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Judgment
Anant Ramanath Hegde, J
Company Application No.340/2022 is filed in Company Petition No.57/2012. In terms of the order dated 07.02.2017, the Company, M/s United Breweries (Holdings) Limited (‘UBHL’ for short) was ordered to be wound up. Thereafter, the Official Liquidator has taken the charge of the said Company.
The present application is filed by the Official Liquidator for the following reliefs:
a. To direct the first respondent Bank to hand over original title deeds of certain immovable properties belonging to the company in liquidation.
b. To appoint two reputed valuers for each property mentioned in the application to value the same and to secure the valuation report in sealed cover.
c. To permit the Official Liquidator to incur the expenditure towards valuation from the funds available to the credit of the company in liquidation.
d. To direct the Joint developer-third respondent to assist the valuer in evaluating the properties.
This application is opposed by the first respondent-HDFC Bank on the premise that Writ Petitions are pending before the Bombay High Court challenging the order passed by the Special Court under The Prevention of Money-Laundering Act, 2002. (Act, 2002 for short). Application is also opposed on the ground that the first respondent-Bank is a secured creditor and has a prior claim over the properties.
The second respondent-State Bank of India (SBI) opposed the application on the premise that the Debt Recovery Tribunal has issued recovery certificate in favour of SBI led consortium to recover the dues payable by the Company in liquidation and the Special Court under Act of 2002, has restored the properties in favour of the second respondent.
Learned Senior counsel Sri. Shyamsundar appearing for the Official Liquidator/applicant raised the following contentions:
(a) The order to wind up the Company – UBHL, has attained finality. The Division Bench has confirmed the order of the Company Judge and the Special Leave Petition is dismissed confirming the order of the Company Judge and the Division Bench.
(b) The Official Liquidator is in charge of the Company and is under obligation to sell the assets of the Company to ensure the payment to the creditors of the Company.
(c) The Special Court under the Act of 2002 in Special Case No.5/2018, vide order dated 24.05.2021 and in Special Case No.7/2017 vide order dated 01.06.2021, though has restored the properties in favour of SBI-led consortium, the orders are passed subject to compliance of the directions in order dated 07.02.2017 in COP No.57/2012.
(d) The recovery officer attached to the DRT in terms of the order dated 07.02.2022 permitted the certificate holders to enforce the recovery certificate subject to necessary clarification to be obtained from the concerned Court either by the certificate holders or by the Official Liquidator.
Sri. Dhyan Chinnappa, the learned Senior counsel appearing for the first respondent- HDFC Bank raised the following contentions:
(a) The orders passed by the Special Court under the Act of 2002 have not yet attained finality and are pending consideration in Bombay High Court.
(b) Respondent No.1 is a secured creditor. The valuation of the properties mortgaged in favour of respondent No.1-Bank cannot be done at the instance of the Official Liquidator.
(c) The second respondent-SBI-led consortium has orally assured before the Bombay High Court in pending writ petitions filed by the first respondent-Bank that it will not take any action in respect of the properties pursuant to the orders passed by the Special Court under Act of 2002.
(d) The dispute relating to the recovery of the dues by the First respondent-bank is still pending consideration before the Apex Court, as such, there cannot be any sale of the properties mortgaged in favour of the respondent bank.
(e) The application for valuation of the properties without a prayer to sell the same is not tenable.
Sri.Phanindra, the learned Senior counsel appearing for the SBI-led consortium raised the following contentions:
(a) The Special Court Under Act of 2002 has restored the properties in favour of SBI led consortium and SBI executed a bond in favour of the Union of India as contemplated under the provisions of The Prevention of Money-Laundering (Restoration of Property) Rules, 2016 (hereinafter referred to as "Rules, 2016" for short). Thus, the properties cannot be sold. And if the properties cannot be sold, there is no need to evaluate the properties.
(b) The money due to the SBI-led consortium in terms of a recovery certificate issued by the Debt Recovery Tribunal is not fully recovered; as such the Official Liquidator cannot seek valuation of the properties.
Sri Udaya Holla, the learned senior counsel appearing for 3rd respondent who claims to be the joint holder of certain properties submits that the third respondent has no objection to allow the application to carry out valuation.
