ORDER
1. The question which has come up lor consideration before this Court in the present application is whether a receiver can be appointed over the properties of the company on which the secured creditors have first charge when Ihe company is in winding up and the Official Liquidator has already taken possession of the same?
2. Brief facts, so far as relevant for the purpose of deciding the present application, are that M/s Sidco Leathers Limited (in liq.) was ordered to be wound up by an order dt. 16-12-1993 passed by this Court on the application of the State Bank of India. The Official Liquidator, High Court, has been appointed the Liquidator. The present applicants namely, (i) The Indusirial Credit & Investment Corporation of India; (ii) Industrial Development Bank of India and (iii) The Industrial Finance Corporation of India (the applicants in short) in pursuance of Ihe request made by the company (in liq.) had advanced to the said company a term load of Rs. 277 Lacs in consortium between the applicants. The company (in liq.) executed a loan agreement in favour of the applicants in respect of the aforesaid term loan. By a joint deed of hypothecation the company (in liq.) also hypothecated in favour of the applicants the movables (save and except the hook debts and the bankers goods) to secure repayment on account of the aforesaid term loan. The company (in liq.) however, failed and neglected to pay off the loan. Consequently the applicants jointly filed a suit for
recovery of their dues in the High Court of Judicature at Bombay which was numbered as suit No. 2789 of 1995 I.C.I.C.I. and others v. Sidco Leathers Limited and another. As the company had already come in liquidation by the time the suit was filed an application under $. 446 of the Companies Act, 1956 (Act in short) was filed before this Court- By order dt. 30-8-1995 this Court granted leave to the applicants to continue the proceedingsof the said Suit before the Bombay High Court. The present applicant (A-43) dt. 24-2-96 has been filed on behalf of the applicants before this Court under S. 453 of the Act praying that leave be granted to the applicants to apply any pray for appointment of a receiver over the assets of the company in their aforesaid Suit pending’at Bombay. The Official Liquidator has filed a counter-affidavit opposing the prayer made in this application and has submitted that the same was not maintainable and liable to be rejected us the Official Liquidator has already taken possession of the assets of the Company (in liq.) Consequently the question of appointment of a receiver for the same properties over which the Liquidator is incharge does not arise.
3. I have heard Shri Yatindra Singh, learned counsel for the applicants and Shri Krishna Murari, learned counsel appearing for the State Bank of India as well as the Official Liquidator. On behalf of the applicants learned counsel has contended that as the applicants are the secured creditors of the company (in liq.) having first charge over all its movables they have a right to remain outside the winding up proceedings and to the a suit for recovery of their dues and execute the decree by selling the charged properties. For the same they have only to take leave of this Court under S. 537 of the Act whieh they arc entitled to as a matter of course. Therefore, for safeguarding their interest over the secured properties the application under S. 453 of the Act if filed for leave to appoint a receiver, and the same has to be granted as a matter of course. Learned counsel has placed reliance on the decision of the Supreme Court in the case of M. K. Ranganathan v. Government of Madras AIR 1955 SC 604 wherein, it has been held that a secured creditor is outside the winding up and he can realise the security without the intervention of the Court by affecting the sale of the mortgaged properties by private treaty or by public auction. Learned counsel has also placed
reliance on the decision of the Karnataka High Court in the case of International Coach Builders Limited (in liq.) v. Karnataka Slate Financial Corporation (1994) 81 Com Cas 49, wherein, it has been held that right of a secured creditor of a
company (in liq.) to realise his security by taking possession of the properties of the company subjected to security and selling them by standing outside the winding up cannot be said even remotely 40 be affected by the amendment of S. 529 and the insertion of S. 529A of the Companies Act, 1956 by the Act No. 35 of 1985. So far as these decisions are concerned, they have been considered and reconsidered by various High Courts including this Court. The law which seems to have crystallised is to the effect that by the amendment brought about in S. 529 and S. 529A by Act No. 35 of 1985, the Official Liquidator as a representative of the workmen has a pari passu charge of Ihe properties of the company over which a security is created in favour of a creditor, even though the said creditor opts to realise its security by standing outside Ihe winding up. The property, therefore, cannot be soldoutrighl ignoring the Official Liquidator of the Court. A Division Bench of Bombay High Court speaking through Justice Sujata Manohar In the case of Maharashtra State Financial Corporation v. Official Liquidator, Bombay High Court, AIR 1993 Bombay 392 has while accepting the aforesaid view has observed thai where the dues of the workmen arc likely to be very small and where the Official Liquidator has no funds to advertise ihe sale in these circumstances the leave is to be granted to the secured creditor to sell the said properly jointly with the Official Liquidator. It is, therefore, quite clear that the Liquidator is entitled to join the secured creditorto realise the pari passu charge for the workmen dues creaied on the very security of the secured creditor. Consequently, the submission made by the learned counsel for the applicants that a secured creditor stands outside the winding up and has every right to sell his security and that permission is to be granted to him under S. 537 of the Act as a matter of course cannot be accepted in its entirety.
