Gujarat High Court
Raja Vidyut Subodh vs Official Liquidator Of Shree Chempest ... on 14 July, 2015
Author: Vipul M. Pancholi
Bench: Vipul M. Pancholi
O/COMA/152/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY APPLICATION NO. 152 of 2015
In COMPANY APPLICATION NO. 14 of 2013
In COMPANY PETITION NO. 46 of 2004
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RAJA VIDYUT SUBODH....Applicant(s)
Versus
OFFICIAL LIQUIDATOR OF SHREE CHEMPEST (INDIA) LTD &
1....Respondent(s)
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Appearance:
MR PAVAN S GODIAWALA, ADVOCATE for the Applicant(s) No. 1
MR GAURANG H BHATT, ADVOCATE for the Respondent(s) No. 1
MR NAVIN K PAHWA, ADVOCATE for the Respondent(s) No. 2
OFFICIAL LIQUIDATOR for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
Date : 14/07/2015
ORAL ORDER
The applicant has taken out this judges summons for the following reliefs:
"A. The Hon'ble Court would be pleased to declare the Applicant Guarantor as secured creditor pursuant to the provisions of section 140 of the contract act as subrogated for debt discharged as guarantor of Company M/s. Shree Chempest (India) Ltd. (In Liquidation) to the Respondent No.2 claiming to be the assignee of the Original secured creditor of the Company now in liquidation.
B. The Hon'ble Court would be pleased to disburse the funds to the Applicant from the realized amount from the sale of the assets of the Page 1 of 20 O/COMA/152/2015 ORDER Company now in Liquidation to the extent of amount paid to the Respondent No.2 for the secured debt in question along with the acrued interest thereon till the disbursement of the amount"
2. Heard learned advocate Mr. Pavan S. Godiawala for the applicant, learned advocate Mr. Gaurang H. Bhatt for respondent No.1-Official Liquidator and learned advocate Mr. Navin K. Pahwa for respondent No.2.
3. Learned advocate for the applicant submitted that this Court passed an order on 19.8.2004 in Company Petition No.46 of 2004 by which the Official Liquidator attached with this Court was appointed as a Liquidator of M/s. Shree Chempest (India) Limited with a direction to take charge of the assets of the Company. Accordingly, the Official Liquidator has taken over the charge of assets of the company. Learned advocate submitted that the applicant and his late mother Mrs. Indiraben S. Raja were contributors, ex-directors and guarantors of the company in liquidation. The personal property of the applicant was given as security to the State Bank of India, being the original lender to the company in liquidation against the loan advanced to the company in liquidation. A deed of assignment was entered into between State Bank of India and respondent No.2-Kotak Mahindra Bank Limited, whereby State Bank of India assigned all its rights, liabilities, etc. in favour of respondent No.2. The alleged assignee bank - respondent No.2 undertook the action under the provisions of the Secularization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short `the SARFAESI Act'), and disposed of the personal bungalow of the applicant, which was in charge of State Bank of India. The amount which was realized from the sale of the said property came to be Page 2 of 20 O/COMA/152/2015 ORDER appropriated by respondent No.2. Thus, the dues of the original lender also got paid off pursuant to such realization. Meanwhile, the assets of the company also came to be sold in the auction conducted in pursuance to the order passed by this Court, and the amount realized from the sale of the assets of the company in liquidation are lying with the Official Liquidator.
3.1 Learned advocate Mr. Godiawala submitted that in view of the provisions of Section 140 of the Contract Act, the applicant is now statutorily eligible, and by operation of law to be declared as secured creditor so far as the dues of the secured debt came to be discharged by the guarantors (the applicants), and hence, the applicant stepped into the shoes of the creditor, and as the secured debt came to be discharged, the applicant became the secured creditor, and therefore, the respondent No.1 be directed to disburse the realized amount from the sale of the assets of the company in liquidation lying with the Official Liquidator to the extent of Rs.1.39 crores along with the accrued interest till the realization of the funds to the applicants.
