Gujarat High Court
Suleman vs Kotak on 12 July, 2010
Author: K.A.Puj
Bench: K.A.Puj
Gujarat High Court Case Information System
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COMA/168/2010 33/ 33 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY
APPLICATION No. 168 of 2010
In
COMPANY
PETITION No. 18 of 1998
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ Sd/-
===================================
1.
Whether
Reporters of Local Papers may be allowed to see the judgment ?
YES
2.
To
be referred to the Reporter or not ?
YES
3.
Whether
their Lordships wish to see the fair copy of the judgment ?
NO
4.
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
NO
5.
Whether
it is to be circulated to the civil judge ?
NO
===================================
SULEMAN
A KALANIYA & 9 - Applicants
Versus
KOTAK
MAHINDRA BANK LTD & 6 - Respondents
===================================
Appearance
:
MR ASHOK L
SHAH WITH MR
P A MEHD for Applicants.
MR NAVIN K PAHWA for Respondent No. 1.
NOTICE SERVED BY DS for Respondent Nos.2,4 - 5.
MS NALINI S
LODHA for Respondent No. 3.
MR M R BHATT, SENIOR ADVOCATE WITH
MRS MAUNA M BHATT for Respondent No. 6.
MR JS YADAV for Official
Liquidator.
===================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
Date
: 12/07/2010
ORAL JUDGMENT
The applicants have taken out this Judge's Summons praying for quashing and setting aside the auction of the assets of the Stanrose Steel Limited to be held on 13.07.2010. The applicants have further prayed for stay restraining the Sale Committee from selling the assets of Stanrose Steel Limited with encumbrances. The applicants have sought for the direction to the Official Liquidator to find out the encumbrances on the assets of Stanrose Steel Limited. They have also prayed for stay restraining the Sale Committee from conducting the auction proceedings of the assets of Stanrose Steel Limited under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. They have also prayed for stay restraining the Sale Committee from disposing of the assets of Stanrose Steel Limited.
An affidavit-in-support of the Judge's Summons is filed by Mr. R. G. Makwana, the applicant No.9.
Mr. Ashok L. Shah, learned advocate appearing for the applicants has submitted that the respondent No.1 Bank has published a notice for auction of the assets under the provisions of the Securitisation Act. The said auction is to be held on 13.07.2010. the applicants have obtained a copy of the bid document for the said auction. Clause 2.7 of the said bid document reads as follows :-
The Unit may have certain outstanding liabilities which are to be met by the purchaser and which will be over and above the purchase consideration. KMBL is not aware of any such amounts. The prospective purchasers may carry out his due-diligence in respect of likely liabilities pertaining to the Unit before submitting the bid. It may be noted that the purchaser will be solely responsible for meeting these liabilities, if they arise, and KMBL will not be liable to meet any such liabilities whatsoever.
He has submitted that the assets are not being sold free of all encumbrances as is contemplated under the provisions of the Companies Act, 1956 and the Rules made thereunder. He has further submitted that the Official Liquidator has not bothered to do his duty and find out the liabilities on the assets of the Company. He has further submitted that the very concept of the sale under the provisions of the Companies Act require that the assets are sold free of all encumbrances to ensure that the maximum price is fetched and the sale proceeds are distributed amongst all the Creditors in order of priority. If the assets are sold with liabilities, firstly, lesser amount would be realized as sale consideration and secondly, there is a chance that the Creditors who would otherwise not be entitled to claim priority would get priority and would manage to recover full portion of their debt since the property is sold with the said encumbrances of those Creditors. It may also be possible that some Creditors who are Unsecured Creditors would get payment from purchaser of the property and thus would steal a march over other Unsecured Creditors of the Company in liquidation in clear violation of the provisions and Scheme of the Act relating to distribution of the assets of the Company in liquidation amongst its Creditors. He has further submitted that the Scheme of the Companies Act itself demands that the property sold by the order of the Company Court is sold free of all encumbrances.
Mr. Shah further submitted that the respondent No.1 Bank in the bid document, represents itself as a Secured Creditor despite an observation made by this Court that the said status is not granted to it. He has further submitted that the earlier order dated 29.02.2008 passed by this Court was merely an arrangement of convenience and it was practically a consent order passed since no person who was then a party had an objection to the auction being conducted under the provisions of the Securitisation Act. The applicants were never party to the said proceedings and were not even heard when the said order was passed. He has, therefore, submitted that in view of the fact that the applicants have an objection, the arrangement which was made practically by consent of the parties may be modified by this Court and appropriate directions to this effect may be issued before any further auction takes place.