4. The main question, however, is that can a secured creditor claim to get a receiver appointed over the secured property as a matter of course when already the Official Liquidator has been
appointed by the Court for winding up the company. The Official Liquidator has contended that once the Court appoints a Liquidator who takes charge of the affairs of the company, no orders for appointing a receiver for the same property is envisaged as the function of the Liquidator and the receiver is more or less the same. The Liquidator has however some additional responsibilities which have been provided in the Act. Consequently, preference should be given to me Official Liquidator to continue. He has referred to unreported decisions given by me in the matter of Madan Industries and another case where I had rejected similar applications for appointment of receivers where the Official Liquidator had already taken charge and possession of the assets of the company. The learned counsel for the applicants has, however, invited my attention to the provisions of S. 453 of the Act, which lays down that a receiver shall not be appointed of assets in the hands of a liquidator except by, or with the .leave of, the Court. On this basis, it has been urged that even though a Liquidator has been appointed by the Court, a receiver can still be appointed with the leave of the Court, consequently, there is no bar for the receiver being appointed, if the Court permits such an appointment. Learned counsel has therefore contended that the view taken by this Court in the earlier decisions requires reconsideration. He has further submitted that certain authorities were not considered by this Court while passing the earlier orders. Attention has been invited by counsel to paragraph 1157 Vol. VII (2) Halsbury’s Laws of England, where it is observed as follows :–
“The power of secured creditor to appoint a receiver under his security may be exercised, assuming that all conditions necessary for the appointment have been satisfied, at any time the creditor chooses; and as regards timing he owes guarantors to select any time other than one which suits his own convenience. In making it is under no duly to refrain from so doing because this may cause loss to the company its unsecured creditor, as for example where a Liquidator who could do all that a receiver could do as already appointed.”
5. Learned counsel has also referred to the decision of the Chancery Division in the case of Re Potters Oils Limited reported in (1986) 1 All ER (C.hd) 890, where it was held that a debenture holder was entitled to appoint a receiver to protect his own interest and was fully entitled to form his
opinion that its interest would not be fully protected by Ihe Liquidator and could only be adequately protected by the appointment of the receiver. In this connection he has also referred to a passage from the H.A.J. Ford’s Principle of Company Law” (para 1238) wherein it was observed that a receiver will have to seek leave of the Court to take possession of the assets out of the control of the Liquidator but he will normally be permitted to realise the security for the debenture holders who stand outside the winding up.
