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Issues: (i) Whether a State Financial Corporation can realise and sell the assets of a company in liquidation under section 29 of the State Financial Corporations Act, 1951 without associating the Official Liquidator representing workmen's pari passu charge under sections 529 and 529A of the Companies Act, 1956. (ii) Whether, in the facts of the case, the Official Liquidator should be permitted to sell the company's movable and immovable properties in association with secured creditors and invite claims from workers and unsecured creditors.
Issue (i): Whether a State Financial Corporation can realise and sell the assets of a company in liquidation under section 29 of the State Financial Corporations Act, 1951 without associating the Official Liquidator representing workmen's pari passu charge under sections 529 and 529A of the Companies Act, 1956.
Analysis: The controlling principle is that once winding up commences, the statutory power of a secured creditor under section 29 does not operate independently of the rights created in favour of workmen by sections 529 and 529A. The Official Liquidator represents the workmen's pari passu charge, and the secured creditor cannot unilaterally enforce security to the prejudice of that charge. Realisation of the security must take place with the Official Liquidator's association and under the supervision of the Company Court.
Conclusion: The State Financial Corporation cannot unilaterally sell the secured assets of a company in liquidation without associating the Official Liquidator.
Issue (ii): Whether, in the facts of the case, the Official Liquidator should be permitted to sell the company's movable and immovable properties in association with secured creditors and invite claims from workers and unsecured creditors.
Analysis: As the company was in liquidation and several secured creditors had claims over different assets, it was necessary to proceed in a manner that protected all interests. The Official Liquidator was therefore directed to conduct the sale with the assistance of the secured creditors, subject to confirmation by the Court. The absence of a statement of affairs made it necessary to call for workers' claims as well, and the Court also applied the procedural framework under the Companies (Court) Rules for inviting claims.
Conclusion: The Official Liquidator was permitted to sell the company's movable and immovable properties in association with secured creditors, subject to confirmation by the Court, and to invite claims from workers and unsecured creditors.
Final Conclusion: The decision harmonises the secured creditor's enforcement rights with the workmen's pari passu protection in winding up and places the sale and distribution process under the control of the Company Court.
Ratio Decidendi: On winding up of a company, the secured creditor's power to realise security under section 29 must be exercised only in conjunction with the Official Liquidator representing workmen's pari passu rights and under the supervision of the Company Court.
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