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of <h1>Court orders global tender to sell cinema complex, repay debts, and distribute surplus among shareholders.</h1> <h3>Pyramid Saimira Theatre Ltd. Versus S. Murugan</h3> Pyramid Saimira Theatre Ltd. Versus S. Murugan - [2010] 155 COMP. CAS. 42 (MAD.) Issues Involved:1. Validity and fraudulence of impugned transactions.2. Rights of sub-mortgagee and lessee.3. Rights of assignee vis-a-vis SARFAESI Act.4. Feasibility of continuing the Receiver.5. Jurisdiction of the civil court and maintainability of present suits.6. Power of the court to order sale of the property in interlocutory applications.Detailed Analysis:I. Validity and Fraudulence of Impugned Transactions:The court examined the bona fides of transactions involving the assignment of mortgage and lease executed by the second defendant. The second defendant's actions were scrutinized, revealing that the transactions did not benefit the company but rather served the personal interests of the second defendant. The court highlighted the differences between redemption of mortgage and obtaining assignment of the mortgage, emphasizing that the second defendant's scheme was questionable and lacked a viable formulation for generating the necessary funds. The court found that the transactions were crafted to benefit the second defendant personally, resulting in a prima facie case of fraud.II. Rights of Sub-Mortgagee and Lessee:The court analyzed the rights of the sub-mortgagee and lessee, noting that the sub-mortgagee could bring the property to sale if the debt was not discharged within the stipulated time. The lessee's rights were also examined, particularly the validity of the lease executed by the second defendant. The court found that the second defendant's actions made the property vulnerable to sale by the sub-mortgagee, thus failing to avert the threat of sale as claimed.III. Rights of Assignee vis-a-vis SARFAESI Act:The court discussed the rights of the assignee under the SARFAESI Act, concluding that the second defendant or the partnership firm could not be treated as a 'secured creditor' under the Act. Consequently, the assignee could not exercise the same powers as the original mortgagee under the SARFAESI Act. The court emphasized that the second defendant's scheme did not provide a lawful basis for creating a lease or sub-mortgage, rendering the transactions invalid.IV. Feasibility of Continuing the Receiver:The court considered whether the receiver appointed by the Debts Recovery Tribunal should continue in possession. Given the lack of bona fides in the second defendant's actions and the ongoing dissension among the company's management, the court found it just and convenient to continue the receiver's possession. The receiver had generated significant income, which could be used to discharge the company's debts.V. Jurisdiction of the Civil Court and Maintainability of Present Suits:The court addressed the contention that the suits were not maintainable under the SARFAESI Act. It clarified that the civil court's jurisdiction was not ousted, as the suits involved allegations of fraud and a series of transactions beyond the scope of the SARFAESI Act. The court held that the civil court had the jurisdiction to adjudicate the validity of the transactions and the alleged fraud.VI. Power of the Court to Order Sale in Interlocutory Applications:The court affirmed the learned single judge's decision that there was a prima facie case in favor of the plaintiffs. Given the ongoing disputes and the company's financial situation, the court found it equitable to order the sale of the cinema theatre complex through a global tender process. This decision aimed to balance the interests of all parties, discharge the company's debts, and distribute the surplus proceeds among the shareholders.Conclusion:The court affirmed the learned single judge's decision on the merits of the plaintiffs' claims and directed the sale of the cinema theatre complex through a global tender process. The proceeds from the sale would be used to repay the amounts advanced by the fourth and fifth defendants with interest, discharge the company's debts, and distribute the surplus among the shareholders. The court also directed the expunction of certain observations regarding the bank's integrity and emphasized the equitable principles guiding its decision. The appeals were disposed of accordingly, with no costs.
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