Punjab-Haryana High Court
State Bank Of Patiala vs Northland Sugar Complex Ltd. on 30 January, 2004
Equivalent citations: [2004]55SCL92(PUNJ&HAR)
Author: Hemant Gupta
Bench: Hemant Gupta
JUDGMENT Hemant Gupta, J.
1. This order shall dispose of C.A. Nos. 881 and 845 of 2002.
2. M/s. Northland Sugar Complex Ltd. was a company incorporated and registered under the provisions of the Companies Act, 1956 (hereinafter to be referred as "the Act") having its registered office at Village Randhawa (Dasuya), District Hoshiarpur. The said company was ordered to be wound up on 9-10-1997 vide order passed in C.P. No. 45 of 1996. Before the order of winding up was passed, the applicant-bank claimed that the securities charged to the consortium of Banks as a secured creditors cannot be sold or disposed of in any manner. This Court while passing the order of winding up ordered that the assets and securities charged to the consortium of banks shall be out of the winding up proceedings. It was held to the following effect :
"As regards the objection raised by Mr. Narang, it is directed that the eonsortiurn of Banks shall give details to the Official Liquidator of the assets and securities charged to the consortium of Banks and on verifying and having been satisfied, the Official Liquidator shall keep the assets and securities charged to the Consortium of Bank being secured creditors, out of winding up proceedings."
3. Prior to the winding up, the stock-in-trade ie. finished crystal sugar and molasses were sold in pursuance of the directions of this Court under the directions of a Committee constituted by this Court in Criminal Misc. No. 13130-M of 1996.
4. Applicant in C.A. No. 881 of 2002 is a body corporate constituted under the State Bank of India (Subsidiary Banks) Act, 1959. As a lead member of the Consortium of Banks, it advanced various credit facilities to the company in liquidation. There was an agreement of pledge of goods and assets dated 6-1-1995, Exhibit A/23, and an agreement of hypothecation of goods and assets dated 6-1-1995. Exhibit A/24, wherein a sum of Rs. 360 lacs and Rs. 410 lacs respectively were financed to the company in liquidation on the terms and conditions mentioned therein. Since the company in liquidation failed to make payment to the Banks, the applicant sought permission of this Court under Section 446(1) of the Act to continue and proceed with the application filed by it before Debts Recovery Tribunal, Jaipur, under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. ,This Court granted leave to the applicant to continue and proceed with the proceedings filed before the Debts Recovery Tribunal and to have the same decided in accordance with law. However, it was ordered that any decree/certificate issued by the Debts Recovery Tribunal shall not be executed against the assets of the company without specific permission of this Court at that stage. The Court concluded to the following effect:--
"For the reasons aforestated, I find no reason as to why permission prayed for be not granted to the applicant-Bank. Consequently, this petition is allowed. The bank is granted permission under Section 446(1) of the Companies Act to continue and proceed with the application filed by it before the Debts Recovery Tribunal and to have the same decided in accordance with law. Leave is granted subject to the condition that any decree/recovery certificate issued by the Debts Recovery Tribunal shall not be executed against the assets of the company without specific permission of this Court at that stage. The petition is accordingly allowed. There shall be no order as to costs."
5. The application filed by the applicant under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, was allowed by the Debts Recovery Tribunal on 27-6-2002. The operative part of the order dated 27-6-2002 reads as under ;--
"The application for recovery of Rs. 6,86,36,137.41 is allowed and defendants Nos. 1 to 9 are ordered to pay :
(i) A Sum of Rs. 1,59,85,174.00 (Rupees one crore fifty nine lacs eighty five thousand one hundred seventy four only) on account of Terms Loan along with pendente lite and future interest at the rate of 18.75 percent per annum with quarterly rests and Rs. 5,28,50,963.41 (Rupees five crores twenty eight lacs fifty thousand nine hundred sixty three and paise forty one only) on account of Cash Credit (Pledge) Facility along with pendente lite and future interest at the rate of 18.50 per cent per annum with quarterly rests from the date of filing of the suit till its realization.
(ii) pay the cost of litigation; and
(iii) pay the above amount within 30 days from the date of receipt of this order."
