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TMI Blog2019 (6) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant. Shri Naushad Engineer for Official Liquidator. Shri Rahul Narichania, senior advocate i/b. Shri Alok Mishra for ex director (Shri Shivaji Bhosale). JUDGMENT : 1. Applicant in company application no.314 of 2017 is City Co- operative Credit Capital Limited ( Applicant ). Applicant had filed the above company application as a secured creditor of Satwik Electric Controls Private Limited ( the Company ), which Company is in liquidation, having been ordered to be wound up by an order dated 19th July 2007 passed by this Court. Applicant seeks directions from this Court to the Official Liquidator to disburse/pay to applicant a sum of ₹ 2,29,30,687/ which had been adjudicated by the Official Liquidator as being payable to applicant with an undertaking to be given by applicant to return the same on such terms as may be directed by this Court. 2. In the above company application, the Official Liquidator has filed the Official Liquidator s Report ( OLR ) seeking directions inter alia to change the status of applicant from being adjudicated as a secured creditor, to an unsecured creditor and to permit the Official Liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to execute the Recovery Certificate as per the provisions of Section 156 of the Act and Rule 107 of the Maharashtra Co- operative Societies Rules, 1961 ( the Rules ) without being required to file a separate application. 7. It is Applicant s case that the Recovery Certificate contains instructions that were peremptorily given to the officers designated under the Act and the Rules for steps to be taken under the above provisions. Thus, vide the Recovery Certificate there was in effect a decree for payment of money coupled with an order for sale of the property in the event that the decretal dues were not paid. 8. Subsequently, on 12th January 2005, pursuant to the above directions for execution and sale of the properties, the possession of the said land and building was taken by the authorized officer under the Act. The Panchnama dated 1st December 2005 ( Panchnama ) notes that the said property mentioned therein was being attached in pursuance of the Decree/Recovery Certificate. The Panchnama identifies the property which was being seized, which seizure in turn was done for facilitating sale of the property as directed by the Decree/Recovery Certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected Applicant to deposit the entire amount of sale proceeds less cost of the sale with the Official Liquidator since Applicant was not a secured creditor. (c) On 1st September 2014, much (more than 7 years) after the Company had been wound up, Applicant filed an application under Section 87 of the Companies Act, 2013 for condoning the delay and extension of time for filing particulars for registration of charge. It is obvious that in view of the order dated 21st March 2014, Applicant Bank had instructed the Company to get the charge registered so that Applicant could claim to be a secured creditor. (d) On 23rd September 2014, Applicant filed its affidavit of proof of debt claiming to be a secured creditor with debt amount of ₹ 6,26,05,066/ , even though its alleged security had not been registered with the Registrar of Companies ( RoC ). (e) On 21st October 2014, the Regional Director, Western Region, condoned the delay on the part of Applicant in registering the charge. On 7th November 2014, the Company paid a sum of ₹ 10,000/ towards penalty for delay in filing the application for registration of charge. (f) On 17th Nove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat a proceeding may be filed inter alia by an Urban Cooperative Bank for recovery of its dues. sub -section 1 of Section 101 of the Act provides that the Registrar may, after making enquiry in the manner prescribed, grant a certificate for the recovery of the amounts stated therein to be due as arrears. sub -section 3 then provides that a certificate granted by the Registrar shall be final and conclusive proof of the arrears stated to be due therein and the same shall be recoverable according to the law for the time being in force as arrears of land revenue. To facilitate the recovery of dues, Section 156 of the Act provides inter alia that the Registrar may recover the amount due by attachment and sale or by sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed. Rule 107 (1) of the Rules provides the mode of sale of the property pursuant to Section 156 of the Act, but clarifies that no separate application is required in the event of a certificate issued under sub -section 1 of Section 101 of the Act. sub- rule 11 of Rule 107 of the Rules thereafter provides that a demand notice be is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge is created by the Company. This is evident from Section 125 of the Companies Act, 1956 itself. However, as held by the Hon ble Supreme Court in Indian Bank (Supra), where the charge is created by operation of law or is created by an order or a decree, Section 125 of the Companies Act, 1956, has no application. In the case of Indian Bank (Supra), the Hon ble Supreme Court cited with approval the judgment of the Hon ble Calcutta High Court in Praga Tools (Supra) and clearly held that the same was good law. The Hon ble Supreme Court proceeded to note that if on the date of winding up what was operative was not merely a declaration that a charge existed but in fact an order for sale of the property for realization of the decretal amount, such an order would be deemed to be a charge created on the property by operation of law/decree/order of the Court and would not be void on account of being unregistered. 