3.2 Learned advocate further referred to the proceedings of Company Application No.14 of 2013 filed by respondent No.2 for the disbursement of the funds, and submitted that in the said proceedings also, the applicant is joined as party respondent. Learned advocate referred to the copy of the statement of the Bank and a copy of the sheet prepared from the said statement, which is produced at Exh I, and submitted that State Bank of India, being the secured creditor and original lender to the Company, charged exorbitant interest and penalty on the company in liquidation, and thereby recovered sizeable amount from the company in liquidation.
Page 3 of 20O/COMA/152/2015 ORDER 3.3 Learned advocate further stated that though the Honourable Supreme court and this Court partly decided the issue pertaining to the assignment, the issues with regard to stamp duty, Registration Act and other issues were kept open by remanding the matter back to the Division Bench of this Court, and now the matter is disposed of by the learned Company Judge.
3.4 Learned advocate Mr. Godiawala further submitted that the applicant due to lack of knowledge of legal implications and understanding allowed respondent No.2 bank to sell his personal bungalow under the provisions of the SARFAESI Act, pursuant to which respondent No.2 recovered a sizeable amount of Rs.1.39 crores. The said amount is appropriated, and now only a marginal amount is required to be recovered. In the meantime, the assets of the company in liquidation came to be sold, and an amount of Rs.1.24 crores came to be realized. Chartered Accountant is appointed by respondent No.1 for the purpose of ascertaining the entitlement of Rs.57 lacs by the respondent No.2. The respondent No.2 is claiming further amount without any justification, and charging interest on interest. The applicant discharged his obligation as guarantor by permitting to sell a private bungalow by respondent No.2.
3.5 Learned advocate Mr. Godiawala thereafter submitted that unlike assignment, subrogation is automatic, and there is no requirement of written agreement to be subrogated. The guarantor, upon discharging the liabilities of the original borrower in the capacity as guarantor/surety to the secured creditor, steps into the shoes of such secured creditor, and enjoys all the entitlements, advantages, benefits as creditor, as can be enjoyed by the secured creditor, and therefore, such guarantor gets subrogated for the amount of secured debts.
Page 4 of 20O/COMA/152/2015 ORDER 3.6 Learned advocate Mr. Godiawala further contended that the assignee bank, which is not a securitization and/or reconstruction company, cannot be legally permitted to initiate actions under the provisions of the SARFAESI Act. The assignee in such eventuality is entitled to realize the dues by resorting to provisions of Recovery of Debts Due to the Banks and Financial Institutions Act of 1993 (for short `Debts Recovery Act'). SARFAESI Act deals with the original lender and borrower, and not with the creditor and the debtor. Learned advocate submitted without admitting that if the assignee bank is having any right, at the most, it can be said that the assignee bank become a creditor, but not a creditor who can initiate actions under the SARFAESI Act.
3.7 In the present case, learned advocate submitted that the applicant and his late mother have given permission to sell the private bungalow of the applicant to respondent No.2, but thereby the legal position would not change, and giving of consent would not circumvent the provision of law. However, when respondent No.2 realized and appropriated the amount from the sale of personal asset of the applicant, the applicant is eligible under the provisions of the Indian Contract Act to be subrogated as secured creditor, as the secured debt got discharged.
3.8 Without prejudice to the aforesaid contentions, learned advocate Mr. Godiawala contended that even if the claim of respondent No.2 as ascertained by the Chartered Accountant is correct, then also excess amount is lying with the Official Liquidator along with accrued interest thereon, and therefore, such excess amount shall have to be disbursed to the applicant now as secured creditor.
Page 5 of 20O/COMA/152/2015 ORDER 3.9 Learned advocate Mr. Godiawala therefore submitted that this application be allowed, and the applicant be declared as secured creditor in view of the provision of Section 140 of the Contract Act as subrogated for debt discharged as guarantor of company in liquidation to respondent No.2, and disburse the funds to the applicant from the realized amount from the sale of the assets of the company in liquidation to the extent of the amount paid to respondent No.2.
