ISRANI, J. - (1.) AN application dated May 5, 1992 under Section 446 read with Section 456 of the Companies Act, 1956 and Rules 6 and 9 of the Companies (Court) Rules, 1959 read with Section 151, CPC, has been filed by the Rajasthan State Industrial Development and Investment Corporation Ltd. (RIICO), in which it has been prayed that leave be granted to applicant-RIICO to remain outside the winding-up proceedings.
(2.) AN application has also been filed on behalf of the State Bank of India, stating therein that the Board for Industrial and Financial Reconstruction (BIFR), after conducting an enquiry under Section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, 'the Act, 1985'), vide its order dated May 10, 1991, has recorded the opinion under Section 20 (1) of the Act, 1985 that it was just and equitable as also in the public interest that the respon-dent-compapy should be wound-up. This opinion was forwarded by the Registrar, BIFR to this Court for further action according to law. It was further stated that RIICO and ICICI were fully aware of the proceedings in respect of the Company before BIFER as also the order dated May 10, 1991, passed by BIFR. After passing of the aforesaid order, RIICO, on February 13, 1991, has taken-over possession of the immovable and movable assets of the respondent-Company. It was also stated that RIICO & ICICI were proceeding with the sale of the same. It was pointed out that the respondent-Company had to pay about Rs. 16,53,986/- to the State Bank of India (SBI), for recovery of which a civil suit has already been filed by the Bank against the respondent-Company. It was further pointed out that outstandings of RIICO and ICICI against the respondent-Company are about Rs. 1 crore and Rs. 155 lacs, respectively. In these circumstances, an order dated March 27, 1992, was passed by this Court to wind-up M/s. Spintex Tubes & Cons. Ltd. and notice of this order was given to the Official Liquidator to proceed, in accordance with law. The application dated May 5, 1992 has been filed on behalf of the RIICO with a prayer that RIICO is a secured creditor of the respondent-Company, which is authorised under law to recover their dues in the manner provided under Section 29/30 of the State Financial Act, 1951 (hereinafter referred to as 'the Act, 1951' ). It is also provided under Section 46-B that it shall have over-riding effect over other laws, which may be inconsistent thereto. The RIICO, therefore, being a secured creditor, opts to remain out of winding-up proceedings by way of abundant caution, prays that leave be granted to RIICO to remain out of winding-up proceedings, so that, it may proceed to realise its dues in the manner provided under the provisions of the Act,. 1951. It is pointed out by S/shri G. S. Bapna, G. K. Garg and Sudhir Gupta, learned counsel, that sections 529-A and 530 of the Companies Act deal with preferential payments to be made, therefore, provisions for making such payments, including the payments payable to workman, shall have to be made from the sale proceeds. It is further pointed out that RIICO was party to the proceedings before BIFR and was well aware of the opinion, regarding winding up of the company given by the BIFR. It is, therefore, submitted that RIICO should not have taken possession of the assets of the company and allowed the OL to proceed with the matter, in accordance with the provisions of the Companies Act. The RIICO has, thus, tried to over-reach the Court. It is also pointed out that SBI is first secured creditor for current assets, e. g. , stocks, which are hypothecated with the Bank and has second charge for the fixed assets. I have heard all the parties and gone through the relevant provisions of law. It is evident that RIICO had already taken possession of February 13/14,1992, before the winding-up order was passed on March 27, 1992. The contention that since RIICO was aware of the proceedings before the BIFR and recommendation made regarding winding-up, therefore, it has tried to over-reach the Court by taking over possession, has no force, because the RIICO is entitled to act under the provisions of the State Financial Corporation Act, 1951 (for brevity, 'the Act, 1951' ). It may be pointed out that RIICO does not oppose the winding-up proceedings even now and has merely made a prayer for granting leave to remain out-side the winding-up proceedings in accordance with the provisions of the Act, 1951. Under Sec. 29, possession has already been taken by RIICO. The RIICO is a statutory body and there is no reason to doubt its bona fides while it exercises its power under Section 29 of the Act, 1951. The RIICO has exercised its right under Section 29 to sell the property and, in fact,no leave of Court is necessary. It may also be pointed