Court dismisses application to restrain sale of company assets by State Financial Corporation. Emphasizes corporation's possession and jurisdiction.

The court dismissed the shareholder and ex-managing director's application to restrain the sale of the company's assets by the Orissa State Financial Corporation. The court emphasized that the corporation's possession of assets had been established, and the official liquidator could not be directed to take charge of those assets. It clarified that properties excluded from the official liquidator's control under section 29 were subject to the corporation's powers. The court found that the sale advertisement for the mortgaged properties fell within the corporation's jurisdiction, and any challenge should be addressed in a separate forum. The application was dismissed without costs.

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Issues:
Application to restrain sale of company's assets by the corporation and direction to official liquidator for supervision.

Analysis:
The applicant, a shareholder and ex-managing director of the company under liquidation, sought to restrain the Orissa State Financial Corporation from selling the company's assets and requested the official liquidator to oversee the sale. The corporation objected, asserting its jurisdiction under section 29 of the State Financial Corporations Act, 1951, to deal with the property. The court examined the provisions of the Companies Act, 1956, particularly sections 456 and 529, which dictate the custody of company assets and the rights of secured creditors. It was noted that all company assets are deemed to be in the court's custody upon liquidation, and a secured creditor may exclude their properties securing the debt from the liquidator's charge by paying expenses.

The court reviewed past proceedings and the order of liquidation, which directed the official liquidator to take over assets except those already taken by the corporation under section 29. It was emphasized that the corporation's possession had been established, and the official liquidator could not be directed to take charge of those assets. The court also addressed the argument that the corporation's takeover under section 29 was without jurisdiction, stating that such issues were not within its purview post-winding-up order.

Regarding the corporation's authority to sell pledged assets, the court clarified that properties excluded from the official liquidator's control under section 29 were subject to the corporation's powers. The court declined to rule on the nature of security involving land and buildings, as it could prejudice future disputes. The court concluded that the sale advertisement fell within mortgaged properties excluded from the court's jurisdiction, and any challenge to the sale should be addressed in an appropriate forum separate from the current proceeding.

Ultimately, the court found no merit in the applicant's application and dismissed it without costs due to the specific circumstances of the case.

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