Financial Corporation's statutory possession and sale prevail over later winding-up restraint orders under the State Financial Corporations Act.
The State Financial Corporations Act, 1951 permits a Financial Corporation to take possession or management of a defaulting concern and to sell secured property under section 29. Once action under section 29 is taken, section 29(5) deems the Corporation to be the owner for proceedings by or against the concern, and section 32E(1)(c) restricts winding-up proceedings or appointment of a receiver without the Corporation's consent. On the stated facts, possession had been taken before the winding-up process advanced, the concern was not a running unit, and later restraint orders could not defeat the Corporation's prior statutory action or the sale made under it. The sale to the purchaser was therefore treated as valid.
Issues: Whether the Financial Corporation's takeover of possession under the State Financial Corporations Act, 1951, and the subsequent sale in favour of the appellant were valid notwithstanding the winding-up proceedings and restraint orders passed by the Company Court.
Analysis: Section 29 empowers the Financial Corporation to take over possession or management and to transfer by sale the property secured to it on default. Section 29(5) deems the Corporation to be the owner for the purposes of proceedings by or against the concern once action under section 29 is taken. Section 32E(1)(c) protects such action by providing that winding-up proceedings or appointment of a receiver in respect of a company concern shall not lie except with the consent of the Financial Corporation. The concern was not a running unit, and on the facts possession had already been taken over before the winding-up proceedings progressed. In these circumstances, possession and management were treated as synonymous for the purpose of the case, and the later restraint orders could not defeat the Corporation's prior statutory or the sale made pursuant to it.
Conclusion: The sale in favour of the appellant was valid and the impugned order setting it aside was unsustainable.
TaxTMI 
AI Drafter ✕
TaxTMI 