15. Mr. Cama added, the judgment of the Hon ble Calcutta High Court in Praga Tools (Supra), which was approved by the Hon ble Supreme Court as stated above, was a case where by a consent order a sum of ₹ 1.45 lakhs was held to be payable. A sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and Rule 107 of the Rules without any further application to be filed for this purpose. Mandatory directions have been given to the designated officers to act in accordance with Section 156 of the Act and Rule 107 of the Rules. Section 156 of the Act clearly contemplates that the dues will be recovered by attachment and sale or sale without attachment of the property of the persons against whom the decree, decision, award or order has been obtained or passed. Thus, expressly in the Recovery Certificate, by incorporation of Section 156 of the Act, there is a direction for attachment and sale of the property for recovery of the decretal dues. Rule 107(11) of the Rules which is also directed to be acted upon in the Recovery Certificate clearly provides that in the event the defaulting party does not make payment in accordance with the notice for demand, then under Rule 107 (11)(c) of the Rules, the Recovery Officer shall sell the property which has been identified for satisfying the decree. Rule 107 of the Rules, which forms part of the Recovery Certificate, is a mandatory direction / order for attachment and sale of the property to satisfy the decree. It is thus clear from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or certain preferential payments provided in the Act the property of the company is to be applied in satisfaction of its liabilities pari passu. Pari passu distribution is to be made in satisfaction of the liabilities as they exist at the commencement of the winding- up (cf. Sections 528 and 529 of the Act; Ghosh on Indian Company Law, 11th Edn., Vol. 2, p. 1073). The effect of a winding- up order on rights already completed as against rights yet to be completed is succinctly stated by Lord Halsbury in Bank of Scotland v. Macleod, [1914] A. C. 311, as follows : Rights in security which have been effectually completed before the liquidation must still receive the effect which the law gives to them. But the company and its liquidators are just as completely disabled by the winding- up from granting new or completing imperfect rights in security as the individual bankrupt is by his bankruptcy. This, indeed, is the necessary effect of the express provision of the Companies Act that the estate is to be distributed among the creditors pari passu. Every creditor is to have an equal share, unless any one has already a part of the estate in his hands, by virtue of an effectual l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Applicant was not a secured creditor and could not take away the sale proceeds. In order to overcome the hurdle, Applicant has got the erstwhile directors of the Company to apply for registration of the charge. This shows that Applicant violated the law. Applicant also sought to rely on the registration of the charge as recorded in the statement of their Advocate, who stated that he would produce the same, in the order dated 16th March 2018. The fact that the charge was registered much after the company had been ordered to be wound up and Applicant wrote to the Official Liquidator on the very same day as the registration of the charge demonstrates that the entire process of registration was a calculated move on the part of Applicant in a desperate bid to fraudulently claim the status of a secured creditor. The RoC in its Affidavit filed in the present proceedings has also stated that the registration of charge was obtained on the basis of suppression of the material fact that the Company was in liquidation. (vi) Applicant now states that they are not relying on the Mortgage Deed dated 23rd January 2004. This is too little too late. After committing an illegality and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created by a member out of the funds in respect of which, the Government has a claim. (2) No property or interest in property, which is subject to a charge under the foregoing subsection, shall be transferred in any manner without the previous permission of the society; and such transfer shall be subject to such conditions, if any, as the society may impose. (3) Any transfer made in contravention of sub -section (2) shall be void. (4) Notwithstanding anything contained in sub -sections (2) and (3), a society, which has one of its objects, the disposal of the produce of its members, may provide in its bye laws, or may, otherwise contract with its members, - (a) that every such members shall dispose of his produce through the society, and (b) that any member, who is found guilty of a breach of the bye laws or of any such contract, shall reimburse the society for any loss, determined in such manner as may be specified in the bye laws. (emphasis added) (ii) A plain reading of Section 47 would indicate that a charge is created in respect of outstanding dues of a member towards the society only under the provisions of Section 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and advances; (b) any person who has taken a loan from a society of which he is a member, before the date of the coming into force of this Act, and who owns any land or has interest in land as a tenant, and who has not already made such a declaration before the aforesaid date shall, as soon as possible thereafter, make a declaration in the form and to the effect referred to in clause (a); and no such person shall, unless and until he has made such declaration, be entitled to exercise any right, as a member of the society; (c) a declaration made under clause (a) or (b) may be varied at any time by a member, with the consent of the society in