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of <h1>Secured Creditor Granted Recovery Rights with Safeguards for All Parties Involved</h1> The court allowed the applicant-bank, the largest secured creditor, to continue recovery proceedings before the Debt Recovery Tribunal with specified ... Winding up - Suits stayed on winding-up order Issues Involved:1. Whether the pending recovery proceedings against the company before the Debt Recovery Tribunal should be allowed to continue or be transferred to the High Court.2. The protection of the interests of the secured creditor.3. The interpretation and application of Sections 446, 529, and 529A of the Companies Act, 1956.4. The guidelines for granting leave under Section 446(1) of the Companies Act.5. The conditions under which leave should be granted to continue recovery proceedings.Detailed Analysis:Issue 1: Whether the pending recovery proceedings against the company before the Debt Recovery Tribunal should be allowed to continue or be transferred to the High Court.The primary question is whether the pending recovery proceedings against the company before the Debt Recovery Tribunal, relating to the realization of debts, should be allowed to continue or be transferred to the High Court, which is handling the winding-up proceedings. The applicant-bank, being a secured creditor, initially filed a civil suit for recovery of debts, which was later transferred to the Debt Recovery Tribunal. The bank seeks leave to continue these proceedings.Issue 2: The protection of the interests of the secured creditor.The applicant-bank, a secured creditor, contends that its interests must be protected as it initiated the recovery proceedings before the winding-up petition was filed. The bank has incurred significant expenses in the conduct of the suit/recovery proceedings, and transferring the proceedings would not be in the interest of justice. The court acknowledges the bank's position and considers the importance of protecting the interests of secured creditors.Issue 3: The interpretation and application of Sections 446, 529, and 529A of the Companies Act, 1956.Section 446(1) of the Companies Act states that no suit or other legal proceeding shall proceed against the company in winding up without the leave of the court. Section 446(2) expands the jurisdiction of the winding-up court to entertain or dispose of any suit or proceeding by or against the company. Section 529 provides for the application of insolvency rules in the winding up of insolvent companies, while Section 529A gives overriding preferential payments to workmen's dues and debts due to secured creditors.Issue 4: The guidelines for granting leave under Section 446(1) of the Companies Act.The court refers to several precedents, including the Supreme Court's judgment in Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies, which outlines that the winding-up court has jurisdiction to entertain or dispose of any suit or proceeding by or against the company, even if initiated before the winding-up order. The court also considers the rationale behind the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and emphasizes that the discretion to grant leave under Section 446(1) should depend on the facts and circumstances of each case.Issue 5: The conditions under which leave should be granted to continue recovery proceedings.The court, applying the guidelines and considering the relevant facts, grants leave to the applicant-bank to continue the debt recovery proceedings before the Debt Recovery Tribunal, Delhi, subject to certain conditions:1. The applicant will undertake to discharge the liability due to the workmen under Section 529A of the Act to the extent of the amount realized from the assets of the company.2. The applicant-bank will inform the official liquidator about the progress of the recovery proceedings and any interlocutory applications related to the secured properties.3. The final result of the proceedings shall be immediately communicated to the official liquidator.4. The bank must obtain permission from the company court before initiating execution proceedings for the realization of the amount from the company's properties.5. The expenses incurred by the official liquidator in defending before the Tribunal shall be recoverable from the sale proceeds of the company's properties.Conclusion:The court concludes that the applicant-bank, being the largest secured creditor with pending recovery proceedings before the Debt Recovery Tribunal, should be allowed to continue these proceedings with specific conditions to ensure the protection of the interests of all parties involved, including other secured creditors and workmen. The company petition is disposed of accordingly, with no order as to costs.
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