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2012 DIGILAW 3706 (MAD)

Gulf Oil India v. Union Motors Services Ltd.

2012-08-27

K.B.K.VASUKI

body2012
Judgment :- 1. This application is filed by the Bank seeking permission to sell the property under the SARFAESI Act or through Debt Recovery Tribunal by virtue of the recovery certificate. 2. The perusal of the records would reveal that the applicant is one of the secured creditors, having obtained equitable mortgage by depositing title deeds in favour of the applicant bank in respect of a property at Pondicherry, owned by the respondent company under liquidation, in addition to hypothecation of its machinery as security for the amount advanced by the applicant along with other creditors. As the respondent co. failed and neglected to pay the amount, the applicant filed O.A.168 of 2003 before the Debts Recovery Tribunal for recovery of the amount and on the failure of either the respondent company or its guarantor, the Debts Recovery tribunal is pleased to pass a decree on 18.2.2008 and on the strength of the decree so made, recovery certificate made on 19.6.2008 is issued in favour of the applicant by the Recovery Officer. 3. While so, the respondent company is ordered to be wound up and the Official Liquidator is appointed by this court and the Official Liquidator sold some of the properties of the respondent company and the sale proceeds are now lying in the hands of the official liquidator. The applicant being the leader of Consortium Member Banks, made a claim before the official Liquidator for the decree amount to the turn of Rs.71,51,93,815.05 and as there was delay in making claim in Form 66 before the official Liquidator, the application to condone the delay is filed before this court and the delay in filing the Form 66 is condoned and the official Liquidator is directed to adjudicate the claim of the applicant and to pay the adjudicated sum to the applicant. In pursuance of the same, the Official Liquidator allowed the applicant’s claim to the tune of Rs.29,70,21,428/- and rejected the balance claim of Rs.41,84,72,387/- and the applicant is hence entitled to recover the allowed portion of the claim from and out of the sale proceeds. 4. In pursuance of the same, the Official Liquidator allowed the applicant’s claim to the tune of Rs.29,70,21,428/- and rejected the balance claim of Rs.41,84,72,387/- and the applicant is hence entitled to recover the allowed portion of the claim from and out of the sale proceeds. 4. Pending such claim, the Official Liquidator filed appropriate application before this court permitting him to sell the mortgaged property of the company under liquidation in Pondicherry to settle the dues of both the secured and unsecured creditors and the official Liquidator is permitted to do so and the property is brought for sale. Whereas, the sale is challenged by third party, who is in possession of the property by filing OSA No.129 of 2008 and the appeal is, after contest, dismissed and the person in possession of the property is directed to hand over the property to the official liquidator and the official liquidator is directed to bring the property for sale. However, inspite of best efforts taken by the Official Liquidator, there were no bidders to purchase the mortgaged property for the upset price fixed by this court and the sale was cancelled. Pending further steps be taken by the official liquidator for sale of mortgaged property, the applicant – Nationalised Bank has come forward with this application to permit them to sell the property under SARFAESI Act or through Debts Recovery Tribunal by virtue of the Recovery Certificate. 5. It is contended by the learned counsel for the applicant that though the loan was sanctioned on the strength of equitable mortgage, the present applicant bank is, as per inter se agreement dated 6.7.2000, authorized by other creditors bank to perform all acts and things on the understanding to share the securities created by the respondent company on pari pasu basis as even after the decree and recovery certificate obtained during 2008, the amount could not be realized till 2012, in view of the fact that the company is under liquidation and any further delay in realizing the securities is likely to result in greater prejudice to the creditors Nationalised banks. It is further contended by the bank that in the event of the applicant be permitted to proceed with the sale under SARFAESI Act or through Debts Recovery Tribunal, the same is likely to safeguard the right of all the secured creditors. 6. It is further contended by the bank that in the event of the applicant be permitted to proceed with the sale under SARFAESI Act or through Debts Recovery Tribunal, the same is likely to safeguard the right of all the secured creditors. 6. The learned counsel for the applicant has also cited the authority of the Division Bench of our High Court reported in Indian Kanoon-http;//indiankanoon.org / doc/249073/ in Asset Reconstruction v. the Official Liquidator, High Court, Madras, in support of the relief claimed herein to permit the applicant to sell the property under SARFAESI Act. 7. In the case cited above, the question which falls for consideration before the Division Bench is whether the assets formed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘Securitisation Act’) is entitled to be associated in the process of the sale of assets of the company under liquidation along with the official Liquidator. The Division Bench of our High Court has, under similar factual premises, answered the same in affirmative by duly following the observations of the Supreme Court in the judgments reported in (2000) 4 SCC 406 (Allahabad Bank v. Canara Bank) and in (2005) 8 SCC 190 (Rajasthan State Financial Corporation v. Official Liquidator) and by duly appreciating the scope of relevant provisions of Securitisation Act. The Division Bench has also extracted the law laid down in Allahabad Bank case in para 11 of its judgment. The Supreme Court in the above judgment, while deciding the jurisdiction of the Debts Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 vis-à-vis the Company Court, held that even where a winding up petition is pending or a winding up order has been passed against the debtor company, the adjudication of liability and execution of the certificate in respect of debts payable to banks and financial institutions are respectively within the exclusive jurisdiction of the Debts Recovery Tribunal and the Recovery Officer under the Act and the question of priorities among various creditors could be decided only by the Debts Recovery Tribunal in accordance with Section 19 (19) of the Recovery of Debts Act r/w Section 529-A of the companies Act, and in no other manner. In such a case, the Company