ORDER
1. This is an application filed by the Andhra Pradesh State Finance Corporation, represented by its Manager, Branch, Kurnool to permit the finalisation fo the sale of assets of the company in liquidation in a sum of Rs.45,00,000-00 as is due form M/s. Swastik Corporation, Adoni, Kumool district.
2. It is submitted that this Court in CA No.216 of 1996, by order dated 27-12-1996 permitted the applicant to remain outside the liquidation proceedings on the following terms:
(i) The State financial Corporation (for short ‘the SFC’) shall undertake to discharge the amounts due by the company to workers, if any under Section 529-A of the Companies Act.
(ii) The State Financial Corporation shall intimate atleast ten days in advance
before the date fixed for receipt of tenders, to the official liquidator about the proposed sale of properties of the company;
(iii) The petitioner shall also obtain permission of this Court before finalising tenders.
3. Pursuant to the permission, the applicant issued advertisement inviting tenders for sale of the assets of the company (in liquidation) on 12-02-1997 in Eenadu, Vaartha and Economic Times, on 10-5-1997 in Eenadu. The Hindu, Economic Times and finally on 2-11-1997 in Eenadu and Economic Times. Pursuant to the first advertisement released on 12-2-1997, no offers were received and in response to the second advertisement released on 10-5-1997 a single offer was received in a sum of Rs.3 5,00,000-00 and the same was rejected as being low compared to the evaluation of the assets. Pursuant to the third advertisement released on 2-11-1997, the sole offer in a sum of Rs.36,00,000-00 was received from M/s. Swastik Corporation, Adoni and the same was remitted the Head Office for further negotiations. On further negotiations, on 2-4-1998, M/s. Swastik Corporation, Adoni had enhanced its offer to Rs.45,00,000-00 and the same was placed before the Board of Directors for a final decision. The Board of Directors, in the meeting held on 13-5-19998 resolved to retain the offer of Rs.45,00,000-00 received from M/s. Swastik Corporation, Adoni as reserved price (Upset price) and accordingly directed the branch to re-advertise the assets.
4. In view of the decision of the Board of Directors of the applicant-Corporation, fresh advertisement was issued in Eenadu on 28-5-1998 and in the Hindu on 29-5-1998 by inviting tenders on 26-6-1998. The Official Liquidator was also duly communicated and intimated with regard to the proposed sale by the applicant-
corporation by letter dated 1-6-1998. The Official Liquidator also attended the Branch office on 26-6-1998, but no offers were received from any quarter on the said date. As the same was intimated to the Mead Office, the Board of Directors of the applicant-Corporation resolved to accept the earlier offer received on 30-7-1998 from M/s. Swastik Corporation, Adoni, for a sale consideration of Rs.45,00,000-00 with 35% down payment of Rs. 15,75,000-00 payable within thirty days from the date of communication of the sale and the balance of Rs.29,25,000-00 payable in three years with a moratorium of six months in eleven quarterly instalments, of which, the first instalment of Rs.2,65,000-00 and the subsequent ten instalment of Rs.2,66,000-00 each with prevailing rate of interest subject to the purchaser offering immovable property as collateral security with an extent of 25% of the proposed loan component. The said order was also accepted subject to the approval of the sale of this Court. The Official Liquidator was also requested to intimate the applicant-corporation with regard to the workers due, if any. Therefore, the present application is filed to permit finalisation of the sale of the assets of the company in liquidation.
5. The official liquidator filed a report stating that as per the statement of affairs field by the ex-directors fo the company, the amount of Rs.63,44,070-00 has been shown as debt to the applicant; and a sum of Rs.I,36,80,782-25 Ps. Has been shown as due to the banks. According to his report, he estimated the realisable value at Rs.2,17,32,102-75; and the book value at Rs.77,62,927-00. He has further stated that the filed CA No.320 of 1998 seeking permission of this Court to invite claims from workmen, secured creditors and other creditors under Sections 528, 529, 529-A and 530 of the Companies Act, 1956 and the same is pending disposal before this Court. He also submitted that the Indian
Bank, Corporation Bank, Karnataka Bank, Adoni have second charge over the assets of the company and the said banks should also be directed to be impleaded to the application. In his option, the period for payment of the balance 65% of the sale consideration in three years is too long. In the event this Court inclined to confirm the sale, the Court may fix a shorter period for payment of the said amount.
6. The applicant filed a reply stating that the assets of the company are mortgaged hypothecated to the applicant-Corporation, as first charge holder and the bankers are having the second charger holders and the amount due to the applicant Corporation as on 31-12-1998 is in a sum of Rs.85,15,887-00 together with further interest from 1-8-1993. No credence can be given to the evaluation of the assets made by the Chartered Engineers basing upon the local enquiries and the estimate of the value of the assets disclosed by the statement of affairs is not only unrealistic but also highly exaggerated. The applicant-corporation further contended that in view of the provisions contained in the State Financial Corporation Act, it is neither necessary nor proper for the Bankers to be impleaded; and the banks are legally equipped to protect their interest and do not require the aid or assistance of the Official Liquidator, that inspite of the advertisement given four times, the applicant Corporation could not get a better offer than the one received from M/s. Swastik Corporation; and if the permission is not granted to proceed with the same, the Corporation will suffer and prayed for allowing the application.
