Export Import Bank Of India vs Gol Offshore Limited
2023 Latest Caselaw 2 Bom

                                                       22-IAL-4988-20+CP-756.DOC

                                                                         Sayali Upasani



        IN THE HIGH COURT OF JUDICATURE AT BOMBAY
               ORDINARY ORIGINAL CIVIL JURISDICTION


              INTERIM APPLICATION (L) NO.4988 OF 2020
                                IN
                 COMPANY PETITION NO.756 OF 2014

Export Import Bank of India                                         ...Applicant
In the matter between
Export Import Bank of India                                            ...Plaintiff
                    Vs
GOL Offshore Limited                                               ...Defendant

Mr. Charles De Souza with Mithila Damle, for Applicant.
Mr. Aditya Pimple, for Official Liquidator.

                       CORAM:                      N. J. JAMADAR, J.

                       RESERVED ON :               16th NOVEMBER, 2022
                       PRONOUNCED                  2nd JANUARY, 2023
                       ON:
ORDER:-

1. The applicant/original petitioner, who is a secured

creditor of GOL Offshore Limited, the company (in liquidation)

has preferred this application, seeking directions to the Official

Liquidator to hand over the balance sale proceeds of

Rs.26,09,50,900/-, realised from the sale of the Secured

Assets, to the applicant along with interest accrued thereon,

after appropriation of claims/liens received by the Official

Liquidator till date, that rank higher in priority to the claim of

the applicant in respect of the Secured Assets. The applicant-

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petitioner had advanced certain financial facilities to GOL

Offshore Limited (GOL), the company (in liquidation). To secure

the repayment, GOL had created charge over the Vessels

(Secured Assets) in favour of the applicant. On account of the

default on the part of GOL to repay the dues, applicant

preferred the instant Company Petition to wind up GOL.

Initially, by an order dated 5th May, 2017, a Provisional

Liquidator came to be appointed. Subsequently, by an order

dated 4th December, 2017, this Court ordered the winding up of

GOL and appointed the Official Liquidator as the Liquidator,

with usual powers under the Companies Act, 1956 (the Act,

1956).

2. The applicant preferred Company Application (L) No.

568 of 2017, seeking directions, inter alia, to the Provisional

Liquidator to take possession, if not already taken, and sale

the six Vessels (Secured Assets), for and on behalf of the

applicant. By an order dated 13 th December, 2017, this Court

noted that Dumb Barge Gal Constructor had gone adrift due to

the heavy seas and winds and the applicant had spent

Rs.30,68,000/-, in securing it and on essential basic repairs in

accordance with the directions of the Port authorities. This

Court did not find any difficulty in acceding to the request of

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the applicant that all those secured assets be brought into the

hands of the liquidator and the process of auctioning the same

be started. Thus the Company Application (L) No. 568 of 2017,

came to be allowed in terms of prayer Clauses (a) to (f).

3. Pursuant to subsequent orders dated 1st March, 2018,

23rd March, 2018 and 28th March 2018, the sale of six Vessels

came to be effected for a consideration of Rs. 28,42,00,000/-.

4. The applicant filed an affidavit of expenses with the

Official Liquidator, seeking reimbursement of expenses to the

tune of Rs.2,33,95,943.37/-. The Official Liquidator filed OLR

No. 141 of 2018, partially accepting the claim of the applicant

to the extent of Rs.1,33,82,986/-, only. By an order dated 26 th

October, 2018, this Court, however, directed the Official

Liquidator to remit a further sum of Rs.98,66,113.68/-, to the

applicant towards the amount sought in the affidavit of

expenses of the applicant. Thus a sum of Rs.2,33,49,100/-,

came to be reimbursed out of the sale proceeds of the Secured

Assets and the balance Rs.26,09,50,900/-, continues to be

deposited with the Official Liquidator.

5. The applicant further claims that pursuant to the

notice published by the Official Liquidator inviting the claims,

the applicant filed Affidavit of Proof of Debts. By a Notice of

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Admission dated 17th January, 2020, the Official Liquidator

admitted the claim of the applicant to the extent of

Rs.619,69,68,700/-.

