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Judgment
Arvind Kumar, J.—The Application is filed by Karnataka State Financial Corporation (hereinafter referred to as "Corporation" for the case of brevity) u/s 442(2)(B) of the Companies Act, 1956 read with Rule 9 of Companies (Court) Rules, 1959 seeking following prayers:
a) To permit the Applicant KSFC to stand outside the winding up proceedings.
b) To issue direction to the 1st and 2nd Respondents to pay to the Applicant-Corporation its share out of the sale proceeds realized from the sale of the assets of 1st Respondent company, in accordance with pari-pasu among secured creditors, within reasonable time to be fixed by this Hon''ble Court.
The application came to be adjudicated by this Court by order dated 16.12.2004 and direction sought for was not granted. In other words prayer south for by the Applicant was refused. Aggrieved by the said order, an appeal in OSA 33/2005 came to be preferred by the Corporation. After considering the contentions raised by the Corporation as well as Official Liquidator and other parties who appeared in the said appeal, Division Bench by order dated 3.1.2011 allowed the appeal by setting aside the order dated 16.12.2004 passed by the Company Judge with following directions:
1) The appeals are allowed.
2) The impugned order passed by the learned Company Judge dated 16.12.2004 in Company Application Nos. 741/2003, 220/2003, 694/2002 c/w 447/2004 and 1234/2002 in Company Petition Nos. 157/1992 and 49/1994 is hereby set aside.
3) It is declared that the workmen as well as the secured creditors who have established the claim or whose claim is admitted by the Official Liquidator, are entitled to the distribution of the sale proceeds in proportion to the amounts due to them.
4) It is made clear, that before distributing the sale proceeds, the Official Liquidator has to ensure that the sale proceeds realized out of the assets were legally secured by the secured creditors and that they would be entitled to pari passu distribution of the amount so realized. Any dispute in the regard may be agitated by the aggrieved person before the Company Court.
5) After such adjudication and distribution of the sale proceeds, if it is found that the KSIIDC is in possession of the amounts which are in excess of what is legally due to them, the KSIIDC shall repay the said amount with interest to the Official Liquidator and such amount shall be distributed among the other creditors.
6) This exercise shall be done by the Official Liquidator within a period of 3 months from today as already 8 long years have elapsed.
It would be of benefit to extract the observation made by Division Bench in the above matter while disposing of the appeals at paragraph 11 of its judgments:
In the contest it is XXXXXXXXXX in the position of a co-mortgagee. Therefore, the State Financial Corporation Act cannot ignore the creditors who intend to enforce their security. It is an established law, that in case of co-mortgagees, all of them should join together in a suit for enforcing the security. If some of them refuse to joint, then they have to be included as Defendants, not merely as pro-forma parries, but as necessary parties inasmuch as the mortgage right vests with them along with the Plaintiff mortgagees. The same principle equally applies to a case of a mortgage and pari passu charge holder over the same security for realizing the security u/s 529 and 529-A of the Companies Act. If a sale takes place it can only be simultaneously for the recovery of the claim of all pari passu charge holders and sale proceeds are required to be divided proportionately in the same proportion as their dues. There, merely because other secured creditors either stood outside the winding up proceedings or put forth their claim before the Official Liquidator in law, makes no difference in so far the proportionate division of the amount of the sale proceeds is concerned. It does affect their emitlement to the sale proceeds proportionate the amounts due to them.
With this observation, the appeal came to be disposed of by allowing the same and setting aside the order dated 16.12.2004. Pursuant to the direction given by the Division Bench, Official Liquidator has adjudicated the claim of Applicant and has admitted the claim of Rs. 1,84,35,409/- u/s 529 of Companies Act, 1956 and has held that Applicant is proportionately entitled for an amount of Rs. 49,22,254/-. After adjudication having been done, Official Liquidator has filed a report in OLR 196/2011 and same has also been communicated to the Applicant hereby by Registered Post Acknowledgment Due dated 18.04.2011. The original records accrued by learned Counsel for Official Liquidator from the office of Official Liquidator has been produced before me and on perusal of the said record, it would emerge that the Applicant has received the report on 20.04.2011 and as such Applicant was put on notice on said adjudication. If at all the Applicant is aggrieved by such adjudication, it was open for the Applicant to file an appeal by challenging the same with 21 days from the date of receipt of the said report. The learned Counsel is unable to state as to whether such an appeal has been filed.
In that view of the matter, prayer sought for by the Applicant having been adjudicated by Official Liquidator, there is nothing which survives for consideration to issue any directions.
Accordingly, C.A. 741/2003 stands dismissed as having been adjudicated and nothing survives for consideration.