6. Similarly, the applicant in respect of C.A. No. 845 of 2002 is a body corporate constituted under the State Bank of India Act, 1955. It has been stated that the assets charged to the applicant has been ordered to be sold by the Court on the application filed by sugarcane growers. The sale proceeds of the said stocks hypothecated to the applicant were ordered to be deposited with State Bank of Patiala, High Court Branch, where the amount is lying in fixed deposit receipts. It has been further pointed out that as per judgment of the Debts Recovery Tribunal dated 27-6-2002 the applicant is a secured creditor and the amount due and payable by the respondents, jointly and severally, to the applicant is Rs. 4,05,11,044 as on 31-8-2002. The Debts Recovery Tribunal has passed the following order:--
"The application for recovery of Rs. 1,93,23,904.53 is allowed and defendants Nos. 1 to 11 are ordered to pay :
(i) A sum of Rs. 1,93,23,904.53 (Rupees one crore ninety three lacs twenty three thousand nine hundred and four and paise fifty three only) jointly and severally along with interest at the rate of 16.57 per cent per annum with quarterly rests from the date of filing of suit till its realization.
(ii) Pay the cost of litigation; and;
(iii) Pay the above amount within 30 days from the date of receipt of this order."
7. Since the stock-in-trade i.e. sugar and molasses etc. of the company in liquidation was sold under the orders of this Court and the sale proceeds thereof are lying deposited under the directions of this Court, the applicant has moved the present application for permission to execute the decree/recovery certificate issued by the Debts Recovery Tribunal against the sale proceeds of sugar and molasses etc, lying deposited with State Bank of Patiala, High Court Branch Chandigarh, in the form of fixed deposit under the directions of this Court.
8. It has been admitted that an aggregate sum of Rs. 9,89,67,681 is standing on date i. e. 24-9-2002 to the credit of various Fixed Deposit Accounts of the Registrar of this Court being the sale proceeds of sugar and molasses etc. it was pointed out that the said amount represents the sale proceeds of movable assets of the company (along with accrued interest) which was pledged with the State Bank of Patiala (now Specialized Commercial Branch), Chandigarh and State Bank of India (now Specialized Commercial Branch), Chandigarh, against their respective working capital limits of Rs. 360 lacs and 44.38 lacs granted to the company and as such only these banks have the exclusive lien over the said sale proceeds. Such sale proceeds are required to be disbursed to them on pro rata basis i.e. 89 per cent to State Bank of Patiala and 11 per cent to State Bank of India. It has been further pointed out that the consortium of Banks i.e. the applicant, State Bank of India and Canara Bank financed the working capital needs of the company against the primary security of movable and other current assets of the company. State Bank of India and Canara Bank granted term loan of Rs. 100 lacs each to the company against the company's fixed assets with pari passu charge with that of Punjab State Industrial Development Corporation. It was stated that the Canara Bank has no charge over the movable assets of the company.
9. In the written statement filed on behalf of the Official Liquidator, it was stated that the applicant has not submitted the details of the movable assets over which it had charge or which were pledged with the applicant-Bank to show that the entire sale proceeds are those which have come out of the sale of movable assets pledged with the applicant-Bank. It was further stated that workmen's claims have not yet been settled on account of the fact that statement of affairs has not been filed. The fixed assets and other movable assets of the company in liquidation were taken over by the Punjab State Industrial Development Corporation under Section 29 of the State Financial Corporation Act, 1951, and were sold to M/s. Chadha Papers Ltd. on 9-10-1997. Thus, the right of the applicant-Bank to stand outside the winding up proceedings in order to realise its security stands extinguished. It was further submitted that the security itself has been lost, the applicant-bank has no right to realize such security. The claim of the applicant-bank would be satisfied by treating the Bank as unsecured creditor.
10. In replication, the applicant-Bank attached an agreement of pledge of goods and assets as well as agreement of hypothecation of goods and assets as mentioned above.
11. Mr. P.D. Mehta, learned counsel for the applicant-Bank has submitted that the sale proceeds are on account of sale of movable assets of the company in liquidation which were pledged to the consortium of Banks. Recovery claim of the applicant-Bank has been accepted by the Debts Recovery Tribunal, a Court of competent jurisdiction, and, thus, the applicant-Bank is entitled to the sale proceeds in the ratio in which they have advanced finances to the company in liquidation.
12. Mr. Puneet Kansal, learned counsel for the Official Liquidator, has raised the following arguments to controvert the stand of the applicant-Bank :--
(i) The consortium of Banks entered into separate and distinct agreement of advancing credit facilities on the security of movable and current assets. The Banks are entitled to recover the amount of advance in respect of such cash credit account pledging movable and current assets of the company in liquidation only. The surplus amount is required to be apportioned amongst unsecured creditors as the Banks cannot apportion the said amount towards their outstanding in respect of their term loan account/or other dues.
