2003 (10) TMI 393 - HC - Companies Law

Summary

Issues Involved:
1. Permission for applicant-Banks to initiate proceedings under the Securitisation Act.
2. Possession and control of the assets of the company in provisional liquidation.
3. Compliance with the provisions of the Securitisation Act by the applicant-Banks.
4. Role and authority of the Official Liquidator in the context of the Securitisation Act.
5. Requirements for sale of the company's assets under the Securitisation Act.

Issue-wise Detailed Analysis:

1. Permission for applicant-Banks to initiate proceedings under the Securitisation Act:
The applicant-Banks sought the Court's permission to initiate proceedings under the Securitisation Act. The Court acknowledged that the applicant-Banks, as secured creditors, were entitled to initiate such proceedings after complying with the provisions of Section 13(9) of the Securitisation Act. The Court noted that the Securitisation Act has an overriding effect due to Section 36. Therefore, permission to initiate proceedings under the Securitisation Act could not be denied solely because the Official Liquidator had been appointed as the Provisional Liquidator of the company.

2. Possession and control of the assets of the company in provisional liquidation:
The Official Liquidator, appointed as the Provisional Liquidator, argued that the assets of the company were under his custody as per Section 456(1) of the Companies Act, 1956. The Court noted that the Official Liquidator had only taken symbolic possession and made inventories of the assets, as directed. The Court directed the Official Liquidator not to take physical possession of the assets until the proceedings under the Securitisation Act were initiated and completed.

3. Compliance with the provisions of the Securitisation Act by the applicant-Banks:
The applicant-Banks argued that they had complied with the necessary provisions of the Securitisation Act, including Section 13(4) and Section 13(9), which provide procedures for taking possession and sale of properties. They also highlighted that the remedies under Section 13 of the Act were faster and more efficient. The Court found that the applicant-Banks had indeed complied with the relevant provisions and were therefore entitled to proceed under the Securitisation Act.

4. Role and authority of the Official Liquidator in the context of the Securitisation Act:
The Official Liquidator contended that the assets were in his custody and referred to various provisions of the Companies Act and the Securitisation Act. However, the Court held that the Securitisation Act had an overriding effect and that the applicant-Banks, as secured creditors, could initiate proceedings under the Act. The Court also noted that the decision of the Andhra Pradesh High Court in the case of Pennar Paterson Ltd. v. State Bank of Hyderabad required prior permission from the Company Court, which the applicant-Banks had sought.

5. Requirements for sale of the company's assets under the Securitisation Act:
The Court addressed the issue of the sale of the company's assets, stating that while the applicant-Banks could take possession under Section 13(4) of the Securitisation Act, they could not sell the assets without the Court's confirmation. The Court emphasized that before finalizing any sale, the Company Court would consider the claims of workers and statutory dues of the government, in line with the Supreme Court's decision in Mardia Chemicals Ltd. v. Union Bank of India.

Conclusion:
The Court allowed the Company Application, permitting the applicant-Banks to initiate proceedings under the Securitisation Act. The Official Liquidator was directed not to take possession of the assets until the proceedings were completed. The Court also clarified that before selling the assets, the applicant-Banks must obtain prior permission from the Court. The application was allowed and disposed of accordingly.