2007 (8) TMI 824 - HC - Companies Law

Summary

Issues Involved:
1. Publicity and Advertisement for Sale of Property
2. Restraint Order Against Sale of Assets
3. Intervention by Appellant
4. Applicability of SARFAESI Act vs. Companies Act
5. Safeguarding Interests of Other Secured Creditors and Workmen

Summary:

1. Publicity and Advertisement for Sale of Property:
The learned Company Judge directed that the applicant/intervener should give more publicity by advertising the sale of the property belonging to Maikal Fibres Ltd. in national newspapers and on the A.R.C. (India) website. Additionally, advertisements should be published in regional language newspapers in Maharashtra, Tamil Nadu, and Gujarat. Intending tenderers who have already collected tender forms will be allowed to submit tenders by the new date published in the advertisement. The intervener/applicant must also get one more valuation done by a reputed Government Valuer and ensure the full safety and preservation of all assets until sold. The intervener is permitted to negotiate with tenderers to fetch the best marketable price, ensuring transparency and equal opportunity for all valid tenders.

2. Restraint Order Against Sale of Assets:
The respondent No. 1, an unsecured creditor, initiated winding-up proceedings u/s 433 and 435 of the Companies Act, 1956. The learned Company Judge issued a restraint order against the respondent company and its directors from transferring, alienating, or selling any assets. If any secured creditor took possession of the assets, no sale should occur until further orders.

3. Intervention by Appellant:
The appellant, a registered Securitisation Company u/s 3 of the SARFAESI Act, filed an Interlocutory Application to seek intervention. The appellant argued that the Company Court could not issue directions de-hors the provisions of the SARFAESI Act, which has an overriding effect u/s 35. The appellant contended that the Company Court should only safeguard the dues of other secured creditors and workmen who share Pari Passu.

4. Applicability of SARFAESI Act vs. Companies Act:
The court acknowledged that the SARFAESI Act has an overriding effect, and other laws should yield to its provisions. However, u/s 529A of the Companies Act, incorporated in Sub-section (9) of Section 13 of the SARFAESI Act, the court can provide for payment of dues to other secured creditors and workmen. The court found that the directions issued by the learned Company Judge were premature as Section 529A becomes operative only when the company is in liquidation.

5. Safeguarding Interests of Other Secured Creditors and Workmen:
The court held that the power of the appellant company could not be curtailed to render Section 13 of the SARFAESI Act otiose. However, to safeguard the interests of persons covered by Section 529A of the Companies Act, the court issued the following directions:
1) The appellant shall endeavor to obtain the maximum price for the assets.
2) Upon realizing the amount, the appellant shall apply to the Company Court to inform about the dues of the workmen.
3) The appellant shall provide a list of other secured creditors and the amounts due to them.
4) The appellant shall file an undertaking to abide by the provisions of Section 529A of the Companies Act as incorporated in the SARFAESI Act.

Conclusion:
The appeal was disposed of with the modification of the directions issued by the learned Company Judge, ensuring compliance with the SARFAESI Act while safeguarding the interests of other secured creditors and workmen. No order as to costs. Certified copy within four days.