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TMI Blog2016 (9) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... r factual aspects noted and discussed by us hereinabove. That somersault was made in application filed under Rule 9 of the Rules, 1959 that no such status as a secured creditor under SARFAESI Act claimed by the appellant, was rightly rejected by the learned Company Judge. Even applicability of Section 130 of the Transfer of Properties Act in the facts of the case was considered by learned Company Judge is also based on submissions made by learned counsel for the appellant in the context of its claim as a secured creditor under SARFAESI Act. Therefore, prayer of the appellant company for substitution as a secured creditor in place of IFCI Ltd. assignor on the strength of deed of assignment of debts, is rightly rejected by learned Company Judge. In the context of Section 62 of Contract Act, 1872, a novation of contract, in the above case answered the contention raised on behalf of borrower that an assignment of a debt can never carry with it the assignment of the obligations of the assignor unless there is a novation of contract by all parties, the Apex Court [supra] held that an outstanding in the account of borrowers [customers] is debt due and payable by the borrowers to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as specified in Section 23 of The Industrial Finance Corporation Act, 1948, provided financial facilities to M/s. Mahendra Petrochemicals Limited [for short, `M/s. MPL'], the company in liquidation, which were secured by the company in liquidation against all the movable and immovable assets of the company in liquidation. Section 23 of The Industrial Finance Corporation Act, 1948 is about nature of business which the Corporation may transact, as defined in clauses [a] to [p] also include granting loans or advances to industrial concerns as per clause [i]. IFCI Limited was the first charge holder and M/s. MPL defaulted in making the payment of the dues in respect of the financial facilities granted by IFCI Limited. In the proceedings initiated before the Company Court, vide order dated 19.04.2010 passed in Company Petition No.150 of 1996, the company was ordered to be wound up. The case of the appellant / applicant Suzuki Parasrampuria Suiting Pvt. Ltd. [SPSPL] assignee before the Company Court was that IFCI Limited assigned the debts due of company in liquidation pursuant to executing Deed of Assignment on 28.07.2010 in favour of the appellant / applicant. Thus, all rights, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1956 and proceedings for winding up the company were initiated in the year 1996 and final order was passed on 19.04.2010. The MoU dated 01.01.2004 was entered into between the appellant and company in liquidation and thereafter Deed of Assignment was executed between the appellant and the IFCI Ltd. on 28.07.2010 and subsequently appellant challenged the order of winding up dated 19.04.2010 passed by learned Company Judge by filing O.J. Appeal No.42 of 2010 in which Deed of Assignment was not produced. That prayer of not taking possession by Official Liquidator made in Company Application No.238 of 2010 was rejected. Even another application being Company Application No.345 of 2011 also preferred by the applicant on 28.04.2011 with a prayer that the transaction by company in liquidation with the applicant by MoU dated 01.01.2004 be validated under the provisions of Section 536(2) of the Companies Act. However, in both the aforesaid applications, the appellant had neither mentioned about Deed of Assignment dated 28.07.2010 nor it was produced before the Court. It was further argued by respondent banks that IFCI Ltd. had no right to assign debts because Bank of Baroda and Punjab Nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant to recall CAV judgment dated 31.07.2015 passed in Company Application No.248 of 2014, as above, and the above application was filed under Rule 9 of the Companies (Court) Rules, 1959 which gives inherent powers to the Company Court, on the ground that appellant did not pray that appellant may be permitted to be substituted in place of IFCI Ltd. as secured creditor for the purpose of SARFAESI Act, but it was a simple application for substitution in place of IFCI Ltd. by virtue of contract or by Deed of Assignment and provisions of SARFAESI Act would not apply. 9 The above application to recall also came to be rejected by assigning reasons and relying on various decisions about powers available with the Company Court to recall / review its order visavis Rule 9 of the Companies (Court) Rules, 1959. 10 Mr. Pahwa, learned counsel for the appellant would contend that the learned Company Judge erred in rejecting Company Application No.248 of 2014 by the CAV Judgment and order dated 31.07.2015 essentially on the ground that the appellant was not entitled to get any benefit under the SARFAESI Act and, therefore, cannot be termed as a secured creditor and even an appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the appellant has relied on the following decisions in support of his submission that appellant's right to be substituted in place of IFCI Limited: [a] Deccan Chronicle Holdings Ltd. vs. IL FS Trust Co. Ltd. [(2015)64 Taxman 326 (AP)]. [b] Mafatlal Denim Ltd. [Company Application No. 376 of 2012] . [c] Mafatlal Denim Ltd. vs. Sicom Ltd. Ors. [SLP (C) 7887 of 2010. [d] Aar Kay Concast Ltd. vs. Reliance Capital Ltd. [(2011)12 Taxman 454 (P H)] . [e] Managing Director, M/s. LVSR Farms Pvt. Ltd. vs. OL of High Court of A.P Ors. [f] Rumonia