(ii) Since the dues of the workmen have not been established as the statement of affairs has not been filed, the Banks should furnish bank guarantee to reimburse the Official Liquidator to the extent of the claim of the workmen found due and payable without any demur or objection.
(iii) The entire due of the consortium of Banks including the applicant-Bank will not carry any interest after winding up order is passed in terms of Rule 154 of the Companies (Court) Rules, 1959.
13. I have considered the respective arguments raised by the learned counsel for the parties and with their assistance gone through the records of the case and provisions of law on the subject.
14. A perusal of the order passed by the Debts Recovery Tribunal shows that the applicant-Bank has a claim of Rs. 1,59,85,174 on account of Term Loan along with pendente lite and future interest at the rate of 18.75 per cent per annum with quarterly rests. The claim of the applicant-Bank against the Cash Credit (Pledge) Facility of Rs. 5,28,50,963.41 along with pendente lite and future interest at the rate of 18.50 per cent per annum with quarterly rests was allowed. The claim of the State Bank of India as per order passed by the Debts Recovery Tribunal is Rs. 1,93,23,904.53. As per arguments raised by Sh. Puneet Kansal, learned counsel for the Official Liquidator, an amount of Rs. 5,28,50,963.41 can be said to be payable to the State Bank of Patiala and an amount of Rs. 53,66,582.73 can be said to be payable to the State Bank of India and that too subject to the condition of furnishing of bank guarantee to pay the amount to the Official Liquidator to the extent of the dues of the workmen as and when determined by the competent Court.
15. On the other hand, Sh. P.D. Mehta, learned counsel for the applicant-Bank, has argued that the applicant-Bank is entitled to recover the entire decretal amount along with interest thereon on pro rata basis as per the ratio of advances given by the consortium of Banks. Once the applicant-Bank is a secured creditor and stand outside the winding up, the applicant-Bank has a right to satisfy its claim out of the security pledged irrespective of the nature of the account i.e. whether the amount is amount due under Term Loan or Cash Credit Account, in view of the terms of the agreement as well as in terms of the general lien of the Bank as provided under Section 171 of the Indian Contract Act, 1872.
16. Before adverting to the merits of the respective contentions of the parties, it will be beneficial to reproduce few terms of the agreement and that of statutory provisions.
17. Clauses (1) and (10) of the Agreement of Pledge of Goods and Assets dated 6-1-1995 read as under :--
"(1) In pursuance of the said Agreement of Loan and in consideration of the Bank having granted under/or agreed to grant to the Borrower all or some or any of the aforesaid credit facilities for the purposes and subject to the terms and conditions specified and contained in the said agreement of Loan and in consideration of the premises aforesaid it is hereby agreed and declared the goods, book-debts, movables and other assets mentioned in the schedule hereto which or the documents of title to which have been already deposited and the goods, book debts, movable and other assets which or the documents of title to which approved by the Bank shall be hereafter deposited with the Bank under this Agreement shall be placed in the Bank's possession and under its absolute disposition in such manner that such possession and disposition may be apparent and indisputable notwithstanding; the fact that in case of factory type pledge, the Borrower is permitted by the Bank to have access to the said goods, Book debts, movables and other assets for the limited purpose of carrying on manufacturing activities and that during such time the Borrower confirms, affirms and covenants with the Borrower shall be so doing as a trustee for the Bank and for which purpose the Bank may without prejudice to the duties of the Borrower hereunder do all such acts and things sign such documents and pay and incur such costs, charges and expenses as may be necessary and said goods, book-debts and assets arc and shall be hereby pledged to the Bank as security for payment and discharged by the Bank on demand of the said sum of Rs. 360 lacs (Rupees Three Hundred Sixty Lacs only) and all other moneys at any time payable by the Borrower to the Bank under or in respect of all or some or any of the aforesaid credit facilities granted and/or to be granted to the Borrower and also as security for the payment and discharge of all indebtedness whatever or liability of the Borrower to the Bank in respect of any liability undertaken by the Bank under any letter of credit opened or guarantee or indemnity issued by the Bank for the Borrower or otherwise in respect of any account at any office of the Bank (whether in India or elsewhere and whether accrued, accruing or contingent and whether solely or jointly with other and any bills of exchange, promissory notes or instrument or any time drawn, made, accepted or endorsed by the Borrower solely or jointly with other which the Bank may discount or become interested in together with all interest, discount commission charges, costs (between Advocate and Client) and expenses payable to incurred by the Bank in relation thereto."
