AI Structured Summary
Not yet generated for this judgment
Judgment
JAYANT NATH, J
CA No.1737/2017
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.
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
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. Â
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 The said appeal was dismissed as withdrawn by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.
Today, I have heard the learned counsel for the bank and also for the petitioner.
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 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.Â
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.   Â
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.
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.
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.
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.â€Â
Hence, the secured creditor has the right over the properties offered to him as security.Â
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. Â
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. Â
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
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.    Â
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.
List on 25.10.2018. Â