favor of which such charge is created; (d) no member shall alienate the whole or any part of the land or interest therein, specified in the declaration made under clause (a) or (b) until the whole amount borrowed by the member together with interest thereon, is repaid in full: Provided that, it shall be lawful to a member to execute a mortgage / bond in respect of such land or any part thereof in favor of an Agriculture and Rural Development Bank or of the State Government under the Bombay Canal Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 only to: (i) resource societies where the majority of members are agriculturists; and (ii) any society specified by the State Government. Admittedly, Applicant does not fall within the scope of either of these two societies. It is not a resource society of agriculturists. And Applicant has failed to produce any order of the State Government extending the application of Section 48 to societies such as Applicant. Therefore, Applicant falls outside the scope of Section 48. This has also been conceded by Applicant during the hearing. (b) Without prejudice to the aforesaid, Section 48(a) of the Act provides that a member of a Co- operative society who makes an application to the society for a loan shall make a declaration in the prescribed form with respect to any ownership or tenancy interest the member has in any property and in the said declaration, the member shall create a charge on the said property in respect of the loan provided by the society to the member. No such declaration has been pleaded, produced or proved to have been made by the Company. (c) A register of such declarations is also required to be maintained under Rule 48( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date the charge is actually recorded in the record of rights and not otherwise. To sum up, in answer to Question No. 1, I hold that provisions of Section 48 and Rule 48 (5) are mandatory in nature for a Cooperative Society if a cooperative society wants to claim benefit /protection of the said provisions. I, therefore, answer the question No. 1 in affirmative. (f) Thus, in the absence of any registration of the charge created by the Company in favour of Applicant in accordance with the provisions of Section 48 of the Act and Rule 48(5) of the Rules in the Record of Rights, Applicant cannot claim to be a secured creditor by placing reliance on Section 48 of the Act. (g) That being so, it is clear that the reliance placed on sections 47 and/or 48 of the Act is wholly misplaced and inapplicable. C). The Recovery Certificate dated 16 th November 2004 does not create a charge. Moreover, even if the terms of the Recovery Certificate are read with the provisions of the Maharashtra Co- operative Societies Act and/or the Maharashtra Co- operative Societies Rules and/or the steps taken thereunder, no charge is created on the property. (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of land revenue due on account of land shall be a paramount charge on the land and on every part thereof and shall have precedence over any other debt, demand or claim whatsoever, whether in respect of mortgage judgment decree, execution or attachment, or otherwise howsoever, against any land or the holder thereof. (2) the claim of the State Government to any monies other than arrears of land revenue, but recoverable as a revenue demand under the provisions of this Chapter, shall have priority over all unsecured claims against any land or holder thereof. 10. Perusal of the above quoted provisions shows that the Maharashtra Land Revenue Code makes a clear distinction between the sum which is recoverable as a land revenue and sum which is recoverable as arrears of land revenue. What creates paramount charge is the sum which is the amount of land revenue and not the sum which is recoverable as land revenue. The Constitution Bench of the Supreme Court in its judgment in the case of Builders Supply Corporation, referred to above, in our opinion, has made the position absolutely clear. Following observations in the case of Builders Supply Corporation, in our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of executing/enforcing the Recovery Certificate. It is settled law as laid down in the case of Kerala State Financial Enterprises (Supra) and Board for Industrial and Financial Reconstruction (B.I.F.R.) V/s. Coromandel Garments Ltd. Ors. In company application no.341 of 2016 on 13th July 2018, that an attachment does not create a charge on the asset. That being so, the fact that Section 156 and Rule 107 talk about the attachment of properties shows that it does not amount to creation of a charge as held by the Hon ble Supreme Court in Kerala State Financial Enterprises (Supra) and this Hon ble Court in Board for Industrial and Financial Reconstruction (B.I.F.R.)vs Coromandel Garments (supra). (v) The decision of the Hon ble Supreme Court in the case of Oil and Natural Gas Corporation Limited V/s. Official Liquidator of Ambica Mills Company Limited (2015) 5 SCC 300 (paras 2022) was a case where ONGC was claiming to be a secured creditor on the basis of an undertaking given by Ambica Mills that it would not deal with or alienate its properties. ONGC sought to contend that this amounted to a charge created by law or decree. The Hon ble Supreme Court n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent itself does not create any charge in the property. By reason of attachment, no decree is passed. 