Punjab-Haryana High Court
State Bank Of India vs Punjab National Fertiliser Chemical ... on 24 January, 2005
Equivalent citations: III(2005)BC447, [2006]134COMPCAS258(P&H), (2005)140PLR228
JUDGMENT M.M. Kumar, J.
1. This order shall dispose of C.A. No. 136 of 2003 in which prayer has been made by the State Bank of India on behalf of the secured creditors of the respondent company namely, Punjab National Fertiliser Chemical Ltd. (for brevity, 'the company in liquidation') for issuance of directions for the disposal of all the current assets and for appropriation of the sale proceeds proportionately towards part satisfaction of the dues of Consortium Bank who are stated to have hold pari passu first charge over the current assets of the company in liquidation C.A. No. 401 of 2002 and C.A. No. 40 of 2004 have been filed by the Official Liquidator on behalf of the Company in liquidation under Section 457(1) of the Companies Act, 1956 (for brevity, 'the Act') read with Rules 9, 272, 273 and 274 of the Companies (Courts) Rules, 1959 (for brevity, 'the Rules') for permission to sell the moveable and immoveable properties of the company in liquidation.
2. On 27.7.2001, this Court had ordered winding up of the company in liquidation while disposing of C.P. No.71 of 2000. The aforementioned order was necessitated because the Board for Industrial and Financial Reconstruction (for brevity, 'BIFR') has conveyed its opinion to this Court on 14.3.2000 which is based on the order passed by a Bench of the BIFR in Reference No.58 of 1987 dated 1.3.2000 (Annexure R-2 attached with the written statement of respondent 10). The Official Liquidator attached to this Court was appointed its liquidator. In pursuance to the directions issued by the Court, the Official Liquidator took possession of the property although there was some resistant by the ex-employees and their families on the ground that there dues were not cleared. It has further been pointed out that Punjab Alkalies & Chemicals Limited-respondent 10 and the company in liquidation have common water system installed in the premises of the company in liquidation and this Court has granted permission to respondent 10 to enter, operate and maintain the aforementioned water system. According to the records which were inspected in the office of Registrar of the Companies, Jalandhar, the registered office of the company in liquidation is situated at Udyog Bhawan, Section 17, Chandigarh and its factory premises are at Naya Nangal, District Ropar. Respondents 1 to 8 are the secured creditors. It has also been asserted that respondent 10 has agreed to pay the dues of the employees of the company in liquidation.
3. The Official Liquidator has obtained valuation reports in respect of the plant and machinery of the company from various agencies. The valuation report has also been assessed of movable assets like tables, chairs and almirahs etc. lying at the registered office.
4. In order to stop growing liabilities on account of accruing interest of secured loans for payment of watch and ward expenses and to save the properties of the com-pany in liquidation from deteriorating, the Official Liquidator has proposed to sell the land, building, plaint, machinery and other items lying at the registered office. A prayer has further been made for grant of permission to invite sealed tenders after vide advertisement in the newspapers English Daily Times of India'. 'The Tribune' All India Edition, Hindi Daily 'Punjab Kesri' and Punjabi Daily Ajit.
5. After notice of motion was issued, written statement have been filed by respondents 3, 5, 6, 7, 9 and 10. In principle except respondent 10, all have agreed to the prayer made by the Official Liquidator for sale of moveable and immovable assets of the company in liquidation. However, respondent 10 has resisted the sale on the ground that Civil Writ Petition No. 15364 of 2002 has been filed wherein order dated 8.5.2002 passed by the Appellate Authority for Industrial & Financial Reconstruction, New Delhi (for brevity, 'AAIFR') has been challenged. The AAIFR in its order dated 8.5.2002 has held that after the passing of winding up order by this Court on 27.7.2001, the authorities under the Sick Industrial Companies (Special Provisions) Act, 1985 (for brevity, 'SICA') including AAIFR would not enjoy any jurisdiction to pass any order under Section 20(4) of the SICA. The aforementioned petition came up for consideration before this Court which has been admitted to be heard by a Division Bench and the same is pending. It is claimed that since both the companies have been promoted by the Punjab State Industrial Development Corporation Limited and the plants of both the companies are located at Naya Nangal, District Ropar (Punjab) adjacent to each other which have common facilities, permission for sale of the assets be not granted. At one stage, respondent No. 10 had made an offer to pay the Company in liquidation a price of Rs. 60 lacs in lieu of its interest in the common facilities which was allegedly determined by the IDBI Bank. The common facilities are as under; -
(a) Exchange of land between PACL and PNFC for straightening of Common Boundary Wall, laying of Railway Tracks and construction of PACL Approach Road.
