Liquidation framework prevails over SARFAESI action; auction proceeds and valuation costs were tied to company-court supervision.

During pendency of company liquidation, a secured creditor cannot use SARFAESI in a way that bypasses the company court and the official liquidator; the claims must be worked out within the liquidation framework. The text also notes that release of the balance auction amount to CBL was made subject to deductions for statutory dues, workers' dues, missing machinery and other contingent liabilities, with further liabilities to be adjusted on handover to the official liquidator. It further records that valuation expenses and ITCOT dues were treated as liquidation-related costs, to be borne through the liquidation process rather than by CBL personally.

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Issues: (i) whether the notice issued by the secured creditor under the SARFAESI Act could be sustained in the company winding-up proceedings or whether the claims had to be worked out through the official liquidator; (ii) whether CBL was entitled to release of the balance auction amount and how deductions for statutory dues, workers' dues, missing machinery and related liabilities were to be adjusted; (iii) whether the fees of the valuer and the dues of ITCOT were to be borne by CBL or by the official liquidator.

Issue (i): whether the notice issued by the secured creditor under the SARFAESI Act could be sustained in the company winding-up proceedings or whether the claims had to be worked out through the official liquidator.

Analysis: The Court held that the earlier Supreme Court directions had required the company court to proceed under the Companies Act and that the prior attempt by the secured creditor to act under the State Financial Corporations Act had already failed in the same liquidation proceedings. In that setting, the subsequent invocation of SARFAESI powers during the liquidation process was treated as impermissible because it would frustrate the long-running company-court process and create multiplicity of proceedings. The Court also noted that the official liquidator could deal with the secured creditors' claims in accordance with law, while security and valuation could proceed under the supervision of the Court.

Conclusion: The SARFAESI notice was set aside and the secured creditors were relegated to work out their claims before the official liquidator.

Issue (ii): whether CBL was entitled to release of the balance auction amount and how deductions for statutory dues, workers' dues, missing machinery and related liabilities were to be adjusted.

Analysis: The Court found that the reinstalled lines and equipment had been satisfactorily restored, that CBL had agreed to undertake payment of specified EPF and ESI dues for the relevant period, and that the factory's post-closure electricity consumption did not justify fastening the entire claimed burden on CBL. The Court also directed retention of sums toward unresolved or contingent liabilities, including the five missing packing machines and any further statutory dues for the period when CBL had possession as receiver. The balance amount was therefore made payable only after the specified deductions and on handover of possession to the official liquidator.

Conclusion: CBL was entitled only to the balance sum after the ordered deductions and compliance with the undertaking regarding further statutory liabilities.

Issue (iii): whether the fees of the valuer and the dues of ITCOT were to be borne by CBL or by the official liquidator.

Analysis: The Court held that the valuation exercise had been undertaken pursuant to the Supreme Court's directions and for the benefit of the liquidation process, not for CBL's own commercial advantage. Since CBL had already sought refund of its auction money and was acting only as receiver, it could not be made liable for the valuer's fees. The unpaid ITCOT dues were therefore directed to be paid out of the common pool fund by the official liquidator.

Conclusion: The valuer's fees were to be borne by the secured creditors, and ITCOT's past dues were to be paid by the official liquidator from the common pool fund.

Final Conclusion: The order primarily preserved the company-court liquidation framework, rejected the secured creditor's SARFAESI action, directed controlled release of money to CBL subject to deductions and undertakings, and shifted the valuation-related burden away from CBL to the secured creditors and the official liquidator.

Ratio Decidendi: During pendency of company liquidation proceedings, a secured creditor cannot bypass the statutory liquidation process by invoking SARFAESI in a manner that would defeat the supervision of the company court and the official liquidator.

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