He has further submitted that even otherwise, since the auction which took place on the basis of the order dated 29.02.2008 has already failed, the issuance of any directions modifying auction conditions would not amount to a review of the earlier order and it would even otherwise be open for this Court to pass a second order for directing the course of the auction proceedings. Since the conditions of the auction are not in compliance with the provisions of the Companies Act and since the auction proposes to dispose off the assets with encumbrances, the said auction proceedings deserve to be quashed.
Mr. Shah has further submitted that it is the duty of the office of the Official Liquidator to find out the encumbrances on the property and thereafter to fix the order of priority and distribute the funds realized from the sale of the assets. The Official Liquidator is in breach of duty since he has not found and adjudicated any of the encumbrances on the property in question. For this purpose, he relied on the provisions contained in Section 457 as well as Rules 147 to 167 of the Companies (Court) Rules, 1957. Mr. Shah further submitted that in the present case, the respondent No.1 Bank has not granted any financial assets or loan to Stanrose Steel Limited and, therefore, Stanrose Steel Limited is not a borrower of the respondent No.1 Bank. The respondent No.1 Bank claims to be a Creditor of the said Company on the basis of its acquiring claims of respondent Nos.2 to 5 against the said Company. In that case, the respondent No.1 Bank does not become a lender and the said Company does not become a borrower within the meaning of the Securitization Act. Had the respondent No.1 Bank been a Securitization Company under the Securitization Act, on its acquiring claims of the respondent Nos.2 to 5 against the Company, it would have become lender by virtue of express deeming provisions of Section 5 (2) of the Securitization Act. The acquiring body would be deemed to be a lender only if it fulfills the requirements of Section 5 (2) which requirement is that the acquiring body must be a Securitization Company or a reconstruction Company under the Securitization Act. In case of no other acquiring body that deeming fiction applies and such other acquiring body would not be a lender and consequently would have no rights under the Securitization Act. The respondent No.1 Bank is admittedly not a Securitization Company or a reconstruction Company. Only either the original lender or a Securitization Company to which a debt is assigned by the original lender can take action under the provisions of the Securitization Act. The respondent No.1 Bank is neither the lender nor Securitization Company which has acquired a debt and consequently the provisions of the Securitization Act do not apply to it and it cannot take any action under the Securitization Act. The present sale is sought to be conducted under the provisions of the Securitization Act. The respondent No.1 Bank is not entitled to carry on the business of securitization. The proposed auction of assignment and securitization by the respondent No.1 Bank is beyond the scope of powers and authorities conferred by the Banking Regulation Act, 1949. The respondent No.1 Bank cannot do the business of buying and dealing in debts claims of other Banks as the respondent No.1 Bank is a Banking Company cannot do the business of buying and trading in debts.
Mr. Shah further submitted that the alleged deeds of assignment are neither valid nor enforceable and create no rights in favour of the respondent No.1 Bank. The Deed of Assignment does not bear proper stamp duty and proper stamp duty has not been paid on the said Deeds of Assignment. He has further submitted that the Deed of Assignment is not a simple deed of assignment. It is a novatio also. It also seeks to transfer the Company's and the guarantors' rights and privileges against the respondent Nos.2 to 5. As stated in the Deed of Assignment, it seeks to transfer the Companies and guarantors rights and privileges. One of the Clauses in one of the Deeds of assignment reads The assignee agrees that the rights and privileges of the Client under the financial instruments will continue unless otherwise agreed to between the client and the assignee. Thus, the said Clause seeks to transfer the Company's and the guarantors' rights and privileges without their consent. This is not permissible and is not effective. The said term seeks to create a novatio without the consent of the Company and the guarantors. None of their rights and privileges against the respondent Nos.2 to 5 can be transferred in favour of the respondent No.1 Bank without their consent. He has further submitted that the consideration and object of the Deeds of assignment is illegal and hence the same is forbidden by law and if it is permitted to operate, it would defeat the provisions of the law and it being fraudulent, is opposed to public policy. He has, therefore, submitted that the prayers made by the applicants in this Judge's Summons are required to be granted.