Marketing Pvt. Ltd. vs. OL of Mardia Steels Ltd. Anr. [Company Application No.59/2007]. [g] ICICI Bank Limited v Official Liquidator of APS Star Industries Limited Others [(2010) 10 SCC 1] 11 Mr. M.B.Gandhi, learned counsel for the respondent No.5 opposed prayer of the appellant and submitted that the learned company Judge has neither erred in law or on facts and reasons are assigned for arriving at findings and conclusions drawn warrant no interference by this Court in appeal preferred by the appellant. It is submitted that proceedings before the learned Company Judge seeking substituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule-D B attached to the Deed of Assignment: SCHEDULE A FINANCIAL ASSETS MAHENDRA PETROCHEMICALS LTD [Rs. in Lakhs] Facility Amount Sanctioned Amount disbursed Principal Outstanding [as on 30.6.2008] Interest other dues / charges [as on 30.6.2010] Total Dues [Pri+Int] RTL 1000.00 1720.00 432.50 15773.30 16205.80 RTL 225.00 Corporate Loan 500.00 Grand Total 1725.00 1720.00 432.50 15773.30 16205.80 SUMMARY OF SCHEDULE B The contents of Schedule B are of Term Loan of ₹ 1000 lakhs , Additional Rupee Term Loan of ₹ 225 lakhs, Corporate Loan of ₹ 500 lakhs for which various loan agreements, deeds of hypothecation and joint equitable mortgage created by deposit of the deeds, interalia, in respect of its immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atral, District Gandhinagar [then Mehsana[, forming part of Survey No.135 of Mouje Chatral, Taluka Kalol, District Gandhingar [then Mehsana] Gujarat State together with all buildings, sheds, columns, warehouse, etc. constructed / to be constructed there on and anything attached to the earth of permanently fastened to anything attached to the earth or any part thereof The above Deed of Assignment, no doubt was registered on 28.07.2010 before the office of the SubRegistrar, KalolGandhinagar, signed by executant and claimant on behalf of assignor and assignee. 13.2 On perusal of the record of this appeal, it appears that the appellant upon a request made by the respondent MPL, an amount of ₹ 70 lakhs was paid to MPL as interest to be deposited and towards consideration for using and occupying the land and building in question [which are subject matter of the liquidation proceedings before the Company Court] and that the appellant was to be into physical possession of the property for which the appellant made investment to the tune of ₹ 1,93,40,946/- and also for installation of new machinery and employing labourers. That MoU dated 01.01.2004 was entered into bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SICA, 1985, reference No.385 of 2000 stood abated on 17.01.2008 and hence measures initiated under Section 13(4) of SARFAESI Act by the secured creditors viz. financial institution / bank for recovery of their dues against their secured assets to which assignor was aware about assignment of deed appears to be not bonafide. That settlement of more than ₹ 160 crores of dues against paltry sum of ₹ 58 lakhs towards consideration is nothing but an eye wash to defeat measures undertaken by respondent banks under Section 13(4) of SARFAESI Act as well as winding up proceedings before the Company Court. It is also an admitted fact that applicant company is not registered under Section 5 of the SARFAESI Act and keeping in mind definition of Securitisation company, reconstruction company, banking company, financial institute in SARFAESI Act viz. 2[za], 2[v], 2[d] and 2[m] respectively, it was not open for the IFCI Ltd. assignor to enter into a Deed of Assignment with applicant bank. 13.4 Company Application No.238 of 2010 was filed by one M/s. Suzuki Parasrampuria Suitings Private Limited [SPSPL] and Company Application No.346 of 2010 was filed by M/s. Suzuki Suitings Priva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1] The transaction of lease is not validated by the learned Company Judge in the impugned order and as the appellants have declared that the appellants are not agitating the merits in the present appeal, we find that the impugned order passed by the learned Company Judge calls for no interference. Hence the order passed by the learned Company Judge on merits would remain in operation in the present matter. [2] Consequently, the appellants would be required to hand over the possession of the property but as the appellant is ready to submit the offer for ₹ 2.75 crores and is also ready to deposit the amount of ₹ 27,50,000.00, it is ordered that if the appellant deposits an amount of ₹ 27,50,000.00 within three weeks from today with the Official Liquidator, the Official Liquidator shall take symbolic possession of the property in question and the physical possession of the property in question may continue with the appellant, subject to finalization of the sale, as may be made by the learned Company Judge in the respective winding up proceedings upon the report of the Official Liquidator. There shall be additional condition to abide by the undertaking to depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant is not accepted by the learned Company Judge and the sale is finalized in favour of any other party who has offered higher amount, the physical possession of the property in question shall be handed over by the appellant within six weeks as per the undertaking failing which the official liquidator shall be at liberty to take possession of the property with the help of the police. [7] It is observed and directed that the rights and contentions of both the sides on the aspects of assignment of debt and the consequential aspects thereto before the appropriate forum shall remain open and shall not be prejudiced in any manner by the present order. All the parties shall cooperate in finalization of the sale proceedings. [8] Present order is also without prejudice to the rights and contentions of the appellants to get refund of the amount of ₹ 70 lacs, if otherwise permissible in law. However, it is observed that in the event such aspect is not finalized at any stage, the appellants shall not be relieved from the undertaking given to this court for the offer of ₹ 2.75 crores and the other aspects relating to for the sale of the property in question. