Jatin Bhupendra Shah vs Praj Industries Limited And Ors
2023 Latest Caselaw 1039 Bom

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                                                                Sayali Upasani




      IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                 ORDINARY ORIGINAL JURISDICTION


           INTERIM APPLICATION (L) NO-13618 OF 2022
                              IN
            INTERIM APPLICATION (L) NO-8062 OF 2022
                              IN
               COMPANY PETITION NO-322 OF 2015


Jatin Bhupendra Shah                                          ...Applicant
In the matter between
Praj Industries Limited and Ors                             ...Petitioners
                     Vs.
Morya Grain Distilleries Pvt Ltd           (In Liqn)     ...Respondents
and Ors



Mr. Vijay Maganlal Vaghela, for Applicant.
Mr. Tejas Dande with Bharat Ghadavi and Trushna Shah i/b
Tejas Dande and Associate, for Respondent No. 1.
Ms. Sumedha Sawant, a/w Nainish Amin, for Union Bank of
India- Respondent No. 3.
Ms. Jaymala Ostwal with Ms. Komal Gosavi i/b M/s J.J.
Associate, for Respondent No. 4.
Mr. Shanay Shah, for Official Liquidator.


                                  CORAM:- N. J. JAMADAR, J.

DATED:- 1st February, 2023

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ORDER:-

1) The applicant, who as an Ex-director of the Morya Grain

Distilleries Pvt Ltd., the company (in liquidation), has preferred

Interim Application (L) No-13618 of 2022, for a declaration that

the action of Union Bank of India, the respondent No. 3, of

taking possession of the assets of the company in liquidation

including the plant and machinery situated at Aurangabad and

sale of the said assets without the order of this Court is void

and illegal.

2) In Interim Application (L) No.8062 of 2022, the applicant

seeks a direction to the Official Liquidator-respondent No. 2 to

take physical possession of the assets of the company (in

liquidation), including Plant and Machinery situated at Plot No.

A-96, MIDC, Paithan, District - Aurangabad, from Union Bank

of India - respondent No-3.

3) Background facts necessary for the determination of these

applications can be stated as under:-

(a) Praj Industries Ltd., respondent No. 1, preferred

Company Petition No. 322 of 2015, seeking winding up of the

company (in liquidation). By an order dated 22 nd February, 2018,

this Court allowed the Company Petition and directed that the

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company (in liquidation) be wound up. The Official Liquidator,

High Court, Bombay, came to be appointed as Liquidator of the

company (in liquidation) with usual powers. The Official

Liquidator addressed a letter dated 13th March, 2018 to the

stakeholders of the company (in liquidation) including Union

Bank of India, respondent No.-3, the secured creditor of the

company (in liquidation) to decide the course of action for taking

over the possession of all the immovable properties of the

company (in liquidation). Respondent No. 3 participated in a

meeting held by the Official Liquidator on 9 th April, 2018. On

27th July, 2018, the respondent No. 3 also lodged its claim with

the Official Liquidator by filing an Affidavit of Proof of Debts

dated 26th July, 2018.

(b) The applicant thus asserts the respondent No. 3,

"Opted in" the liquidation proceeding. It was, therefore,

incumbent upon the Official Liquidator to take physical

possession of all the assets of the company in liquidation

including the land, plant and machinery situated at

Aurangabad (the subject assets). The Official Liquidator,

according to the applicant, failed to take possession of the

subject assets despite statutorily bound by the provisions of the

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Companies Act, 1956 and the Companies (Court) Rules, 1959.

In the meanwhile, the respondent No. 3 sans permission of the

Company Court, moved to take physical possession of the

subject assets with the assistance of the District Magistrate,

Aurangabad. As the Official Liquidator, according to the

applicant, remained a "mute spectator" the District Magistrate

took forcible possession of the subject assets on 16 th February,

2022, and delivered the same to respondent No. 3. The

applicant alleges there was a collusion between the Official

Liquidator and respondent No. 3. In any event, there was a

dereliction of duty on the part of the Official Liquidator. Hence,

the application to declare the action of respondent No. 3 to take

over the possession of the assets of the company in liquidation

as void and illegal.

