9911796707
TMI Blog1980 (3) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the respondent. From the facts of this case which are not in dispute it appears that prior to the said company, India Electric Works Ltd., being wound up by an order of this court, an agreement was entered into with the State Bank of India, Calcutta, for the advance of money and/or overdraft facilities for running the business of the company by way of cash credit account on various terms and conditions which are set out in the letter dated the 16th of January, 1963, a copy of which is annexed to the affidavit in support of this application by and under which it transpires that pursuant to the correspondence between the company and the Stale Bank of India, a cash credit accommodation was sanctioned to the company on the terms and conditions set out in the said letter dated the 16th of January, 1963, from the State Bank of India to the company, the limit being Rs. 85,00,000 and the security being hypothecation of the company's whole assets, stock-in-trade, raw materials, book debts, stores and all other assets together with a guarantee of the President of India. There were two accounts, one being account No. 1, the Cash Credit Account and the other being account No. 2, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciating the correct position it will be convenient to set out some relevant correspondence, the first being a letter dated the 6th of January, 1963, written by the State Bank of India, Strand Road, Calcutta, to the India Electric Works Ltd. sanctioning the cash credit accommodation in the two accounts being accounts Nos. 1 and 2. Copy of letter No. ADV |C. 365 dated the 16th January, 1963, from the State Bank of India, 3, Strand Road, Calcutta, to the India Electric Works Ltd., Diamond Harbour Road, Calcutta 34. Private and Confidential Dear Sirs, Cash Credit Accounts. A/c. No. 1 limit Rs. 85 lakhs. A/c. No. 2 limit Rs. 55 lakhs. With reference to the correspondence resting with your letter No. ADV/C. 8265 dated the 20th December, 1962, we have pleasure in advising, that the bank has sanctioned cash credit accommodation to the company on the following terms and conditions : Account No. 1 : ( a )Limit Rs. 85 lakhs. ( b )Security Hypothecation of the whole of the company's stock- in-trade of whatever kind and description, whether raw or in process of manufacture, and all articles manufactured therefrom, stores, book debts and other assets plus the guaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen during the stipulated period of repayment, the management of the company under section 18A(1) of the Industries (Development and Regulation) Act comes to an end. 2. Please return to us the duplicate of this letter duly signed by yourselves and the Secretary to- the Government of India, Ministry of Commerce Industry, in token of acceptance of the terms and conditions of the advance, as indicated above. Yours faithfully, Sd/- Superintendent. Duplicate duly signed by Sri Ranganathan, Secretary, Ministry of Commerce and Industry and Shri P. C. Basu, Authorised Controller. India Electric Works Ltd., sent to Bank. Pursuant to the said agreement, the State Bank of India lent and advanced diverse sums of money and the said agreement was duly guaranteed by the Union of India, in terms of the said agreement, up to the total amount together with interest aggregating to Rs. 2,02,71,371. Before the said arrangement for the overdraft on cash credit account and the guarantee by the Union of India, the State Bank, pursuant to its cash credit arrangement prior to the liquidation of the company, presented a winding-up petition being C.P. No. 361 of 1967 against the company, and, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will have to be paid first before the claims of the preferential creditors as provided in section 530 of the Companies Act, 1956. As desired by you I discussed the matter with the Superintendent, Advances Department, State Bank of India (Head Office), Calcutta. He, however, informed me that they had not yet received your letter. Yours faithfully, Sd/- J. P. Mukherjee, Official Liquidator, High Court, Calcutta". It appears that on the 28th of March, 1977, the Union of India made an application for a condonation of the delay in preferring its claim and filing its proof of debt in respect of the said amount before the official liquidator.. By an order dated 30th March, 1977, the Union of India was given leave to file the proof of debt before the official liquidator before 13th May, 1977. Pursuant to the said order dated 30th March, 1977, the Union of India filed its proof of debt before the official liquidator on or about 13th May, 1977. The petitioner is also claiming a sum of Rs. 43,17,00,000 as an ordinary creditor in addition to the said claim as a-secured creditor for the amount of Rs. 2,02,71,371. It is alleged that between 3rd of August, 1967, and the 30th of Novemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India must be deemed to have waived its claim on the security, if any, in respect of the said properties of the company which have now admittedly been sold in the winding-up proceedings by the official liquidator in the course of administration of the company in winding-up. Therefore, Mr. Chatterjee submitted that the present application should be dismissed with costs and the Union of India is not entitled to any right as a secured creditor or an ordinary creditor in respect of the sum claimed by the Union of India out of the assets lying in the hands of the official liquidator. Mr. S. B. Mukherjee, appearing for the official liquidator, submitted that the Union of India having paid the State Bank of India as the guarantor for the said loan granted by the State Bank of India to the company has now stepped into the shoes of the State Bank of India and is entitled as a secured creditor in respect of the assets and properties of the company, which were charged and mortgaged in favour of the State Bank of India by the said company against the said cash credit accounts hereinbefore stated. Mr. Mukherjee submitted that there is no dispute whatsoever that the State Bank of India has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company executed the said document being the Cash Credit (Hypothecation of Goods) Agreement dated the 2nd of January, 1963, hypothecating and charging various assets of the present and future, and the properties, in favour of the State Bank of India and it also appears that on or about 4th January, 1963, the company deposited with the State Bank of India at Calcutta the title deeds of the immovable properties with intent to create a security by way of equitable mortgage for the money lent and advanced by the State Bank of India to The company during the period it was working under the Industries (Development Regulation) Act, 1951, through the authorised controller appointed by the Central Govt. The State Bank of India did not file any suit for the recovery of its dues and the enforcement of its securities but applied for a winding-up of the company and the said company was wound up as hereinbefore stated by the order dated the 27th of August, 1968. It appears that after negotiation between the State Bank of India and the President of India, who was the guarantor, a sum of Rs. 2,02,71,371, being the total amount advanced together with interest by the State Bank of India in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocates appearing for the official liquidator and the Union of India being Mr. S. B. Mukherjee and Mr. D. Some respectively on behalf of the Union of India and also Mr. Somenath Chatterjee appearing for the India Electric Workers' Union. The reasonings parity in this judgment and partly in the other application made by the Union of India cover the entire questions about which the official liquidator has sought a determination and direction in the summons taken out dated the 2nd of June, 1978. Therefore, I am making the following order : In terms of prayer ( i ) it is determined that, in the facts and circumstances of this case, the Union of India is a secured creditor for a sum of Rs. 1 crore 40 lakhs only and has the right to pursue the claim preferred before the official liquidator as a secured creditor to that extent. As the properties have already been sold and the securities in respect thereto have shifted to the sale proceeds, there is no question of return of the title deeds by the official liquidator to the Union of India. The official liquidator to retain the costs of this application out of the assets in his hands to be paid at the first instance before paying the Un ..... 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