2010 (9) TMI 233 - HC - Companies Law

Winding up - Overriding preferential payments - Held that - Here in the present case neither the applicant-bank nor the official liquidator has acted promptly and accurately in the matter. The court, therefore, thinks it fit and proper that instead of handing over the possession to the applicant-bank, through the official liquidator, the court itself undertakes sale of the property in question with the assistance of the applicant-bank as well as the official liquidator and chock out the detail of programme and procedure. The official liquidator is directed to get the valuation of the property in question and, thereafter, invite offers from the interested purchaser by issuance of public advertisement. For this purpose, a sale committee is ordered to be constituted wherein the applicant-bank is one of the members of the sale committee and the official liquidator be convener.All those offers received by the office of the official liquidator shall be put into sealed cover and it should be placed before the court and auction of the property shall take place on 29-10-2010.

Issues:
1. Application for directions to official liquidator to hand over possession of secured assets.
2. Compliance report not filed by official liquidator.
3. Possession file traced after special drive.
4. Failure to file compliance report for nine years.
5. Inquiry ordered against responsible persons.
6. Properties of company in liquidation not disclosed earlier.
7. Applicant-bank's secured creditor status and request for possession.
8. Recovery proceedings initiated by applicant-bank.
9. Dispute over possession between official liquidator and applicant-bank.
10. Legal entitlement of applicant-bank to possession.
11. Proposal for sale committee by official liquidator.
12. Court's decision on possession and sale of property.

Analysis:
1. The applicant-bank sought directions for the official liquidator to hand over secured assets' possession to enforce its rights outside winding-up proceedings. The court noted the absence of the compliance report and the subsequent efforts to trace and produce the possession file.
2. The official liquidator's report revealed the failure to file the compliance report despite preparation, prompting the court to order an inquiry against responsible individuals. The court expressed disappointment over the lack of progress for nine years.
3. The court directed the official liquidator to investigate undisclosed properties of the company in liquidation and initiate necessary inquiries against relevant personnel for lapses.
4. Recognizing the applicant-bank's secured creditor status, the court acknowledged its entitlement to sell and realize mortgaged properties for debt recovery, emphasizing the exclusive charge held by the bank.
5. Disputes arose over possession between the official liquidator and the applicant-bank, leading to recovery proceedings and subsequent orders for possession handover.
6. The legal position regarding the applicant-bank's entitlement to possession was highlighted, citing relevant legal precedents and procedures followed by the Recovery Officer.
7. The official liquidator proposed a sale committee for property sale to benefit all creditors and workers, citing provisions of the Companies Act, 1956.
8. The court, observing delays and negligence from both parties, decided to undertake the sale of the property itself with the assistance of the applicant-bank and official liquidator, forming a sale committee to oversee the process.
9. The court directed the official liquidator to value the property, invite offers through public advertisement, and conduct an auction, ensuring completion within a specified timeframe for the benefit of all parties involved.

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