Karnataka High Court
Official Liquidator Of vs M/S Ksfc on 7 April, 2022
Bench: B.M.Shyam Prasad
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:
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
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
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
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
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
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