9911796707
TMI Blog1984 (12) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. The applicant in C. A. No. 617 of 1982 is the Karnataka Bank Ltd., a banking concern incorporated under the Banking Companies Act. It is represented by its manager at the Harihar branch who is also its duly authorised power of attorney holder. The applicant-bank claims to be a secured creditor of the respondent, M/s Craft Tools Pvt. Ltd., which has been ordered to be wound up by this court. The respondent is represented by the official liquidator who is the liquidator of the company in question. The bank claims to have advanced a little over Rs. 9,74,259.04 as pronote loans in certain sums on four hypothecation deeds in respect of machinery and stock-in-trade. The prayer in the application is that the official liquidator may be direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed creditors can move this court under section 446(2)( b ) of the Act and if not whether the applications are liable to be rejected as not maintainable. The learned counsel appearing for the applicant companies have submitted their arguments at length. Shri Udaya Holla, the learned counsel in C. A. No. 617 of 1982, has placed reliance on a number of decisions to some of which reference will be made in the course of this order. Shri S. Vijayashankar, learned counsel appearing for the official liquidator, has strenuously opposed the prayers in the applications and has contended that the practice of this court has always been to dismiss claims by secured creditors who stand outside the winding up proceedings leaving them to work out their re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings are required to obtain decrees against the company in liquidation after making the official liquidator a party to such suits and enforce the decree against the official liquidator. In other words, enforcement of security is to be done by procedure known to law and not by preferring claims under section 446(2)( b ) of the Act unless the secured creditor also stands within the winding up proceedings and takes his chance with others. Section 47 of the Insolvency Act clearly provides that the secured creditor may relinquish his security and stand in line with others and receive payment after valuing the security. This is very unlikely in most cases. The only situation when the secured creditor relinquishes his security and falls in line ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same in the case of a hypothecation where the creditor has a right to possession at his will, possession of the properties secured when the loan is not repaid or terms of the deed of hypothecation in other respects is violated by the borrower. Whether there is non-payment of loan, whether there has been violation of the other terms like reducing the value of security, frittering it away, etc ., is a matter to be pleaded and proved before possession can be ordered, that too in an appropriate civil court. The company court normally would decline to entertain such suits or claims and decide the questions involved in summary proceedings. It is in that circumstance that the present claim applications will have to be examined. At one stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank like the applicant in the first of the petitions to which movables and machineries are hypothecated can seek possession of the hypothecated goods while standing outside the winding up proceedings. The court will assume jurisdiction to decide the priority only in relation to persons who are within the winding up proceedings. The security realised outside the winding up proceedings, therefore, must necessarily be settled in courts other than the company court. Any other view would lead to a situation that even a mortgage can be redeemed in a claim application as long as the mortgagor is a company in liquidation. That does not appear to be the general scheme of the Act. As earlier pointed out, as long as the provisions of the Provincial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red creditor. That will not in any way help the case of the applicants here who are outside the winding up proceedings and they are free as declared by that sub-section to enforce that security. The company court is not putting any restrictions on them at all. On the other hand, it is submitted by Mr. Holla that the bank has indeed filed a suit after this application was presented in this court by way of caution with the permission of this court and, therefore, that suit has been kept pending awaiting decision on the question of maintainability of this application, without progress. In other words, the applicant in the first of the applications has already chosen to enforce his security in a civil court and, therefore, he should not be perm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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