1993 (2) TMI 261 - HC - Companies Law

Winding up Suits stayed on winding-up order, Custody of company s property, Winding up Overriding preferential payments

Summary

Issues:
1. Application 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 of the Civil Procedure Code filed by RIICO.
2. Prayers for leave to remain outside winding-up proceedings by RIICO.
3. Dispute over possession and sale of assets by RIICO.
4. Preferential payments under sections 529A and 530 of the Companies Act.
5. Rights of secured creditors under the State Financial Corporations Act, 1951.
6. Jurisdiction of the court in asset sale proceedings.
7. Precedents regarding secured creditors' rights in winding-up proceedings.

Analysis:
The judgment by I.S. Israni, J. addresses an application by RIICO under the Companies Act seeking leave to stay outside winding-up proceedings. RIICO, a secured creditor, had taken over assets before the winding-up order, prompting objections from other parties. The court noted RIICO's statutory rights under the State Financial Corporations Act, allowing it to act independently. The court emphasized RIICO's adherence to statutory procedures for asset realization under section 29. The judgment highlighted RIICO's cooperation with the official liquidator for asset valuation and sale publicity, ensuring compliance with section 529A for workmen's claims.

The judgment discussed the applicability of preferential payment provisions under the Companies Act, emphasizing the need for proper distribution from asset sales. It rejected contentions of overreach by RIICO, affirming its right to act under the State Financial Corporations Act. The court clarified that RIICO's actions did not undermine the court's authority, given its statutory powers. The judgment cited precedents where secured creditors were allowed to sell assets independently during winding-up proceedings, subject to statutory obligations.

The court dismissed suggestions for joint asset sale with the bank, affirming RIICO's right to conduct sales independently. It highlighted the overriding effect of the State Financial Corporations Act over conflicting laws, safeguarding RIICO's rights. The judgment underscored the need for court intervention only in case of non-bona fide sales. It referenced past cases where secured creditors were permitted to sell assets during winding-up, reinforcing RIICO's position in the current matter.

In conclusion, the court granted RIICO's application to remain outside winding-up proceedings, subject to compliance with specified procedures. It vacated previous stay orders, allowing RIICO to proceed with asset sales while ensuring adherence to statutory requirements. The judgment upheld RIICO's rights as a secured creditor under the State Financial Corporations Act, emphasizing the importance of following legal procedures for asset realization and workmen's claims.