(c) During the pendency of the Interim Application (L)

No. 8062 of 2022, the respondent No. 3 made an effort to sale

the subject assets in a clandestine manner. Hence, the

applicant was constrained to file a fresh Interim Application (L)

No. 8062 of 2022, seeking direction to Official Liquidator to take

forcible possession of the subject assets.

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4) It would be contextually relevant to note that in the

intervening period, the respondent No. 3, sold the assets of the

company in liquidation to the bidder Minaxi Agro Industries LLP

- respondent No. 4 and a Sale Certificate was issued on 28 th

June, 2022. Eventually, the Sale Certificate came to be

registered with the Sub-Registrar of Assurances on 29 th August,

2022.

5) Both the applications are resisted by the respondent No. 3

- Union Bank of India and the Official Liquidator.

6) I have heard Mr. Vaghela, the learned Counsel for the

applicant, Mr. Shanay Shah, the learned Counsel for the Official

Liquidator and Ms. Sawant, the learned Counsel for the Union

Bank of India - respondent No. 3, at some length. With the

assistance of the learned Counsel for the parties, I have perused

the pleadings and the material on record.

7) Mr. Vaghela, the learned Counsel for the applicant,

strenuously submitted that post winding up order dated 22 nd

February, 2018, the Official Liquidator was statutorily enjoined

to forthwith take physical possession of all the subject assets. In

the case at hand, singular dereliction duty by the Official

Liquidator has caused irretrievable injustice to all the

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stakeholders of the company (in liquidation) including the

applicant. The conduct of respondent No. 3 - Bank in taking

over the possession of the subject assets by resorting to mala

fide proceedings before the District Magistrate under The

Securitisation And Reconstruction Of Financial Assets And

Enforcement Of Security Interest Act, 2002 ("the SARFAESI

Act"), even after filing an Affidavit in Proof of Debts and

subjecting its claim to the liquidation, is equally blameworthy.

8) Mr. Vaghela further submitted that the Official Liquidator

was not at all apprised of the action of taking the physical

possession of the assets of the company in liquidation. Nor the

Official Liquidator was involved in the sale of the assets. All

these actions of respondent No. 3 are in flagrant violation of the

governing provisions contained in the Companies Act and the

SARFAESI Act. It was further urged by Mr. Vaghela, with a

degree of vehemence, that once a winding up order is passed,

the assets of the company in liquidation become custodia legis

and no entity can deal with the assets of the company in

liquidation sans the permission of the Company Court. In the

instant case, the subject assets have been sold without

obtaining the permission of the Company Court and also behind

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the back of the Official Liquidator and, therefore, the entire

action from the stage of taking possession to sale deserves to be

quashed and set aside.

9) Mr. Shanay Shah, the learned Counsel for the Official

Liquidator, submitted that both the applications are wholly

misconceived. The foundational premise of the applications that

the Official Liquidator committed dereliction of duty is

completely unfounded. At no stage the Official Liquidator had

either taken or claimed to have taken possession of the subject

assets. He submits that the contention that the Official

Liquidator was not apprised of the action of the secured creditor

is against the weight of the record. In any event, since the

respondent No. 3 - Bank had 'opted out' of the liquidation

process, the submissions on behalf of the applicant that the

sale could not have been effected without leave of the Court is

plainly against the weight of the settled position in law. To

bolster up of this submission, Mr. Shah placed a strong reliance

of the judgment of Supreme Court in the case of Pegasus Assets

Reconstruction Private Limited Vs. Haryana Concast Limited

and Another1.

1      (2016) 4 SCC 47





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10)        Ms. Sawant, the learned Counsel for the respondent No.

3 - Bank, submitted that respondent No. 3 realised its security

in accordance with the provisions contained in the SARFAESI

Act and the Companies Act. At no point of time, the respondent

No. 3 had relinquished its security and exercised the option to

claim under liquidation. Therefore, the edifice of the application

that the respondent No. 3 had "Opted in", gets dismantled.

11) To begin with, it may be apposite to extract the relevant

provisions contained in Sections 529 and 529 A of the

Companies Act, 1956. They read as under:-

"529. Application of insolvency rules in winding up of insolvent companies.