The Court has considered the contentions raised at the bar. From the records, it is apparent that the following facts are admitted;
a. The company in liquidation was ordered to be wound up by an order dated 07.02.2017.
b. The said order is confirmed as the appeal challenging the said order is dismissed by the Division Bench of this Court.
c. The Special Leave Petition filed by the Company in Liquidation is not entertained.
d. The Debt Recovery Tribunal has passed an order for the recovery of dues payable by the company in liquidation in favour of a consortium led by SBI.
e. The application properties were attached under the Act of 2002, and the attachment order was vacated and the restoration orders are passed in favour of the SBI-led consortium.
f. The orders of restoration are under challenge in Writ Petitions No.2720/2021 and 2721/2021 before the High Court of Bombay and there is no interim order operating against the Official Liquidator.
g. The Debt Recovery Officer has issued a certificate of recovery in favour of SBI-led consortium with a rider that appropriate orders are to be obtained from the competent Court before putting the properties for sale.
h. The first respondent-bank has recovered its dues from sale of shares of the company and the dispute in respect of said recovery by respondent No. 1-bank is the subject matter of a petition pending in the Supreme Court.
In the backdrop of the admitted facts referred to above, it is necessary to refer to paragraph(g) of the operative portion of the order dated 07.02.2022 in TRC No.255/2017 in O.A. No.766/2013. The said paragraph reads as under:
“Since it is brought to my notice that the immovable properties owned by UBHL and now restored in favour of CHBs are in the custody of Official Liquidator and transfer of custody of such properties (including title deeds and related documents) for the purpose of enforcement of same may be lengthy and cumbersome process, the official liquidator if consenting is permitted to retain the custody of the immovable properties owned by UBHL and to sell the properties in a time bound frame. Under this circumstance, a clarification is required to be obtained from the concerned Court or any higher Forum either by CHB or by Official Liquidator or together, regarding sale of immovable properties restored to CHBs through Recovery Officer by DRT and the issue of undertaking to be furnished by Official Liquidator. Till a clarification is received from the concerned Court or from any higher forum, no further action on the affidavit filed by CHBs for sale of immovable properties shall be entertained by this Authority due to the reasons as mentioned above.”
(Emphasis supplied)
The above said order is passed on an application submitted by the SBI led consortium. On perusal of the aforementioned portion of the order, it is evident that the custody of the properties which were once subject matter of attachment before the Special Court is with the Official Liquidator. This order is not questioned by anyone. Even otherwise, the company is ordered to be wound up and said order having attained finality, the Official Liquidator has all the power to deal with the properties in the manner prescribed under law.
As already noticed two proceedings are initiated in Special cases No.5/2018 and 7/2017 under the provisions of 2002 Act. The properties which were attached under the Act, 2002 are ordered to be restored in favour of the SBI led consortium. It is also necessary to refer to the relevant portion of the order dated -24.05.2021 in Special Case No.5/2018 which reads as under:
“The Recovery Officer, DRT is permitted to proceed in accordance with law subject to compliance of the order of Hon’ble Karnataka High Court dated 07.02.2017 in Company Petition No.57/2012 in respect of official liquidator of UBHL”.
The relevant portion of the order dated 01.06.2021 in Special Case No.7/2017 reads as under:
“The Recovery Officer, DRT is permitted to proceed in accordance with law subject to compliance of the order of Hon’ble Karnataka High Court dated 07.02.2017 in Company Petition No.57/2012, in respect of Official Liquidator of UBHL"
On a reading of the aforementioned orders in Special Cases referred to above, it is explicitly clear that the recovery officer, DRT is permitted to proceed in accordance with law subject to the order of this Court in COP No.57/2012. These orders by the Special Court under Act, 2002, are not questioned by the SBI led consortium. On the other hand, accepting the said orders, the SBI led consortium sought disbursal of sale proceeds to the tune of Rs.700 crores arising from the sale of assets of the defaulting company. To the said affidavit seeking disbursal of the amount, the Official Liquidator has filed objections. After considering the rival claim, an order dated 07.02.2022 is passed for sale of shares belonging to the company. The paragraph No.(c) of the said order reads as under:
“It is clarified that in terms of Company Petition No.57/2012 before the Hon’ble High Court of Karnataka, the Official Liquidator remains custodian of all assets of UBHL which were not attached by the Enforcement Directorate and this order will not come in the way of Official Liquidator disposing of the Liquidation proceeds of such assets as per the priority prescribed in the Companies Act”.