In support of his submissions, he relied on the following decisions :-
Amar Nath Krishan Lal and others V/s. Hindustan Forest Company (Pvt.) Limited, (1993) 77 COMPANY CASES 128 (Punjab & Haryana) State Bank of Hyderabad V/s. Official Liquidator, (1999) 98 COMPANY CASES 679 (ANDHRA PRADESH) Re. Oswal Agro Furane Limited (In Liquidation), (2008) 8 SCL 44 (Punjab & Haryana) Mr. N. K. Pahwa, learned advocate appearing for the respondent No.1 Bank has submitted on the basis of the affidavit-in-reply filed on 07.07.2010 that the applicants have no right to maintain this application in view of the fact that the sale proceedings are being conducted by a Sale Committee appointed by this Court and the action of the respondent No.1 has already been approved by this Court in writ proceedings. He has further submitted that being aggrieved by the sale of the properties of the Company in liquidation under the SARFAESI Act, the applicants filed Special Civil Application No.7979 of 2008 which came to be dismissed by this Court on 21.07.2009. The said order was carried in appeal before the Division Bench by filing Letters Patent Appeal No.1951 of 2009. The Division Bench not only confirmed the order passed by the learned Single Judge but also accepted the action of the respondent No.1 Bank as valid. The Division Bench after considering various orders passed by the Apex Court in the pending SLP (C) No.2240 of 2009 observed that in view of the above interim orders of the Apex Court, the judgment of another Division Bench of this Court holding the assignment to be invalid cannot come in the way of the respondent Bank. The appellants / present applicants are the guarantors for the dues of the Company in liquidation and the respondent is presently not proceeding against the appellants or the properties of the appellants. He has further submitted that the order passed by the Division Bench of this Court has also been approved by the Apex Court when the SLP filed by the applicants was dismissed as withdrawn vide order dated 07.05.2010. He has, therefore, submitted that the action of the respondent No.1 Bank in conducting sale of the properties of the Company in liquidation under SARFAESI Act has been found to be legal and valid by the Division Bench. The Division Bench further held that the present applicants who were the appellants in the said appeal would have no locus to challenge the sale of the properties of the Company in liquidation as the respondent No.1 was not proceeding against the guarantors.
Mr. Pahwa has further submitted that the applicants have also suppressed the fact that the applicants have filed an application / appeal under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal, Ahmedabad on some what similar reliefs as are prayed in the present application. The applicants were relegated to the Debts Recovery Tribunal by this Court on the proceedings taken out by the applicants being Special Civil Application No.7979 of 2008. However, the applicants have chosen to file appeal against the said Special Civil Application being Letters Patent Appeal No.1951 of 2009 and later on carried the same to the Apex Court. After exhausting that remedy, they have now chosen to concurrently pursue the present Company Application as well as filed an application under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal. He has, therefore, submitted that the present proceedings are not maintainable on the said ground.
Mr. Pahwa has further submitted that the only intention of the applicants to move the present Company Application is to avoid auction to be held by the respondent No.1 Bank. The applicants have taken recourse to various proceedings in past. However, the applicants have failed in all the proceedings. They have, however, successfully prevented the respondent No.1 Bank to sell the properties of the Company in liquidation. The respondent No.1 Bank is incurring huge expenditure everyday towards security and other expenses for protecting the assets of the Company in liquidation. The respondent No.1 Bank has also made various other expenses required for sale of the properties of the Company in liquidation and for defending the legal proceedings. He has, therefore, submitted that though the applicants have no locus whatsoever to prevent assets of the Company in liquidation being sold, the applicants by filing frivolous litigations are causing serious prejudice to the Creditors and the properties of the Company in liquidation. He has, therefore, submitted that the present application deserves to be summarily rejected with exemplary costs.
Mr. Pahwa has further submitted that the terms and conditions based on which sale is proposed are valid. In any case, the applicants have filed an appeal / application under Section 17 of the Act for almost similar challenge and reliefs. The SARFAESI Act and the Rules framed thereunder take care of all such eventualities. The applicants have raised this ground with the sole object of delaying auction / sale of the properties of the Company in liquidation with ulterior motives. The applicants without having any locus whatsoever are causing serious prejudice and harassment to the Creditors and also to the properties of the Company in liquidation. He has further submitted that in any case, the sale is subject to the final approval of this Court and hence, there is no reason not to reject the said application preferred by the applicants.