10. The expression 'attachment' has no definite connotation. An order of attachment is passed for achieving a limited purpose. It is subject to further orders as also provisions of other statute. (emphasis added) (ii) The aforesaid decision was relied upon by this Hon ble Court in Board for Industrial and Financial Reconstruction (B.I.F.R.) vs Coromandel Garments (Supra). In the said decision, the Hon ble Court held in para 25 as under: 25. (a) The application proceeds on the basis that the attachment of the Satara property constitutes a charge in favour of applicant. In the course of the hearing, however, applicant has sought to abandon its stand that the attachment would constitute a charge. If it did, it would in any event fall foul of both Sections 531 and 536 of the Companies Act 1956. However, applicant has continued to maintain that by virtue of the attachment, applicant was a secured lender and was entitled to priority of payment out of the sale proceeds from the Satara property. (b) There is nothing in law to support t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is a complete misreading of the judgment. In paragraph 18 of the judgment of the Hon ble Supreme Court, the Hon ble Supreme Court sets out the issues before the Hon ble Kerala High Court. Pertinently, there were two distinct issues/questions which were being considered by the Hon ble Kerala High Court viz., (a) the effect of a decree creating a charge; and (b) the interplay between Section 46 B of the State Financial Corporations Act, and Section 125 of the Companies Act, 1956, i.e., as to which would prevail. The quoted portion of the Hon ble Kerala High Court judgment deals separately (albeit in the same paragraphs), with the above two questions. The first question as to the effect of a decree creating a charge was answered by the Hon ble Kerala High Court to say that an order for realization of the amount by sale of the assets of the Company amounts to a charge/decree and such a charge having not been created by the Company, but being under an order of the Court, Section 125 of the Companies Act, 1956, will not apply. This issue was not differed from by the Hon ble Supreme Court. The second question before the Court on the interplay between the State Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting attachment of an identified property and sale thereof towards satisfaction of the decree. Such an order being an order for sale stands on a different footing than a simplicitor order for pre judgment attachment as in the case of Forbes Co. (supra) and in the case of Kerala State Financial Enterprises (supra), which is relied upon by the Hon ble Bombay High Court in this judgment. (iv) ONGC (Supra) Similar to the above, this was a case where the order was simply a pre judgment attachment in the nature of a restraint on the Company not to further encumber its assets. It was not an order of sale or even attachment prior to sale of the property, and has no application in the present fact situation. In paragraph 26 of the judgment it is clarified that the undertaking given by the Company in Liquidation showed that there was no identified immovable asset which was to be made available in discharging the liability of appellant therein, unlike in the present case. (v) SICOM Limited (Supra) This judgment was relied upon by the Official Liquidator to contend that recovery of arrears of land revenue was different from an order stating that the dues would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... templated under Section 125 of the Companies Act is registered, would the same be valid. In this case, applicant s rights qua the identified asset of the Company crystallized before the winding up order was passed by this Court. The pre-auction notice would indicate that the identified property was ordered to be sold but only the formal order selling the property remained to be passed. This would not render the orders/decrees passed by the authorities under the Act meaningless. On a true and correct reading of the provisions of the Act and the Rules, Shri Cama submitted that applicant by operation of law and under the order/decree of a Court, is a secured creditor of the Company. 22. Shri Cama also submitted that it is not in dispute that by merely obtaining a decree, a party does not become a secured creditor; however, when the order of sale flows from the decree and the same is given effect to under the relevant statute, it can hardly be contended that applicant in this case would fall within the category of those creditors who have merely obtained money decrees from a Court. 23. Shri Narichania submitted that the ex director, who he was appearing for, has studi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the recovery of arrears of any sum advanced by it to any of its members or by an urban Co- operative bank for the recovery of arrears of its dues, or any sum advanced by the District Central Co- operative Bank to its individual members or by non agricultural Co- operative credit society for the recovery of the arrears of its dues or by salary earners Co- operative society for the recovery of arrears of its dues, or by a fisheries Co- operative society for the recovery of arrears of its dues), or by any such society or class of societies, as the State Government may, from time to time, notify in the Official Gazette, for the recovery of any sum advanced to, or any subscription or any other amount due from, the members of the society or class of societies so not notified; and on the society concerned furnishing a statement of accounts and any other documents as may be prescribed in respect of the arrears, the Registrar may, after making the inquiry in such manner as may be prescribed, grant a certificate for the recovery of the amount stated therein, to be due as arrears: The application for grant of such certificate shall be made in such form and by following such procedure acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) any amount due under a decree or order of a Civil Court obtained by a society; (b) any amount due under a decision, award