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TMI Blog2000 (2) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1985. The appellant is a statutory corporation which advanced loans to the companies concerned on obtaining securities including the assets of the company. Thus, the appellant is in the position of a secured creditor. The appellant is endowed with the power of take over and sale of assets to realise its outstanding dues under the provisions of the State Financial Corporations Act. It can opt to remain outside the winding up proceedings and enforce the securities on its own, subject to the leave of the court. It is to be mentioned at the outset that it is not at the instance of the appellant-Corporation that the BIFR referred the cases for passing" the order of winding up the companies. The appellant did not figure in the proceedings before this court. In the proceedings before this court, the appellant did not make any request for winding up. It neither supported nor opposed the winding up proceedings. However, at the time of passing the order of winding up, this court directed the appellant-Corporation to cause the publication of the order and to deposit the said amount for the reason that it is the principal secured creditor. In R. C. C. No. 3 of 1998, the learned judge clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We may mention that this problem as to defraying of initial expenses soon after the winding up order is passed is peculiar to the references made by the BIFR under section 20 of the Sick Industrial Companies (Special Provisions) Act. In other cases, while passing the winding up order, the court can direct the petitioners who are mostly creditors to advertise and advance the amount to meet initial expenses of official liquidator. However, that is not the position in the case of winding up at the instance of the BIFR unless of course a creditor intervenes and supports the reference. As already stated, the learned single judge relied on the proviso to 292 in his order dated February 24, 1999, in R. C. C. No. 3 of 1998. But, the proviso only provides for reimbursing the amount advanced to the official liquidator by the petitioner or a creditor or a contributory out of the assets of the company on preferential basis. It does not cast a positive obligation on the part of the contributory to advance certain money towards preliminary expenses to the official liquidator. Even by necessary implication, it cannot be said that a duty is cast on a secured creditor like the petitioner who d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining the security. Such preservation and maintenance of security so far as he is concerned, is for the benefit of the workmen, who-are pari passu secured creditors, having equal rights with other co-creditors, since 'pari passu' itself means 'with equal step equally without preference' as per Jowitt's Dictionary of Law. The official liquidator may have to incur other incidental expenses like paper publication, communicating orders to the other persons affected by the winding up proceedings and all such expenses are ultimately meant to preserve and maintain the security for the benefit of workmen, who are pari passu secured creditors. Therefore, the official liquidator is entitled to contribution from other co-secured creditors, the expenses incurred by him proportionately." The principle laid down by the Division Bench that the secured creditor is liable to bear the expenses for the preservation and maintenance of security, has been further extended by the learned single judge to cover the initial expenses like paper publication, etc., because according" to the learned single judge, such expenses "are ultimately meant" to preserve the security for the benefit of workmen. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up order passed at the instance of the BIFR, are not correctly decided and we hereby overrule the said decisions. At the same time, we make it clear that the appellant is bound to reimburse the official liquidator for the expenses incurred by him in connection with or for the purpose of maintenance and preservation of security. Such amount should be paid without avoidable delay after receiving a statement of expenditure from the official liquidator. The official liquidator can also require the secured creditor to pay in advance regarding the expenditure which he is called upon to incur for this purpose provided sufficient details are notified to the appellant-Corporation. If there is any dispute in regard to the quantum of expenses or the justification therefore, either the official liquidator or the secured creditor can move the court. It is unfortunate that the BIFR has not put in its appearance despite service of notice. In our view, the BIFR which for all practical purposes is in the position of a petitioner as far as section 20 of the Sick Industrial Companies (Special Provisions) Act and rule 113 of the Companies (Court) Rules are concerned, is bound to advertise the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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