- (1.) INCIDENT THAT GAVE RISE TO THE PRESENT LITIGATION: Basant Paper Mills Limited, subsequently known as Manjusa Paper Mills Limited obtained credit facilities from various financial institutions including Syndicate Bank and IDBI. The claim of the Syndicate Bank was secured by mortgage of property restricted to Rs. 20 lakhs. IDBI, IFCI, LIC and other financial institutions were also having pari-passu charge over the assets. The company became sick and was referred to the Board of Industrial and Financial Reconstruction (BIFR). BIFR formulated a scheme and asked the Syndicate Bank and Indian Overseas Bank to invest further sums to revamp the company's financial position. Syndicate Bank and Indian Overseas Bank thus invested further sums approximately Rs. 4.68 crores on condition that they would have pari-passu charge covering the further financial support that the other financial institutions should have agreed. The BIFR accordingly approved the scheme. Syndicate Bank would claim, they registered the charge covering the increased financial support that they gave to the company. The company also agreed to such proposal of the Bank, Bank accordingly registered its charge with the Registrar of Companies covering their increased financial stake. The company ultimately did not survive. This Court passed an order of winding up on July 16, 1997. The Syndicate Bank also obtained a decree from the Debt Recovery Tribunal of Delhi to the extent of Rs. 28,35,31,238/- along with the interest at the rate of 11 per cent per annum. The Official Liquidator sold the assets of company for a sum of Rs. 4.01 crores. The present dispute would start from there. Official Liquidator invited claims from the creditors. By an order dated November 30, 2007, the Official Liquidator admitted the claim of the Bank to the extent of Rs.15,46,60,497. Nobody objected to such settlement. IFCI also got their claim settled to the extent of Rs. 4.4 crores as a preferential claim. Disbursements were also made on ad hoc basis. Syndicate Bank, however, did not receive any sum, as claimed by them. IDBI subsequently filed an application being C.A. No. 392 of 2008 without any notice to the Syndicate Bank wherein the learned Company Judge set aside the earlier settlement. We find from the record, IDBI got ad hoc payment of Rs. 50 lakhs, IFCI Rs. 20 lakhs and Standard and Chattered Bank Rs. 15 lakhs. However, the Syndicate Bank was not paid a single furthering as would appear from the page 180. The Official Liquidator also could not give any plausible explanation as to how those payments were made to the exclusion of Syndicate Bank. The Official Liquidator in its report would contend, the Bank did not make any claim to the extent, it had any charge on the land and building. Surprisingly, the learned advocate appearing for the other financial institutions namely, IDBI, IFCI appeared before the learned Company Judge and pointed out that the claim of the Syndicate Bank over the security was restricted to Rs. 20 lakhs that was not brought to the notice of the Official Liquidator. His Lordship set aside the earlier settlement and directed resettlement. The order was passed in absence of the Bank, no notice was ever served upon the Syndicate Bank. The Bank came to know from the letter of the Official Liquidator and immediately they objected to the same. The Court also recorded foul play as would appear from the order dated March 19, 2010 appearing at pages 327-330. The learned Judge directed an investigation to be made. Syndicate Bank was also permitted to take appropriate steps in the matter. The matter appeared before the other Company Judge on change of determination. Vide order dated September 2, 2011, the learned Company Judge directed fresh determination after hearing all the secured creditors giving a reasoned decision. Accordingly, the Official Liquidator conducted a fresh adjudication and rejected the claim of the Bank beyond Rs. 20 lakhs. According to the Official Liquidator, there was no security for the amount beyond Rs. 20 lakhs. The Syndicate Bank challenged the same. By a subsequent order dated October 12, 2012, due to change of determination, the matter went back to the learned Company Judge who passed the order dated April 6 and 30, 2010. The learned Company Judge again set aside the order of rejection and directed reconsideration upon due notice to the parties. The matter went back to the Official Liquidator, the Official Liquidator once again rejected the claim of the Bank vide order dated April 22, 2013 appearing at page 361-363 of the paper book. The reasoning was all the more same. Significant to note, although the Official Liquidator was having a consistent view on the priority to the extent of Rs. 20 lakhs, they paid nothing to the Syndicate Bank, despite substantial payments made to the other secured creditors. The discriminatory treatment is apparent on the face of the record. We wonder, how a public authority acting under the supervision of the Court could do so.
(2.) The Bank challenged the same before the learned Judge. The learned Judge upheld the rejection vide order dated April 2, 2014 appearing at page 15-23 of the paper book that became the subject matter of the present appeal at the instance of the Bank.
(3.) THE JUDGMENT AND ORDER IMPUGNED: Before the learned judge, according to the Bank, although they were having the pari-passu charge to the extent of Rs. 20 lakhs, pursuant to the direction of the BIFR and with the consent of the other secured creditors they extended further financial support with the understanding that they would be registering the charges pari-passu with the other secured creditors covering the enhanced financial support. They would heavily rely on the letter of the other financial institutions through the lead institution being IFCI appearing at pages 293-295 and the Certificate of Registration appearing at page 296-299. The other financial institutions would contend, they did not accord their consent and there was no proper registration of charge. Hence, the Bank was not entitled to their claim. The learned Judge very correctly recorded the entire incident and noticed the mischief done at someone's behest that would directly favour the other secured creditors particularly IFCI, IDBI group to the exclusion of the Bank. However, the learned Judge was of the view, there was no evidence of pari-passu charge in favour of the Bank or any consent given by the other institutions. The leaned Judge also considered Section 48 of the Transfer of Property Act and observed, in absence of consent from each of the first charge holders, the findings of the Official Liquidator could not be interfered with. The learned Judge imposed heavy cost on IFCI, IDBI and permitted those financial institutions to recover such sum from their counsel if they so like. Being aggrieved, Bank filed the appeal.;