or order of the Registrar, Co- operative Court or Liquidator or Co- operative Appellate Court; (c) any sum awarded by way of costs under this Act; (d) any sum ordered to be paid under this Act as a contribution to the assets of the Society; (e) any amount due under a certificate granted by the Registrar under sub -section (1) or (2) of section 101 or under subsection (1) of section 137; together with interest, if any, due on such amount or sum and the costs of process according to the scales of fees laid down by the Registrar from time to time, by the attachment and sale or by sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed. (2) The Registrar or the officer empowered by him shall be deemed, when exercising the powers under the foregoing sub -section, or when passing any orders on any application made to him for such recovery, to be Civil Court for the purposes of Article 136 in the Schedule to the Indian Limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) The holder of a decree sought to be executed by the attachment of another decree of the nature specified in clause (i) shall be deemed to be the representative of the holder of the attached decree and to be entitled to execute such attached decree in any manner for the holder thereof. 107. (11) In the attachment and sale or sale without attachment of immovable property, the following rules shall be observed : (a) The application presented under sub- rule (2) shall contain a description of the immovable property to be proceeded against, sufficient for its identification and in case such property can be identified by boundaries or numbers in a record of settlement of survey, the specification of such boundaries or numbers and the specification of the defaulters share or interest in such property to the best of the belief of the applicant and so far as he has been able to ascertain it. (b) The demand notice issued by the Recovery Officer under sub- rule (3) shall contain the name of the defaulter, the amount due, including the expenses, if any, and the batta to be paid to the person who shall serve the demand notice, the time allowed for paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as any security on the company's property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the instrument, if any, by which the charge is created or evidenced, or a copy thereof verified in the prescribed manner, are filed with the Registrar for registration in the manner required by this Act within thirty days after the date of its creation: Provided that the Registrar may allow the particulars and instrument of copy as aforesaid to be filed within thirty days next following the expiry of the said period of thirty days on payment of such additional fee not exceeding ten times the amount of fee specified in Schedule X as the Registrar may determine, if the company satisfies the Registrar that it had sufficient cause for not filing the particulars and instrument or copy within that period. (2) Nothing in sub -section (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge. (3) When a charge becomes void under this section, the money secured there by shall immediately become payable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) That viewed as a composite whole, Section 101, read with Section 156 and Rule 107 created a charge by operation of law/decree. 30. In my view, none of these individually or cumulatively, create a charge on the Company s properties and therefore, do not convert applicant into a secured creditor. The submissions of applicant is misconceived, inter alia, for the following reasons : (i) The Recovery Certificate dated 16th November 2004 only states that an amount is due and payable. It does not say that Applicant is a secured creditor or that it has a charge on the assets of the Company. Further, on a perusal of Section 101, it is clear that Section 101 is only a summary manner in which certain types of societies can recover amounts that are loaned. The section does not state that the amounts that are found to be payable are recoverable as a secured creditor. On the contrary, Section 101(3) of the Act makes it clear that the effect of a recovery certificate under Section 101 is that the amount so stated to be due shall be recoverable according to the law for the time being in force as arrears of land revenue . (ii) The fact that the amount under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not create a charge on the asset. That being so, the fact that Section 156 and Rule 107 talk about the attachment of properties shows that it does not amount to creation of a charge as held by the Hon ble Supreme Court in Kerala State Financial Enterprises (Supra) and this Court in Board for Industrial and Financial Reconstruction (B.I.F.R.) vs Coromandel Garments (Supra). (v) Applicant contends that since the Recovery Certificate expressly stipulates that the amount so decreed is recoverable pursuant to Section 156 and Rule 107 without any further order, it creates a charge. This is patently incorrect for the reasons set out hereunder : (a) The Recovery Certificate is issued in the standard format prescribed for the same under the MCS Rules. Rule 86F, which falls in Chapter VIII A, dealing with grant of recovery certificate under Section 101 of the Act, prescribes that the recovery certificate shall be issued in Form V. The relevant portion of Form V reads as follows: I hereby order that amount mentioned above be recovered from the respondents as per the provisions of the Maharashtra Land Revenue Code 1966 as arrears of Land Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referential claims under Section 530 also. Under Section 529 A the dues of the workers and debts due to the secured creditors are to be treated pari passu and have