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of <h1>Court rules ONGC not a secured creditor, must process claims under Companies Act</h1> <h3>ONGC Ltd. Versus OL. of Ambica Mills Co. Ltd.</h3> ONGC Ltd. Versus OL. of Ambica Mills Co. Ltd. - [2006] 71 SCL 274 (GUJ.) Issues Involved:1. Whether ONGC can claim preferential right over secured creditors and workmen based on the Supreme Court's orders.2. Whether ONGC's claim can be treated as that of a secured creditor.3. The applicability of sections 529 and 529A of the Companies Act to ONGC's claims.4. The impact of the Supreme Court's order dated 17-10-1997 and subsequent orders on ONGC's claim.5. The legal status of the undertaking given by Ambica Mills to the Supreme Court.6. The implications of the winding-up order on ONGC's claims.Detailed Analysis:1. Preferential Right Over Secured Creditors and Workmen:The court examined whether ONGC could claim a preferential right over secured creditors and workmen based on the Supreme Court's orders. The judgment clarified that ONGC cannot claim any preferential right on the basis of the order dated 17-10-1997 in priority to the secured creditors and the workmen, considering the provisions of sections 529 and 529A of the Companies Act. The court emphasized that such preferential claims, if falling under section 530, would follow the claims of secured creditors and workmen under sections 529 and 529A.2. ONGC as a Secured Creditor:The judgment scrutinized whether ONGC's claim could be treated as that of a secured creditor. The court found that ONGC failed to establish any lien or charge as required under section 125 of the Companies Act. The court noted that ONGC did not have any instrument by which the charge was created or evidenced, nor was there any registration of such a charge with the Registrar of Companies. Consequently, ONGC could not be treated as a secured creditor.3. Applicability of Sections 529 and 529A:The court analyzed the applicability of sections 529 and 529A of the Companies Act to ONGC's claims. It was held that even if ONGC were to be treated as a secured creditor, it would have to accept a pari passu charge in favor of the workmen to the extent of the workmen's portion. The court reiterated that the claims of ONGC must be processed in light of sections 529 and 529A, which provide for the priority of workmen's dues and secured creditors.4. Impact of the Supreme Court's Order Dated 17-10-1997:The judgment addressed the impact of the Supreme Court's order dated 17-10-1997 and subsequent orders. The court concluded that the order dated 17-10-1997 must be read subject to the provisions of sections 529 and 529A of the Companies Act, as clarified by the Supreme Court in its judgment dated 12-4-2004 in the case of Textile Labour Association. This meant that ONGC's claims would not have priority over the claims of secured creditors and workmen.5. Legal Status of the Undertaking by Ambica Mills:The court examined the legal status of the undertaking given by Ambica Mills to the Supreme Court. The court held that the undertaking did not create any charge, mortgage, or lien on the properties of Ambica Mills in favor of ONGC. The undertaking merely prevented Ambica Mills from further encumbering or alienating its immovable assets without the leave of the Supreme Court. Therefore, it did not confer secured creditor status on ONGC.6. Implications of the Winding-Up Order:The court considered the implications of the winding-up order on ONGC's claims. It was noted that once a winding-up order was made, ONGC was required to seek leave of the Company Court or obtain orders from the Company Court for pursuing its legal remedies. The court emphasized that ONGC could not act beyond the provisions of the Companies Act, and its claims had to be processed in accordance with sections 529 and 529A.Conclusion:The court dismissed ONGC's appeal, affirming that ONGC could not claim preferential treatment over secured creditors and workmen. ONGC was not considered a secured creditor due to the lack of a registered charge or lien. The claims of ONGC were to be processed in accordance with sections 529 and 529A of the Companies Act, and the undertaking given by Ambica Mills did not create any security interest in favor of ONGC. The court's decision was based on a thorough analysis of the statutory provisions and relevant case law, ensuring that the rights of secured creditors and workmen were upheld in accordance with the law.
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