3.10 Learned advocate Shri Godiawala appearing for the applicant submitted that respondent No.2 was not entitled to sell the property of the applicant because the bungalow of the applicant was mortgaged with the original lender. Respondent No.2 is the assignee. However, when respondent No.2 has already sold the bungalow of the applicant, the secured debt got discharged pursuant to the said sale of the private property given by way of security, and therefore, the amount which is received by respondent No.2 from the sale of the said property be appropriated towards the outstanding dues of the company in liquidation. When the amount of Rs.1.30 cr. is already appropriated towards outstanding dues, now the applicant be declared as subrogated. Learned advocate further submitted that the funds as realized and lying with the Official Liquidator are in excess, and even without admitting if the remaining dues of the secured creditor, i.e. respondent No.2 is kept aside, the balance amount is required to be disbursed to the applicant. He, therefore, submitted that this application be allowed.
3.11 Learned advocate Mr. Godiawala has placed reliance upon the order dated 8.4.2008 passed by this Court in Company Application No.503 of 2007. In the said case, the concerned applicants as guarantors paid the amount of the borrower, and therefore, this Court held that the Page 6 of 20 O/COMA/152/2015 ORDER said applicants become secured creditors proportionately for the said credit, and therefore, considering the provisions of Sections 140 and 141 of the Indian Contract Act, it was held that the applicants become secured creditors to the extent of the payments made by them to the concerned bank.
3.12 Thereafter, learned advocate for the applicant further placed reliance upon the judgment dated 4.8.2009 rendered by this Court in Company Application No.358 of 2008, wherein this Court in paragraph No.20(A) and 20(B) held as under:
"A. If after the satisfaction of the debt under Section 529A, any surplus/balance amount is available, the secured creditors would be entitled to the remaining share, if paid less on account of the workers claim to the extent of the money realized from such property, which was as the security of such secured creditor. But, such would be restricted to the contractual interest up to the date of winding up.
B. If the secured creditor is holding the decree for the interest as per the contractual rate, even for the period later to the date of winding up, he would be entitled to the interest at the rate of 4% p.a. from the date of winding up, until the property is sold from the available surplus/balance fund realised from such security, prior to the payment attributable to the preferential creditors under Section 530 of the Act. If the secured creditors are not holding the decree, for any interest later to the date of winding up, their claim is not required to be considered for interest in such category."
4. On the other hand, learned advocate Mr. Navin K. Pahwa Page 7 of 20 O/COMA/152/2015 ORDER appearing for respondent No.2 has strongly opposed this application, and submitted that this application is not maintainable. Sections 140 and 141 of the Contract Act are not applicable to the facts of the present case. He contended that the bungalow of applicant was mortgaged in favour of respondent No.2. The said property was sold by respondent No.2 under the provisions of the SARFAESI Act, after complying the formalities of all the provisions of the said Act and the Rules framed thereunder. The possession of the said property was taken over with the assistance of the Chief Metropolitan Magistrate under Section 14 of the said Act. The applicant, therefore, preferred Special Civil Application No.21879 of 2007. This Court granted interim stay on the sale of the mortgaged property. Respondent No.2, therefore, preferred Letters Patent Appeal No.1612 of 2007 wherein stay was continued for a period of fifteen days with a direction to dispose of the Special Civil Application. Thereafter, the applicant and respondent No. 2 entered into settlement. Consent terms were filed before this Court in Special Civil Application No.21879 of 2007. By way of said settlement, applicant agreed that respondent No.2 was entitled to proceed against the bungalow, and respondent No.2 was entitled to sell the same and appropriate the sale proceeds against the dues of the company in liquidation. Respondent No. 2 was entitled to recover the balance amount from the company in liquidation. In view of such consent terms, the bungalow was sold for a sum of Rs.1.30 crores. Special Civil Application was disposed of by an order dated 27.3.2008 in terms of the consent terms. Learned advocate Mr. Pahwa referred to the consent terms produced at page 68 of the compilation.
4.1 Learned advocate Mr. Pahwa further contended that the bungalow, which was the property of the applicant, was mortgaged in favour of the Bank, and was sold. They have not paid any amount on behalf of the Page 8 of 20 O/COMA/152/2015 ORDER company in liquidation, and therefore, the applicant is not entitled for subrogation of the debt paid on behalf of the company.