(1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to-

(a) debts provable;

(b) the valuation of annuities and future and contingent liabilities; and

(c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent:

1[Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen' s portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security,-

(a) the liquidator shall be entitled to represent the workmen and enforce such charge;

(b) any amount realised by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of workmen' s dues; and

(c) so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this

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proviso or the amount of the workmen' s portion in his security, whichever is less, shall rank pari passu with the workmen' s dues for the purposes of section 529A.]

(2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section:

[Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to 3 pay his portion of the expenses] incurred by the liquidator (including a provisional liquidator, if any) for the preservation of the security before its realization by the secured creditor.]

[Explanation.- For the purposes of this proviso, the portion of expenses incurred by the liquidator for the preservation of a security which the secured creditor shall be liable to pay shall be the whole of the expenses less amount which bears to such expenses the same proportion as the workmen' s portion in relation to the security bears to the value of the security.]

(3) For the purposes of this section, section 529A and section 530,-

(a) " workmen", in relation to a company, means the employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947 );

............

(c) " workmen' s portion", in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen' s dues bears to the aggregate of-

(i) the amount of workmen' s dues; and

(ii) the amounts of the debts due to the secured creditors. Illustration The value of the security of a secured creditor of a company is Rs. 1, 00, 000. The total amount of the workmen' s dues is Rs. 1, 00, 000. The amount of the debts due from the company to its secured creditors is Rs. 3, 00, 000. The aggregate of the amount of workmen' s dues and of the amounts of debts due to secured creditors is Rs. 4, 00, 000. The workmen' s portion of the security is, therefore, one- fourth of the value of the security, that is Rs. 25, 000.]

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529 A. Overriding preferential payment. Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force in the winding up of a company-

(a) workmen' s dues; and

(b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub- section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts.

(2) The debts payable under clause (a) and clause (b) of sub- section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.

12) A conjoint reading of the provisions contained in

Sections 529 and 529A, would indicate that the secured creditor

has an option to realise or relinquish his security. If the secured

creditor exercises the option to realise his security, he is entitled

to do so in a proceeding other than the winding up proceeding.

But he has to pay to the liquidator the costs of preservation of

the security till he realises the security. The workmen of the

company in winding up also acquire the status of secured

creditor. Where a company is in liquidation, a statutory charge

is created in favour of workmen in respect of 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 creditors of the company as illustrated by Section

529 of the Act.

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13) In the case of Allahabad Bank V. Canara Bank2 in

essence, the impact of the provisions contained in Recovery of

Debts Due to Banks and Financial Institutions Act, 1993 (RDB

Act), a subsequent legislation, on the provisions of the

Companies Act, 1956, arose for consideration. In the context of

the controversy sought to be raised on behalf of the applicants,

the following questions considered by the Supreme Court in the

case of Allahabad Bank (supra) deserves to be noted-

(1) Whether in respect of proceedings under the RDB Act at the stage of adjudication for the money due to the banks or financial institutions and at the stage of execution for recovery of monies under the RDB Act, the Tribunal and the Recovery Officers are conferred exclusive jurisdiction in their respective spheres?

(2) Whether for initiation of various proceedings by the banks and financial institutions under the RDB Act, leave of the Company Court is necessary under Section 537 before a winding-up order is passed against the company or before provisional liquidator is appointed under Section 446(1) and whether the Company Court can pass orders of stay of proceedings before the Tribunal, in exercise of powers under Section 442?

(3) Whether after a winding-up order is passed under Section 446(1) of the Companies Act or a provisional liquidator is appointed, whether the Company Court can stay proceedings under the RDB Act, transfer them to itself and also decide questions of liability, execution and priority under Section 446(2) and (3) read with Sections 529, 529-A and 530 etc. of the Companies Act or whether these questions are all within the exclusive jurisdiction of the Tribunal?

14) The first question was answered by the Supreme Court in

paragraph No. 25 as under.

2 (2000) 4 SCC 406

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"25.....the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of DRT and Recovery Officer and no other court or authority much less the civil court or the company court can go into the said questions relating to the liability and the recovery, except as provided in the 1993 Act."

15) The second and third questions were answered by the

Supreme Court in paragraph 50 as under.

