Nakshatra Steel Sales And Sevices ... vs M/S Jinendra Strips & Tubes Pvt. ...
2018 Latest Caselaw 3771 Del

$~CP-7
*    IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                          Date of decision: 09.07.2018
+     CCP(CO.) 10/2014
      NAKSHATRA STEEL SALES AND SEVICES LTD ..... Petitioner
                     Through  Mr.Shakeel       Sarwar        Wani,
                              Mr.Himanshu Garg and Ms.Sindhu
                              Suta, Advs.
                     versus
      M/S JINENDRA STRIPS & TUBES
      PVT. LTD. & ORS.                         ..... Respondents

Through Mr.Janendra Lal and Ms.Yasmin Tarapore, Advs. for the applicant-

Union Bank of India.

Mr.Deepak Anand, Adv. for the OL.

CORAM:

HON'BLE MR. JUSTICE JAYANT NATH

JAYANT NATH, J.(ORAL)

CA No.1737/2017

1. This application is filed by the applicant- Union Bank of India seeking to modify and recall the order dated 19.05.2017 passed in C.A. No.3107/2015.

2. On 19.05.2017 this court had allowed the application of the bank being CA No.3107/2015 whereby they sought modification of the earlier order of this court dated 06.08.2015 to permit the bank to take recovery measures under the SARFAESI Act, 2002 and RDDBFI Act. This court on 06.08.2015 had directed the bank to maintain status quo with regard to all financial transactions including any property of respondent No.1 Company. This order was modified and the above noted application of the bank was allowed on 19.05.2017 and the bank was allowed to take steps under the

CCP(CO.) 10/2014 Page 1 SARFAESI Act, 2002 and other legal proceedings against respondent No.1 company. However, from the sale proceeds, a sum of Rs.4 crores was to be kept in a no lien account which would be subject to orders of this court.

3. The bank had filed an appeal before the Division Bench against the said order dated 19.05.2017. The said appeal was dismissed as withdrawn by the bank reserving the right to approach this court with an application seeking appropriate relief regarding the deposit in no lien account of the said sum of Rs.4 crores. Hence, this application.

4. Today, I have heard the learned counsel for the bank and also for the petitioner.

5. The learned counsel for the petitioner has taken me through various earlier orders which have led to passing of the order by this court dated 06.08.2015. Some of the relevant facts which have been stressed by the learned counsel for the petitioner may be noted.

The winding up petition had been filed by the petitioner on account of unpaid dues of Rs.4 crores. This court on 22.07.2013 had admitted the petition and appointed the OL as the provisional liquidator. The petitioner and the respondent company entered into a compromise agreement dated 25.11.2013 whereby the respondent company had undertaken to pay its dues to the petitioner. In clause 6 of the compromise agreement, it was noted that Mr.Sanjay Poddar, the Managing Director of the respondent company shall furnish an undertaking to abide by the compromise deed. He also stated about an assurance from the bank that they shall restructure the account so as to enable the respondent company to abide by the compromise terms and restructure arrangement. A similar statement was recorded on 03.12.2013. Based on this compromise, the order appointing the OL as the provisional

CCP(CO.) 10/2014 Page 2 liquidator was withdrawn and the petition was disposed of on 03.12.2013. On that date, the learned counsel for the bank had submitted that they had no objection to the settlement arrived at between the petitioner and the respondent company.

6. As there has been a default on the part of the respondent company, the present contempt petition has been filed. The main culprit in the contempt petition is the Managing director of the respondent company Mr.Sanjay Poddar. On 06.08.2015 this court had noted that though the OL had made extensive efforts to trace Mr.Sanjay Poddar but the same has not been possible. The Police have also not been able to trace out Mr.Poddar. This court also noted that some correspondences had been placed on record by the OL which show that the bank was in regular touch with Mr.Sanjay Poddar. As the bank was not co-operating to locate Mr.Sanjay Poddar, the bank was directed to ensure that status quo is maintained with regard to all financial transactions including any property with which the respondent company may be concerned.

7. By the order dated 19.05.2017 this court while modifying the order dated 06.08.2015 permitted the sale of the property which are mortgaged in favour of the bank subject to the conditions that a sum of Rs.4 crores shall be kept in a no lien account subject to orders of this court.

8. The learned counsel for the petitioner strongly stresses that it is on account of the submission of the bank including their no objection to the settlement agreement and also their assurances that the petitioner entered into a settlement with the respondent. In the absence of the assurance of the bank the petitioner may not have done the settlement. He pleads that the order dated 19.05.2017 should not be modified.

