms of the priority under Section __l8- 529 of the Act, declares the dividends and he is.--stiii ieft with further amounts, these aspects present "ther'nsevi.ives for determination. Added to this position,-'in case so far as the secured credito'rs"are §:on_.r:eirn'ed', ester':-seas' j A' per the order passed by the Co'u_rt',-_theyiiii=.<.ere, Liii'"ejC't.r;'bVCif'.tQ remain outside the wiridingtip..iproc'eedirrgs¢_; u"AsV"o'f 'now no further amount is asv;iilab!.e"'fo:r:'~distribution-iutnyder Section 530 of the Act, then ;the'r-efiis Vcause for the Official Liquidator _und:e'-_r_ the V'S"tfaction 530 of the Act:
for :decEa"r'atji'en_éVo3tV'di\reid~e_nd_ in favour of sharehoiders and in accordance with---iirt'he"'p_:riorities mentioned therein. it may nothe necessary to issue any direction in this Company _ V'/3iop|EiE::rati'io.r'; in fairour of the appiicants. substance the Seamed Company Liudge up Vedecliuted to entertain the claim of other creditors holding " --»thet they are not entitled to any amount and thus rejected F their ciairh. it is against the said order, the creditors are before this Court.
_3_9..
5. The workmen have flied contending that the Canara Bani<"and E§a«niV<';
are not the secured creditors not passu distribution of theV>s'e,ie~~..considerat,iAoh: é:n'd"'ti1at even' the creditors are nQit...entitiedVV:te«eny' anwéount respect of 2 '/2 acres which waseiinot' and therefore he contend_$.'€he:t_ theiiworkmen needs to be g . .
6._. - he°'i"he__»§eramed_._cou.'nsei appearing for the secured creditors' c0ni:en"d.s,..tjhatieithough KSIIDC is the secured creditor, Et"we_sV§3eri'nitted to stand outside the winding up and bring the property to sale. The said entitied to appropriate the entire saie ii'ensv~i.':dez<:a"i:ien towards the amount due to them. The sale re .er,jc>nSVi'tf.eratien has to be appropriated among the secured "'.e'f<:r'editors as Wei? as the workmen proportionateiyu The T Officiat Liquidator has adjudicated the ciairrae of these 53 , 3/ /I,., ._20_ creditors and therefore there is no necessity for them to go before the Debt Recovery Tribunai to estabiésh.ni:hreiri'cIVaim and the observations of the iearned the Company Court or the Q£fic_i_ai are L' expected to adjudicate their claim 'ithat.t'he:i?r to be adjudicated oniy by Re'<:e\'/ery View of the Apex Court de_cision,Ae.i.suVe"rroneeus' a'n.d'Are.c}uires to be Set aside, 7; i*§'§f.:gr_ rievarned counsel appearing for the i{S;I'DC the learned Company 3udge was right.' in"'holdi.hgwthat the stage of considering the _ of other seciured creditors has not reached and ail of k;e'j:":.:f':é~'tied to amounts under Section 529 and 530 of the 'Cernpanies Act, As nothing adverse to their interest A. Vehas.=b§een heid by the learned Company Liudge, these A' '..V"'--e;:rbea|s are rniscohceived and therefore he submits that F these appeals are liabie to be dismissed' { /,.x 3 §:/ W21...
8. The apprehension of the iearne.dVV_:'~.eounsei appearing for the workman is that those not secured creditors are sought to be""p"ai;:c_i~,a's. sec:.i,red "-- creditors on the basis of a '».chajrge5 on the '''i"n'te.ve:1ai3ie . Dropertv and the consideration reai-i..s'ed.V is not the subject V_matterV_:ot'-'.,the Since the proceeds are sougVf'i-ttto to the secured creditors it isaiegai.:.A*r*:§'eir'ef'o--:e;t_n.ey that since they have an...jent§tieinenrt_to t.he~.en:t'i're amount due, the quesv-tio'n' ofvthose sale proceeds with them wouid n0.t arise.._ the aforesaid facts and the rival " .'.C'anter:tE"enVs=Verged it is ciear that the Company was ordered to ji.a'e,w.oxur}e' up by the Company Court. Consequentiy aif it 'tree assets of the Cempany vested with the Officiai Liquidator. Even before the erder cf winding tie, the KSIIDC exercised its power under Section 29 of the SFC Act and has taken eessession of the assets ef the " --.cE.rAcumstances, the other creditors fiied these applications' i ..22__ Company under' liquidation. After passing of the order of iiquidation, they fiied an appiication before theV.C_o'm.Vpany Court requesting the Court to permit them to;'st-a.n~;i..'__oigtsirde the winding up proceedings and bring sate subject to the distribution of the sa.i.e'proscee.d's 4in'treVrr:ns:'of Section 529 and 530 Vof,___theifiiompaniesiii:f5i'ct.'_j'; application was ailowed _propertj/'iirasvfisold and a sum of Rs.4,76,5O',tiO'D/-7_iNaisVrea'Eii_sed_ by"i<is11pc. The Court directed a sum of Officiial Liquidator for payment of statuitiory' _ as the wori<men's' duesi Accorgdingwgharwsum Rs.1,50,00,000/~ was paid. It is _ Vtii1eré'afte.v_thatAoutiof the remaining sale proceeds, KSIIDC geppro;a.iri'aVted:'.1~~the entire amount due to them, without Aeffer_ii:ig_:}'the said amount towards the proportionate AA gdistri.F:i:ution among the secured creditors. It is in these _.23...
