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1998 (4) TMI 437 - SC - Companies LawDirections given by the court in winding up directing the official liquidator to sell the vessel along with the appellant and to bring the sale proceeds into court. Held that - Appeal allowed. The appellant has a supervening priority in respect of its claims against the vessel it has a right to sell that vessel and realise the sale proceeds. The appellant cannot be divested of this statutory right without its consent or be subject to other priorities under the Companies Act. Looking to the overriding priority statutorily given to the appellant the impugned order passed by the High Court is set aside. The appellant shall be entitled to sell the vessel by auction in accordance with the procedure prescribed by its rules and regulations. Since the appellant has no objec- tion to the official liquidator and/or a representative of the first-respon- dent (petitioning creditor) remaining present at the sale it will be open to the official liquidator to depute its representative to remain present at the sale and the same right is given to the first respondent as well.
Issues Involved:
1. Paramount right of the Port Trust to arrest and sell the vessel for unpaid charges. 2. The necessity of obtaining leave under section 446 of the Companies Act for the sale of the vessel. 3. The statutory lien of the Port Trust over the vessel and its priority over other creditors. 4. The procedure for the sale of the vessel and the distribution of sale proceeds. Detailed Analysis: 1. Paramount Right of the Port Trust to Arrest and Sell the Vessel for Unpaid Charges: The Port Trust arrested the vessel M.V. Varuna Kachhapi under section 64 of the Major Port Trusts Act, 1963, due to unpaid anchorage and other charges. The Port Trust has a statutory right to arrest and detain the vessel until the dues are paid. This right includes selling the vessel if the charges remain unpaid for more than five days. The Supreme Court emphasized that this statutory right is paramount and stands above the rights of secured and unsecured creditors in the winding-up proceedings of the shipping company. 2. Necessity of Obtaining Leave Under Section 446 of the Companies Act for the Sale of the Vessel: The official liquidator directed the Port Trust to maintain the status quo and seek leave from the High Court under section 446 of the Companies Act before selling the vessel. However, the Supreme Court clarified that the Port Trust's power to arrest and sell the vessel emanates from section 64 of the Major Port Trusts Act, 1963, and does not require leave under section 446 of the Companies Act. The Port Trust can exercise its statutory rights independently of the winding-up proceedings. 3. Statutory Lien of the Port Trust Over the Vessel and Its Priority Over Other Creditors: The Supreme Court highlighted that the Port Trust's lien over the vessel is a paramount lien, which overrides the claims of all other creditors, including secured creditors. The statutory right to detain and sell the vessel for unpaid charges is superior to any other claims against the vessel. This lien cannot be extinguished or transferred to the sale proceeds without the Port Trust's consent. The Court referenced several precedents, including the cases of *Ashok Arya v. M.V. Kapitan Mitsos* and *Forwarding (P) Ltd. v Trustees, Port of Vizagapatnam*, to support this position. 4. Procedure for the Sale of the Vessel and the Distribution of Sale Proceeds: The Supreme Court set aside the High Court's order directing a joint sale by the Port Trust and the official liquidator. The Court ruled that the Port Trust is entitled to sell the vessel by auction according to its rules and regulations. The official liquidator and the petitioning creditor's representative may be present at the sale. The Port Trust is entitled to recover its statutory dues from the sale proceeds, and any surplus should be deposited with the official liquidator. The Port Trust must file an account of its dues and the realization from the sale in the winding-up proceedings. If there is any shortfall, the Port Trust may file a claim for the balance in the winding-up proceedings. Conclusion: The Supreme Court allowed the appeal, recognizing the paramount statutory right of the Port Trust to arrest and sell the vessel for unpaid charges without requiring leave under section 446 of the Companies Act. The Court affirmed the Port Trust's priority lien over other creditors and directed the Port Trust to conduct the sale and distribute the proceeds as per the statutory provisions. The appeal was allowed with no order as to costs.
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