Court’s jurisdiction under Sections 442, 537 and 446 of the Companies Act stood ousted and no leave of the Company Court was necessary for initiating proceedings under the Recovery of Debts Act, which was a subsequent legislation in point of time to the introduction of Section 529-A of the Companies Act and it had overriding effect. It is further held therein that section 19(19) does not give priority to all the secured creditors, but only to limited class of secured creditors and any claim made by a secured creditor against the realization by other creditors of the debtor under section 529 A r/w proviso (c) to section 529(1) of the Companies Act could arise before the Debts Recovery Tribunal only if the creditor concerned stood outside the winding up and realized amounts and if it is shown that out of the amounts privately realized by it, some portion had been rateably taken away by the Liquidator under Clauses (a) and (b) of the Proviso to Section 529(1). While deciding so, the Supreme Court has not held that Section 529A of the Companies Act will have no application in a case where a proceeding under the Recovery of Debts Act has been set in motion by a financial institution. 8. Further, the Supreme Court in Rajasthan State Financial Corporation case, is called upon to decide the right of the State Financial Corporation under Section 29 of the State Financial corporations Act 1951 against debtor company to sell assets of company and realize security, when the company is under winding up. It is held by the Apex court that the said power can be exercised by the State Financial Corporation only after obtaining appropriate permission from the Company Court and to act in terms of directions issued by the Company Court as regards conduct of the sale and distribution of proceeds thereof, in terms of Sections 529 and 529-A of the Companies Act. The Apex Court has in para 18 of the judgment in Rajasthan Financial Corporation case, also laid down the legal position, which reads as follows: “(i) A Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the Debtor, even if a company in liquidation, through its Recovery officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (ii) A District Court entertaining an application under section 31 of the SFC Act will have the power to order sale of the assets of a borrower company in liquidation, but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him (iii) If a financial corporation acting under section 29 of the SFC Act seeks to sell or otherwise transfer the assets of a debtor company in liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the Company Court and acting in terms of the directions issued by that Court as regards associating the Official Liquidator with the sale, the fixing of the upset price or the reserve price, confirmation of the sale, holding of the sale proceeds and the distribution thereof among the creditors in terms of Section 529-A and Section 529 of the companies Act (iv) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the creditor concerned is to approach the Company Court for appropriate directions regarding the realization of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company in liquidation.” 9. The Division Bench of our High Court has, following the legal positions laid down by the Apex Court in the cases of Allahabad Bank and Rajasthan Financial Corporation, arrived at its own conclusion in the case dealt with by the same in para 13 of its judgment, which is extracted hereunder: “13. The Division Bench of our High Court has, following the legal positions laid down by the Apex Court in the cases of Allahabad Bank and Rajasthan Financial Corporation, arrived at its own conclusion in the case dealt with by the same in para 13 of its judgment, which is extracted hereunder: “13. In the light of the law laid down by the Rajasthan State Financial Corporation Case (supra) it is clear that where the bank or the financial institution has initiated proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Debts Recovery Tribunal would be entitled to order sale even if a company is under liquidation through its Recovery Officer, but only after notice to the Official Liquidator or the Liquidator appointed by the Company court and after hearing him. Where, however, no proceedings have been initiated under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the case would fall under paragraph 18(iii) of the judgment of the Supreme court in Rajasthan State Financial Corporation case, (supra). In that even, if the securitization company acting under Section 13 of the Securitization Act seeks to sell or otherwise transfer the assets of a debtor company in liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the company court and acting in terms of the directions issued by that court as regards associating the official Liquidator with the sale, the fixing of the upset price or the reserve price, confirmation of the sale, holding of the sale proceeds and distribution thereof among the creditors in terms of Section 529-A and 529 of the Companies Act.” 10. In the present case, the property in question is an extent of 5.33 acres together with building measuring an extent of 8400 sq.ft. situated at No.81 Manapet, Bahor Commune Panchayat, Union Territory of Pondicherry and comprised in RS.No.115/3, Cadastre No.195 5/6, 195 6/6 and 196 and the property is re-valued by the Official Liquidator, in pursuance of the order of the company court on 16.8.2011 and the upset price fixed by the official Liquidator is Rs.2.72 crores. However, there were no bidders for the upset price so fixed, as a result, the property could not be brought for sale by the Official Liquidator. However, there were no bidders for the upset price so fixed, as a result, the property could not be brought for sale by the Official Liquidator. Under such circumstances, this court is of the considered view that in the event of the relief sought for herein being allowed in terms of the legal principles laid down by the Supreme Court and followed by the Division Bench of our High Court in the authorities cited above, the same would serve the interest of all creditors including that of the applicant herein. 11. In the result, the applicant is permitted to sell or otherwise transfer the assets of the respondent company in liquidation either under Section 13 of the Securitization Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in association with the official liquidator for the sale of the property fixing upset price or reserve price, confirmation of sale and holding of the sale proceeds by the official liquidator and distribution thereof among the creditors in terms of Section 529-A and 529 of the Companies Act. 12. The application is, in terms of the above directions, disposed of.