6. The applicant further claims that the applicant had an

exclusive charge over the Secured Assets. It had neither

relinquished the security nor elected to join the winding up

proceedings in respect of GOL. The applicant had, on the

contrary, sought the sale of the Secured Assets for and on

behalf of the applicant. In the circumstances, as against

admitted claim of Rs.619,69,68,700/-, the amount of balance

sale proceeds represents a minuscule part. It would, therefore,

be just and reasonable that the said amount of

Rs.26,09,50,900/-, alongwith the accrued interest thereon, be

paid to the applicant.

7. An affidavit-in-reply is filed by the Official Liquidator

resisting the aforesaid claim. The Official Liquidator contends

that there is no material to indicate that the applicant had

registered the charge over the assets of the company in

liquidation with the Registrar of Companies. In the absence of

such registration of charge with ROC, the charge claimed by

the applicant would be void as against the Official Liquidator.

It is further contented that the applicant had not exercised the

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option to enforce its security interest standing outside winding

up. Instead the applicant consciously chose to bring the

Vessels, the Secured Assets, to sale through the Company

Court. Moreover, the right of the applicant to claim

reimbursement of liquidation expenses was kept open and the

applicant, in fact, recovered the liquidation expenses from the

Official Liquidator. Therefore, the claim of the applicant that it

had not relinquished the security and participated in the

winding up can not be considered. Resultantly, according to

Official Liquidator, the applicant can not claim priority in

payment of the sale proceeds and must await distribution of

dividend under the winding up proceeding.

8. I have heard Mr. De Souza, the learned Counsel for the

applicant, and Mr. Pimple, the learned Counsel for the Official

Liquidator at some length. The learned Counsel took the Court

through the pleadings and the material on record, including

the orders passed by this Court.

9. Mr. De Souza laid emphasis on the order passed by

this Court in Company Application (L) No. 568 of 2017,

whereby the Secured Assets were ordered to be auctioned. It

was urged, with a degree vehemence, that this Court had

allowed the said application in terms of prayer Clauses (a) to

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(f), which included a direction to then the Provisional

Liquidator to hand over the sale proceeds to the applicant. In

view of the said order, according to Mr. De Souza, at this stage,

it is not open for the Official Liquidator to contest the prayer in

the instant application, as the Official Liquidator had

acquiesced in the said order and it attained finality.

10. Prayer Clause (e), upon which special emphasis was

laid by Mr. De Souza, reads as under-

"(e) That in the event the sale of the Secured Assets (or such of them) is successful the Provisional Liquidator be directed to hand over the sale proceeds to the Applicant, within a period of 45 days from the date of receipt of payment from the successful bidder, after deducting all reasonable expenses incurred directly by the Provisional Liquidator in connection with the sale of the Secured Assets (or such of them);"

11. Since the applicant's claim primarily rests on the order

dated 13th December, 2017, it would be necessary to note the

relevant part of the said order to retain emphasis and decide

the question in controversy in a proper perspective, which

reads as under-

3. In prayer clause (a) of the Chamber Summons these vessels are mentioned. The prayer reads:

"(a)That this Hon'ble Court be pleased to exercise power sunder Section 457(3) read with Section 536(2) of the Companies Act, 1956, and direct the Provisional Liquidator to take possession of, if not already taken, and sell Floating Dry Dock Great Offshore FD-1 (Ex- FD-3) and Dumb Barge Gal Constructor; harbour tugs viz MT Kanti and MT Malini; and merchant vessel viz Malaviya Thirty belonging to the Respondent (Secured Assets), and for and on behalf of the Applicant, by way of an e-auction through MSTC Limited, a Government of India Enterprise, an agency empaneled with the

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Office of the Official Liquidator of this Hon'ble Court or any other agency as may be considered appropriate by the Official Liquidator of this Hon'ble Court."

4. Dr Saraf on behalf of the Applicant points out that Dumb Barge Gal Constructor actually went adrift due to the heavy seas and winds in the recent cyclone. It has since been secured at the applicants' costs and brought to anchorage. It was heavily damaged. The Applicant is pending Rs.1,12,000/- approximately on a daily basis to safeguard the vessel having already spent Rs.30,68,000/- in securing it and on essential basic repairs in accordance with the directions of the Port authorities.