"(10) That this agreement shall operate as a continuing security for all moneys, indebtedness and liabilities aforesaid notwithstanding the existence of a credit balance on the account or accounts at any time or any partial payments or fluctuations of accounts."
18. Section 171 of the Indian Contract Act reads as under :--
"171. General lien of bankers, factors, wharfingers, attorneys and policy-Brokers.--Bankers, Factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain, as a security for general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect."
19. Hon'ble Supreme Court in the case M.K. Ranganathan v. Govt. of Madras AIR 1955 SC 604 while considering the provisions contained in Sections 171, 229 and 232 of the Companies Act, 1913 has held that the secured creditor is outside the winding up. He can realize his security without the intervention of the Court by effecting a sale of the mortgaged premises by private treaty or by public auction. Sections 171, 229 and 232 of the Companies Act, 1913 are pari materia to the provisions of Sections 446, 529 and 537 of the Companies Act, 1956. It was held to the following effect:--
"The secured creditor is outside the winding up and he can realize his security without the intervention of the Court by effecting a sale of the mortgaged premises by private treaty or by public auction. It is only when the intervention of the Court is sought either by putting in force any attachment, distress or execution within the meaning of Section 232(1) 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 is necessary and if no such leave is obtained the remedy cannot be availed of by the secured creditor." (p. 604)
20. However, with the amendment in Sections 529, 530 and insertion of 529A by virtue of the Companies (Amendment) Act, 1985, the dues of the workmen have a pari passu charge over the security of the secured creditors. In view of these provisions, that though the secured creditor is outside the winding up but still the property is required to be apportioned with the permission of the Company Court as the Company Court is custodian of the interest of all the secured-creditors and the workmen. Reference may be made to the decision in the case as Industrial Credit Investment Corpn. of India v. Srinivas Agencies [1996] 4 SCC 165, 8 SCL 55 in the judgment, it was held as under :--
"6. The aforesaid questions arise because a secured creditor who has initiated a suit or proceeding in a Civil Court is interested in realization of his debts only, whereas the company Court looks after the interest of all the creditors; so too, the workmen's dues, which rank pari passu with debts due to secured creditors. This is brought home not only by Section 529A, which was inserted by the Companies (Amendment) Act, 1985, but also by the proviso to Sub-section (1) of Section 529 inserted by the same Amendment Act. The winding-up Court docs these acts through a liquidator, who has been given wide powers by Section 457 of the Act. As against this, a receiver appointed by a civil Court on being approached by secured creditor would basically look after the interest of that creditor, whose interest may in many cases be in conflict with that of the liquidator, as was acknowledged in Karamelli and Barnett Ltd., In re [1917] 1 Ch. 203. We feel no difficulty in stating that in ease of such conflict, the interest of liquidator has to receive precedence over that of the receiver inasmuch as the former looks after the interest of a large segment of creditors along with that of workmen, whereas the latter confines his concern to the interest of the secured creditor on whose approach the receiver has been appointed. This view cannot also be and has indeed not been contended by the learned counsel appearing for the appellants." (p. 170)
21. A reading of the above judgment would show that this Court is to look after the interest of all the creditors including the workmen. The dues of the workmen ran pari passu with the dues of the secured creditors. However, the official liquidator had to initiate the process of determining the dues of the workmen may be for the reason that statement of affairs had not been filed. In this view of the matter, I find substance in the argument raised by the learned counsel for the official liquidator that the amount can be disbursed to the consortium of the banks subject to their furnishing an undertaking that they will pay to the official liquidator the amount found to be payable to the workmen pari passu with the claim of the secured creditors. Since the claim is of the banks, therefore, instead of bank guarantee, an undertaking by the banks to make the payment to the official liquidator without any demure or objection after final adjudication of the claim of the workmen treating the workmen dues pari passu to the claim of the secured creditors would meet the ends of justice.