10. The manner in which the payment of the sale proceeds is to be done, is cieariy set out in Section 529--A of the Companies Act, which reads as under:--
"529A. (1) Notwithstanding anything any other provision of this Act or anyV_otfh.er' lfawii"or~--.: _ V' the time being in force, in the' winding at L"
com pa ny~
(a) wori<men's dues.;"'a-.nd
(b) debts dvuezyto S'e'C'Ll c'i*editors"t*o the extent 'tr-ia:i'i'i<i.:iinde'r"ci'aiJse (c) of the proviso to s'u'b-sectifond section 529 pari passu with stitch dulesfa' . it shali be"paiyd____i_ii. priority to all other debts. The debts payable under clause(a) and A"'ci'a.i,;_se.l(:'p'j' of SE.Eb"S@C'CiOfl (1) shall be paid in fuil, v_E.;el.esslthe assets are insufficient to meet them, in ~ which case they shail abate in equai proportions." Therefore, notwithstanding anything contained in any other provisions of this Act, or any other law for the time $5:
being in force, the debts due to the secured creditors to the extent such dues are recovered under Clan-'.se{c_}"0fV"ot.he proviso to sub--Section (1) of Section such dues, shall be paid on priorityto' other'Adu_e's._~.l:ri'VoT_ther T. words, the wori<meh's' du,eS4_'ahd"--t_he creditors are to be paid ohiivpoaeirii'passue amouht realised is not suffic'i'ent amounts due to them,_theh be distributed proportiona'tei$g.i.i:'to.the ahiouhti-V"v*»'--hi.eh is legally due to them. '_1't"5is_o:pieri.t'o_'vv_th_e_--secured creditors, which are financial" pihsitituti'onVs';--.__:"to"" approach the Debt Recovery T¥;'i"L'}'l,li'iai uoa~..,Vt"he'"Ofti-cial. Liquidator to estabiish their claim. s'u~r:;_b avflmcibaim is established, then the sale 2[C0i;iS.iiC§"%§i;&ifi.D,Efi" has to be distributed in terms of such an 'a.djud'icati'oh along with the persons who brought the ii _propetrt:y to sale.
11. in this Contest it is useful to refer ':0 the Judgment of the Apex Court in the case of .... 'I015 INTERNATIONAL COACH BUELDERS LTD.,vs. KARNATAKA STATE FINANCIAL CORPORATION reported in 2003 AIR SCW 1524 wherein it has been held as uncler:~ "20. The rights of the pari passu wouid run equaily, tempora;r»iiy>_ and!'po't-ent,ly';: v\'fi.'.lVtl'..a.fi the rights of the secured Liquidator, as the repraesent'atiy'eV_A.of to enforce such pari pa.s:seV_%cha.rg.e woiVu.l:dVV'h"a'vie"the right: of representing the__l:ir§rori<njen.eCnia._lly iivith the rights of the secpred is defined nidiei--- 1:'UQV.:"of th'e"'Tflransfer of property Act "EV"'alection_3.._OACi-fl'"~~--Where immoveable property of 'one perso«n.ViVs____Aby act of parties or operation of law r:fiade"«._.seCurity for the payment of money to the transaction does not amount to a the latter person is said to have a ..c_f'i'2a:4q'e on the property, and ail the provisions heireinbefore contained (which apply to a simple mortgage snail, so far ae may be, apply to such charge). ....