4.2 Learned advocate Mr. Pahwa thereafter submitted that the contention of the applicant that State Bank of India has charged exorbitant interest is required to be discarded in view of the fact that the said issue has been decided by the Debt Recovery Tribunal, Ahmedabad in the Original Application filed against the applicant and the company in liquidation. The applicant has not challenged the decree passed by the Debt Recovery Tribunal, and therefore, at this stage, the applicant cannot raise such contention.
4.3 Learned advocate Mr. Pahwa further contended that respondent No.2 bank sold the bungalow in question under the provisions of the SARFAESI Act since the bungalow was mortgaged by the applicant in favour of the bank as security interest. Respondent No.2 bank has enforced the security interest under the provisions of the SARFAESI Act, and realized part of its dues. Respondent No.2 executed registered sale deed in favour of the purchaser. The applicant and his mother were the affirming parties to the said registered sale deed, and they have consented to the transfer of the title in favour of the purchaser. It is undisputed that the bungalow in question belonged to the applicant, and was mortgaged in favour of respondent No.2. The applicant being guarantor has not redeemed the mortgage created of the assets of the company in liquidation nor they have paid any amount on behalf of the company in liquidation. The bungalow was sold against the dues of the applicant and his mother as guarantors. He once again contended that dues of the bank are not fully satisfied, and only part of the dues were realized. Thus, there is no subrogation in favour of the applicant as per Page 9 of 20 O/COMA/152/2015 ORDER Sections 91 and 92 of the Transfer of Property Act and Sections 140 and 141 of the Contract Act. He further contended that the applicants are not secured creditors, and they cannot seek any claim for disbursement of the amount.
4.4 Learned advocate Mr. Pahwa thereafter submitted that the outstanding dues of the company in liquidation are adjudicated by the competent authority, viz. the Debt Recovery Tribunal. The respondent No.2 has lodged the claim with the Official Liquidator. The same was forwarded to the Chartered Accountant for verification as per the permission granted by this Court. The concerned Chartered Accountant verified the claim, and gave his report dated 21.5.2013. In the said report, the Chartered Accountant has clearly stated that the applicant is not a secured creditor. The said Chartered Account further stated that respondent No.2, after adjusting the amount of Rs.1.30 cr. already received from the sale of the bungalow of the applicant, is entitled to get Rs.53,49,005/-. Respondent No.2 has contested the said finding, and claimed more amount. Respondent No.2 is the sole secured creditor of the company in liquidation, and is entitled to recover the dues as per the recovery certificate issued by the Debt Recovery Tribunal.
4.5 Learned advocate Mr. Navin Pahwa appearing for respondent No.2 submitted that the order dated 8.4.2008 passed by this Court in Company Application No.503 of 2007 relied upon by the applicant is not applicable to the facts of the present case. In the said case, the concerned applicant, as guarantor issued the cheques on behalf of the borrower. Therefore, this Court considered him secured creditor being subrogated in place of the concerned bank. Whereas, in the present case, the applicant-
guarantor mortgaged his bungalow with State Bank of India. The
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O/COMA/152/2015 ORDER
borrower company could not pay the amount to the said bank. The State Bank of India executed a deed of assignment in favour of respondent No.2 bank, proceedings were initiated under the SARFAESI Act, and in pursuance to the orders passed by the Debt Recovery Tribunal, respondent No.2 bank sold the property of the applicant-guarantor and appropriated the amount towards the debt of the borrower company in liquidation.
4.6 Learned advocate Mr. Pahwa further submitted that reliance placed by the learned advocate for the applicant on the oral judgment dated 4.8.2009 rendered by this court in Company Application No.358 of 2008 is misconceived. He submitted that in paragraph No.20(C) of the said order, this Court has held as under:
"(C) The remaining unpaid amount of interest as per the decree of the secured creditor is to be considered for payment, if surplus amount remains after satisfying the debt of all other creditors."
