2019 (8) TMI 273 - HC - Companies Law

Taking over of property - liabilities of the workmen under Section 529A of the Companies Act, 1956 - costs of security provided at the property by the Official Liquidator - HELD THAT - It is plain that in terms of the proviso to Section 529(1), the security of every secured creditor is deemed to be subject to a pari passu charge in favour of the workman to the extent of the workman s dues. Consequently, the impugned order of the learned Single Judge requiring the Appellant to undertake the liability of workmen s dues cannot be said to be contrary to the law - As far as the obligation of the Appellant to provide security at the site of the property in question is concerned, the proviso to Section 529(2) of the Act is clear in this regard that if the secured creditor proceeds to realise security, it shall be liable to pay his portion of expenses incurred by the liquidator for preservation of security. In the present case, even if one were to consider that the Appellant could not have proceeded to realise the security till it actually got possession of the property in question i.e. from the date it was ordered to be de-sealed by the DRT i.e. 12th October 2017, certainly the obligation to preserve the property thereafter was that of the Appellant. The Appellant will be handed over possession of the property in question by the OL subject to the Appellant - Appeal disposed off.

Issues:
1. Appellant's appeal against an order permitting it to take over a mortgaged property.
2. Appellant's liability towards workmen's dues and security costs.
3. Appellant's lack of action in protecting the mortgaged property.
4. Interpretation of Sections 529(1) and 529(2) of the Companies Act, 1956.
5. Appellant's obligation to reimburse security costs and take possession of the property.

Analysis:
1. The Appellant, a secured creditor, appealed against an order allowing it to take over a property mortgaged by the Respondent. The Appellant sought to avoid bearing the liabilities of workmen's dues and security costs provided by the Official Liquidator (OL).

2. The Appellant had initiated recovery proceedings against the Respondent for defaulting on payments. Despite recovering a significant amount, the Appellant still had outstanding dues. The Appellant argued against bearing the workmen's dues and security costs, citing Section 31B of the IDBI Act.

3. The Appellant failed to protect the mortgaged property adequately, leading to the OL taking possession. The OL argued that the Appellant's inaction necessitated the OL to provide security. The OL referred to Sections 529(1) and 529(2) of the Companies Act, 1956, and a relevant legal precedent.

4. Sections 529(1) and 529(2) of the Companies Act, 1956, establish rules regarding the rights of secured creditors and the priority of workmen's dues. The provisos under these sections outline the obligations of secured creditors towards workmen and expenses incurred for security preservation.

5. The Court found the Appellant responsible for reimbursing security costs and workmen's dues. The judgment directed the Appellant to pay the specified dues, take over possession of the property, and ensure continuous security arrangements. The order clarified the conditions for the handover of possession and emphasized the case-specific nature of the decision.

6. The judgment highlighted the Appellant's obligations under the law and the necessity to fulfill financial responsibilities towards workmen and security costs. The decision provided a detailed analysis of the legal provisions and the Appellant's role in protecting the mortgaged property.

← Previous Next →