Bank Allowed to Execute Against Sale Proceeds; Must Reimburse Workmen's Claims Before Appropriating for Dues.

The Court permitted the applicant-bank to proceed with the DRT application, allowing execution against sale proceeds of pledged assets, subject to reimbursement for workmen's claims. The bank's general lien over sale proceeds was upheld, allowing appropriation towards outstanding dues. Secured creditors were entitled to interest per the DRT's order until realization. The bank must furnish an undertaking for workmen's claims, ensuring their pari passu charge with secured creditors. The applicant-bank was directed to submit disbursement calculations within three weeks. Further proceedings were scheduled for 5-3-2004.

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Issues Involved:
1. Permission to continue proceedings before Debts Recovery Tribunal u/s 446(1) of the Companies Act.
2. Execution of decree/recovery certificate against sale proceeds of pledged assets.
3. General lien of the bank over sale proceeds.
4. Interest entitlement of secured creditors post winding up order.
5. Workmen's claims and their pari passu charge with secured creditors.

Summary:

1. Permission to Continue Proceedings Before Debts Recovery Tribunal u/s 446(1) of the Companies Act:
The applicant-bank sought permission to continue proceedings before the Debts Recovery Tribunal (DRT) under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Court granted leave to proceed with the DRT application, stipulating that any decree/certificate issued by the DRT shall not be executed against the company's assets without specific permission from the Court.

2. Execution of Decree/Recovery Certificate Against Sale Proceeds of Pledged Assets:
The applicant-bank moved for permission to execute the DRT decree against the sale proceeds of the company's stock-in-trade, which were lying in fixed deposits under the Court's directions. The Court acknowledged the applicant-bank's claim as a secured creditor and allowed the execution of the decree against the sale proceeds, subject to the condition of furnishing an undertaking to reimburse the Official Liquidator for the workmen's claims.

3. General Lien of the Bank Over Sale Proceeds:
The Court upheld the applicant-bank's general lien over the sale proceeds of the pledged assets, as per section 171 of the Indian Contract Act, 1872. The bank was entitled to appropriate the sale proceeds towards the outstanding dues in the Cash Credit Pledge Account and any surplus towards other accounts, in accordance with the terms of the agreement.

4. Interest Entitlement of Secured Creditors Post Winding Up Order:
The Court ruled that Rule 154 of the Companies (Court) Rules, 1959, which restricts interest claims post winding up, does not apply to secured creditors standing outside the winding up. The secured creditors, including the applicant-bank, were entitled to interest as per the DRT's order up to the date of realization.

5. Workmen's Claims and Their Pari Passu Charge with Secured Creditors:
The Court emphasized that the dues of workmen have a pari passu charge over the security of secured creditors. The applicant-bank was required to furnish an undertaking to pay the workmen's claims without demur or objection, once determined by the competent authority.

Conclusion:
The applications were allowed with the following directives:
1. The applicant-bank had a lien over the sale proceeds irrespective of the account type.
2. The applicant-bank was entitled to interest as per the DRT's order until realization.
3. The applicant-bank must furnish an undertaking to reimburse the Official Liquidator for the workmen's claims.

The applicants were instructed to submit calculations for disbursement as per the agreed ratio within three weeks. The case was scheduled for further proceedings on 5-3-2004.

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