22. However, the question which was vehemently disputed was whether the applicant-Bank has general Hen over the amount realized by the sale of the pledged property to the amount due to the Bank against any account. As mentioned above, the applicant-Bank has relied upon the terms of the agreement as well as Section 171 of the Indian Contract Act, 1872. Section 171 of the Indian Contract Act, 1872, is in two parts. The first part is in the absence of agreement to the contrary. The banker have a right to retain the security for a general balance of accounts any goods or securities bailed to them. It extends to all securities placed in his hands as a banker by his customer, which are not specifically appropriated. A banker can draw on them to liquidate a general balance due from the customer, either at the time when the securities were deposited, or at any subsequent time, while they lawfully remain in his hands. The law permits the banker to exercise his lien in case of all those securities which come into his possession in the course of his dealings as a banker with his customers, unless there is a contract, express or implied, inconsistent with the lien. The second part of Section 171 of the Indian Contract Act, 1872, states that other than bankers, factors, wharfingers, attorneys of a High Court and policy brokers, none else have a right to retain, as a security for such balance.
23. Hon'ble Supreme Court in the case of the Board of Trustees of the Port of Bombay v. M. Sriyanesh Knitters, AIR 1999 SC 2947, has interpreted the provisions of Section 171 of the Contract Act wherein it has been held that Section 171 of the Contract Act is in two parts. The first part gives statutory right of lien to four categories including Banker. The second part of Section 171 applies to persons other than the categories therein. It was held to the following effect :
"This section is in two parts. The first part gives statutory right of lien to four categories only, namely, bankers, factors, wharfingers and attorneys of High Court and policy-brokers subject to their contracting out of Section 171. The second part of Section 171 applies to persons other than aforesaid five categories and to them Section 171 does not give a statutory right of lien. It provides that they will have no right to retain as securities bailed to them unless there is an express contract to that effect. Whereas in respect of the first category of person mentioned in Section 171 Section itself enables them to retain the goods as security in the absence of a contract to the contrary but in respect of any other person to whom goods are bailed the right of retaining them as securities can be exercised only if there is an express contract to that effect." (p. 2953)
24. In the case Devendrakumar Lalchandji v. Gulabsingh Nekhesingh AIR 1946 Nagpur 114, it was held by the Court that in the absence of specific provisions on the subject, when moneys are held by the bank in one account and the payer in respect of these moneys owes the bank on another account, the banker's lien gives the bank a charge on all the monies of the payer in its hands, so that they may be transferred to whatever account the bank chooses, to set off or liquidate the debt. It was held to the following effect :--
"That under the English law a banker has such a lien is laid down in several cases. In (1898) AC 693 it was held that 'as the bank was not shown to have received during the currency of the account notice of their trust character, the bank was entitled to set them off against its own claim against the company in liquidation.' In (1872) 8 Ex. 10 it was held that a banker is entitled to combine accounts and exercise a lien. Venkatesa Iyer in his law of Contracts, Edn. 3 at p. 902 says :
'In England, general lien of the kind contemplated in the section were first recognized in favour of bankers by the usages of trade which crystallized into the Law Merchant. Where a customer deposited securities with the bank, the banker was given a general lien over all the securities, except in eases where the deposit was for a particular purpose or where there was an agreement or contract inconsistent with the lien. Thus, if securities are deposited for safe keeping or if a particular purpose is mentioned as the object of the deposit, the banker cannot claim a lien on the securities in respect of the general balance that may be due.... When monies are held in one account and the payer in respect of these moneys owes the bank on another account, the banker's lien gives the bank a charge on all the monies of the payer in the hands, so that they may be transferred to whatever account the bank chooses, to set off or liquidate the debt.' This is what is stated in (1934) ILR 12 Rang 25 and AIR 1926 Sind 225 though on account of the peculiar circumstances of these cases a lien was not permitted; but the law has been enunciated very clearly in both these cases following the principle laid down in the English case in (1876) 1 AC 554. Relying on the case law referred to above I am of the opinion that the plaintiff in this case was entitled to a banker's Hen on all the moneys of the defendant in his hands and had even the right to combine the two accounts and transfer one from the other if he so chose..." (p.116)
25. A Division Bench of this Court in the case as Punjab National Bank Ltd v. Arura Mat Durga Das, AIR 1960 Punj. 632 has the occasion to consider the general lien of the bank contemplated under Section 171 of the Contract Act, 1872. The rule of English law that the bank has a lien or more appropriately, a right to set off against all monies of his consumers in his hands has been accepted as a rule in India. It has been held that when monies are held by the Bank in one account and the depositor owes the Bank on another account, the Banker by virtue of his lien has a charge on all monies of the depositor in his hands and is at liberty to transfer the monies to whatever account, the banker may like to set off or liquidate the debts. This Court has held as under :--