to be treated as prior to all other dues. 9. Therefore, the law is clear on the matter as held in UCO Bank case that Section 529 A will override all other claims of other creditors even where a decree has been passed by a court. (c) Therefore, it is evident that a decree- holder is not a secured creditor for the purposes of Section 529 A of the Companies Act, 1956. The Act too does not anywhere expressly provide that a charge is created in favour of every holder of a recovery certificate under Section 101 or that such holder of recovery certificate is a secured creditor. In such circumstances, I cannot accept applicant's contention that by implication, a holder of a recovery certificate becomes a secured creditor merely because of the reference to Section 156 of the Act and/or Rule 107 of the Rules. Such a construction would significantly alter the priority of claims as stipulated in Sections 529, 529A and 530 of the Companies Act, 1956 and such alteration is not permissible without the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The only deeming fiction stipulated for the amount due under a recovery certificate is that it shall be recoverable as arrears of land revenue (Section 101(3) of the Act), which, as can be seen from what is set out earlier clearly does not create a charge. (viii) Similarly, the Act expressly stipulates the situations in which a charge is created in respect of a debt owed by a member to the society. These include : (a) Under Section 46 of the Act, a society shall have a charge upon the share or interest in the capital and on the deposits of a member and upon any dividend, bonus or profits payable to such member in respect of any debt due from such member to the society. (b) Section 47(1) of the Act provides that any debt or outstanding demand of a society against a member is a first charge upon certain properties of the member enumerated therein. (c) A charge under Section 48 of the Act is created on a member s land where a member takes a loan from the society, provided the pre- conditions of Section 48 are met. (ix) Since the Act expressly envisages situations in which a charge is created on members interests in respect of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 10 Company further undertakes not to alienate any of its immovable assets hereinafter with effect from 15 -04- 1987 except with the leave of this Hon'ble Court. The Respondent No. 10 Company further undertakes to make available all its immovable assets in the event of discharging the liabilities which may arise on account of the difference between the price at which all the gas being supplied to the company during the pendency of the proceedings in this connection and the price which may be determined by this Hon'ble court while disposing of the present appeals finally. A perusal of the aforesaid undertaking shows that Ambica Mills has not identified any particular immovable assets which would be made available in discharging the liabilities in favour of the Appellant. Therefore, we have no hesitation in rejecting the submission of Mr. Kuhad that the interim order read with the undertaking expressed an intention to create an enforceable charge of any particular asset of the company in liquidation. (emphasis added) (c) As stated above, the Recovery Certificate merely contains a reference to Section 156 of the Act and Rule 107 of the Rules for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execution of the Recovery Certificate. If applicant's contention is to be accepted, it would tantamount to a situation where any unsecured decree- holder could contend that merely because any property has been attached in execution and put up for sale it is now a secured creditor, which would run counter to the settled position in law that an unsecured creditor who has a decree does not become a secured creditor and also that an attachment does not create a charge. (c) It was in the context of a mortgage suit that the Hon ble Supreme Court has held that if an order of sale of the mortgaged property had been passed, then the provisions of Section 125 would not apply. It is important to note that a charge could be created either by the act of parties or by operation of law. Act of parties necessarily means a situation where parties are ad idem/agree that a particular asset may be offered as security. A charge created by operation of law would be a situation where a charge is created by virtue of a legal provision such as Section 55(4)(b) and 55(6)(b) of the Transfer of Property Act, Sections 529 and 529A of the Companies Act, Section 48 of the Act, and recovery of lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belong exclusively to the secured creditor and the workmen will have a pari passu charge on the company s assets, including the sale proceeds, as of the date of the winding- up order. The Hon ble Supreme Court held: 67.2. Where a company is in liquidation, a statutory charge is created in favour of workmen in respect of their dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen's portion in relation to the security held by the secured creditor of the debtor company. 67.3. The above position is equally applicable where the assets of the debtor company have been sold in execution of the recovery certificate obtained by the bank or financial institution against the debtor company when it was not in liquidation but before the proceeds realized from such sale could be fully and finally disbursed, the company had gone into liquidation. In other words, pending final disbursement of the proceeds realized from the sale of security in execution of the recovery certificate issued by the Debts Recovery Tribunal, if debtor company becomes company in winding u ..... 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