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TMI Blog2015 (8) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... t no.1, A.P. Industrial Development Corporation and respondent no.2, A.P. State Financial Corporation when the Company Judge has permitted them to stand outside the liquidation proceeding subject to certain conditions under which the respondent Corporations may pursue the powers available to them under Section 29 of the State Financial Corporations Act, 1959 (for brevity referred to as 'the SFC Act'). 2. The relevant facts are not at all under dispute and to answer the issue of law indicated above it is not necessary to delve deeper into facts. It would suffice to notice that the Official Liquidator has taken over the charge of the company by virtue of Section 445 of the Companies Act and the property of the company is also seized by the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by the second charge holder or by the Official Liquidator, confirmed the sale of land, buildings, plant and machinery in favour of M/s. Sri Venkataswara Industries represented by Sri Adarsha Gupta for a sum of Rs. 86 Lacs and carding machine in favour of M/s. Supreme Associates, Coimbatore for a sum of Rs. 2.45 Lacs. However, the learned Single Judge made the order of confirmation subject to the following conditions : "Before the applicant and 2nd respondent seek to appropriate the sale proceeds for themselves, they should prove their claim before the Official Liquidator. The proceeds realised through the sale of the properties shall be kept by the applicant-Corporation in interest earning deposits till the Official Liquidator adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding with liberty to pursue its remedy as per statutory rights available under the SFC Act, subject only to the conditions imposed by the court. The reasons for such a view are apparent on a perusal of the following three judgments of this Court : 1. A.P. State Financial Corporation v. Official Liquidator (2000) 7 SCC 291; 2. International Coach Builders Ltd. v. Karnataka State Financial Corpn. (2003) 10 SCC 482; and 3. Rajasthan State Financial Corpn. v. Official Liquidator (2005) 8 SCC 190 6. In A.P. State Financial Corporation this Court had the occasion to examine the extent of powers available to a Financial Corporation under Sections 29 and 46 of the SFC Act in the light of later amendments to the Companies Act incorporating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y intendment, according to us. This impediment is of a limited nature for the specific purpose of protecting the pari passu charge of the workmen's dues and subject thereto, SFCs can continue to exercise their statutory rights as secured creditors without being reduced to the status of unsecured creditors required to prove their debts in insolvency and stand in line with other unsecured creditors. Neither is the apprehension expressed justified, nor the contention sound." 8. It is clear from the aforesaid judgment that no doubt the changes brought about in the Companies Act through amendments of 1985 impede even the statutory powers available to a secured creditor like SFCs under Section 29 and the other relevant sections of the SFC Act b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for the limited purpose of securing the right of the workers for distribution of their wages as pari passu charge. But such limited impediment to their rights under the SFC Act will not alter the status of State financial corporations as secured creditors and they will not be required to prove their debt which they are entitled to realize under the provisions of the SFC Act subject to right of the workers to receive their wages also as secured creditors on pari passu basis. The control of the Company Judge and the Official Liquidator if authorized, can extend only to ensure that the aforesaid purpose of Section 529A is effectively achieved. Like any other affected person, if the Company represented by the Official Liquidator has reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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