CCP(CO.) 10/2014 Page 3

9. The admitted fact is that the petitioner is an unsecured creditor. The bank is a secured creditor and the properties which are proposed to be sold are all mortgaged with the bank. The secured creditor would have rights over the claim of the unsecured creditor qua the security. Reference may be had to the judgment of the Supreme Court in the case of Jitendra Nath Singh v. The Official Liquidator & Ors., (2013) 1 SCC 46, where the court held as follow:

"6. ........ On a reading of the two provisions quoted above, we find that an unsecured creditor is entitled under Section 45 of the Insolvency Act to receive dividends equally with the other creditors, whereas the secured creditor has the right under Section 47 of the Insolvency Act to realize the security and to prove for the balance due to him in case on realization of such security he is not able to recover the entire amount due to him. If, however, the secured creditor does not opt to realize his security but relinquishes it for the general benefit of the creditors, then he may prove for his whole debt. Under the Insolvency Act, therefore, the secured creditor has only a right over the particular property offered to him as security and all the creditors have equal rights over the other properties comprising the estate of the person adjudged insolvent.

7. In our considered opinion, therefore, on a reading of the provisions of clause (c) of sub-section (1) of Section 529 of the Companies Act along with the provisions of the Insolvency Act relating to the respective rights of secured and unsecured creditors, a secured creditor of an insolvent company which is being wound up has only a right over the particular property or asset of the company offered to the secured creditor as a security and the unsecured creditors have rights over all other properties or assets of the insolvent company. We may now examine whether the proviso to sub-section (1) of Section 529 of the Companies Act makes any difference to these rights of secured creditors and unsecured creditors of an insolvent company."

CCP(CO.) 10/2014 Page 4

10. Hence, the secured creditor has the right over the properties offered to him as security.

11. There is clearly no basis for the petitioner to claim that it can recover its dues which are payable by the respondent company from the secured creditor. Merely because some assurances were given for re-structuring of the loan of the respondent company would make no difference. The earlier order of this court dated 06.08.2015 was passed in special circumstances whereby the bank was not co-operating in trying to locate the whereabouts of the defaulter Managing Director, Mr.Sanjay Poddar.

12. In my opinion, there are no grounds for the direction passed by this court on 19.05.2017 to continue as the petitioner company would have no right to recover its dues from the sale of property which have been mortgaged to the bank. In the eventuality that the consideration received from the sale of the property is more than the dues of the bank, the petitioner would be entitled to recover its dues as per law. The order dated 19.05.2017 is modified to the extent that the bank need not keep the said amount in a no lien account. The application stands disposed of. However, the bank will remain liable for any other dues as per law.

CCP(CO) 10/2014

13. Keeping in view the fact that there is a clear default of the respondent company in adhering to the settlement agreement dated 25.11.2013, in my opinion, this is a fit case to modify the order dated 03.12.2013. In view of the compromise deed, this court revoked the order appointing the OL as the provisional liquidator. Accordingly, I modify the order dated 03.12.2013 and appoint the OL as the liquidator of the respondent company. The liquidator

CCP(CO.) 10/2014 Page 5 will take steps to seize all the assets other than which have been released to the secured creditor of the respondent company. The citations be published in the Delhi editions of the newspapers „Statesman‟ (English) and „Veer Arjun‟ (Hindi), as well as in the Delhi Gazette, at least 14 days prior to the next date of hearing. The cost of publication is to be borne by the petitioner who shall deposit a sum Rs.75,000/- with the Official Liquidator within 2 weeks, subject to any further amounts that may be called for by the liquidator for this purpose, if required. The Official Liquidator shall also endeavour to prepare a complete inventory of all the assets of the respondent-company when the same are taken over; and the premises in which they are kept shall be sealed by him. At the same time, he may also seek the assistance of a valuer to value all assets to facilitate the process of winding up. It will also be open to the Official Liquidator to seek police help in the discharge of his duties, if he considers it appropriate to do so. The Official Liquidator to take all further steps that may be necessary in this regard to protect the premises and assets of the respondent-company.

14. Despite several attempts, Mr.Sanjay Poddar remains untraceable. It appears that he is deliberately evading service and appearance before the court. Issue non-bailable warrants for production of Mr.Sanjay Poddar at the address Plot No.496 (A and C), Phase-I, RIICO Industrial Area, Bhiwadi, Rajasthan (Mob: 9810119145) in the court before the next date. In case, he is detained, he may be produced in court immediately thereafter.

15. List on 25.10.2018.

JAYANT NATH, J.

JULY 09, 2018/v

CCP(CO.) 10/2014 Page 6