4.7 Learned advocate Mr. Pahwa further submitted that respondent No.2 is standing outside the liquidation proceedings, and it is entitled to realize the decreed amount with interest as per the order passed by the Debt Recovery Tribunal till the date of the payment, and therefore, Rule 154 of the Companies (Court) Rules of 1959 does not in any manner mandate compulsory consideration of the date of winding up order for calling of claims. He thus contended that the claim of the respondent No.2 cannot be restricted till the date of order of winding up. Date of winding up is relevant only for those creditors whose claims are required to be adjudicated by the Official Liquidator. He, therefore, submitted that the claim of respondent No.2 is to the extent of Rs.1,64,61,922/- as on Page 11 of 20 O/COMA/152/2015 ORDER 9.1.2013 together with further interest @ 12% per annum from 10.1.2013 till realization.
4.8 Learned counsel for respondent No.2 thereafter placed reliance upon the decision rendered by the Kerala High Court in the case of Federal Bank Limited vs. Official Liquidator reported in 2003 (1) ILR 572 and more particularly observation made in paragraph No.7 of the said order.
He, therefore, submitted that the present application is not maintainable, and as such, the same may be dismissed.
5. I have considered the rival submissions canvassed on behalf of the learned advocates for the parties. I have also gone through the documents produced on record as well as the provisions of law relied upon by the learned advocates, and the decisions cited by the learned advocates for the parties.
6. The questions which are required to be considered in this application are -
(i) Whether the applicant-guarantor can be declared as secured creditor pursuant to Section 140 of the Contract Act or not?
(ii) Whether the Official Liquidator can be directed to disburse the funds to the applicant from the realized amount from the sale of assets of the company in liquidation to the extent of the amount paid by applicant to respondent No.2?Page 12 of 20
O/COMA/152/2015 ORDER
7. For considering the aforesaid issues, certain provisions of the Contract Act as well as Transfer of Property Act are required to be considered by this Court.
Sections 140 and 141 of the Contract Act provide as under:
"140. Rights of surety on payment or performance. - Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor."
"141. Surety's right to benefit of creditor's securities. - A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, or without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security"
Sections 91 and 92 of the Transfer of Property Act provide as under:
"91. Persons who may sue for redemption. - Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property, namely:-
(a) any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;
(b) any surety for the payment of the mortgage-debt or any part
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O/COMA/152/2015 ORDER
thereof; or
(c) any creditor of the mortgagor who has in a suit for the
administration of his estate obtained a decree for sale of the mortgaged property.
92. Subrogation. - Any of the persons refer to in section 91 (other than the mortgagor) and any co-mortgagor shall, on redeeming property subject to the mortgage, have, so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee. The right conferred by this section is called the right of subrogation, and a person acquiring the same is said to be subrogated to the rights of the mortgagee whose mortgage he redeems.
A person who has advanced to a mortgagor money with which the mortgage has been redeemed shall be subrogated to the rights of the mortgagee whose mortgage has been redeemed, if the mortgagor has by a registered instrument agreed that such persons shall be so subrogated. Nothing in this section shall be deemed to confer a right of subrogation on any person unless the mortgage in respect of which the right is claimed has been redeemed in full."
8. In the present case, State Bank of India had granted various credit facilities to Shree Chempest (India) Limited. The said company had mortgaged its property, i.e. plant, machinery and building situated at G.I.D.C. Chhatral by way of security for repayment of the said credit facilities. The present applicant and his mother were the promoters of the company. They also as guarantors mortgaged their personal property being bungalow situated at Bodakdev by way of security for the credit facilities given by the State Bank of India. In view of the continuous defaults by the said company, State Bank of India filed a suit being Page 14 of 20 O/COMA/152/2015 ORDER Original Application No.170 of 2001 before the Debt Recovery Tribunal, Ahmedabad, for recovery of its dues and enforcement of securities. In the meantime, the aforesaid company came to be wound up by an order dated 19.8.2004 passed by this Court in Company Petition No.46 of 2004. Thereafter, Debt Recovery Tribunal passed an order on 25.5.2005 whereby a direction was given to the company in liquidation and the guarantors to pay Rs.1,27,45,610/- with simple interest @ 12% per annum from 30.3.2001 till realization. Thereafter, State Bank of India executed deed of assignment with respondent No.2 herein, i.e. Kotak Mahindra Bank Limited. Respondent No.2 initiated proceedings under the provisions of the SARFAESI Act in respect of bungalow mortgaged by the guarantors, i.e. the applicant herein. The possession of the said property was also taken over with the assistance of the Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act. The applicant and his mother challenged the order of the Chief Metropolitan Magistrate before this Court by filing Special Civil Application. Learned Single Judge granted stay in favour of the applicant. Respondent No.2 bank challenged the said order by filing Letters Patent Appeal before the Division Bench of this Court. The Division Bench disposed of the said appeal with a direction to the learned Single Judge to dispose of the petition within a stipulated time limit. In the meantime, the present applicant settled the matter with the respondent No.2 bank. The terms of settlement was produced on record, and thereby the applicant permitted respondent No.2 bank to sell his mortgaged property i.e. the bungalow, and permitted respondent No. 2 to appropriate the amount towards the debt of the company in liquidation.