The Official Liquidator has filed his report. Mr. J.S. Yadav, learned advocate appearing for the Official Liquidator has submitted that the main contention of the applicants is that the respondent No.1 Bank is neither a Secured Creditor nor a Securitization Company or Reconstruction Company. Therefore, the Bank cannot sell the properties of the Company in liquidation under the Securitization Act. The applicants have further contended that properties are sought to be sold with unknown encumbrances to be paid by the purchaser over and above the purchase consideration, thereby the non-entitled Unsecured Creditor would get priority over the other entitled Creditors. He has further submitted that the applicants have pressed that the assets of the Company should be sold under the Companies Act free from all encumbrances after ascertaining and determining the claims of all classes of Creditors of the Company under the Companies Act and the Companies (Court) Rules, 1959. In this connection, he has submitted that the respondent No.1 Bank is conducting the sale under Securitization Act as convener of the Sale Committee appointed by this Court. The respondent No.1 Bank after conducting the auction will be required to submit an application to this Court for confirmation of sale. Therefore, there is no infirmity in the sale proceedings. However, it remains a fact that the respondent No.1 Bank is neither a Secured Creditor nor a Securitization Company or Reconstruction Company. Therefore, it appears that the respondent No.1 Bank even otherwise is not competent to invoke the provisions of the Securitization Act for sale of the assets of the Company in liquidation. He has further submitted that if the assets of the Company are directed to be sold under the Companies Act through a Sale Committee, the assets may be sold free from all encumbrances under the order of this Court. In the present situation, when the possession of the assets of the Company is not with the Official Liquidator and nothing is likely to come into the hands of the Official Liquidator out of the sale proceeds, the claims against the Company have not been determined. He has, therefore, submitted that appropriate orders may be passed by the Court considering all these aspects of the matter.
Mr. M. R. Bhatt, learned Senior Advocate appears on behalf of the respondent No.6 GIIC and he has virtually adopted the arguments canvassed by Mr. Pahwa. He has, therefore, submitted that the application deserves to be rejected.
Having heard learned advocates appearing for the parties and having gone through the facts stated, averments made and the contentions raised in the memo of Company Application as well as affidavit-in-reply filed by the respondent No.1 Bank and in the report of the Official Liquidator, the Court is of the view that the applicants have raised several issues in this application. However, except one issue, almost all issues were raised by the applicants in the earlier proceedings filed before this Court in Special Civil Application No.7979 of 2008, Letters Patent Appeal No.1951 of 2009 and SLP (Civil) No.8207 of 2010 filed before the Apex Court and since the finality was reached qua those issues, it is not permissible for the applicants to raise all these issues once again in this Company Application.
Only issue which requires consideration by this Court is in relation to the grievance raised by the applicants for the terms set out in the tender document, with special reference to condition No.2.7 which states that the Unit may have certain outstanding liabilities which are to be met by the purchaser and which will be over and above the purchase consideration. It further states that the prospective purchaser may carry out his due diligence in respect of likely liabilities pertaining to the Unit before submitting the bid and the purchaser will be solely responsible for meeting these liabilities, if they arise and the respondent No.1 Bank would not be liable to meet with any such liabilities whatsoever. While challenging this term of the bid document, Mr. Shah has strongly urged before the Court that the Liquidator has no right or power to sell properties of the Company with encumbrances. For this purpose, he relied on the provisions contained in Sections 456 & 457 of the Companies Act, 1956 as well as Rules 163 to 169 of the Companies (Court) Rules, 1959. Under Sections 456 & 457, the Official Liquidator has power to sell properties of the Company and not the liabilities or debts of the Company. It is also the submission of Mr. Shah that when liabilities are sought to be transferred, it amounts to novatio and cannot be effected except with the consent of the person whose liability is sought to be transferred to the purchaser. Liquidator cannot transfer the Company's debts/liabilities. It is also the submission of Mr. Shah that if assets of the Company are sold with encumbrances, it may adversely affect the priorities and Scheme of distribution of assets of the Company amongst its Creditors. A Creditor who otherwise may not be able to get anything from sales realization of the assets standing in queue with other creditors may be able to steal a march over other Creditors of the same class. Municipal tax