% M26,
21. Though the charge by itseif may not to mortgage, aii the provisions which simpie mortgage, so far as may 2 charge. Thus, the Officiai""Liqei'dat:o'rA;V'V:v[as '-ti.1eV"g representative of the workn*i'en's_"p~a'ri :'haxir'ge,'-f wouid be in the position VtofiaVc:i'f"tnie.rtgag'eeV.h Though Section 29 hithjettoi enabi'e.ci"'the S§"CWas a mortgagee to ex.ercis.e""'ri'ght téhe:*euii"i:cier by taking possession'oftheff--5ji:."o4;5'esr'tyV'iand seliing it in satisfaction of vitsr-ihdebt-,._:the""._sViAtVt3.ation has now changed."f;.s.y1"Bécatzse "thVe3.V"«vafo.resaid statutory ii'rn'teir\re'n1tion',*-3 "th"'e~,:SFC "_'n*i'u'st necessariiy contend with 'a~ oar}-»..;jtas4se__:"c--h_arge holder who has equai rights.» Itis "wei..iiestabiisheci iaw that where there 5 -are cto-mnor"tgag'ees, one co-mortgagee cannot seli " without con's--ent of the co-mortgagee or institute anyi broceedings for sake of mortgaged i5'i*o"e.er::3y"yvithout joining the other Co-mortgagees eiti1.ei%'Aas plaintiffs or as defendants. The SFC's "rvi§:ht under Section 29 of freeiy reaiising its security it gets trammeled if it has to take on a pari passe A' charge hoider. The reaiisation of the security can thereafter oniy be done either by satisfaction of the pari oassu charge or by a suit in which the pari passu charge holder wouid be a party defendant. 5%//I',
-27"
Theugh when the SFC Act was enactee in 1951 it was intended that SFC couid act uni|atera||y,"t,he amendments made to the Companies Act have introduced a pari passu charge holder ~ helmsman of the ship of the SFC, ..i--..w'ho cana' neither be ignored nor overriidden; ._ In ethe'rrm_rdsV, the existence of the pari passe trhairgeiiimilderi. represented by the"iV_Cfxficiaii'v. Liqu_ideto«t_fv--.wo-uld necessarily bring in supi'evr_§f:si_on of Company Court as the Offi'ci..a_| Li'.qLiidetorficapnnotiectiywwithout directions from -the Company Court. This is.~"'pi*eCiseiy"'»i,they why the Court A.P.State Financial Corpioration'f{*sep«rei)._h,.:>|ds that the statutory right of th'e..Si"-Csito sei'iv.t'i?i'e property under Section 29 of the SFC' is new subject to the provisions of .S3e:é'c::tide__S29 'and Section 529A of the Companies 3 5f§":.e "statutory right to seil the property under "--...i'§eCti§?":snVA'?§9 of the Act has new to be exercised in teviridevnfi with the rights of pari pessu charge in {event ef the workmen created by the previse fieetion 52% 0f the Companies Act. This Ceuri: ebserveoi in A.F>.,State Finaneiei Cerpe:ratien.(supra).
._28....
"The Act of 1951 is a special Act M financial assistance to indu__st.ri,al co'ncérn'_'g;. with-Wa:._V View to boost up industrializationSand2als.o"--reco'xt_er3{ it of such financial assistance i'f----Ait"i>ecom'esA.ba§d 'and similarly the Companie':~:..c4'}'\"::t deals.v»*i.thi_;cVorn';5anies including winding up AVo.f:'su_c*h__ com"pa.nAies§. The proviso to sub--s_ejr:tion ;[1.)"~~of..i"'Section 529 and Section 529~A bei_n_gj a ls'_LiVbfseqiiV.e'n.jteiiactment, the non--obs,tar:3:te. clafiise S.eAct'i'_on prevails over Sectiro-n"*v2_95Iof~;'_th'e:.:r'Xct~..of -19Af53,' infliiiew of the settled DOSltlG'..ij"iipflavii therefore, of the opinion that _to sub--section (1) of Section 52.9" will control Section 29 of theVV'Ar__ij of " 'Inother words the statutory right ',._§gt0ri.sell theovroperty under Section 29 of the Act of has to be exercised with the rights of pan 3 to the workmen created by the pro?-ics_nc'i1'Vto Section 529 of the Companies Act. weer" the proviso to sob~section (1) of Section SSVZ9, the iiqoidator shall be entitled to represent the workmen and force (sic enforce) the above oari oassu charge. Therefore, the Company Court was fuily justified in imposing the above conditions the enable the Official Liquidator to discharge his g //_4,.