9. Thus, in view of the aforesaid facts of the present case, it is clear that the applicant has not voluntarily paid the amount on behalf of the Page 15 of 20 O/COMA/152/2015 ORDER company in liquidation. In fact, his bungalow, which was mortgaged by way of security, was sold by respondent No.2 in pursuance to the proceedings initiated under the SARFAESI Act.
10. The applicant, in fact, challenged the order by filing Special Civil Application before this Court, and the matter was settled between the parties during the pendency of the said proceedings. But the fact remains that the personal property of the applicant-guarantor, which was mortgaged with the Bank, was sold in pursuance of the proceedings under the SARFAESI Act, and hence, in the facts of the present case, I am of the opinion that the provisions of Sections 140 and 141 of the Contract Act are not applicable. The applicants, therefore, cannot be said to have subrogated the debt of the company in liquidation, and hence the applicant cannot be considered as secured creditor.
11. Another contention of learned advocate Mr. Godiawala is that State Bank of India has charged exorbitant interest, which is not permissible under the law. However, the said contention is required to be rejected because all the contentions, including the interest, were considered by the Debt Recovery Tribunal, Ahmedabad, in Original Application filed before it. The decree passed by the Debt Recovery Tribunal has not been challenged by the applicant. Thus, the decree passed by the Debt Recovery Tribunal has attained finality.
12. The next contention raised by learned advocate Mr. Godiawala is that respondent No.2-bank has appropriated an amount of Rs.1.30 cr. after the bungalow of the applicant was sold, and hence, as per the report of the Chartered Accountant, respondent No.2 is entitled to get Rs.53,49,005/- only. The Official Liquidator is having Rs.
Page 16 of 20O/COMA/152/2015 ORDER Rs.1,18,84,104/- in the account of the company in liquidation, and therefore, after the amount of Rs.53,49,005/- is granted to respondent No.2, the remaining amount be disbursed to the applicant. His further contention is that respondent No.2 is not entitled to get any interest on the said amount. Alternately, it was contended that respondent No.2 is entitled to get interest @ 4% per annum only.
However, this contention of the applicant is misconceived. The Debt Recovery Tribunal has passed a decree on 22.2.2005, whereby a direction was given to the company in liquidation and the guarantors to pay Rs.1,27,45,610.19ps. with simple interest @ 12% per annum from 30.3.2001 until realization.
13. In the case of Federal Bank Limited (supra) Honourable Supreme Court in paragraph 7 held as under:
"7. The question to be examined is whether a secured creditor who was granted leave under section 446, and obtained a civil court decree with interest, at the rate of 10 per cent, is still entitled to get only 4 per cent just like secured creditors, workmen etc. whose claims were to be settled in the winding up proceeding. We are of the view, as far as persons who are covered by section 529A read with rule 179 of the Companies (Court) Rules are concerned, they are bound by those rules. Granting of interest at rate exceeding 4 per cent as per a court decree does not mean tampering the claim of secured creditors covered by section 529A, who are not entitled to interest contrary to rule 179 of the Companies (Court) Rules. Secured creditors, who had obtained a decree from a civil court with interest, can claim the amount as per the decree with interest without prejudice to the rights of those secured creditors and workmen covered by section 529A read with rule 179. In other words, Page 17 of 20 O/COMA/152/2015 ORDER right of those secured creditors covered by section 529A read with rule 179 is also to be respected vis-a-vis decree obtained by secured creditors outside the winding up proceedings, but only to the extent of limitation prescribed with regard to interest under rule 179. Decree obtained by secured creditor, who stood outside the winding up of the company, shall not defeat the rights of secured creditors covered by section 529A read with rule 179, to that extent rights of those persons covered by section 529A read with rule 179 are protected."