7. Learned Counsel for the applicant-Corporation contended that once this Court granted permission to remain outside the liquidation proceedings in CA No.216 of 1996, this Court has to permit the finalisation of the assets of the company in liquidation. The Official Liquidator is only
concerned with the dues of workmen under Section 529-A of the Act. As no fraud is played in receiving tenders of finalisation of the sale, the sale has to be confirmed. So far the claims of the workmen are concerned, the same were not ascertained by the Official Liquidator. In view of the same, if the applicant Corporation is not permitted to proceed with the finalisation of the sale, not only the applicant-Corporation, but all other second charge holders, including workmen, who are also having pari passu charge, will be the losers. In support of his case, he relied on the decision of a Division Bench of Gujarat High Court in Gujarat State Finance Corporation v. Official Liquidator (Guj), 1996 Vol.87 Com. Cas. 658; and the decision of a Division Bench of this Court in Andhra Pradesh State Financial Corporation v. Official Liquidator, (DB). ‘
8. On the other hand, Sri P. V. Rama Raju, learned Counsel for the Official Liquidator contended that Section 29 of the State Finance Corporation Act authorities only on default of payment due to the Corporation, but it cannot take possession of the property on winding up. In view of Section 529 and Section 529-A of the Companies Act, 1956, the notice has to go to all the bankers and the workers will have a claim over the property. He relied on the judgement of a Division Bench of Bombay High Court in Maharashtra State Financial Corporation v. Official Liquidator, Bombay, ; and the judgement of a Division Bench of this Court in Andhra Pradesh State Financial Corporation v. Eteclrothermic Private Limited, 1996 (2) ALD 213 (DB).
9. In Gujarat State Financial Corporation v. Official Liquidator, 1996 Vol.87 Com. Cas. 658, the Division Bench of Gujarat High Court set aside the judgement of the learned single Judge, who allowed the application filed by the Official
Liquidator to handover the possession of the properties of the company. It is further observed that “If that be the correct position, and in our opinion it is, the conclusion is irresistible that a secured creditor, on option to exercise his rights to realise the security without intervention of the Court shall stands outside the winding up proceedings.”
10. In the Andhra Pradesh State Financial Corporation v. Official Liquidator (supra), a Division Bench of this Court held that:
“24. We are, therefore, firmly of the opinion that the right of the secured creditor emerging from Section 29 of the State Financial Corporation Act ceases to be an absolute right the moment it comes on the record of the case that there is a pari passu charge in respect of workmen’s dues on the assets and properties of the company in liquidation”.
11. In Maharashtra State Financial Corporation v. Official Liquidator, Bombay, , a Division Bench of the Bombay High Court held as follows:
“….Therefore, the power to seel which is given to a financial corporation under Section 29 has to be exercised consistently with the right of pari passu charge holder. Such a right can be exercised with the consent of the pari passu charge holder or on orders of the Court after making him a party to the proceedings to enforce the security. Since the charge holder is the Official Liquidator, his power to consent is subject to the sanction of the Court.”
12. In Andhra Pradesh State Financial Corporation v. Electrothermic Private Limited, 1996 (2) ALD 213 (supra)), a Division Bench of this Court held as follows:
“14. The view that we have taken leads us to the conclusion that the financial
corporation shall stand in the queue of the secured creditors pari passu with the claim of the State Bank of Hyderabad. As the case appears to us fully covered by Section 529(1) of the Companies Act, 1956, the liquidator has a duly to bring this fact to the notice of the Court and to ensure that the two secured creditors apportion, it their debts in full are not likely to be discharged by the assets of the company, in such a manner that they get their claims discharged in proportion to their claims strictly pari passu”
13. The principle called out from the above pronouncements is that the secured creditor like State Financial Corporation have an option to exercise its rights to realise the security without intervention of the Court, if stayed outside the winding up proceedings. In case if it is so, Section 529 of the Companies Act enforce the pari passu charge in favour of the workmen and to ensure that the amount realised was applied ratably for the discharge of the workmen dues which may feel necessary for the Court to intervene and impose conditions, which may be found necessary for the realisation of the pari passu charge in favour of the workers.
14. In view of the same, there is no bar for this Court for permitting finalisation of the sale of assets of the company in liquidation in favour of M/s. Swastik Corporation, Adoni, Kurnool district in a sum of Rs.45,00,000-00. The same is subject to the claims, which were made by the Official Liquidator towards the workmen due in proportion to the paripussu charge.
15. Accordingly the application is allowed granting permission to the applicant Corporation for finalising the sale of the assets of the company in liquidation in a sum of Rs.45,00,000-00 as is due from M/s. Swastik Corporation, Adoni, Kurnool
district subject to further orders that may be passed on the application filed by the Official Liquidator for the dues to the workers. Till then, the amounts realised by the Corporation shall not be appropriated by it towards the loan amount. No costs.