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Issues involved: Loan agreement, mortgage deed, winding up process, validation of property disposition, interests of creditors, application for validation, possession of property, rights of secured creditors, commencement of winding up proceedings.
In the present case, the Company in liquidation sought a loan from M/s V.G.P. Finance Ltd. and executed a loan agreement. Subsequently, the Company failed to repay the amounts leading to the mortgage of the property in question. Following the winding up order of the Company, the Official Liquidator issued a notice for handing over the assets. Respondent No. 1 moved the Company Court for validation of the property disposition, which was earlier granted possession by the Single Judge and confirmed by the Division Bench. The Indian Bank, a secured creditor, approached the Supreme Court challenging the validation without considering the interests of other creditors and the timing of the transactions in relation to the winding up process. The Supreme Court observed that the Company Court and the Division Bench did not adequately consider the interests of all creditors, both secured and unsecured, as required by law. The Court highlighted the importance of assessing the list of assets held by the Company in liquidation, especially when no other assets besides the subject lands were identified. The Court noted the absence of a validation prayer in the initial application and the lack of consideration for the commencement of winding up proceedings. Consequently, the Court directed the Company Judge to reexamine the application for validation, ensuring proper registration, consideration of all creditors' claims, and the assets held by the Company in liquidation. The Indian Bank contended that the validation of the sale deeds should not have been granted without accounting for creditors' interests, asset lists, and the timing of transactions vis-à-vis the winding up process. The Supreme Court instructed the High Court to reconsider the matter without being influenced by previous observations and allowed both parties to present their arguments. In conclusion, the Supreme Court ordered the maintenance of status quo regarding possession of the lands with respondent No. 1, prohibiting any encumbrance, alienation, or creation of third-party rights. The appeal was disposed of with no costs imposed, granting liberty for further submissions by both parties.
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