The Honourable Supreme Court further laid down the principles which are as under:
"From the above discussion, the following principles would emerge.
(i) A secured creditor could obtain leave of the court for standing outside the winding up jurisdiction of the Company Court so as to proceed against the security, and could enforce the decree as against the Official Liquidator.
(ii) The Company Court, while granting leave under Section 446 has got the power to incorporate such terms, if it so finds necessary to safeguard the interest of the creditors, contributors, workmen affected by the liquidation proceedings.
(iii) A secured creditor, who obtained leave without any conditions under section 446, could enforce the decree fully as against the liquidator subject to section 529A of the Companies Act read with Rule 179 of the Companies (Court) Rules.
(iv) The Official Liquidator is bound by the Decree obtained by a secured creditor from a court of competent jurisdiction with leave of the Company Court under section 446 of the Companies Act, and no plea inconsistent with the Decree passed against the Official Liquidator could be raised while discharging the priorities under sub-section (d) of section
446. However, this would be subject to the rights of the secured creditors Page 18 of 20 O/COMA/152/2015 ORDER covered under section 529(A) of the Companies Act read with Rule 179 of the Companies (Court) Rules.
(v) Dues of workmen and debts due to secured creditors under section 529A are to be treated pari passu, and shall be paid in priority to all other debts. However, under Rule 179 in the event of there being a surplus after payment in full of all the claims admitted to proof, creditors whose proofs have been admitted would be entitled to only interest at the rate of 4 per cent per annum on the admitted amount of claim and cannot get interest in excess of Rule 179 even though secured creditor who stood outside the winding up proceedings had obtained decree in excess of 4 per cent interest per annum.
(vi) Secured creditor who stood outside the winding up proceedings and obtained decree can enforce the decree as against the assets, and the ceiling with regard to payment of interest under Rule 179 would not apply in the case of those secured creditors, and they are entitled to get interest as decreed by the civil court. In a case where there is no surplus after payment in full of all the claims admitted of proof, the creditors who stood outside the winding up proceedings as well as the secured creditors, who fall under Section 529A, would be treated alike to the extent of granting interest at the rate of 4 per cent under Rule 179 of the Companies (Court) Rules. In a case where there is surplus amount after satisfying the decree of secured creditors, including secured creditors who stood outside the winding up as well as those who covered under section 529A read with Rule 179, secured creditors who obtained decree with interest at the rate more than 4 per cent would be entitled to realise the said interest from the surplus amount. In such an event, even though there is surplus amount secured creditors covered under section 529A are not entitled to demand in excess of 4 per cent."
In view of the aforesaid decision, it is clear that in case where there is surplus amount after satisfying the decree of the secured creditors, Page 19 of 20 O/COMA/152/2015 ORDER including secured creditors who stood outside the winding up as well as those who covered under section 529A read with Rule 179, secured creditors who obtained decree with interest at the rate more than 4 per cent would be entitled to realize the said amount as surplus amount. In the present case, respondent No.2 is the only secured creditor, and therefore, it is entitled to get interest awarded by the Debt Recovery Tribunal. After the claim of respondent No.2 is satisfied as per the decree passed by the Debt Recovery Tribunal, if any amount remains as surplus, the Official Liquidator is entitled to disburse the same in favour of the applicant.
14. Thus, in view of the aforesaid discussion, the applicant cannot be declared as a secured creditor, and therefore, the Official Liquidator cannot be directed to disburse the funds to the applicant from the realized amount from the sale of the company in liquidation to the extent of the amount paid by the applicant to respondent No.2. Accordingly, this application fails, and it is dismissed accordingly.
(VIPUL M. PANCHOLI, J.) sndevu Page 20 of 20