(b) Water Reservoir and Pumping System.
(c) Common Power Sub-Station for supply of Power.
(d) Common Railway Siding.
(e) Storm Water Drain.
(f) Common PACL-PNFC Housing Colony.
6. In the objections filed by respondent No. 10 some developments which have taken place either before this Court or before the authorities under the SICA have been given in detail which are not required to be referred to in view of the fact that eventually AAIFR has to hold that after the order of winding up passed by this Court, it had no jurisdiction with regard to sale of the properties concerning the common interest of two companies as per the provisions of Section 20(4) of the SICA.
7. It has further been asserted in the reply filed by respondent No. 10 that the Official Liquidator has not been able to take any steps for possession of the Houses/Flats which are with the ex-employees of the company in liquidation after the passing of the winding up orders. It is alleged that those employees without paying anything to respondent No. 10 have been using water and electricity which is maintained by the answering respondent. The averments of the Official Liquidator that respondent 2 has agreed to pay the dues of the employees of the company in liquidation have been denied and those are said to be false. A reference has also been made to an agreement dated 1.3.1986 (An-nexure R-l). On the basis of the aforementioned, prayer for sale of assets of the company in liquidation has been opposed in respect of the interest of the company in liquidation in the common facilities comprising of the following:-
(a) 15.946 So. Mts. of land being the areas of raw water pumping station and electrical sub-station premises near Nangal Dam, underground pipeline 900 mm dia from pumping station (Nangal Dam area) to water reservoir in PNFC area and overhead power line;
(b) Raw water reservoir and proposed roads-3990 Sq. Mts. of land for the same; and
(c) Construction including pumping station and electrical sub-station at Nangal Dam area- embedded pipe line of carbon steel complete, raw water reservoir, plant and machinery pertaining to water supply had been ordered to be transferred to and vested in the PACL Under Section 20(4) of SICA for a sum of Rs. 60 lakhs with the proviso that PACL rights in 2.637 Sq. Mtrs. of land and PACL's share in locoshed within the campus of PNFC would stand vested in PNFC. The amount of Rs.60 lakhs had to be deposited by PACL with the Official Liquidator appointed by the Hon'ble High Court of Punjab and Haryana at Chandigarh in four monthly instalments of Rs. 15 lakhs each, the first instalment being payable on or before 8th October, 2001."
8. Mr. Puneet Kansal and Mr. V.M. Gupta, learned counsel for the Official Liquidator have submitted that a period of over three years has passed since the passing of the winding up order by this Court on 27.7.2001. According to the learned counsel, it would be entirely in the interest of the company, secured creditors 1 to 8 and its workers to permit the sale of its moveable and immovable assets so that growing liabilities of the company are capped. Learned counsel have argued that interest on the secured loan is accruing and the moveable property like furniture and machinery etc. would be reduced to junk which would be adversely to the interest of the secured creditors respondents 1 to 8. Learned counsel have then argued that no other secured creditor from respondents 1 to 8 have raised any objection to the sale of moveable assets of the company. On behalf of the Official Liquidator they have offered that the part forming common facilities as detailed in the written statement filed by respondent 10 can be kept in a separate lot so that its proceeds are identifiable.
