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TMI Blog2012 (9) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... charge on the assets of an establishment and to be paid in priority to all other debts while distributing the sale proceeds. Since we have differed from the view taken by other High Courts, to give time for approaching the Supreme Court, we grant eight weeks time to the Official Liquidator to de-seal the premises and to put the auction purchaser into possession of the property. The Official Liquidator, if of the view that the sale by the Bank is in contravention of the SARFAESI Act and the Rules framed thereunder, shall also have liberty to approach the DRT under Section 17 thereof, within the said time of eight weeks. No costs. - CO. APP. No. 58/2012, CO. APP. No. 62/2012 - - - Dated:- 17-9-2012 - HON BLE THE ACTING CHIEF JUSTICE HON BLE MR. JUSTICE RAJIV SAHAI ENDLAW For the Appellant : Mr. Rana Mukherjee with Mr D. Verma and Ms. Neha S. Verma, M Daisy Hannah, Advocates, Mr. Bhupesh Narula, Advocate For the Respondent : Mr Rajiv Bahl, and Mr. Sanjay Katyal, Advocates for OL. Mr. Bhupesh Narula, Advocate , Mr Rana Mukherjee with Mr D. Verma and Ms. Neha S. Verma, M Daisy Hannah, Advoates, Mr Rajiv Bahl and Mr Sanjay Katyal, Advocate for Advocates for OL. Mr. Bhup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid property on 28th and 29th August, 2011 and finally took possession on 30.08.2011. 7. It was then that Co. Applications No. 1947 and 1948, both of 2011 were filed by the auction purchaser and the bank respectively seeking de-sealing of the property and restoration of the possession thereof to the auction purchaser. Vide order dated 21.09.2011, the learned Company Judge directed maintenance of status quo qua the property. The Official Liquidator filed reply in CA No. 1948/2011 averring, (i) that though the official liquidator had been appointed as the Provisional Liquidator on 3.8.2011, it was not associated with the auction held subsequently on 24.08.2011; (ii) that there was nothing to show whether the auction had been conducted in a fair manner; (iii) that admittedly the sale of the property is not complete as the sale certificate is not yet registered and thus the auction purchaser had not become the owner of the property and the ownership remained with company in liquidation; (iv) that no statement of affairs of the company in liquidation had been submitted till then and thus it was not possible for the Official Liquidator to ascertain the status of liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and having not being so associated the sale by the bank on 24.08.2011 was bad . Consequently the bank has been directed to prepare a fresh draft sale notice in association with the Official Liquidator, after taking into account the valuation report obtained by the learned Company Judge and to refund the amount received from the auction purchaser. Axiomatically the applications of the bank as well as the auction purchaser have been dismissed. 10. The contention of the counsels for the bank and the auction purchaser before us is that the learned Company Judge has merely followed the judgment (supra) of the Division Bench of the Punjab Haryana High Court without even discussing the arguments in differentiation thereof urged by them. It is contented that:- i) the SARFASESI Act in Section 13 (1) thereof provides for enforcement by a secured creditor of the security interest without the intervention of the Court or Tribunal and in accordance with the provisions of this Act i.e. the SARFAESI Act only; ii) Section 13 (8) enables the borrower to, even after measures under Section 13 (4) have been taken, pay up the dues of the secured creditor; iii) that such payment, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeds of the secured assets; c) Delhi Financial Corporation V. Rajiv Anand (2004) 11 SCC 625; and d) Unique Butyle Tube Industries (Pvt.) Ltd. v U.P. Financial Corporation (2003) 2 SCC 455 both in support of the contention that despite clear and specific scheme prescribed by the Parliament by providing for the interplay between the rights of secured creditor and the workmen, the impugned order seeks to create a casus omissus where none exists. 11. It is additionally argued by the counsel for the Bank that the Division Bench of the Punjab Haryana High Court in Haryana Concast Limited (Supra) in turn relied on Rajasthan Financial Corporation Vs. Official Liquidator (2005) 8 SCC 190. It is contended that the said reliance is misconceived since Rajasthan Financial Corporation (supra) was concerned with Section 29 of the State Financial Corporations, Act 1951 (SFC Act) which does not have a provision similar to the fifth proviso to Section 13 (9) of the SARFAESI Act. 12. The counsels for the Official Liquidator have, highlighted the differences in the valuation obtained by the bank and submitted by the valuer of the Official Liquidator; referred to Asset Reconstruction C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therewith but by subsequent legislation i.e. the DRT Act, in relation to the banks and Financial Institutions, it was the DRT which was entrusted with the distribution in accordance with Section 529A of the Companies Act. 15. The three Judges Bench of the Supreme Court in Rajasthan Financial Corporation (Supra) was constituted owing to a prima facie conflict having been found by the two Judges Bench, before which the matter came first, between Allahabad Bank (supra) and International Coach Builders Ltd. vs. Karnataka State Corporation (2003) 10 SCC 482, both of two Judges Benches. 