out that jurisdiction of this Court may arise only when the sale is challenged on the ground that it is not bona fide and has been made for extraneous considerations. In such circumstances, this Court may interfere, if any occasion so arises. In the matter under consideration, the Company, admittedly, has taken loan from RIICO and ICICI. It has mortgaged and hypothecated its assets and properties in their favour by executing various documents. When the winding-up order was passed, all the assets of the Company were in possession of RIICO. As mentioned in the order dated November 20, 1992, Mr. Mathur, learned counsel, agreed that valuation of the property shall be done by a Govt. approved valuer. The OL will be associated during that process and all the expenses of the OL for going or sending his representative will be paid by the RIICO. He further agreed that wide publicity in at- least one local Hindi daily of Rajasthan and two National dailies, published from Delhi, will be made, regarding the sale. Keeping in view the provisions of Section 529a of the Companies Act, it was also agreed by Mr. Mathur that ICICI and RIICO will give undertaking that they will keep the money ready payable to workmen, regarding their claims, which may be filed with the OL. The OL shall call for applications from the workmen to file their claims, if any, and verify their genuineness. I do not find any force in contention of Mr. Gupta that sale should be conducted by the RIICO and Bank jointly, so that, best price may be secured. As pointed out by Mr. Mathur, a representative of the Bank will be associated with the sale as per the guidelines of the RIICO, therefore, the Bank will have opportunity to examine the process of sale as also to give any suggestions in this regard. I do not find any force in contention of learned. O. L. that since the order of winding up has already been passed by this Court, the sale should be conducted subject to confirmation of this Court. It may be pointed out that Section 46-B of the Act, 1951 provides that the provisions of the Act, 1951 and of any rules or orders made thereunder shall have over-riding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Therefore, the rights of RIICO under Section 29 and other relevant provisions of the Act cannot be curtailed. However, it may be pointed out that position may be different in a situation, where Official Liquidator has taken possession of the assets of the Company after the winding up order has been passed by this Court and, thereafter the "financial Institutions like RIICO/rfc want to exercise their powers under section 29 of the Act, 1951. However, this position does not exist in the matter-under consideration.
(3.) A similar view was taken in A. V. Plywood Ltd. vs. RIICO & anr (1), in which, it was held by the Delhi High Court that even where the Financial Corporation, which is a secured creditor, took over the assets of the company during the winding up proceedings and disposed of the same before passing of the winding up order, it was held that by virtue of Section 29 of the Act, 1951, the Corporation was justified in taking possession and selling the assets of the company without intervention of the Court. It was further held that Section 537 of the Companies Act was in-applicable to such a case and. that the Financial Corporation was competent to enforce a mortgage under Section 29, without approaching a Civil Court: In M/s Boolani India vs. M/s A. S. S. & Chemicals Ltd. (2), it was held by this Court that despite the fact that winding up proceedings have commenced and are pending, the Financial Corporation has a right under Section 29 of the Act, 1951 to sell the property and no leave of the Court is necessary. It was further observed that the Court's jurisdiction may arise only when such sale is challenged, as being not bonafide and being for extraneous considerations. The application to opt to remain out of winding up proceedings was allowed. In Misc. Application No. 16/90 in SB Company Petition No. 1/85, (M/s Ayrgee Engineering & Co. vs. M/s India Electricals Ltd.) vide order dated November 29, 1991, the same view was taken. In the result the application dated May 5, 1992 filed on behalf of RIICO is allowed. However, it shall liable to act in accordance with this order as also the order dated Nov. 20, 1992 regarding advertising, sale etc, of the property. It shall also keep the share of the sale proceedings ready for payment to the workmen regarding their claims as finalised by OL in accordance with provisions of Section 529-A of the Act. In view of the above order, the stay order dated March 27, 1992 directing the RIICO not to take any steps to sale,is vacated and application dated April 30, 1992 filed on behalf of RIICO is also allowed. . ;