-=/' .......29.m functien preperly meet" the supervision Cenipany Court as the new Section companies Act confers upon a Company'-._:CoL;r.tVi'thee:
duty to ensure that the WOFFs'ifi":'E3!3.fS dfnesviée'ci*e_pVaivdjjin"'-.& it priority to aii other debts ac'co:rciar2_ce provisions of the above: section._ The iegi"séVatgte ihaisi amended the Companies-gist inV.1'98_S'~Av§?'ith"i.ausociai purpose viz., to ;.nrotect-----dties"o.f.thetworknien. If concfitiens are not..V:ii'mpaLse_dvv'.toi--.'pro'tect the right of the workmen there' is that the secured:.c«r'ed'i'ter tfnayitrusttavtgg.th_§::VVfabove pari passu right :05" the;1e}d--'?k:ne.in:'.'f_V :5' Since Liquidator is in the position def a 'V er;'>'--r'ri"ort3gagee, the SFCS cannot act C:'iir:;1epehdentiy"'e'rVby ignoring him for enforcing their ..Vsecurit.y:;"' .._It is established law that, in case of co-« "-".___«me§tg_ag~e'esf aii of them snouid jein the suit for eh_iorcii'ng the security, but if some of them refuse tevjein, they have tn be inciuded as eefendants, not it 'ii"«.,.;'nere§y as pre» ferma sarties, east as necessary it ":perties,, inasmuch as the nsertgage right vests in them aieng with the piaintiffs-«mertgagees. {See in this connection the judgment of the Privy Cezmeii in $:m§tEba!a Sean es, Crnarae Suhsari Bebé. (AIR 191% 2%
-33., PC 24). The same principie would be _ true and applicabie in the case of a myort-g:age.eend a pari passu chargemolder over-.tyhe--'_4'sa_mé'V:S€curity'-. for reaiising the security. of:"i'tbei1.i_: security can only bec.'do_ne b"y._t;oth hoiders joining and°=,reaiising"._V_ 'security simuitaneously. Iffla sa'|V.e"ta.¥§es"ptiace,it'cianionly be simuitaneousiy forw§'1e.co-yeéy;toi'-tizeiclaim of aii pari passu cha_rge~hol..d.ers, 'fiisiaaiiveiifivyv-proceeds are required» dizyidecie'prop'o'rti.o.i1€§teiy in the same propo-rtionp 'es_._ V that the statutory right of the State éFin!aincia'i' hfioirporetéion to seii the property under Syecytiyon 29 of Sf-'C Act, is subject to the provisions of *S,ecti_on_5:29..aA of the Companies Act. The State Financiai ._Cfo;ipoi'e'tii.on{Jaennot act uniiateraily after the amendment m'ade"-Tto't'i§e Companies Act, 1985, The statutory right to * seii the eroperty under Sectien 2% ef the SFC Act has now "'-t{'>"i3e exercised in tandem with the rights of pan passe " charge in favour of the workmen as weii as the secured creditors in view of the proviso to Section 529 of the E //4....
;_/ Companies Act. The Officiai Liquidator is in the posEi:§"o.n of a co--mortgagee.
Corporation Act cannot ignore the creditors initehdih enforce their security. It is an :estai3i«is_i"§-.ecE.g3aW}«__that= case of co--mortgagees, ali ofVthem:'*sh'ot_ild 3'oi'rV_i-v_iAtogethe.r'--~i.h"~. a suit for enforcing the S€CUl'l't*:,!\:\_'\l..,,.. If some refuse V to join, then they havueto beri'i'hCiu'deVdr-.g;s defe"nd'ants, not mereiy as pro forma pen-'.tiVes}j'hut__..as.i/ihyeeessary parties inasmuch as §tl"i'e_vinort$gage.:}rig4ht'~i".g2'e$i;$:f'with them along with the plaliiihtfisfi flihe same priracipie equally applies ease._offAa :_r'ito:ritg"age and a pari passu charge holder -over the "same" security for realising the security °ungie.€ S'e:c?:ijoe_.529Vhe'hid 529-A of the Companies Act. If a A*5ai~e_ it can only be simultaneously for the reco?ver\;'ofV.E'he ciaim of ail part passe (:harge~hoide:'s and :'""theL sale proceeds are required to be divided o.e_ro»eor'rtiohately in the same proportion as their dues. ...T§ierefore, merely because other secured creditors either V stood outside the winding up proceedings or pet forth their E Therefore, the State V ._32....
claim before the Official Liquidator in law, no difference in so far as the proportionate d§i:§}i'si«o_ra----:of?-:_t'he amdunt of the sale roceeds is concerhedfit. doese affect, their entitlement to the sale pr<§_cee_dso.f:3rep.oir't'ion'ate___tezthe ' amounts due to them.