"50 For the aforesaid reasons, we hold that at the stage of adjudication under Section 17 and execution of the certificate under Section 25, the provisions of 1993 Act confer exclusive jurisdiction on the DRT and the Recovery Officer in respect of debts payable to banks and financial institutions and there can be no interference by the company court under Section 442 read with Section 537 or under Section 446 of the Companies Act. In respect of the moneys realized under the 1993 Act, the question of priorities among the banks and financial institutions and other creditors can be decided only by DRT and in accordance with Section 19(19) read with Section 529A of the Companies Act and in no other manner. The provisions of the RDB Act, 1993 are to the above extent inconsistent with the provisions of the former. This position holds good during the pendency of the winding-up petition against the debtor Company and also after a winding-up order is passed. No leave of the Company Court is necessary for initiating or continuing the proceeding in favour of the appellant and against the respondents."

(emphasis supplied)

16) In the light of the provisions contained in RDB Act,

which has an overriding effect, two propositions emerge. First,

RDB Act confers exclusive jurisdiction upon DRT for

determination of the matters specified in Section 17. Second, the

Act ousts jurisdiction of all other Courts in determining and

deciding the issues which are within the province of the

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Authorities under RDB Act, save and except the powers of the

Supreme Court and High Court under Articles 226 and 227 of

the Constitution.

17) A useful reference in this context can be made to a three

Judge Bench judgment of the Supreme Court in the case of

Jitendra Nath Singh Vs. Official Liquidator and Others 3, wherein

the Supreme Court expounded the import of the provisions

contained in Sections 529 and 529A of the Companies Act,

1956. The Supreme Court culled out the propositions in

paragraph No. 16. The first proposition reads as under:-

"16. Our conclusions on interpretation of the provisions of Sections 529 and 529A of the Companies Act, therefore, are:

16.1 a secured creditor has only a charge over a particular property or asset of the company. The secured creditor has the option to either realize his security or relinquish his security. If the secured creditor relinquishes his security, like any other unsecured creditor, he is entitled to prove the debt due to him and receive dividends out of the assets of the company in the winding up proceedings. If the secured creditor opts to realize his security, he is entitled to realize his security in a proceeding other than the winding up proceeding but has to pay to the liquidator the costs of preservation of the security till he realizes the security.

(emphasis supplied)

18) In the backdrop of the aforesaid enunciation of law, the

moot question that crops up for consideration is whether the

respondent No. 3 stood outside the winding-up and proceeded 3 (2013) 1 SCC 462

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to realise its security on its own. Two circumstances were

pressed into service by Mr. Vaghela to bolster up the case that

the respondent had "Opted in". First, the respondent No. 3 had

participated in the meeting held by the Official Liquidator on 9 th

April, 2018. Second, on 27 th July, 2018, the respondent No. 3

had filed Affidavit of Proof of Debt with the Official Liquidator.

These twin circumstances, according to Mr. Vaghela,

unmistakably indicate that the respondent No. 3 had exercised

the option to relinquish the security and claim under

liquidation.

19) I am afraid to accede to this submission. None of the

aforesaid circumstances would justify an inference that the

respondent No. 3 had relinquished the security.

20) The minutes of the meeting (page No. 214 of the Interim

Application (L) No. 8062 of 2022) deserve to be extracted to

appreciate the stand of respondent No. 3.-

"Today's meeting has been convened to decide modalities of taking possession of the properties of the Company (In Liqn.). The ex-director(s) of the Company (In Liqn.) did not attend the meeting. Shri. S.S. Mishra, Chief Manager from Union Bank of India has informed that the bank has taken the symbolic possession of the Registered office and Factory premises of the Company (In Liqn.) under SARFAESI Act on 05/03/2016. The Bank has also filed DRT proceedings against the Company (In Liqn.) The bank has been asked to submit the

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relevant documents in this regards and to implead the Official Liquidator in the DRT proceedings."

21) Three facts emerge. First, the Bank informed the Official

Liquidator that it had already taken symbolic possession of the

office and factory premise of the company (in liquidation) under

SARFAESI Act on 5th March, 2016, itself. Second, the Bank had

filed a proceeding to recover its debt against the company in

liquidation before the DRT. Third, the Official Liquidator called

upon the respondent No. 3 - Bank to implead the Official

Liquidator in the DRT proceeding. These facts indicate that the

respondent No. 3- Bank had already initiated the proceeding

other than a winding-up proceeding to enforce the security, and

before a forum created under the special enactment.

