2005 (1) TMI 421 - HC - Companies Law

Summary

Issues Involved:
1. Disposal of current assets and appropriation of sale proceeds.
2. Permission to sell movable and immovable properties.
3. Jurisdiction of AAIFR post winding up order.
4. Distribution of sale proceeds.
5. Impact of pending Civil Writ Petition No. 15364 of 2002.
6. Priority of SICA over the Companies Act.

Issue-wise Detailed Analysis:

1. Disposal of Current Assets and Appropriation of Sale Proceeds:
The State Bank of India, on behalf of secured creditors, sought directions for the disposal of the current assets of the company in liquidation (Punjab National Fertilizer Chemical Ltd.) and appropriation of the sale proceeds towards the dues of consortium banks. The court acknowledged the secured creditors' pan passu first charge over the current assets and considered this request in conjunction with other related applications.

2. Permission to Sell Movable and Immovable Properties:
The official liquidator, representing the company in liquidation, filed applications under section 457(1) of the Companies Act, 1956, for permission to sell the company's movable and immovable properties. The court had previously ordered the winding up of the company on July 27, 2001, following the BIFR's opinion. The official liquidator had taken possession of the property despite resistance from ex-employees. Valuation reports for the plant, machinery, and other assets were obtained. To prevent further liabilities and deterioration of assets, the official liquidator proposed selling the assets through sealed tenders advertised in various newspapers.

3. Jurisdiction of AAIFR Post Winding Up Order:
Respondent No. 10 opposed the sale, citing a pending Civil Writ Petition challenging the AAIFR's order dated May 8, 2002. The AAIFR had held that it lacked jurisdiction to pass orders under section 20(4) of the SICA after the winding up order. The court noted that the AAIFR's previous order directing the sale of the company's interest in common facilities to respondent No. 10 for Rs. 60 lakhs was set aside due to lack of hearing for the official liquidator. The AAIFR reaffirmed its lack of jurisdiction post winding up order in its subsequent decision on May 15, 2002.

4. Distribution of Sale Proceeds:
Counsel for the official liquidator and secured creditors discussed the distribution of sale proceeds. It was suggested that movable assets be sold before immovable assets to avoid additional costs. The court emphasized that the distribution of sale proceeds would follow sections 529 and 529A of the Companies Act after the sale and crediting of proceeds to the official liquidator. The court found no substantive objection from secured creditors (except respondent No. 10) to the sale of assets.

5. Impact of Pending Civil Writ Petition No. 15364 of 2002:
Respondent No. 10 argued that the pending writ petition questioning the AAIFR's order should prevent the sale of common facilities. The court was not persuaded, noting the AAIFR's lack of jurisdiction post winding up order and the absence of any interim order from the Division Bench. The court directed the official liquidator to proceed with the sale, ensuring common facilities were kept in a separate lot for identifiable sale proceeds. Respondent No. 10 was allowed to participate in the tender process.

6. Priority of SICA over the Companies Act:
Respondent No. 10 argued that SICA provisions should prevail over the Companies Act, citing Supreme Court judgments. The court refrained from addressing this issue as it was already raised before the Division Bench. The court concluded that the official liquidator should proceed with the sale process, advertising widely and creating a separate lot for common facilities. The sale process would be finalized with the involvement of secured creditors, and expenses shared equally among them.

Conclusion:
The court allowed the applications by the official liquidator, directing the sale of movable and immovable assets, including common facilities in a separate lot. Respondent No. 10 could participate in the tender process. The sale proceeds would be distributed according to the Companies Act, ensuring the interests of secured creditors and workmen were protected.