12. The quest_i.VCf'n_Av§r_he;th;e'r=.ai.basjticuiar creditor is a secured creditor or nyotyiniirespect."o_fVt'h1e'broperty he holds against :i.s"th:'e"'consideration realised by sale otsju-ci} is _a matter to be adjudicated by the ijffiécial ' It is only after such an adjjuvdiycatiéoayithe sale" proceeds could be distributed in .Vterms:'ofj'h'S.ectionH"S'29--A of the Companies Act, That is not Qyfrtiych requires to be considered by the Company ACiourt'v'o;l'.i"~by this Court at this stage. If any person is oyagglriveyed by such an adjudication by the Official «' -..v"Li:i':iidator, it is open to him to challenge the same before the CQi'i"i§)a{"i'y Court, Suffice to say, that all the secured creditors and the workmerz stand on the same footing and 1 2 -
i J'
-33..
ail of them are entétieti to amounts which are ieg,aiVi'y_:d.t_ie to them. if the amount realised is not sufficientfto"street:
claims, then proportionate to the arnou-rrts.:'§iu:e"~wt0<-thern;»flu'~-_x the saie proceeds would have togbe;_distriut;rute.d';'-
13. Therefore the fVinding*.of'-_t_he lea-rn'e»d '.Co:rrr--p%ai1y Judge that the other credEto--.r:s"~--haveh to the Deht Recovery Tribunai tQi"e..$tat>i~i's'h 'tnfieir"'cl._aim éis'"err'oneous. AH the creditors are before'the~'EOffici:ai--."_LE§i;ti§.idator and infact have andiieven the Officiai Liquidator has aAd:nEtted' If any person is aggrieved by such a finédinygof the dfféciai Liquidator, then it is open for cha_Eienge'H'the sarne before the learned Company 1««i7jj_ is submitted that after the recovery of the aféoreseiidhvéisaie proceeds of Rs.~¢,75,S0,0GO/--, some more properties were sofd and the amounts have been reaiised, "fine amounts so realised are sufficient to pay the entire %"//_4 ,.
- 34 ~-- , debt due to the workmen as well as to thevjs-'ecured creditors. That: is an exercise to be done e:4f3ffi':ial Liquidater after hearing 31! the parties tiief wouid have no bearing in decidivffitfi'e3ve'*.ap-:peTe':ES--_e.n"niefits. 7. In this View of the matter,>T.t§1e ofdelr'-passgg;_".n_by"the 'iéarned Company Judge cannot be'suetained;'* ._H'en:?:e, <4zeVVVpass the fcltowing order:--
__'o.rder passed by the Iearned CompaVnn-y._Vjuvd§'e-__fii§ated.:."~iL6~12--20O4 in Company Apeiication f'§I't'iLeS.E7__ff'¥¥1,{2OiV".>"E§','«...__2.2O/2003, 694/2002, 594/2002 C/w ';. 447;';;GO:é§=. '-and 1234/2002 in Company mitten * . Ne's.15éi:': egg & 49/1994 is hereby set aside, H3) It is deciareci that the warkmen as wefi as 31E the secures? creditors whe have estabiisheid their ciaim or whose eieérn is admitted by the C3ffécia§ Liquidatcr, are W35"
entitled to the distribution of the saie proveeeds in proportion to the amounts due to them.
4) It is made ciear, that before the proceeds, the Official Liquidator:,A1hag'3.,tofivehstir.e"*thatf-tthe::VSeie proceeds reaiised out of thee-i.assets._w"ere leg'éai.iéi3t._Vsec_iJred the secured creditors and they be} ehtitied to pari passu distribu't«i.o':r:_o77_ "arnoLm_t so reaiised. Any dispute in this regaArd..}h-ay'a§'if:eAt'ed'"by the aggrieved person before the ~cemfpa} ny"':€;';3;r:r:Jr"t--..V. i
5) After sutii«;§dj.iir;i'aereVti:;rrfind distribution of the sale V,p'ro_ceed'Si'«:. it__ is that the KSIIDC is in pessessiohef' -t.hev._,e'rn:Vouiht.g which are in excess of what is iefigaiiy dueittevi'theeie,,r;% the KSIIDC shaii repay the said erri:o~i.;.r:t'.y_vith iihtetresty to the Gfficiei Liquidator and such :'r:3:*r:i;oi't;srit:sfi*:eii;ib«e distributed among the other creditors it,/"' ....36......
6) This exercise shat! be done _f:=;§Q"'t«§:é_t;»«. _C'i'é?fi_té%a! Liquidator within a period of 3 months»..4.ffof*n'~::teda:f4 afready 8 iong years have eEaps}_ed.:...4[éA.fiV The parties to bear Vt»hé irt._own.Vmsts-..,A1