22) The mere fact that the secured creditor files an Affidavit

in Proof of Debt with the Official Liquidator, by itself, is not

sufficient to draw an inference that the secured creditor has

relinquished his security. It requires conscious act on the part

of the secured creditor to infer relinquishment of security than

mere filing of a claim in response to public notice issued by the

Official Liquidator. In the case at hand, as noted above, at the

first possible opportunity, the respondent No. 3- Bank asserted

its claim over the secured assets by pointing out that it had

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taken symbolic possession of the secured assets and had

instituted a proceeding before DRT. A useful reference in this

context can be made to the following observations of Hon'ble

Justice Swatanter Kumar, in the case of Jitendra Nath Singh

(supra) wherein the circumstances which may bear upon an

inference of relinquishment of security were discussed.

"45. The relinquishment of security by a secured creditor certainly requires some conscious act on his part more than the mere filing of a claim in response to a public notice issued by the official liquidator. Once the secured creditor takes such further actions like sale of the secured assets through the liquidator and subject to the control of the Company Court in that event, he would be part of the scheme of payment as rationalized under Section 529 and 529A of the Act.

48. A secured creditor who has a charge over the assets of a company in winding up, merely by instituting an application before the DRT or any other special forum without effectively pursuing that remedy and taking effective steps to realize his security would not stand outside the winding up proceedings. If the sale of secured assets is effected by the Official Liquidator subject to control of the Company Court and such amounts are utilized for discharging the debts of the secured creditor as well as statutory charge of the workmen created under Sections 529 and 529A, then, in effect, the secured creditor would be deemed to have participated in the winding up proceedings and not stood outside the same. It is for the reason that a secured creditor has to take steps by filing petition before any other forum just to protect his legal right and to prevent the claim from getting barred by time. On the contrary, if he realizes his security within the four corners of the company law, i.e., before the Official Liquidator and the Company Court, in that event it would not be possible to hold that such secured creditor has given up his option to participate in the winding up proceedings. However, the matter would be quite different where the secured creditor elects not only

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to institute a petition before the specialized forum but also takes effective steps to realize his security and pursues the proceedings effectively, in which event, the conclusion has to be that such secured creditor has stood 'outside the winding up' proceedings.

49. Equally, it can be stated that a secured creditor who, after institution of a claim but without pursuing the remedy outside the provisions of this Act, files claim before the official liquidator, relinquishes his security and agrees to the distribution of the sale proceeds through the official liquidator, subject to jurisdiction of the Company Court, could always be said to be not 'standing outside the winding up' proceedings. However, where he institutes a petition, proceeds with it and seeks realisation of security before a forum outside the Company Court, then he obviously pursues the remedy beyond mere filing of a claim and would be a person 'standing outside the winding up' proceedings and shall be subject to the rights enforced by the official liquidator in terms of the proviso to Section 529 of the Act. As it has also been held by this Court in the case of ICICI Bank (supra), the secured creditor has to take some positive steps to participate in the winding up petition.

(emphasis supplied)

23) In my view, the aforesaid pronouncement is on all four

with the facts of the case at hand as the respondent No. 3 -

Bank had done all that was required to enforce the security and

stand outside the liquidation process by i) taking symbolic

possession of the secured assets, ii) instituting the proceeding

for recovery before DRT, iii) taking physical possession of the

secured assets with the intervention of the District Magistrate

and iv) selling the secured assets. An inference other than that

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of the respondent No. 3 - Bank having stood, "outside the

winding-up", is inconceivable.

24) The second limb of the submission of Mr. Vaghela that

for taking over the possession of the subject assets and the

subsequent sale, permission of the Company Court was

peremptory does not deserve to be countenanced. The reliance

placed by Mr. Shah on the judgment of the Supreme Court in

the case of Pegasus (supra) seals the issue. In the said case, the

Supreme Court considered the following question of law-

Whether a Company Court, directly or through an Official

Liquidator, can wield any control in respect of sale of a

secured asset by a secured creditor in exercise of powers

available to such creditor under the SARFAESI Act ?