9. Mr. R.M. Suri, Mr. B.B. Bagga and Mr. Nitin Kumar, learned counsel have made submissions with regard to the distribution of the sale proceeds. It has, however, been suggested that moveable assets be put to sale prior in time to the land and building because otherwise moveable assets may have to be shifted to rented accommodation resulting into incurring of further costs. However, on principle there is no opposition to the Prayer made by the Official Liquidator for sale of the assets.
10. Mr. Arun Nehra, learned counsel for respondent No. 10 has opposed the prayer made by learned counsel for the Official Liquidator for grant of permission to sell the assets of the company in liquidation by arguing that the matter is sub judice and pending before the Division Bench which has admitted Civil Writ Petition No. 15364 of 2002. According to the learned counsel, the controversy raised in the writ petition is as to whether the order pronounced by the AAIFR on 8.5.2002 is sustainable in the eyes of law. The learned counsel has pointed out that AAIFR has opined that after the order of winding up passed by this Court on 27.7.2001, it could not have passed any order with regard to the assets of the company. It is pertinent to point out that earlier AAIFR by its order has directed the sale of interest of the company in liquidation to respondent No. 10. The aforementioned order was challenged before this Court in Civil Writ Petition No. 14791 of 2001 and Civil Writ Petition No. 2250 of 2002. A Division Bench of this Court to which I am a party has set aside the order on the short ground that the liquidator of the company in liquidation who is the Official Liquidator was not granted the opportunity of hearing. The Division Bench did not express any opinion with regard to jurisdiction of the AAIFR and quash order dated 7.9.2001 by which the interest of the company in liquidation in common facility was sought to be sold to respondent No. 10. The case was remanded back to the AAIFR for its decision afresh. The AAIFR has decided the matter by opining in its order dated 15.5.2002 that once an order of winding up has been passed by this Court, AAIFR would not enjoy any jurisdiction conferred on it under Section 20(4) of the SICA. The aforementioned order being subject matter of challenge in Civil Writ Petition No. 15364 of 2002. The learned counsel has asserted that this Court should refrain from passing any order of sale in respect of the common facilities. The learned counsel has also raised another argument that the provisions of Sections 20 and 32 of the SICA would prevail over the Act and, therefore, the earlier Act would prevail over the later Act as there are non-obstante clauses implied in Sections 20 and 32 of the SICA. In support of his submission, the learned counsel has placed reliance on paragraph 9 of a judgment of the Supreme Court in the case of Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. and Anr.,1 (1993)2 S.C.C. 144. He has also cited judgment of the Supreme Court in the case of Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. and Anr.,2 A.I.R. 2001 S.C. 958. The learned counsel has then referred to the proposal dated 8.8.2000 (Annexure R5) with his reply and argued that common facilities existing between the company in liquidation and respondent No. 10 had been jointly established by them by incurring expenditure on 50:50 basis. The facilities have not been enjoyed by both the companies for the last over 18 years. He has also referred to the order of the AAIFR wherein the interest of the company in liquidation was offered to be purchased by respondent No. 10 for a sum of Rs. 60 lacs which offer is still being made by Mr. Nehra.
11. After hearing learned counsel for the parties at a considerable length. I am of the considered view that the applications filed by the Official Liquidator deserve to be allowed. The secured creditors respondents 1 to 8 have no objection with regard to the sale of moveable and immoveble properties. The only objection raised is by some secured creditors is the mode of distribution of sale proceeds and then whether moveable property or immovable property should be sold first. Such like objections would pale into insignificance because firstly the prayer by the Official Liquidator is for sale of both moveable and immovable assets. The other argument that the sale proceeds should be distributed in a particular manner cannot be raised at this stage because sale proceeds have to be distributed in terms of Sections 529 and 529-A of the Act, after the sale is complete and the sale proceeds are credited to the Official Liquidator. Therefore, there is no substantive objection by the secured creditors (except respondent No. 10) for sale of the movable and immovable assets of the Company, Even otherwise, I find that it would be in the interest of the secured creditors as well as workmen of the company in liquidation to grant the prayer made by the Official Liquidator for sale of movable and immovable assets of the company. The interest of the secured creditors and the workmen are paramount consideration as has been observed by the Supreme Court in the case of LICA (P) Ltd. (No. 1) v. Official Liquidator,1 (2000)6 S.C.C. 79. The winding up order was passed on 27.7.2001 and the accounts of various secured creditors and the workmen have to be settled in order to stop the burden of growing interest on the secured loan and the wages due. The machinery, plants and other moveable assets of the company are likely to be devalued with the passage of time. Therefore, it would be in the interest of every one to grant permission to the Official Liquidator for the sale for moveable and immovable assets of the company in liquidation.