5. At this stage, the request is that all these assets be brought in to the hands of Liquidator and the process of auctioning then be started. I can see no conceivable difficulty in the grant of relief. Subject to the directions set out below, there will an order in terms of prayer clauses (a) to (f).

8. It is made clear that while the Applicant Petitioner will bear the costs of these operations, this is only in the first instance and the Petitioner-Applicant will be entitled to make a claim to recover these costs from the sale proceeds, or from the funds then available in the hands of the Official Liquidator, or both. Exim Bank's claim for recovery will include all amounts spent including expenditure already made and expenditure yet to be incurred."

(emphasis supplied)

12. Banking upon aforesaid order, Mr. De Souza submitted

that the fact that the applicant is a secured creditor of GOL, is

incontestable. In fact, the Official Liquidator has admitted the

claim of the applicant vide Notice of Admission of Proof of Debt

dated 17th January, 2020, in the applicant's said capacity. In

this view of the matter, by keeping aside a portion for the

workmen or any other claimants, who stand higher in priority

than that of the applicant, the balance amount of the sale

proceeds must be paid to the applicant, urged Mr. De Souza.

13. In contrast to this, Mr. Pimple, the learned Counsel for

the Official Liquidator stoutly submitted the application is

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wholly misconceived. Mr. Pimple premised his resistance on

the ground that there is no material to show that the

applicant, as a secured creditor, stood outside winding up

process. Conversely, there is material to show that the

applicant consciously made the Secured Assets a part

liquidation proceedings. According to Mr. Pimple, the core

issue that crops up for consideration, in the instant

application, is whether the applicant stood outside the winding

up proceeding and realised his security.

14. Taking the Court through the material on record and

the orders passed by this Court, Mr. Pimple would urge the

answer to the aforesaid question must be in the negative. The

order passed by this Court on 13 th December, 2017, directing

the Official Liquidator to take possession of the Secured Assets

and proceed for auction thereof, according to Mr. Pimple, is of

no avail to the applicant. On the contrary, the said order

unmistakably indicates that the applicant had chosen to

subject his claim to the outcome of winding up proceedings.

15. At the first blush, the submission of Mr. De Souza that

nothing survives for consideration in this application as the

order dated 13th December, 2017, directs the payment of the

sale proceeds to the applicant, appears attractive. However, on

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a close scrutiny, I am afraid to draw such an inference

unhesitatingly. The order dated 13th December, 2017, in my

view, is required to be read in the context of the then prevailing

situation, presented before the Court. The applicant had

moved the Court as it was made to incur huge expenses for

securing one of the Vessels which had gone adrift. In that

backdrop, request was made to the Court that all the Vessels

be brought into the hands of the liquidator and the process of

auctioning be started. It seems in the prevailing

circumstances, the Court found the said request innocuous.

Thus an order was passed in terms of prayer Clauses (a) to (f).

16. On a plain reading of the said order, it would be

audacious to draw an inference that, at that stage, the Court

had delved into the aspect of determining the priorities and/or

directing the payment of sale proceeds of the Secured Assets to

the applicant alone to the exclusion of other claimants.

17. Mr. Pimple was justified in laying emphasis on the

observations in paragraph No. 8 (extracted above), whereby the

applicant was directed to bear the costs of the operations, in

the first instance only, and lay a claim to recover those costs

from the sale proceeds or from the funds available in the hand

of the Official Liquidator or both. This direction indicates that

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the applicant was, in effect, relieved of the liability to incur

costs to secure the Secured Assets.

18. At this juncture, it may be apposite to extract the

relevant provisions contained in Sections 529 and 529 A of the

Act, 1956.

"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 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

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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.]

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.

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19. A conjoint reading of the provisions contained in

Sections 529 and 529A, would indicate that the secured

creditor has an option to realise his security or relingquish 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.

20. 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 1,

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

1 (2013) 1 SCC 462

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propositions in paragraph No. 16 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.

16.2 over the security of every secured creditor, a statutory charge has been created in the first limb of the proviso to clause (c) of sub- section (1) of Section 529 of the Companies Act in favour of the workmen in respect of their dues from the company and this charge is pari passu with that of the secured creditor and is to the extent of the workmen's portion in relation to the security of any secured creditor of the company as stated in clause

(c) of sub- section (3) of Section 529 of the Companies Act.

