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Issues Involved
1. Applications with dissimilar reliefs, nature of. 2. Option under RDB Act not exercised. 3. Option for sale through the official liquidator withdrawn to pursue remedy under SARFAESI Act. 4. Objections for pursuing remedy under SARFAESI Act. 5. The points for consideration. 6. Relevant provisions of SARFAESI Act analogous provisions of other enactments containing non obstante clauses. 7. In case of seeming conflict, the attempt must be to harmonize. Detailed Analysis (I) Applications with dissimilar reliefs, nature of: Two batches of applications were considered in relation to a company ordered to be wound up. The official liquidator was permitted to sell the assets with the assistance of secured creditors. An offer of 29.12 crores by Radha Raman Builders and Developers P. Ltd. failed due to non-deposit of 25% bid amount. HSIIDC opposed the offer, suggesting a revaluation for potentially higher offers. (II) Option under RDB Act not exercised: Bank of India, the sole secured creditor for the land, approached the Debts Recovery Tribunal (DRT) under the RDB Act and obtained a recovery certificate. However, the bank opted not to act under the RDB Act but consented to the sale under the Companies Act, later withdrawing consent due to delays and increased property value. (III) Option for sale through the official liquidator withdrawn to pursue remedy under SARFAESI Act: The company was ordered to be wound up on October 22, 1999. The first sale order was on May 28, 2004. A sale by the official liquidator was set aside on March 20, 2008. The applicant-reconstruction company reserved its right to recover dues under SARFAESI Act and initiated action under Section 13(2), with no objection from the official liquidator. The applicant contended it would undertake the liability of workmen's claims under Section 529A of the Companies Act. (IV) Objections for pursuing remedy under SARFAESI Act: HSIIDC contended that Bank of India did not object to the sale initially or when the sale was set aside and re-sale ordered. The assignee (applicant) could not have better rights than the assignor (Bank of India). HSIIDC argued that the assets should be sold by the official liquidator under court supervision for public interest, ensuring fair valuation and protection for creditors and workmen. HSIIDC had settled liabilities of several banks and had strong objections to recalling the sale order. (V) The points for consideration: The court considered the power of a secured creditor to stand outside the winding-up process and enforce security for dues recovery. The timing and manner of addressing the rights of several creditors, including workmen, were crucial. The court also examined whether the company court loses jurisdiction when a secured creditor claims assets during winding-up proceedings. (VI) Relevant provisions of SARFAESI Act analogous provisions of other enactments containing non obstante clauses: The arguments referenced analogous provisions in the State Financial Corporations Act (SFC Act) and RDB Act, which allow for property sale under relevant enactments, excluding the Companies Act except for workmen's claims under Section 529A. The SARFAESI Act, under Section 13(9), allows secured creditors to exercise rights if agreed upon by creditors representing at least three-fourths in value. Section 35 of the SARFAESI Act provides an overriding effect, while Section 37 states the Act's provisions are in addition to other laws. The RDB Act and SFC Act contain similar non obstante clauses. (VII) In case of seeming conflict, the attempt must be to harmonize: The court referred to several decisions emphasizing harmonizing provisions rather than seeing conflict. The Madras High Court in K. Chidambara Manickam v. Shakeena and the Bombay High Court in Rama Steel Industries v. Union of India dealt with the interplay of SARFAESI Act and RDB Act. The Supreme Court in Greater Bombay Co-operative Bank Ltd. v. United Yarn Tex. P. Ltd. and Transcore v. Union of India held that the SARFAESI Act provisions would prevail over the Companies Act, except for workmen's claims under Section 529A. The Allahabad High Court in BPL Display Devices Ltd., In re, allowed a reconstruction company to remain outside winding-up proceedings, emphasizing the need to inform the company court of sale processes. The court concluded that while the SARFAESI Act allows for independent action, the official liquidator must be informed, and the sale process must be transparent. The reconstruction company was permitted to stay outside winding-up proceedings, but the sale must be conducted under SARFAESI Act rules, with expenses deducted and surplus proceeds deposited with the official liquidator. Conclusion The applications by the reconstruction company and other connected applications were disposed of with specific directions to ensure transparency and adherence to SARFAESI Act provisions while protecting the interests of all stakeholders, including workmen and other creditors.
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