16. In International Coach Builders Ltd. (supra), Supreme Court held that a right under Section 29 of the SFC Act against a debtor, if a company, is available to a financial corporation only so long as there is no order of winding up and that when the debtor is a company in winding up, the rights of financial corporations are affected by the provisions of Section 529 and 529A of the Companies Act. It was also held that the proviso to Section 529 creates a pari passu charge in favour of workmen to the extent of their dues and makes the Liquidator the representative of the workmen to enforce the char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Sections 529 and 529A create pari passu charge in favour of workmen to the extent of their dues and makes the liquidator the representative of the workmen to enforce the charge, sale by the SFC in exercise of powers under Section 29 could only be with the concurrence of the Company Court. viii) held that the view taken in Allahabad Bank was in the light of the DRT Act being a subsequent legislation and a special law, which prevails over the general law i.e. the Companies Act; however, this argument is not available as far as the SFC Act is concerned - Section 529A was introduced in the year 1985 and the over-riding provision therein would prevail over the SFC Act of the year 1951 as amended in the year 1956 and notwithstanding Section 46B of the SFC Act. ix) held that as regards distribution of assets, there is no conflict whether the assets are realized by a secured creditor proceeding under the DRT Act or the SFC Act, the distribution could only be in terms of Section 529A of the Companies Act and by recognizing the right of the Liquidator to calculate the workmen s dues and collect it for distribution among them pari passu with the secured creditors. x) held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the SFC Act the Supreme Court has directed the Official Liquidator to be associated with the process of sale, he should be so held to be required to be associated with sale under the SARFAESI Act also. This has to be determined in the light of the ratio aforesaid of Rajasthan Financial Corporation that right to sell and distribution of sale proceeds are two different things. 20. Associating the Official Liquidator in sale is not to be a mere formality and such association cannot be an empty exercise. If such association is to be given a meaningful interpretation it would necessarily entail adjudication by the Company Court of all issues arising, relating to such sale, including of valuation, modality, publication etc. The sale, will then become with the intervention‟ of the Company Court. 21. However, the very genesis of the SARFAESI Act is to enable sale of financial assets by the secured creditor without the intervention of the Court (see Mardia Chemicals Ltd. Vs. Union of India (2004) 4 SCC 311). What we have wondered is whether an exception can be carved out in the case of a company in liquidation. 22. Even though the DRT Act also does not provide for assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereto is thus clearly suggestive of the role of the Official Liquidator being confined only to determination of workmen s dues and receiving payment thereof and undertaking from the secured creditor. The Supreme Court in Rajasthan Financial Corporation as aforesaid, has already carved out a difference between the right to sell‟ and the distribution of sale proceeds‟. The SARFAESI Act does not even vest the power of such distribution in the Official Liquidator. Significantly, Section 13(9) permits sale only under agreement between the secured creditors representing not less than three-fourth in value of the amount outstanding and makes the said agreement binding on all the secured creditors. The question thus of distribution by the Official Liquidator to other secured creditors also does not arise. 23. As far as the reason behind associating the Official Liquidator in sale, of ensuring that a proper price is fetched for the assets, is concerned, we find the SARFAESI Act and the Rules framed thereunder to be a complete code in that respect. Rules 5 8 of the SIE Rules require the Authorized Officer of the Bank/Financial Institution to obtain the estimated value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e secured creditor under Sections 13 (5) to (13). It is thus not as if the debtor/borrower/ mortgagor or for that matter, in the case of such a debtor/borrower/mortgagor being in liquidation, the liquidator is without any remedy or that the sale is merely at the whim and fancy of the secured creditor and his Authorized Officer. Not only are the modalities of sale prescribed but a forum for redressal of grievances with respect thereto is also provided in the form of DRT. The Official Liquidator, thus if of the view that appropriate price is not being or has not been fetched or relating to issues of distribution, has the remedy before the DRT. 26. If it were to be held that the Official Liquidator (who acts under the dictates of the Company Court) is to be also associated with the sale, it will naturally open up the fora of the Company Court also for entertaining matters relating to such sale and which as aforesaid is not only likely to lead to conflicts but is also contrary to the spirit of the SARFAESI Act of sale being without the intervention of the Court. 27. Reference in this regard can be made to Allahabad Bank where the Supreme Court in para 25 held that the adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout associating the Official Liquidator cannot thus held to be bad or illegal. The dicta in Rajasthan Financial Corporation of associating the Official Liquidator in sale, in the context of the SFC Act and the DRT Act in both of which sale is through the intervention of the District Judge or the DRT, is not applicable to a sale under the SARFAESI Act, sale whereunder is without the intervention of the Court. As far back as in Herrington Vs. British Railways Board 1972 (2) WLR 537 it was observed that there is always a peril in treating the words of a judgment as though they are words in a legislative enactment and it is to be remembered that judicial utterances are made in the setting of facts in a particular case. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases and disposal of cases by blindly placing reliance on a decision is not proper. The Apex Court in Bharat Petroleum Corporation Ltd. Vs. N.R. Vairamani (2004) 8 SCC 579 cited Lord Denning with approval opining that each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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