16.3 where a secured creditor opts to realize the security then so much of the debt due to such secured creditor as could not be realized by him by virtue of the statutory charge created in favour of the workmen shall to the extent indicated in clause (c) of the proviso to sub- section (1) of Section 529 of the Companies Act rank pari passu with the workmen's dues for the purposes of Section 529A of the Companies Act.

16.4 The workmen's dues and where the secured creditor opts to realize his security, the debt to the secured creditor to the extent it ranks pari passu with the workmen's dues under clause (c) of the proviso to sub-section (1) of Section 529 of the Companies Act shall be paid in priority over all other dues of the company."

(emphasis supplied)

21. A Division Bench of this Court, in the case of Asian

Power Controls Ltd Vs. Bubbles Goyal 2, enunciated the

2 2013(3) Mh. L.J.811

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options which are open to a secured creditor of company,

which is ordered to be wound up as under-

..........10. A secured creditor who has a mortgage, charge or lien on the property of the company as security for her debt may either: (a) enforce the security and prove in the winding up for the balance of the debt after deducting the amount realised; or (b) surrender the security to the Liquidator and prove for the whole of the debt as an unsecured creditor; or

(c) estimate the value of the property subject to her security, and prove for the balance of the debt after deducting the estimated value; or (d) rely on the security and not prove in the winding up proceedings. [Pennington's Company Law (Fourth edition, page 762)]. A secured creditor has the option of relinquishing his security and/or proving the entirety of his debt in the course of winding up. If the secured creditor does so in the course of winding up proceedings, the security will ensure for the benefit of the body of creditors. On the other hand, it is open to a secured creditor to prove in the course of winding up proceedings to the extent of his debt which has not been realised outside the proceedings for winding up by either accounting for the amount that has been so realised or by estimating the value of the property subject to security so as to enable him to prove in respect of the balance of the debt."..............................

.................. (emphasis supplied)

22. In the light of the aforesaid enunciation of law, it

has to be seen, whether in the case at hand, the applicant

stood outside the winding up and proceeded to realise its

security on its own. Mr. De Souza would submit that the

mere fact that the applicant had either made an application

for taking possession of the Secured Assets and the

consequent sale thereof or that it had filed an Affidavit of

Proof of Debt, pursuant to the notice inviting claims issued

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by the Official Liquidator, by itself, does not constitute

relinquishment of the security. Mr. De Souza submitted that

it requires a positive and conscious act on the part of a

secured creditor to infer relinquishment of security. In any

event, since the applicant is ready to keep aside an amount

to satisfy the claims of workmen, under Section 529 A of the

Act, 1956, and pay the costs of preservation of the security

incurred by the Official Liquidator, there is no justification in

depriving the applicant of the sale proceeds.

23. Mr. Pimple countered the submissions of Mr. De

Souza by pointing out that the positive acts on the part of

the applicant in bringing the Secured Assets under

liquidation process, claiming reimbursement of the entire

cost incurred for preserving the security before effecting the

sale, and lodging the whole claim before the Official

Liquidator lead to no other inference than that of

relinquishment of security. Mr. Pimple would urge that all

these acts militate against the claim that the applicant stood

outside the liquidation.

24. To bolster up the aforesaid submission, Mr. Pimple

banked upon the following observations of Hon'ble Justice

Swatanter Kumar, in the case of Jitendra Nath Singh

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(supra).

"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 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

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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)

25. The aforesaid pronouncement indicates the actions like

sale of the Secured Assets through the liquidator and

subject to the control of the Company Court, non institution

of the proceedings before the forum other than the Company

Court, failure to effectively prosecute the proceeding

instituted before other forums, despite having lodged the

same, and instead filing claims before the Official Liquidator,

constitute relinquishment of security and a secured creditor

can then be said to be not "standing outside the winding up"

proceeding.

26. In the facts of the case at hand, in my considered

view, the actions and omissions on the part of the applicant

clearly demonstrate that the applicant consciously chose to

bring the Secured Assets under the control of Official

Liquidator, desired its sale through the Official Liquidator

under the control of the Company Court, refrained from

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realizing the security by instituting the proceedings in

forums other than the Company Court and lodged the claim

with Official Liquidator.

