Page 1C.A.No.5805/05 etc.

REPORTABLEIN THE SUPREME COURT OF INDIACIVIL APPELLATE JURISDICTIONCIVIL APPEAL NO.5805 OF 2005Laxmi Fibr! L"#.$..A%%&&a'"Vr!(!A.P. I'#(!"ria& D). C*r%'. L"#. + Or!.$..R!%*'#'"!, I T HC.A.N*!.580- a'# 580. */ 2005J U D 0 M E N TSHIVA 1IRTI SIN0H2 J.Civil Appeal No.5805 of 20053. Inthis appeal preferred by the appellant-company underliquidationrepresentedbythefficial !iquidatorthequestionofla" arisin# for consideration is "hether the fficial !iquidator canclaim any po"er or $urisdiction in itself to ad$udicate and quantifythe claim of statutory corporations such as respondent no.%& A.'.1Page 2C.A.No.5805/05 etc.

Industrial (evelopment Corporation and respondent no.2& A.'.)tate *inancial Corporation "hen the Company +ud#e haspermitted them to stand outside the liquidation proceedin# sub$ectto certainconditions under "hichthe respondent Corporationsmay pursue the po"ers available to them under )ection 2, of the)tate*inancialCorporations Act& %,5, -forbrevity referred to as.the )*C Act/0.2. 1he relevant facts are not at all under dispute and to ans"erthe issue of la" indicated above it is not necessary to delve deeperinto facts. It "ould suffice to notice that the fficial !iquidator hasta2en over the char#e of the company by virtue of )ection 335 ofthe Companies Act and the property of the company is also sei4edby the first respondent -the Corporation0under )ection 2, of the)*C Act.1he sale of the assets of the company "as conducted byfirst respondent as per conditions imposed by the 5i#h Court.1ocomply "ith one of the conditions the corporation "as required toobtain permission of the 5i#h Court for finali4in#6confirmin# thesale. 1he fficial !iquidator had already been allo"ed to inspectthe properties and assets of the company and to ta2e inventory asand "hen required.1he valuer/s report "as also placed before thecourtbeforethepropertiescoveredunderthemort#a#edeedsin2Page 3C.A.No.5805/05 etc.

favour of Corporation "ere put to sale.1he respondent-corporationhad also submitted to the order of the Company +ud#e requirin#the corporation to underta2e to deposit "or2men/s dues "ith thefficial !iquidator as and "henquantified by himas per theprovisions of )ection52,Aof the Indian Companies Act "ithinterest at the ban2 rate and "hatever surplus "ould remain afterthe sale and reali4ation of the dues of the secured creditors and the"or2men& asperla"& thebalancesaleproceedscouldbemadeavailable to the fficial !iquidator for bein# dealt "ith as per theprovisions of the Companies Act and the 7ules.-. n the application filed by the respondent-corporationsee2in# confirmation of sale of the mort#a#e assets of the company&thelearned)in#le+ud#evideorderdated%,.%%.2008notedthecontention of all the parties and findin# that there "as no ob$ectionto sale of the properties either by the second char#e holder or bythe fficial !iquidator& confirmed the sale of land& buildin#s& plantand machinery infavour of 96s. )ri :en2atas"ara Industriesrepresentedby)ri Adarsha;uptaforasumof 7s.8?efore the applicant and 2ndrespondent see2 toappropriate the sale proceeds for themselves& theyshould prove their claim before the fficial !iquidator.1he proceeds realised throu#h the sale of the propertiesshall be2ept bytheapplicant-Corporationininterestearnin# deposits tillthe fficial!iquidator ad$udicatesand quantifies the claimof the applicant and 2ndrespondent Corporations. 1he applicant and 2ndrespondent shall deposit %63thof the sale proceeds "iththe fficial !iquidator to enable him to proceed "ith thead$udication of the claims of the "or2men and fordistribution amon# themselves. 1hey shallma2e overthe e@cess sale proceeds& if any& to the fficial!iquidator.After receivin# the entire sale consideration only&the petitioner is directed to hand over possession of theproperties to the hi#hest bidders and e@ecute necessarysale papers in their favour.A.. A##rieved only "ith the condition e@tracted above& therespondent no.% preferred an intra-court appeal bearin# )A No.85of 2008. 1helearned(ivision?enchdisposedof theappeal byorder impu#ned dated 0B.0%.2003 directin# that the confirmationof sale of the properties in favour of the hi#hest bidder "ould besub$ect to only one conditionthat the fficial !iquidator shallquantify the amounts liable to be paidto the "or2men. 1he(ivision ?ench accepted the ob$ection raised byrespondent-corporation that there could be no question of4Page 5C.A.No.5805/05 etc.

establishin# the claim of the corporation before the fficial!iquidator as the corporation "as a secured creditor.5. 1he (ivision ?ench in our vie" came to a correct conclusionthat the fficial !iquidator does not have $urisdiction to ascertainor ad$udicate the claimof a secured creditor "ho has beenpermitted by the Company +ud#e to stand outside the liquidationproceedin# "ith liberty to pursue its remedy as per statutory ri#htsavailable under the )*C Act& sub$ect only to the conditions imposedbythecourt. 1hereasonsfor suchavie"areapparent onaperusal of the follo"in# three $ud#ments of this Court =%. A.'. )tate *inancial Corporation v. fficial!iquidator -20000 B )CC 2,%C2. International Coach?uilders !td. v. Darnata2a)tate *inancial Corpn. -20080 %0 )CC 382C and8. 7a$asthan )tate *inancial Corpn. v. fficial!iquidator -20050 8 )CC %,04. InA.P. S"a" Fi'a'5ia& C*r%*ra"i*'this Court hadtheoccasion to e@amine the e@tent of po"ers available to a *inancialCorporation under )ections 2, and 3< of the )*C Act in the li#ht oflateramendments tothe CompaniesAct incorporatin# provisoto)ection52,-%0 and)ection52,Aof theCompaniesAct throu#hAmendment Act 85 of %,85.1he ob$ect of the amendment "as to5Page 6C.A.No.5805/05 etc.

protect the dues of the "or2men. 1his Court held that the po"eravailable to a corporation under )ection 2, to sell the property of adebtor company under liquidation is not absolute but is sub$ect tothe proviso to )ection 52,-%0andnonobstanteclause in )ection52,A of the Companies Act providin# for pari passu char#e of the"or2men.6. InI'"r'a"i*'a& C*a57B(ir!L"#.thisCourt not onlyfollo"ed the vie" ta2en in A.'. )tate *inancial Corporation case but"entontoe@plaininpara#raph8%astoho"thevie"adopted"ould not obliterate the difference bet"een a creditor optin# to stayoutside "indin# up and one "ho opts to prove his debt in "indin#up.'ara 8% of the $ud#ment provides thus =>8%. *inally& counsel for )*Cs ur#e that the vie" "e areto ta2e "ould obliterate the difference bet"een acreditor optin# to stay outside "indin#-up and one "hoopts to prove his debts in "indin#-up.Ee are unable toaccept it. As a result of the amendments made by theAct of %,85 in the Companies Act& %,5