dues, excise or customs dues, other tax dues are entitled to priority under Section 530 of the Act only to the extent they became due and payable within 12 months next before the relevant date (date of winding up). For the rest of the claims, they are unsecured creditors only. This tax dues are sometimes in the form of attachment on the assets of the Company and they may not be able to get anything or much under Section 530 of the Act, but there being an attachment on the assets of the Company, the authorities may be able to recover the same from the purchaser. It is also the submission of Mr. Shah that Official Liquidator cannot escape from his liability of adjudicating the claims against the Company. He cannot abdicate his statutory duty to adjudicate the claims against the Company by selling assets of the Company with encumbrances. Rules 163 to 169 of the Companies (Court) Rules, 1959 expressly impose duty on the Official Liquidator to examine and adjudicate claims against the Company. Detailed and exhaustive procedure is laid down in the Rules. It is only the Official Liquidator who is at the first instance entitled and bound to adjudicate upon claims against the Company. If encumbrances on the assets are not determined and disclosed, there would not be a fair auction. Some bidders may be able to get the details of the encumbrances from the Official Liquidator's office, some may not be able to get the same. With uncertainty of quantum and nature of encumbrances, the assets may not fetch the best price which it would otherwise able to fetch. Even if the Official Liquidator can sell assets of the Company along with encumbrances, he has first to adjudicate upon the encumbrances and claims and then only he can sell the assets with encumbrances. Since this has not been done, the auction sought to be held deserves to be set aside. The issue raised by Mr. Shah can certainly be gone into in appropriate cases. But a guarantor, only with a view to avoid his liability or to forestall the sale proceedings of the assets of the Company, the Principal debtor, cannot take shelter of such submissions. It is well settled position in law that the creditor can enforce the recovery of outstanding dues even against the assets of the guarantors.
In connection with the discharge of statutory duties and functions by the Official Liquidator, judgments cited by Mr. Shah certainly merit consideration.
In Amar Nath Krishan Lal and others (supra), the petitioners have filed the petition under Sections 524 & 525 of the Companies Act read with Rule 9 of the Companies (Court) Rules for the removal of the Liquidator appointed by the Court. The grievance of the petitioners was that they have not received any communication from the Liquidator relating to the determination of their claim. The Liquidator is duty bound under Rule 163 either to accept or reject the claim of the Creditors. The failure of Liquidator to communicate the determination or to decide the claim has prejudiced the rights of the petitioners. The Court on facts found that the Liquidator has not taken any steps and has failed even to admit and reject the proof submitted by the petitioners as required under Rule 163. The Court, therefore, allowed the petition and granted the prayer of removing the Liquidator of the Company in liquidation under voluntary winding up and the Official Liquidator was appointed as the Liquidator of the Company.
In State Bank of Hyderabad V/s. Industrial Estate Branch, Sanathnagar (supra), the Court observed that one of the most important matters in winding up is ascertaining the claims against the Company and to determine who are to be paid and how much. The Official Liquidator has to decide whether to include a claim in the list or not and, therefore, his conclusion is a decision appealable under Section 183 (5) of the Act.
In Re.
Oswal Agro Furane Limited (In Liquidation) (supra), the Court after observing that there is no order of acceptance or rejection of proof contemplated under Rule 163 of the Rules, but still payment has been made on the basis of affidavits taken on the date of issuance of dividend notices and the amount disbursed, directed the Central Bureau of Investigation to investigate the entire gamut of payment of dividend from the stage of invitation of claims, settlement and payment to find out misappropriation of the funds of the Company in liquidation by the Official Liquidator, employees or workmen or any other person who has connived or colluded with the officials.
The above judgments undoubtedly point out the role of the Official Liquidator while inviting the claims, examining the proof of claims and determining the amount to be paid to the creditors and workers out of the funds realized on sale of the assets of the Company in liquidation. There is no dispute about the propositions laid down in these judgments. However, simply because there is some lacuna on the part of the Official Liquidator in ascertaining the claims and/or liabilities and/or encumbrances, the auction sale undertaken by the respondent No.1 Bank cannot be stayed. The Official Liquidator will be held responsible for any inaction but it would not be linked with the sale of the properties of the Company in liquidation.