25) After considering the provisions of the Companies Act,

1956, SARFAESI Act, State Financial Corporations Act, 1951

(SFC Act) and RDB Act, 1993 and the previous

pronouncements, the Supreme Court enunciated the position in

law as under-

"23 A reading of Sections 9 and 13 of the SARFAESI Act leaves no manner of doubt that for enforcement of its security interest, a secured creditor has been not only vested with powers to do so without the intervention of the court or tribunal but detailed procedure has also been prescribed to take care of various eventualities such as

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when the borrower company is under liquidation for which proviso to sub-section (9) of Section 13 contains clear mandate keeping in view the provisions of Section 529 and 529A of the Companies Act, 1956. Since significant amendments were introduced in Section 529 while inserting Section 529A through Amendment Act 35 of 1985, effective from 24.5.1985 and with the aid of a non obstante clause in sub-section (1) of Section 529A workmen's dues were given preference over other dues and made to stand pari passu with dues of the secured creditors, in case of apparent conflict, this Court through various judgments has upheld the proceedings under the RDB Act as it happens to be a later Act with overriding effect over other laws. The interest of the workmen in respect of dues payable to them as per Section 529 and 529A of the Companies Act has been protected by permitting, wherever necessary, association of the Official Liquidator with the proceedings before the Debts Recovery Tribunal under the RDB Act. In our considered judgment, the same view is required to be taken in context of SARFAESI Act also, for the additional reason that Section 13 requires notice to the borrower at various stages which in the case of a company under winding up being a borrower would mean requirement of notice to the Official Liquidator. The Security Interest (Enforcement) Rules, 2002 (for brevity, 'the Rules') framed under the provisions of SARFAESI Act also require notice upon the borrower or his agent at different stages. For sale of immovable secured assets, as per Rule 8, the authorized officer can take possession by delivering a Possession Notice to the borrower and by affixing Possession Notice on the outer door or at some conspicuous place of the property. Before the sale also, the authorized officer is required to serve to the borrower a notice of 30 days. Thus the Rules also ensure that the Official Liquidator is in knowledge of the proceedings under the SARFAESI Act in case the borrower happens to be a company under winding up. As a borrower, the Official Liquidator has ample opportunity to get the details of the workers dues as ascertained under the Companies Act, placed before the authorized officer and seek proper distribution of the amount realised from the sale of secured assets in accordance with various provisos under sub- section (9) of Section 13 of the SARFAESI Act. .............

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29. On behalf of respondent Bank, Kotak Mahindra as well as Respondent No. 2, auction purchaser, the judgment in the case of Rajasthan State Financial Corporation (supra) was distinguished by placing reliance upon factual and legal situation prevailing in that case as noted in Paragraph 2 of the judgment. It was pointed out that Section 32 (10) of the SFC Act contains ample clarification that if liquidation proceedings have commenced in respect of the borrower before an application is made under sub- section (1) of Section 31, the financial corporation will not get any preference over the other creditors unless it is conferred on it by any other law. In that case no proceeding had been initiated under the SFC Act and all developments had taken place in the liquidation proceeding. Rajasthan State Financial Corporation was therefore unable to take any advantage of provisions under SFC Act. At the end of paragraph 2, this Court rightly held that "a mere right to take advantage of any enactment without any act done towards availing of that right cannot be deemed a right accrued.

30. Since we have held earlier in favour of views of Delhi High Court, it is not necessary to burden this judgment with the case laws which support that view and have been noted by the High Court. We are in agreement with the submissions advanced on behalf of respondent Kotak Mahindra Bank as well as respondent No.2 that there is no lacuna or ambiguity in the SARFAESI Act to warrant reading something more into it. For the purpose it has been enacted, it is a complete code and the earlier judgments rendered in the context of SFC Act or RDB Act vis-à-vis the Companies Act, cannot be held applicable on all force to the SARFAESI Act. There is nothing lacking in the Act so as to borrow anything from the Companies Act till the stage the secured assets are sold by the secured creditors in accordance with the provisions in the SARFAESI Act and the Rules. At the post sale stage, the rights of the persons or parties having any stake in the sale proceeds are also taken care of by sub-section (9) of Section 13 and its five provisos (not numbered). It is significant that as per sub- section (9) a sort of consensus is required amongst the secured creditors, if they are more than one, for the exercise of rights available under sub-section (4). If borrower is a company in liquidation, the sale proceeds have to be distributed in accordance with the provisions of Section 529A of the Companies Act even where the company is