12. However, the problem is only in respect of these assets of the company in liquidation which is common with respondent No. 10. The interest of the company in liquidation as well as respondent No. 10 can beneficially be secured by directing that common facilities, area and assets be kept in a separate lot and sealed tenders be invited in respect thereof separately. Keeping in view the anxiety of respondent No. 10 which has offered Rs. 60 lacs to purchase the interest of the company in liquidation with the common facilities, respondent No. 10 shall be at liberty to participate in the sale of the assets of the company in liquidation by sending its own tender. If the tender of respondent No. 10 is found to be the highest or it raises its bid by hiking the offer, then it could succeed in purchasing the interest of the company in liquidation with common facilities.
13. The argument that Civil Writ Petition No. 15364 of 2002 is pending before a Division Bench of this Court and for other persons no permission with respect to the common facilities be granted has not impressed me because the order of the AAIFR is against respondent 10 wherein it is observed that it has no jurisdiction to pass any order under Section 20(4) of the SICA after this Court has passed a winding up order on 27.7.2001. The earlier order passed by the AAIFR on 7.9.2001 whereby the interest of the company in liquidation in the common facilities was proposed to be purchased by respondent No. 10 for Rs. 60 lacs was set aside by this Court on a petition filed by the Kirti Mazdoor Welfare Union and the Official Liquidator on the ground that the company in liquidation through the Official Liquidator was not heard and the case was remanded back to the AAIFR for passing order afresh. Thereafter the AAIFR has passed order on 8.5.2002 observing that it looses jurisdiction to pass any order under Section 20(4) of the SICA after the winding up order has been passed on 27.7.2001.
14. The Division Bench while admitting C.W.P. No. 15364 of 2002 has not passed any interim order nor any application has been filed with any such prayer despite the fact C.P. No. 401 of 2002 was filed for permission to sell the movable and immovable properties of the company in liquidation on 3.12.2002. Further more its interest stands secured as the Official Liquidator through its counsel has undertaken to put the property and assets having common facilities in a separate lot. Therefore, I do not find any substance in the objections raised by learned counsel for respondent No. 10.
15. I do not propose to deal with another argument raised by learned counsel for respondent No. 10, namely, whether the provisions of the Companies Act would give way to the provisions of SICA in view of the judgments of the Supreme Court in the cases of Maharashtra Tubes Ltd. (supra) and Solidaire India Ltd. (supra). The aforementioned question has already been raised before the Division Bench and expression of any opinion, at this stage, would not be proper.
16. For the reasons stated above, the petitions are disposed of with a direction that the Official Liquidator who is the liquidator of the company in liquidation shall undertake the sale process by giving wide advertisement in the proposed newspapers. It shall, however, carve out a separate lot in respect of the assets comprised of the common facilities shared between the company in liquidation and respondent No. 10 by clearly mentioning in the advertisement that separate sealed tenders have to be furnished by the prospective buyers in respect of that lot. Respondent No. 10 would be entitled to participate in the tenders in accordance with law. The sale process be finalised by the Official Liquidator after associating secured creditors respondents 1 to 8 with it. All the expenses in respect of the sale process shall be equally shared by respondents 1 to 8 who are the secured creditors of the company in liquidation.