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TMI Blog1997 (7) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... e 7, 1985, the bank filed another statement stating that if the company was ordered to be wound up, necessary direction might be given to safeguard the rights of the bank to proceed against the assets of the company for realisation of the amount due to the bank. The bank also filed C.A. No. 291 of 1984 under section 446 of the Companies Act for sanction to institute a civil suit to enforce their security. By order dated February 11, 1985, the above request was granted. In the meanwhile, this court ordered the winding up of the company on June 10, 1985. The bank instituted O.S. No. 3 of 1986 before the Sub-Court of Ernakulam, against the company. According to learned counsel for the bank, this court permitted the official liquidator to compromise the suit and, accordingly, a decree was passed on January 30, 1988. The suit was decreed to the tune of Rs. 1,48,23,388.73. The decree further allowed the bank to realise interest at the rate of 10 per cent. per annum on the amount from the date of the suit till realisation. Thereafter, the bank filed E. P. No. 275 of 1990 in the Sub-Court. The sale which was conducted by the Sub-Court was the subject-matter of certain petitions before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to support the same conclusion. Prior to the amendment the law was well settled both in England and in India that the secured creditor was outside the winding up and he could realise his security without the intervention of the court by effecting a sale of the mortgaged premises by private treaty or by public auction. It was only when the intervention of the court was sought either by putting in force any attachment, distress or execution within the meaning of section 232(1), as it stood before the amendment or proceeding with or commencing a suit or other legal proceedings against the company within the meaning of section 171 that leave of the court was necessary and if no such leave was obtained the remedy could not be availed of by the secured creditor." Learned counsel also brought to my notice a latest decision of the Supreme Court in Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies [1996] 86 Comp. Cas. 255; [1996] 4 SCC 165 wherein the view expressed by the Supreme Court in M. K. Ranganathan's case [1955] 25 Comp. Cas. 344 ; AIR 1955 SC 604, was reiterated in the following words (page 257): "The foundational premise of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor in case any surplus is available for distribution after meeting the claims of the workers for their wages and those of other creditors. Another ruling relied on by learned counsel for the bank is Venkataraju v. Lakshmanaswami, AIR 1931 Mad 729. That case, which arose under the Provincial Insolvency Act, discussed and decided the distribution of the surplus among the secured creditors and others. The above case was relied on by learned counsel in order to reinforce his argument that he is entitled to get interest at the contract rate. The following observations in the above judgment indicate the above stand point (page 738): "Cases of surplus in the administration of an insolvent's estate are not matters of frequent occurrence. When such cases occurred in England, learned judges there have held that the creditor is entitled to interest at the contract rate till date of actual payment, if there were sufficient assets in the hands of the official receiver..............In cases of winding up of companies by order of court, though interest ceases to run from the date of the winding up order, yet interest at contract rate is payable if there are sufficient surplus asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed by this court. Under these circumstances, it cannot be said that the institution of the suit and the subsequent proceedings are without any sanction from this court. After considering the powers of this court under sections 446, 529, 529A and 537, there cannot be any doubt that the action taken by the secured creditor in filing the original suit and the subsequent events are with jurisdiction. But the real bone of contention is with regard to the rate of interest to be paid to the secured creditors. When learned counsel for the official liquidator as well as learned counsel for the contributors take the stand that rule 179 of the Companies (Courts) Rules, stands in the way of granting interest more than 4 per cent. per annum to the secured creditor when a surplus is available, the answer to the above argument by the secured creditor is that when he is standing outside the winding up proceedings, he is not bound by the provisions contained in rule 179. The further submission is that when the decree provides for the payment of 10 per cent. interest, that must be respected and followed. In such contingencies, according to the secured creditors, rule 179 does not operate. Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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