(Emphasis supplied)
The prayer in the application is only to evaluate the properties and there is no prayer for sale. It is urged by the learned senior counsel for the first respondent-bank that without there being a prayer for the sale of the properties, there cannot be any evaluation of assets as the exercise does not serve any purpose. It is also urged that the properties are mortgaged in favour of the first respondent-bank and Official Liquidator cannot seek valuation of the properties.
It is an admitted fact that the dues payable by the Company in liquidation are not fully paid to the creditors. Thus, the order to wind up the Company should reach its logical conclusion. In the process of liquidation, the proceedings were initiated under the Act of 2002 on the premise that the properties are the proceeds of crime. The SBI led consortium prayed for restoration of the properties. Official Liquidator opposed the said application. Before the Special Court, the prosecution did not object to restoring the properties in favour of SBI led consortium. The Special Court passed a conditional restoration order in favour of SBI led consortium. First respondent-bank which claims that it is a secured creditor has challenged the said orders. However, in the said proceeding there is no interim order against the Official Liquidator from proceeding against the properties of the Company in liquidation. Though, First respondent claims that the said properties were mortgaged in its favour, said claim cannot come in the way of the Official Liquidator taking steps to evaluate the assets post winding up order. The reasons are;
(a) Alleged mortgage of the properties in favour of the first respondent-bank is after the presentation of the petition for winding up. The order in COP.No.57/2012 does not save the alleged mortgage as there is no specific order in this regard under Section 536(2) of Companies Act, 1956.
(b) The Order dated 07.02.2017 passed by the Special Court under Act of 2002, also states that the properties are restored to the SBI subject to the directions in COP No. 57/2012.
(c) The recovery certificate dated 10-04-2017 issued in favour of the Certificate Holder Bank also mandates necessary directions to be obtained from the Court to proceed further.
(d) The evaluation of the properties is a step-in-aid to liquidate the assets of the company in liquidation to realise the dues of the creditors.
(e) As of now, there is no order against the Official Liquidator from proceeding against the properties of the Company in Liquidation. On the other hand, the Official Liquidator is under obligation to proceed further to take the order for winding up the company to its logical end.
For the reasons recorded supra, there cannot be any doubt that the properties belonging to the Company in liquidation have to be evaluated to proceed further pursuant to winding up order.
The amount due from the Company in liquidation to creditors is said to be several thousand crores. The interest on the amount due, is mounting. This being the position, this Court is of the view that further steps are to be taken to liquidate the assets of the Company. The valuation of assets is a step-in-aid to liquidate the assets. As of now it appears it is the only way forward to repay the debts of the Company in liquidation subject of course, anyone coming forward to take over the assets and liability of the company. No such eventuality is in the sight.
Admittedly, the properties are huge. The Official Liquidator is incurring huge expenditure to maintain the same. The liability of the Company in liquidation is also huge. It is imperative that further steps towards liquidation should be initiated before the value of the properties looks minuscule in comparison to the mounting debts of the company, defeating the very purpose of the winding up order.
For the aforementioned reasons, this Court is of the view that the application is to be allowed on the following terms:
(i) The assets of the Company in liquidation viz., No.24, UB Towers, Vittal Mallya Road, Bengaluru-560 001, No.87/16, Rusthumji Residency, Richmond Road, Richmond Town, Bengaluru and at No.602, HB, Wallace Apartments, Nasir Bharucha Marg, Grant Road Mumbai, are to be valued by two independent valuers.
(ii) The first respondent-Bank shall permit the valuers to inspect the original title deeds pertaining to the properties referred to above belonging to the Company in liquidation, and shall also permit the valuers to take Xerox copies of the said title deeds.
(iii) The invoices relating to the valuation shall be placed before this Court for appropriate orders relating to valuers' fees.
(iv) The third respondent–the joint owner shall co-operate with the valuers in valuation process.
(v) The Official Liquidator, first, and second respondent shall submit the list of 5 valuers, in sealed cover to enable this Court to finalise the valuers to value the properties.
List this matter on 16.02.2024 for submitting the list of valuers.