2002 (4) TMI 821 - HC - Companies Law

Summary

Issues:
1. Application filed under Companies Act, 1956 for leave to remain out of winding-up proceedings and realize dues under State Financial Corporation Act, 1951.
2. Dispute regarding applicant's obligation to pay security expenses and determination of debt against the company in liquidation.

Analysis:
1. The application was filed by Rajasthan State Industrial Development & Investment Corpn. Ltd. under Companies Act, 1956 seeking permission to stay out of winding-up proceedings and recover dues under State Financial Corporation Act, 1951. The company in liquidation was ordered to be wound up by the Court under the Sick Industrial Companies (Special Provisions) Act, 1985. The Official Liquidator raised objections regarding the delay in filing the application and non-payment of security expenses by the applicant. The applicant argued that the State Financial Corporation Act provisions override those of the Companies Act, allowing the applicant as a secured creditor to opt out of winding-up proceedings and realize its dues independently.

2. The Official Liquidator contended that the applicant must first determine its debt through specific procedures before seeking recovery. The applicant responded by stating that it is not bound by the Banks and Financial Institutions Act and provided details of its secured creditor status and mortgage agreements. The Court considered the submissions and referred to the Central Bank of India v. Hilmot Engg. Co. case, emphasizing the protection of assets during winding-up. The Court acknowledged the applicant's secured creditor status and allowed the application, subject to conditions. The applicant was permitted to stay out of winding-up proceedings, submit its claim to the Official Liquidator, and proceed with the sale of assets under Court supervision.

3. The Court directed the applicant to report progress on asset sales to the Official Liquidator, involve relevant financial institutions in the sale process, and keep sale proceeds in a separate account. The Court mandated that no withdrawals could be made without Court approval and required the submission of sale proceeds details and expenses to the Official Liquidator. The Official Liquidator was instructed to hand over possession of the company's assets to the applicant. The application was disposed of with no costs awarded.

This detailed analysis covers the issues raised in the judgment, outlining the arguments presented by the parties and the Court's decision on each matter.