2005 (8) TMI 720 - HC - Companies Law

Summary

Issues Involved:
1. Recall of the order dated 17.10.2003 permitting secured creditors to proceed under the Securitisation Act.
2. Quashing the order passed in Review Application No. 55/2005.
3. Validity of the mortgage and registration of charge under the Companies Act.
4. Jurisdiction and applicability of the Securitisation Act versus the Companies Act.

Issue-wise Detailed Analysis:

1. Recall of the Order Dated 17.10.2003 Permitting Secured Creditors to Proceed Under the Securitisation Act:
The Company in Liquidation, through the Official Liquidator, challenged the order dated 4.5.2005, which refused to recall the order dated 17.10.2003. The original order allowed secured creditors to proceed under the Securitisation Act. The Company Judge also allowed the State Bank to sell the secured asset of 18 acres and 20 gunthas of land, while restricting the sale of movables in the custody of the Official Liquidator. The appeal contended that the property put up for sale had not been entirely mortgaged in favor of the respondent, and thus could not be sold under the Securitisation Act.

2. Quashing the Order Passed in Review Application No. 55/2005:
The appellant sought to quash and set aside the order passed in Review Application No. 55/2005 on 13.6.2005, which had rejected the review of the order dated 4.5.2005. The appellant argued that the properties could not be sold under the Securitisation Act after the winding-up order was passed and that the second mortgage was not registered as required by law, making it void against the liquidator.

3. Validity of the Mortgage and Registration of Charge Under the Companies Act:
The appellant contended that the second mortgage for 7 acres and 9 gunthas was not registered with the Registrar of Companies, thus not constituting a secured asset. The respondent-Bank argued that equitable mortgages were created by deposit of title deeds on 4.5.1990 and 21.8.1991. The Tribunal had accepted these mortgages, but the Official Liquidator was not a party to those proceedings. The Court noted that despite awareness of the proceedings, the Official Liquidator had not moved the Debts Recovery Tribunal to recall its order dated 4.10.2004.

4. Jurisdiction and Applicability of the Securitisation Act Versus the Companies Act:
The Court referred to the Supreme Court's judgment in Allahabad Bank v. Canara Bank, which held that the Tribunal under the RDB Act has exclusive jurisdiction even after a winding-up order is passed. The Court analyzed the provisions of the Securitisation Act, noting that it prevails over the Companies Act. The Securitisation Act allows secured creditors to proceed without the leave of the Company Court, both before and after winding-up. The Court concluded that the respondent could sell the secured assets under the Securitisation Act, and the appellant could seek remedies under the Debts Recovery Act or the Securitisation Act if they contested the validity of the charge.

Conclusion:
The appeal was disposed of with the direction that the appellant could move under the Debts Recovery Act or the Securitisation Act to challenge the validity of the charge. The Court upheld the applicability of the Securitisation Act over the Companies Act, allowing the respondent to sell the secured assets without the Company Court's leave.