6. I have carefully considered the submission made by the learned counsel for the applicants. I am, however, of the view that the observations made in the case of Re Porter’s Oils Limited (supra) and the observations made in Halsbury’s and Ford’s “Principle of Company Law” can be distinguished. The same are based upon the F_n-glish law. Tn the Companies Act, 1956, a specific provision namely, S. 453 has been enacted. Besides it will be noticed that in Re Porter’s case the agreement wilh the debenture holder clearly stipulated an appointment of a receiver to protect the interest of the Finance Company. The observations made by Halsbury is also based upon the decision of Reporter’s case. Ford in his “Principle of Company Law” has drawn a distinction where the power is conferred by the debenture or the trust deed for appointment of a receiver and a case where the debenture or trust deed gives no such power. It has consequently been observed that where no power has been given in the deed itself and the Court is asked to appoint a receiver, it may appoint Ihe Official Liquidator to be the receiver in order to save expenses unless there arc reasons why this would be undesirable. In the present case at hand, it would be noticed that no such right has been claimed under any agreement by the applicants for appointment of a receiver. In view of this position, the decision cited by the learned counsel for the applicants in my view will not be of much help in the present case. On the contrary, there is a direct decision of the Calcutta High Court in the case of Knar Kharee Collieries Limited, reported in AIR 1932 Cal 76. In this case asuit was filed by secured creditors on the basis of a mortgage. Subsequently, the company was ordered to be wound up and the assets were taken possession of by the Official Liquidator. Thereafter, a receiver, was appointed by the Court in the suit mentioned above. The secured creditor’s plea was that the
Offcial Liquidator be directed to make over possession of the mortgaged properties to the receiver. The contention was thai in S. 175(6) of 1913 Act the word “assets” mean the assets of the company, and the property which was subject to a charge could not be within the section the assets of the company. It was held that the contention was not correct. It was very definite and clear that intention of the provision was to avoid arty question of competition betweena receiver and an Official Liquidator, and to construe it in such a way as to give preference to the receiver appointed in a suit brought by a secured creditor would result in defeating its apparent object. The assets were and must be held to be the assets of the company though subject to a charge. This provision preclude the Court from appointing a receiver to oust the possession of the Liquidator at the instance of u secured creditor. The Court relied upon the decision in the case of Joshua Sluhbs Limited Burner v. Joshua Stubbs Limited (1891) I Ch 475. wherein il was held that where there id a question of competition between the Liquidator and a receiver appointed by the Court at the instance of the debenture holders or mortgagees the Court will ordinarily in exercise of its discretion give preference to the Liquidator. The Court also relied upon another unreported decision of Costello. J. of the Calcutta High Court in the case of Baldco Dass Rameshwar v. Cook & Co. Limited, wherein it was held that a receiver could not be appointed to oust the possession of the Liquidator at the instance of a secured creditor. The facts of the case of Khar Kharee Collieries Limited (AIR 1932 Cal 76) (supra) is somewhat similar to the facts of our case and I respectfully agree with the view taken by the Calcutta High Court in the aforesaid case. In the case at hand, the winding up order was passed prior to the institution of the suit and Official Liquidator had been appointed who had already taken possession of the assets of the company. It is evident that under R. 233 of the Companies (Court) Rules. 1959 the position of the official liquidator is more or less that of a receiver. Under the provisions of S. 468 ol the Act the Official Liquidator is entitled to the custody of all money, property, books and papers of the company and is expected to protect the interest of the creditors including that of the secured creditors. In the facts and the circumstances of the case, it will, therefore, be neither
expedient nor proper to grunt leave for appoint-ment of receiver under S. 453 of the Act as prayed by the applicants.
7. Apart from the academic point of view there is a practical aspect of the matter also. From the report filed by the Official Liquidator before this Court and the inventory prepared while taking possession, it would be evident that valuable machineries and their parts have already been removed from the factory. The machineries which are there arc hardly of much value. If a receiver is appointed in the suit he will have to come all the way from Bombay to secure the property of the company (in liq.) where hardly any valuable assets or machineries arc available. No doubt, the receiver to take charge of the property and to secure whatever is left, will have to incur ex penses. It will also be difficult for him to look after the property from Bombay whereas, for the Official Liquidator stationed at Allahabad which is only about 80 kms. from the factory site, it would be easier to manage the said property. The expenses will also be comparatively much less. He hax already taken possession and has appointed security guards for the security of the property. In case the applicants have any apprehension regarding security they can also post security guards of their own for protecting whatever assets remain. So far as disposing the assets is concerned, that shall be on the orders of this Court and a joint sale by the applicants as well as the Official Liquidator can be ordered. For the said purpose the applicants could advertise the sale of the assets along with the Official Liquidator and sell the same either by calling for tenders or by auction. A receiver is not required for the said purpose. The interest of the applicants is, therefore, fully safeguarded. It would, therefore, be more expedient to let the Official Liquidator be incharge of the property taking into consideration the facts and circumstances of this case.
8. As a result, I do not find any reason to allow this application filed by the applicants and consequently the same is rejected.
9. Application dismissed.