"14. The rule of English law that the bank has a lien or more appropriately, a right to set off against all monies of his customers in his hands has been accepted as the rule in India. According to this rule when monies are held by the Bank in one account and the depositor owes the Bank on another account, the Banker by virtue of his lien has a charge on all monies of the depositor in his hands and is at liberty to transfer the monies to whatever account, the banker may likely with view to set off or liquidate the debts : vide Lloyds Bank Ltd. v. Administrator General of Burma AIR 1934 Rang 66 and Devendrakumar Lanchandji v. Gulabsingh AIR 1946 Nag 114." (p. 635)
26. In the case of London and Globe Finance Corpn. [1902] 2 Chancen Division 416, it was decided that if the securities so deposited are left in the hands of a banker after the loan secured is cleared, the securities become subject to the general lien as the customer by leaving them is supposed to have re-deposited them. On the other hand, if, upon sale of the securities deposited for securing an advance there is a surplus remaining, the banker may have a right to set off such surplus as against other sums due from the customer on general account. It was thus held as under :--
"The transactions as between the customer and the broker resulted in a sum owing by the customer to the broker, and there were in the possession of the broker securities which had come into his hands in the course of his business as broker of the customer. It is a well-established principle that the broker has as against the customer the right to hold those securities for the account due."
27. General lien of the bank has been accepted by the Supreme Court in the case reported as Syndicate Bank v. Vijay Kumar AIR 1992 SC 1066, wherein it was held to the following effect :--
"...The above passages go to show that by mercantile system the Bank has a general lien over all forms of securities or negotiable instruments deposited by or on behalf of the customer in the ordinary course of banking business and that the general lien is a valuable right of the banker judicially recognised and in the absence of an agreement to the contrary, a Banker has a general Hen over such securities or bills received from a customer in the ordinary course of banking business and has a right to use the proceeds in respect of any balance that may be due from the customer by way of reduction of customer's debit balance. Such a lien is also applicable to negotiable instruments including FDRs which are remitted to the Bank by the customer for the purpose of collection. There is no gain saying that such a lien extends to FDRs also which are deposited by the customer." (p. 1069)
28. In view of the discussion above, I am of the opinion that the applicant Bank has general lien over the money realized on account of sale of sugar and molasses etc. which was secured under one agreement. The applicant-bank has a right to appropriate the surplus out of such sale proceeds towards the money due to the bank in the other account. In fact, such was the terms of agreement apart from the fact that such right is recognized under the law as well. Learned counsel for the official liquidator could not show any term of the agreement wherein the general lien of the applicant-bank has been curtailed in any manner. Consequently, the consortium of banks are entitled to first appropriate the sale proceeds in the agreed ratio in respect of the outstanding against Cash Credit Pledge Account. The balance, if any, can be appropriated by the consortium of banks in the same ratio in respect of the amount due to them in other accounts.
29. Now the question which remains to be decided is whether interest can be claimed by the secured creditors after the date of winding up order or not. Rule 154 of the Companies (Court) Rules on which counsel for the official liquidator has put reliance is not applicable in respect of the secured creditors who stand outside the winding up. Since the secured creditors stand outside the winding up on the strength of their security, the consortium of banks are entitled to realize the interest in terms of the order passed by the Court of competent jurisdiction. The date of winding up is relevant only for those creditors whose claim is required to be settled by the official liquidator. Since the claim of the consortium of banks is not required to be adjudicated upon by the official liquidator, they are entitled to execute the order inclusive of interest against the sale proceeds of their securities. However, such realization would be subject to the dues of the workmen as and when finalized in respect of which the banks shall furnish undertaking aforesaid.
30. To conclude, it is held that :--
(i) by virtue of the provisions of Section 11 of the Contract Act, the applicant bank had lien over the amount lying deposited under the orders of this Court in respect of its dues irrespective of the fact that the sale proceeds represents the sale of goods secured by the banks under the cash credit accounts;
(ii) the applicant-Bank are entitled to interest in terms of the orders passed by the Debts Recovery Tribunal up to the date of realization; and
(iii) the applicant-Bank shall furnish undertaking to reimburse the Official Liquidator to the extent of the workmen's claims found due and payable without any demur or objection.
31. Thus, both the applications are allowed. The applicants shall now furnish calculations for disbursement as per agreed ratio within three weeks.
32. To come up on 5-3-2004 for further proceedings.