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TMI Blog2005 (12) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuant to the order dated March 12, 1997, passed by this Court in Misc. Civil Application No. 6 of 1992, the assets of the Amruta Mills Ltd. (in liquidation) ( the company ), other than lands and buildings of the company have been sold at a public auction. The sale was conducted under the recovery application filed by the Industrial Finance Corporation of India Ltd. (IFCI) under the provisions of section 30 of the Industrial Finance Corporation Act, 1948 (hereinafter referred to as "the Act"). The sale was conducted by the sale committee appointed by the court. The sale committee comprised of the official liquidator, a representative of the Textile Labour Association (TLA), representatives of Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India Ltd. (ICICI), Industrial Investment Bank of India (IIBI) and Punjab National Bank (PNB) and the IFCI. The sale committee was headed by the representative of the applicant-IFCI. 4. The offers were invited through the advertisements in the leading newspaper dated 5-6-1998. The plant and machinery and miscellaneous fixed assets, other than land and buildings were valued at Rs. 2.67 crores. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt claimed by the IFC are as under : (Rs.) 1. 58,978 Security expenses 2. 20,475 13,032 33,507 Cost of advertisement valuation and incidental expenses. 3. 4,30,975 Insurance premium charges. 4. 6,98,670 Legal fees, charges, court fees and charges for bringing the documents from Mumbai, etc. 12,23,268 11. The IFCI has claimed the aforesaid amounts as actual costs incurred. At the time of hearing learned counsel of the IDBI has supported the aforesaid claim of the IFCI for costs. However, Mr. Vasavada, learned counsel for the TLA has vehemently opposed the same and has relied upon the certain decisions of this Court. Thereafter, our learned brother Justice M.S. Shah has heard the matter and decided as under : "Having heard learned counsel for the parties on the aforesaid disputes, it appears to the court that while the IFCI has made out a case for claiming reimbursement of the above first three items, there is no case made out for the fourth item of legal fees and other expenses to the rune of Rs. 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up of the company. Learned counsel further submitted that the learned Single Judge ought to have held that when a secured creditor opts to realise the security under the Special Act, then it is also obligatory on it to bear the entire brunt of expenditure incurred by it. It was stated that the learned Single Judge ought not to have granted the reimbursement in this behalf. The said Division Bench judgment reported in Gujarat State Financial Corporation s case ( supra ) had followed the decision of the Division Bench of the Karnataka High Court in International Coach Builders Ltd. v. Karnataka State Financial Corporation [1994] 81 Comp. Cas. 19. However, the Hon ble Supreme Court reversed the said decision of the Karnataka High Court in International Coach Builders Ltd. v. Karnataka State Financial Corporation [2003] 114 Comp. Cas. 614 1 (SC) and also by the same judgment, in Civil Appeal No. 6303 of 1995, the judgment of the Division Bench of this Court in Gujarat State Financial Corporation s case ( supra ) was set aside. 14. However, at the time of hearing of this appeal, Mr. Vasavada, learned counsel has stated that though originally when appeal was filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Of course, even in such a situation, if the same property was mortgaged to more than one secured creditor, they had to either come to an agreement, or in the event of disagreement, there had to be a suit in which dissenting mortgagee had to be sued as a necessary party defendant. No doubt section 29 of the SFC Act was intended to place SFCs on a better footing. But, in our view, this better footing is available only so long as the debtor is not a company or is a going company. The moment a winding up order is made in respect of a debtor company, the provisions of sections 529 and 529A come into play and whatever superior rights had been ensured to SFCs under the provisions of the SFC Act are now subjected to and operate only in conjunction with the special rights given to the workmen, who as pari passu charge-holders are represented by the official liquidator. We are, therefore, of the view that the unhindered right hitherto available to the SFCs to realise their security, without recourse to the court, no longer holds true as the right vested in the official liquidator is a statutory impediment to such exercise and has to be reckoned with. And since the official liquidator c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his debt in the winding up, then there is no doubt that the official liquidator will come into custody of all the assets of the company in liquidation and the distribution of the assets would have to proceed in accordance with the provisions of section 529A of the Companies Act, in which case the secured creditor stands in line as an unsecured creditor. It is only when the SFC as a secured creditor opts to stand outside the winding up and seeks to realise its security that the conflict, if any, can arise. We have already indicated as to who must yield in such a clash of the titans. The fact that the liquidator or the workmen do not have a right independently to enforce the charge, unless the creditor decides to stand outside the winding up, does not make any difference to the situation, in our view. It is not the contention of the SFCs that they do not desire to exercise the option available to them of standing outside the winding up. In fact, it is their contention that as mortgagees they have a right to stand outside the winding up and are not subject to the supervisory jurisdiction of the Company Court. They also contend that, unlike other mortgagees, they have a special right b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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