Document Fragment View

Matching Fragments

17. As a result of the proviso added in Section 529, the security of every secured creditor is deemed to be subject to a 'pari passu' charge in favour of the workmen to the extent of the workmen's dues (called 'workmen's portion, as defined in Sub-section (3)(c) therein. It is further provided that, where the secured creditor, instead of relinquishing its mortgage and proving his debt, opts to stand outside the winding up proceedings and realise his security, the Official Liquidator shall be entitled to represent the workmen and enforce such charge and that any amount realised by enforcement of such charge shall be applied ratably by the Official Liquidator for the discharge of workmen's dues. It is true that even the amended proviso does not give the Liquidator an independent right of enforcing the charge by selling the security against which such charge is created. Nonetheless, it creates a 'pari passu' charge in favour of the workmen to the extent of their dues and makes the Liquidator the representative of the workmen to enforce such a charge. By reason of Clause (c) of the newly added proviso, so much of the debt due to the secured creditor opting to realise security as could not be realized because of the special created rights in favour of the workmen, or the amount of the workmen's portion in the security, whichever is less, shall rank pari passu with the workmen's dues under Section 529A. Section 529A provides for overriding preferential payments of workmen's dues and unrealised portion of the secured creditors dues, as provided in Clause (c) of the proviso to Section 529.

20. The rights of the pari passu charge holders would run equally, temporally and potently, with the rights of the secured creditors.

22. Since the Official Liquidator is in the position of a co-mortgage, the SFCs cannot act independently or by ignoring him for enforcing the security. It is established law that in case of co-mortgages, all of them should join in the suit for enforcing the security, but if some of them refuse to join, they have to be included as defendants, not merely as performa parties, but as necessary parties inasmuch as the mortgage right vests in them along with the plaintiffs-mortgagees. (See in this connection the judgment of the Privy Council in Sunitibala KPPNair 29 CP 719/2002 a/w OLR NO. 188/14 Debi v.Dharae Sundari Debi AIR 1919 PC 24. The same principle would be substantially true and applicable in the case of a mortgagee and a pari passu charge-holder over the same security for realising the security. The realization of the security can only be done by both the charge-holders joining and realising the security simultaneously. If a sale takes place, it can only be simultaneously for recovery of the claim of all pari passu charge-holders and sale proceeds are required to be divided proportionately in the same proportion as their dues.

2. The SFCs cannot unilaterally act to realise the mortgaged properties without the consent of the official liquidator representing workmen for the pari passu charge in their favour under the proviso to Section 529 of the Companies Act, 1956.

3. If the official liquidator does not consent, the SFCs have to move the Company court for appropriate directions to the official liquidator who is the pari passu charge holder on behalf of the workmen. In any event, the official liquidator cannot act without seeking directions from the Company Court and under its supervision."

25. Thus, after the introduction of Section 529-A which gave workers a pari passu charge along with secured creditors in mortgaged or hypothecated securities in a winding up, it is no longer open for a secured creditor to contend that it is entitled to enforce its securities without reference to or the leave of the Company Court.

26. It was then contended on behalf of MMPL that the Official Liquidator having failed to adjudicate the claims of the workmen, no pari passu charge in their favour could be said to exist which would limit the right of the subrogee to deal with the hypothecated securities. This argument is clearly misconceived.