IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 07TH DAY OF APRIL 2022
BEFORE
THE HON'BLE MR. JUSTICE B. M. SHYAM PRASAD
COMPANY APPLICATION NO.970/2004
IN
COMPANY PETITION NO.186/1998
BETWEEN :
OFFICIAL LIQUIDATOR OF
M/S TECHNO PROFILE (INDIA) PVT LTD (IN LIQN)
ATTACHED TO THE HIGH COURT OF KARNATAKA
'F' WING, 4TH FLOOR, KENDRIYASADAN
BANGALORE - 34.
... APPLICANT
(BY SRI.JAGADEESH GOUD PATIL, ADVOCATE
OFFICIAL LIQUIDATOR)
AND :
1. M/S KSFC
JAYANAGAR BRANCH OFFICE
8TH FLOOR, JAYANAGAR SHOPPING COMPLEX,
BANGALORE - 11.
2. M/S STATE BANK OF INDIA
SPECIALISED REHABILITATION
RECOVERY BRANCH, NO 61, 4TH FLOOR
RESIDENCY PLAZA RESIDENCY ROAD
BANGALORE - 25.
3. M/S DECENT FURNITURES
NO. 27/37, STORE STREET
2
M.R.R. LANE, KALASIPALYAM
BANGALORE - 560 002.
... RESPONDENTS
(BY SRI.P.S. SRIKANTH.,ADVOCATE FOR R1;
SRI. M.V. CHANDRASHEKAR REDDY, ADVOCATE FOR R3;
SRI. B.R. VISHWANATH, ADVOCATE FOR R2)
THIS APPLICATION IS FILED UNDER SECTION 537 OF
THE COMPANIES ACT, 1956 READ WITH SECTION 456 OF
THE ACT AND RULE 9 OF THE COMPANIES (COURT)
RULES, 1959 PRAYING TO A) DECLARE THE SALE OF
MACHINERY OF THE COMPANY (IN LIQUIDATION) AND
THE ENCASHMENT OF FIXED DEPOSIT AS VOID. B) TO
DIRECT THE KSFC TO REMIT THE SALE PROCEEDS OF
RS. 80,000/- TOGETHER WITH INTEREST FROM
19.01.2000 TILL THE DATE OF PAYMENT; C) TO DIRECT
THE KSFC TO REMIT THE AMOUNT OF FIXED DEPOSIT
APPROPRIATE BY THEM TOGETHER WITH INTEREST
FROM 18.02.2001 TILL THE DATE OF PAYMENT; D) TO
DIRECT THE STATE BANK OF INDIA TO REMIT THE SUM
OF RS. 1,00,000/- PAID TO THEM AS COMMITMENT
DEPOSIT TOGETHER WITH INTEREST FROM 12.02.2022
TILL THE DATE OF PAYMENT.
THIS APPLICATION COMING ON FOR FINAL HEARING,
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The Official Liquidator has filed this application under Section 537 of the Companies Act, 1956 read with Section 456 thereof and Rule 9 of the Companies (Court) Rules, 1959. The Official Liquidator has sought for the following reliefs:
3
a) declare the sale of Machinery of the Company (in liqn.) and the encashment of fixed deposit as void.
b) to direct the KSFC to remit the sale proceeds of Rs.80,000/- together with interest from 19.1.2000 till the date of payment.
c) to direct the KSFC to remit the amount of Fixed Deposit appropriated by them together with interest from 18.2.2001 till the date of payment.
d) to direct the State Bank of India to remit the sum of Rs.1,00,000/- paid to them as commitment deposit together with interest from 12.2.2002 till the date of payment.
2. The undisputed facts that emerge from the records, which includes the deposition that is un- contested by the respondent, are that the company - in liquidation, had availed loan of Rs.2,82,000/-from Karnataka State Financial Corporation (for short 'KSFC')
- the first respondent - for purchase of 40 KVA DG set. The KSFC in exercise of its right to secure its interest 4 under the State Financial Corporations Act, 1951 (for short 'the SFC Act') has brought this Generator to sale on 19.1.2000, and a sum of Rs, 80,000/- is also realized from the sale. The application for winding up is filed on 7.12.1998 and the winding up order is dated 22.7.2002. Almost after two years, the Official Liquidator has written to KSFC to clarify whether leave of this Court was obtained before bringing the Generator to sale. The KSFC has responded stating that the possession of the Generator was taken on 19.1.2000 invoking the power under Section 29 of the SFC Act and the sale amount of Rs.80,000/- is adjusted towards the loan amount.
3. The learned Counsel for the Official Liquidator submits that with this Court's winding up order dated 27.2.2002 the proceedings would relate back to the date of the petition viz., 07.12.1998 and therefore the KSFC could not have brought the 5 Generator to sale without the leave of this Court and therefore, the prayer for directions against KSFC must be allowed. As regards the direction to the State Bank of India to remit the sum of Rs.1,00,000/- paid to them as commitment deposit by the company under liquidation, the learned counsel does not contest that nothing is brought on record to substantiate the claim and there cannot be any relief from this Court in this regard. As such, the only question is whether there must be directions against the KSFC as sought for.
4. It is settled that the provisions of the SFC Act being a special statute would prevail over the provisions of the Companies Act, 1956 and the Official Liquidator's role when provisions of Section 29 of the SFC Act is invoked is only to ensure that a proper price is obtained for the assets sold so as to protect the rights of the other secured creditors. A useful reference in this regard could be made to the decision of the Hon'ble 6 Supreme Court in this regard in Official Liquidator vs. Metallic Soaps & Chemicals (Pvt) Ltd. Vs. The Manager, Karnataka State Financial Corporation and Another, Civil Appeal No.6079/2009, and Para 9 of this decision reads as under :
"On a perusal of the legal provisions expounded before us, we have no doubt that the role of the official liquidator and his association with the sale of the assets, where action is taken under the SFC Act, is to ensure that a proper price is obtained for the assets sold so as to protect the rights of the other secured creditors. In this behalf, we may note the judgment of this court in "Bakemans Industrial Pvt. Ltd. V. New Cawnpore Flour Mills & ors'. (2008 (15) SCC 1) where it has been categorically opined that the provisions of section 29 of the SFC Act, that being a special statute, would prevail over the general powers of the company Judge under the Companies Act."
The records demonstrate indubitably that as against the loan of Rs.2,86,000/- the KSFC has recovered Rs.80,000/- by bringing the Generator to 7 sale. This would in any event be much below the amount that the KSFC would be entitled to recover given its loan. The sale of the Generator by the KSFC is much before the date of the winding up order and not only that, it is four years after the sale there is a communication from the Official Liquidator about the winding up order. The Official Liquidator has not asserted any pari passu claims. In these circumstances, this Court is of the view that there is no reason for allowing the application and the application stands rejected accordingly.
Sd/-
JUDGE nv