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Issues: (i) Whether a securitisation company or secured creditor exercising rights under the SARFAESI Act, 2002 in respect of a company in liquidation can conduct the sale and appropriate the proceeds without supervisory directions of the Company Court and without association of the Official Liquidator. (ii) Whether the learned Company Judge erred in recording that the plant and machinery had been hypothecated to HSIIDC.
Issue (i): Whether a securitisation company or secured creditor exercising rights under the SARFAESI Act, 2002 in respect of a company in liquidation can conduct the sale and appropriate the proceeds without supervisory directions of the Company Court and without association of the Official Liquidator.
Analysis: The provisions of section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 permit enforcement of security interest without court intervention, but section 13(9) expressly preserves the distribution mechanism in a winding up and requires sale proceeds to be dealt with in accordance with section 529A of the Companies Act, 1956. The statutory scheme was read harmoniously with sections 35 and 37 of the SARFAESI Act, 2002, which do not exclude the Company Court's role where liquidation proceedings are pending. The earlier authorities governing sale by secured creditors and financial corporations in liquidation required association of the Official Liquidator and supervision by the Company Court to protect workmen's dues and ensure proper realization of value.
Conclusion: The Company Court had jurisdiction to issue supervisory directions, and the securitisation company was not entitled to absolute freedom to conduct the sale and appropriate the proceeds outside judicial supervision.
Issue (ii): Whether the learned Company Judge erred in recording that the plant and machinery had been hypothecated to HSIIDC.
Analysis: The record did not support the finding that the plant and machinery stood hypothecated to HSIIDC. The factual statement in the impugned order was therefore incorrect to that extent and required correction. The error did not alter the main legal position on the respective rights of the parties in the liquidation process.
Conclusion: The finding regarding hypothecation of plant and machinery in favour of HSIIDC was and was directed to be deleted.
Final Conclusion: The appeals failed on the main legal challenge, while a limited factual correction was made in the impugned order regarding the status of hypothecation.
Ratio Decidendi: In liquidation proceedings, a secured creditor or securitisation company exercising rights under the SARFAESI Act, 2002 must act consistently with section 13(9) and the protection of workmen's dues under section 529A of the Companies Act, 1956, so the Company Court may issue supervisory directions and require association of the Official Liquidator.
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