As against the submission of Mr. Shah, Mr. Pahwa for the respondent No.1 Bank has submitted that the Bank is permitted to hold the auction under the SARFAESI Act. Clause 2.7 in the tender document is in consonance with Rule 9 (7) of the Security Interest (Enforcement) Rules, 2002 which states that where the immovable property sold is subject to any encumbrances, the Authorized Officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him. Thereafter, under Rule 9 (8), the Authorized Officer issues a notice to the persons interested in or entitled to the money deposited with him by the purchaser for discharge of encumbrances and take steps to make the payment accordingly. Only after undertaking this exercise, the Authorized Officer delivers the property to the purchaser free from encumbrances known to the Secured Creditor on deposit of money as specified in Sub-rule (7) above. Since the property is sought to be auctioned by the respondent No.1 Bank being the convener of the Sale Committee appointed by the Court, the Official Liquidator has to play a very little role and it cannot be said that he has abricated his duty in not adjudicating the claim of the Creditors or not ascertaining the encumbrances on the assets of the Company in liquidation. Sub-rule (7) of Rule 9 specifically empowers the respondent No.1 Bank to incorporate such terms in the bid document and hence, it cannot be said that it is in violation of the provisions of the Act. It is also important to note that the covenant in the bid document shall not override the provisions of the Act. Even if there is an encumbrance of the secured creditor and it is noticed subsequent to the auction sale, the liability in respect thereof is required to be discharged on pro-rata basis from the realization of the sale proceeds of the assets of the Company in liquidation. The respondent No.1 Bank, on the basis of Clause 2.7 of the bid document cannot refuse to part with the requisite fund to discharge this liability, if so required.
Apart from the submission of Mr. Shah ventilating the grievance against the Official Liquidator for not discharging his statutory duty of ascertaining claims of the Creditors and/or encumbrances of the assets of the Company which is not weighed with the Court so far present application is concerned, one more issue which prevents this Court from entertaining this application is the locus of the applicants. The applicants are admittedly the guarantors of the advances given by the Banks and financial institutions to the Company in liquidation. Their assets are not put to auction. The properties put on auction are the properties belonging to the Company. The applicants raised their grievance only to the extent of realizing less price because of uncertainty of the exact amount of encumbrances and if the less price is fetched, to that extent, their liabilities would be increased. There appears to be some substance in this submission. However, it is all in the realm of assumption and presumption. Before putting the properties on auction, valuation report is obtained and it is to be sold on the basis of the highest bid that may be fetched. If ultimately less price is fetched and correspondingly the guarantors' liabilities would be increased, in that case, the guarantors may come forward and raise their grievance. However, this is not the proper stage to challenge the auction proceedings only on the ground that the encumbrances are not determined. The obvious object seems to delay the auction proceedings which cannot be permitted. Even otherwise, any sale that may be effected is subject to confirmation of this Court. At the time when the matter is placed before the Court, this issue can be looked into and if there is any iota of evidence showing that the less price was fetched only because of uncertainty about the encumbrances and as a result thereof, the guarantors liabilities are increased, appropriate order can be passed. Except this limited indulgence, the guarantors have no say in the matter of selling the properties of the Company in liquidation. Thus, keeping the rights of the applicants open to ventilate their grievance and move this Court at the time of confirmation of sale in case they found that because of encumbrances, adequate price could not be fetched.
There is one more reason for not entertaining this application. The applicants have not disclosed the facts that they have approached Debts Recovery Tribunal by way of an application / appeal filed under Section 17 of the SARFAESI Act and the Debts Recovery Tribunal has refused to grant stay against the action of the respondent No.1 Bank to go on with the sale of the assets of the Company in liquidation. It is true that the applicants have also filed Civil Suit before Bhavnagar Court claiming damages against the Bank. However, this will not have any direct nexus with the present application and it would not have any bearing on the subject matter of this application.
It is also true that the respondent No.1 Bank is not a Secured Creditor and it is not proper for it to claim the status of Secured Creditor. Any appropriation of the fund by the respondent No.1 as a Secured Creditor is subject to the final outcome of the Supreme Court decision in pending matters relating to validity of assignment.
It is further made clear that the point raised by the applicants through their counsel with regard to discharge of statutory duties by the Official Liquidator deserves consideration and hence, the Court directs the Official Liquidator to undertake exercise of inviting claims of the Creditors Secured, Unsecured as well as statutory Creditors and also the workers and to place appropriate reports before the Court so that by the time the matter comes up for confirmation of sale, the position with regard to such claims, encumbrances or liabilities would be known to everyone.
Subject to this, the present application deserves to be rejected and it is accordingly rejected. Notice discharged without any order as to costs.
Sd/-
[K. A. PUJ, J.] Savariya Top