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TMI Blog1994 (3) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... (the bank) and the A. P. Industrial Development Corporation, Hyderabad (APIDC), which are secured creditors of Business Machines (India) Pvt. Ltd., which has been wound up, to pay the salaries of the watch and ward staff including the arrears from February 1, 1992. According to the application, by an order dated April 22, 1988, in Company Petition Nos. 15 and 59 of 1987 this court directed winding up of the company. The bank filed a suit for recovery of the money due to it and also obtained leave of this court to stay outside the winding up proceedings. On the other hand, APIDC has not informed the applicant about the course of action it has adopted or proposes to adopt. Pursuant to the orders of this court in C.A. Nos. 251 and 252 of 1988, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, that the bank had a second charge over the block of fixed assets of the company, the first charge being in favour of the APIDC, that the bank had a first charge on the current assets of the company, that on the request of the official liquidator, the bank had agreed to pay the salaries to the watch and ward staff for a temporary period and so far paid an amount of Rs. 1,09,981 and that neither the APIDC nor the official liquidator has done anything for the past three years to dispose of the assets or permitted the bank to sell the current assets hypothecated in favour of the bank. The APIDC has filed a counter stating that an amount of Rs. 1,52,87,043 inclusive of interest, is due to it from the company and that under the proviso to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of section 529A. (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section: Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to pay his portion of the expenses incurred by the liquidator (including a provisional liquidator, if any) for the preservation of the security before its realisation by the secured creditor". Sri S. Suryaprakash Rao, learned counsel for the bank, and Sri Sriram Reddy, learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or has to meet the expenses first and later claim reimbursement from the secured creditor, is not correct as held by the Gujarat High Court in New Swadeshi Mills of Ahmedabad Ltd., In re [1985] 58 Comp. Cas. 86 ; [1987] 1 Comp LJ 151. In the latter case, it was held by the Gujarat High Court as follows (page 93): "In my view, it would be taking too truncated and unrealistic a view of the provisions of section 529(2), proviso, to even contend that even though ultimately the secured creditor standing outside the winding up would be liable to reimburse all the expenses incurred by the liquidator for preservation of the security, in the process of preservation, no contribution can be asked for from such secured creditor". The proviso was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the suit, it is liable to bear the expenses under the proviso to section 529, sub-section (2). He relies on the judgment in New Swadeshi Mills of Ahmedabad Ltd., In re [1985] 58 Comp. Cas. 86 (Guj); [1987] 1 Comp LJ 151. The counter filed by the APIDC is silent on the question whether it opts to stand outside the winding up proceedings or not, nor has it indicated its intention either way to the official liquidator. As there is no period of limitation for it to exercise this option, it may, at any time opt to proceed to realise its security by remaining outside the winding up proceedings by invoking section 29 of the State Financial Corporations Act, or by filing a suit, if within limitation. In such a case, it would be deriving the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 48 lakhs and Rs. 120 lakhs respectively, the principal amounts being about Rs. 15 lakhs and 36 lakhs. So the ratio in which the bank and the APIDC have to bear the expenses can be fixed as 2:5 (48: 120). I accordingly direct the bank and the APIDC to pay the official liquidator amounts to cover salaries payable from the March of 1994 in the ratio of 2:5. However, as regards the arrears of salary payable from February, 1992, to February, 1994, as the bank had already spent an amount of Rs. 1,09,981 to meet the salaries up to the month of January, 1992, I think it just and fair to direct the APIDC to pay the expenses to meet the arrears of salaries payable from February, 1992, to February, 1994. It is made clear that as and when the API ..... X X X X Extracts X X X X X X X X Extracts X X X X
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