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of <h1>Court modifies order allowing BISCICO to keep assets but surrender records to liquidator. Committee established for supervision.</h1> The court modified the order dated December 5, 1997, permitting BISCICO to maintain possession of the assets while mandating the turnover of all records ... Winding up – Commencement of Issues Involved:1. Authority of BISCICO to retain possession of the company's assets under Section 29 of the State Financial Corporations Act (SFC Act) versus the powers of the official liquidator under the Companies Act.2. The impact of the winding-up order and the commencement of winding-up proceedings on BISCICO's possession of the assets.3. The precedence of the SFC Act over the Companies Act due to the non obstante clause in Section 46B of the SFC Act.4. The rights and interests of other secured creditors, contributories, and workmen under Sections 529 and 529A of the Companies Act.5. The necessity for the official liquidator to have access to the company's records to fulfill statutory obligations.Issue-wise Detailed Analysis:1. Authority of BISCICO to Retain Possession of the Company's Assets:BISCICO argued that it had taken charge of the company's assets on October 15, 1996, under Section 29 of the SFC Act, which grants it statutory powers to manage and sell the assets for debt recovery. This action occurred before the winding-up order dated December 5, 1997. BISCICO maintained that the non obstante clause in Section 46B of the SFC Act allows it to retain possession despite the winding-up order, as it supersedes the provisions of the Companies Act. BISCICO was willing to cooperate with the official liquidator as directed by the court.2. Impact of the Winding-up Order and Commencement of Proceedings:Opposing parties contended that under Section 441(2) of the Companies Act, the winding-up proceeding is deemed to commence from the date of the petition (August 22, 1996), thus invalidating BISCICO's possession from October 15, 1996. They argued that the official liquidator should take charge of the assets to protect the interests of all stakeholders, including other secured creditors and workmen, as per Section 529A of the Companies Act.3. Precedence of the SFC Act Over the Companies Act:The court acknowledged the non obstante clause in Section 46B of the SFC Act, which overrides inconsistent provisions in other laws, including the Companies Act. Citing the Rajasthan High Court's decision in Boolani Engineering Corporation v. Asup Synthetics and Chemicals Ltd., it was noted that the SFC Act, being a special statute, prevails over the Companies Act. However, BISCICO's willingness to work with the official liquidator mitigated the need for an in-depth examination of this precedence.4. Rights and Interests of Other Secured Creditors and Workmen:Sections 529 and 529A of the Companies Act establish that secured creditors' security is subject to a pari passu charge in favor of workmen's dues. The court highlighted that Section 529A, inserted by the Companies (Amendment) Act, 1985, contains a non obstante clause that prioritizes workmen's dues alongside secured creditors' debts. This provision, being later in time than Section 46B of the SFC Act, implies that workmen's dues must be treated at par with BISCICO's claims, preventing BISCICO from having unrestricted control over the sale of assets.5. Necessity for the Official Liquidator to Access Records:The court recognized the official liquidator's need to access the company's records to fulfill statutory duties, such as filing statements of affairs under Section 454 of the Companies Act and complying with tax obligations. The court proposed forming a committee comprising the official liquidator, BISCICO's managing director, and a senior officer from the Central Bank of India to oversee the company's management and ensure proper handling of obligations and asset sales.Conclusion:The court modified the order dated December 5, 1997, allowing BISCICO to retain possession of the assets but requiring it to hand over all records to the official liquidator. A committee was constituted to manage the company and oversee asset sales, subject to court directions, ensuring the protection of all stakeholders' interests. The application and connected affidavits/reports were disposed of accordingly.
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