27. What is of critical salience is the fact that the

applicant insisted to be reimbursed of the costs it incurred

in preserving the Secured Assets and auction sale of the

Secured Assets. Conversely, there is no material to indicate

that the applicant volunteered to incur the costs of

preservation of the Secured Assets. In the backdrop of the

aforesaid facts, I find it rather difficult to accede to the

submission on behalf of the applicant that it stood outside

the winding up process.

28. I am not persuaded to agree with the broad submission

of Mr. De Souza that it is open to a secured creditor to utilize

the machinery provided under the Companies Act to effect

the sale of the Secured Assets for the purpose of exclusive

appropriation of the sale proceeds to the secured creditor,

without adhering to the mandate of the proviso to sub

Section (2) of Section 529 of the Act, 1956.

29. The reason is not far to seek and can be legitimately

found in the provisions of Section 529 of the Act, 1956. The

proviso to Sub Section (1) of Section 529, gives an option to

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the secured creditor to either relinquish or realise his

security. The proviso to Sub Section (2) further provides that

the in case a secured creditor opts to realise his security, he

shall be liable to pay his portion of the expenses incurred by

the Liquidator for the preservation of the security, before its

realization by the secured creditor.

30. The Parliament has designedly used the words

"realise" and "realization". The terms "realise" and

"realization" have a definite meaning and connotation.

Realisation implies actulisation of the security or convert the

security into such form that it becomes immediately

available for utilisation. Realisation involves initiating

measures, including proceedings, if required, to realise the

thing to which a person claims to be entitled to. The

expression "until payment and/or realisation", which is often

used in legal parlance, brings out the import of the term

realization. It conveys an idea of initiating the steps and/or

proceedings to recover.

31. In P. Ramanatha Aiyar, Advanced Law Lexicon, 3 rd

Edition, (Reprint 2007), the term "realize" has been defined

as under-

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"Realize- To convert into cash or into any form whereby it becomes available for immediate distribution. 28 Bom 264 : 6 LR 11.

To recover, to obtain or to acquire possession. When used in connection with the conversion of claims or demands into money, "realize" is a very broad term, and may reasonably be said to include a realization of money by "compromise".

To put a plan into action, or sell assets for cash; the act of doing so is realization. (Banking; Insurance) To dispose of goods or securities at the best price obtainable. (Trade Finance)".

32. In Black's Law Dictionary, Eighth Edition, the term

"realization" has been explained as under-

"realization, n 1. Conversion of Noncash assets into cash assets".

33. It is in the aforesaid context of the connotation of

the term "realization", a secured creditor, who stands outside

the winding up is expected to institute proceeding, other

than that of winding up proceeding, to realise his security. It

could be a proceeding under Recovery of Debts and

Bankruptcy Act, 1993, or the measures under the The

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002, without the

intervention of the Court, or for that matter, The Admiralty

(jurisdiction and settlement of Maritime Claims) Act, 2017.

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34. In the facts of the case at hand, the applicant

could have instituted suits on the strength of the charge

on the Secured Assets in the capacity of mortgagee of,

and/or charge holder on, the Vessels and laid maritime

claim under Section 4 (1) (c) of The Admiralty (jurisdiction

and settlement of Maritime Claims) Act, 2017.

35. In conclusion, the proviso to Sub Section (1)

and Sub Section (2) of Section 529 of the Act, 1956, give

an option to the secured creditor to "realise" the security

and not a right to "appropriate" the sale proceeds of the

security which have been realised by the Official

Liquidator, on the premise that he is a secured creditor. If

a secured creditor exercises the option to realise the

security, he has to enforce the same in a proceeding other

than the one under the Companies Act, 1956 and bear the

process, costs and expenses. Having chosen not to realize

his security, in the manner ordained, a secured creditor is

not entitled to lay an exclusive claim over the proceeds

realised from the sale of the assets of the company by the

Official Liquidator under the control of the Company Court.

22-IAL-4988-20+CP-756.DOC

36. For the foregoing reasons, the application deserves to

be rejected.

37. Hence, the following order.

:ORDER:

           (i)      The application stands rejected.

           (ii)     No costs.



                                         [N. J. JAMADAR, J.