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being wound up after coming into force of the SARFAESI Act, if the secured creditor of such company opts to stand out of the winding up proceedings, it is entitled to retain the sale proceeds of its secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of Section 529A of the Company Act. The third proviso is also meant to work out the provisions of Section 529A of the Companies Act, in case the workmen's dues cannot be ascertained, by relying upon communication of estimate of such dues by the liquidator to the secured creditor, who has to deposit the amount of such estimated dues with the liquidator and then it can retain the sale proceeds of the secured assets. The other two provisos also are in aid of the liquidator to discharge his duties and obligations arising under Section 529A of the Companies Act. Thus, it is evident that the required provisions of the Companies Act have been incorporated in the SARFAESI Act for harmonizing this Act with the Companies Act in respect of dues of workmen and their protection under Section 529A of the Companies Act. In view of such exercise already done by the legislature, there is no plausible reason as to take recourse to any provisions of the Companies Act and permit interference in the proceedings under the SARFAESI Act either by the Company Judge or the liquidator. As noted earlier, the Official Liquidator as a representative of the borrower company under winding up has to be associated, not for supplying any omission in the SARFAESI Act but because of express provisions therein as well as in the Rules. Hence the exercise of harmonizing that this Court had to undertake in the context of SFC Act or the RDB Act is no longer warranted in respect of SARFAESI Act vis-à-vis the Companies Act.

31. The aforesaid view commends itself to us also because of clear intention of the Parliament expressed in Section 13 of the SARFAESI Act that a secured creditor has the right to enforce its security interest without the intervention of the court or tribunal. At the same time, this Act takes care that in case of grievance, the borrower, which in the case of a company under liquidation would mean the liquidator, will have the right of seeking redressal under Sections 17 and 18 of the SARFAESI Act." ......

(emphasis supplied)

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26) In light of the aforesaid legal position, a detail reference

to the Judgments of the Gujarat High Court in Company

Application No. 77 of 2014 and connected applications in the

matter of Authorised Officer and Assistant General Manager Vs.

Official Liquidator of Apoorva Laminates Private Ltd., and Star

Chemicals (Bombay) Ltd Vs. Vitta Mazda Ltd. And Another 4, the

judgments of Madras High Court in V.G.P. Finances Limited Vs.

Neptune Inflatables Limited5, and Panjab and Haryana High

Court in the case of Chetan K. Singh Vs. City Bank N.A. and

Others6 , sought to be relied upon by Mr. Vaghela is not

warranted. It would be suffice to note that those cases revolved

around the question of validation of the disposal of the assets of

the Company under Section 536 (2) of the Companies Act, 1956.

27) Reliance placed by Mr. Vaghela on the judgment of the

Supreme Court in the case of Bakemans Industries Private

Limited Vs. New Cawnpore Flour Mills and Others 7, also does

not advance the cause of the submission as the issue involved

in the said case was about the exercise of supervisory power by

the Company Court over the sale of the assets of the company in

4 (2008) 145 Comp Cas 455 (Guj) 5 2013 SCC Online Mad 2914 6 (2009) 150 Comp Cas 409 (P & H) 7 (2008) 15 SCC 1

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liquidation under the provisions of Section 29 of the SFC Act,

1951.

28) In conclusion, if the aforesaid exposition of law in the

case of Pegasus (supra) is considered in the light of the law

postulated in the case of Allahabad Bank (supra), both the

submissions on behalf of the applicant that the Official

Liquidator ought to have taken physical possession of the

subject assets, despite the secured creditor having initiated

steps to enforce the security interest therein, and before sale

respondent No. 3 must have obtained the permission of the

Company Court, fell through.

29) Resultantly, both the applications deserve to be

dismissed.

30)     Hence, the following order.

                                              ORDER


                          Applications stand dismissed.



                                                          [N. J. JAMADAR, J.]