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic interest even at the stage of considering an application for substitution in place of assignor, which has far reaching consequences. The company Court dealing with assets of the company in liquidation based on reports filed by Official Liquidator, who is an eye and ear of the Company Court cannot simply ignore or brush aside legitimate claim of other secured creditors in such a scenario. 13.8 In the case of Sesa Industries Ltd. v. Krishna H. Bajaj Ors. [AIR 2011 SC 1070] , the Apex Court in para 39 held as under: 39. An Official Liquidator acts as a watchdog of the Company Court, reposed with the duty of satisfying the Court that the affairs of the company, being dissolved, have not been carried out in a manner prejudicial to the interests of its members and the interest of the public at large. In essence, the Official Liquidator assists the Court in appreciating 25 1951 SCR 277 26 AIR 1968 SC 615 3 the other side of the picture before it, and it is only upon consideration of the amalgamation scheme, together with the report of the Official Liquidator, that the Court can arrive at a final conclusion that the scheme is in keeping with the mandate of the Act and that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect threadbare in para 20 of the judgment dated 31.07.2015 reproduced law with regard to registration of charge under Section 125 of the Companies Act, 1956 and also paras 44, 45, 46, 51 and 52 of the judgment of the Apex Court in the case of ICICI Bank Ltd. [supra] and definition of banking company, financial institution, reconstruction company, Securitisation company under SARFAESI Act and also that the applicant company was not a bank or a banking company or a financial institution or a securitization company or reconstruction company and, therefore, the appellant was not to be permitted to be substituted in place of IFCI as secured creditor for the purpose of SARFAESI Act. The above clear findings were in the context of submissions made and pleadings in the application and reply and considered by the learned Company Judge to which we are in agreement and in addition to other factual aspects noted and discussed by us hereinabove. That somersault was made in application filed under Rule 9 of the Rules, 1959 that no such status as a secured creditor under SARFAESI Act claimed by the appellant, was rightly rejected by the learned Company Judge. Even applicability of Section 130 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the deed of assignment. Sicom Limited assigned debt in favour of Mishapar Investments Limited. The substitution was allowed after the Hon'ble Apex Court recognized the same in the pending SLP. [c] In the case of Mafatlal Denim Ltd. [supra] [ii] , during the pendency of the petition before the Hon'ble Supreme Court there was an assignment of debt between Sicom Limited in favour of Mishapar Investments Ltd. and the substitution in pursuance to the deed of assignment was allowed. [d] In the case of Aar Kay Concast Ltd. [supra], The High Court of Punjab and Haryana, held that an assignee was eligible to take recourse of filing a winding up petition after procuring the debt from another company. After the assignment of the debt, the assignee had preferred a winding up petition in which an objection was raised about maintainability of the locus of the assignee to litigate on and for the assignor, the Court overruled the objection and dismissed the appeal. SLP against the order of the Division Bench came to be dismissed. [e] In the case of Managing Director, M/s. LVSR Farms Pvt. Ltd. [supra], when A Private Limited Company had taken debt from Central Finance Inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our Assignee had also not conveyed its consent to treat Andhra Bank as a secured creditor C.A. No.1007 of 2011 disposed of and C.A. No.306 of 2012 filed by Andhra Bank dismissed . [f] In the case of Rumonia Marketing Pvt. Ltd. [supra] , a private limited company had moved an application for being substituted in place of ICICI Bank pursuant to the deed of assignment and this Court permitted to represent the debt of the assignor bank pursuant to the deed of assignment. [g] In the case of ICICI [supra] question required to be decided was whether inter se transfer of Non Performing Assets [NPA] by the banks is illegal under the Banking Regulation Act, 1949 as held by the Gujarat High Court in the judgment under challenge . The Apex Court referred to provisions of Banking Regulation Act, 1949 and scope of banking business in the context of RBI Guidelines expanding scope of banking business which was held to be not limited to core banking of accepting deposits and lending, but also Banking Regulation Act, 1949 leaves ample scope for banking companies to undertake such additional businesses as are not violative of prohibitive and restrictive statutory provisions and RBI c ..... 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