International Coach Builders Ltd vs Karnataka State Financial Corpn on 5 March, 2003
In the later judgment reported as International Coach Builders Ltd. v. Karnataka State Financial Corporation , Hon'ble Supreme Court considered the aforesaid judgment and held that the rights of pari passu charge holders would run equally, temporally and potently, with the rights of the secured creditors. The official liquidator, as representative of the workmen, to enforce such pari passu charge would have the rights of representing the workmen equally with the rights of the secured creditors. It was held that the statutory right to sell the property under Section 29 of the Act has now to be exercised in tandem with the rights of pari passu charge in favour of the workmen created by the proviso to Section 529 of the Companies Act. It has been further held that the Official Liquidator is in the position of co-mortgagee. State Financial Corporations cannot act independently or by ignoring him for enforcing their security. The realization of the security can only be done by both the charge-holders joining the realising the security simultaneously. If a sale takes place, it can only be simultaneously for recovery of claim of all pari passu charge-holders and sale proceeds are required to be divided proportionately in the same proportion as their dues. The Court concluded to the following effect: