TaxTMI 
TaxTMI 
2012 (8) TMI 659
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....on. (D) ...." 2. In support of the summons the applicant has filed affidavit wherein the applicant has stated, inter alia, that:- "(a) The company (in liquidation) is ordered to be wound up vide order dated 20.1.2000 passed in Company Petition No. 18 of 1999. (b) In pursuance of the order dated 20.1.2000 the OL took possession of the assets of the company and on 28.2.2008 issued advertisement in the newspapers for disposal of the specified assets of the company (c) Sale of some of the properties/assets was confirmed, vide order dated 14.10.2008 in favour of the highest bidder viz. M/s. Setco Automotive Limited who offered Rs. 1.90 Crores during the inter-se bidding. (d) In the recovery proceedings initiated by present applicant (i.e. Original Application No. 293 of 2000) learned tribunal passed order dated 12.3.2004 and thereafter also issued Recovery Certificate. On the basis of the Recovery Certificate, the Recovery Officer commenced proceedings under R.P. No. 2060/A to recover the amount awarded by learned Tribunal (i.e. Rs. 12,87,76,858/- with running interest @ of 12% per annum)." 3. In response to the notice by the Court, the ....
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....ced by IDBI is concerned in jointly with IFCI Limited and ICICI Bank Limited. This fact is evident from the letter issued by the applicant bank on 28.7.2010 to the said charted accountant. A copy of letter dated 28.7.2010 is annexed hereto and marked as Annexure-R1 to this affidavit in reply. In this letter, the applicant bank has clearly stated that rupee term loan of Rs. 164 lakh was sanctioned and disbursed by three creditors viz. IFCI Limited, IDBI and ICICI Bank Limited under Project Finance Participation Certificate Scheme and the said amount of Rs. 164 lakh was shared by three institutions as under:- IFCI Limited Rs. 17.92 lakh IDBI Rs. 84.26 lakh ICICI Bank Limited Rs. 44.82 lakh The certificate of registration of the charge is placed on record at page No.37 which tallies with figure shown in the letter of IFCI Limited." 6. The said opponent No. 2 IDBI claimed that the Chartered Accountant committed mistake in considering the claim by ICICI bank inasmuch as the Chartered Accountant considered the claim of ICICI Bank at Rs. 4,65,24,121/- as on 20.1.2000 i.e. date of winding up whereas according to the judgment of the learned tribunal, the claim of ICICI bank w....
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....,024.96 was incorrect). 6.3 Thereafter, the applicant bank filed further affidavit dated 18.7.2011. On the other hand the opponent No. 2 IDBI again came out with affidavit/objection dated 20.7.2011 (pages 173 to 175) and opponent No. 8 ARCIL filed its affidavit/objection dated 21.7.2011. The said opponent ARCIL has tried to present bifurcation of the sale consideration of Rs. 1.90 Crores so as to demonstrate as to what amount was received from disposal of which particular property and on that basis what would be the percentage amount received from disposal of the particular property vis a vis the total amount received from disposal of the properties. The details mentioned by opponent No. 8 read thus:- Sr. No. Particulars Realisable Value Percentage (%) Bifurcation of sale proceeds Immovable Properties 1. Land (28,983 sq. mtrs) 28.98 24.30% 46,17,000 2. Compound Wall 2.00 1.65% 3,13,500 3. Building 85.89 72.00% 1,36,80,000 Sub Total (A) 116.87 97.95 1,86,10,500 Movable Properties &n....
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....gistrar of Companies, Gujarat in respect of immovable properties of Company. We again confirm on the basis of documents supplied by the financial institutions in support of their claims and also from online search of RoC records from MCA 21 website that no charge is registered on the immovable property of the company in favour of IFCI, IDBI and ICICI. Therefore in view of section 125 of Companies Act, 1956, the aforesaid Financial Institutions can not claim the status of secured creditors qua immovable property of the Company." [Emphasis supplied] 8. Thus, what has ultimately emerged from the reports by the Chartered Accountant is the fact that so far as the immovable properties of the company are concerned, any charge over any immovable properties of the company has not been registered in accordance with the provisions contained under section 125 of the Act either by the applicant - IFCI or the other creditors and in that view of the fact - situation, the Chartered Accountant has reported that the said financial institutions cannot claim status of "secured creditors". 8.1 In this context, it is pertinent to note that in reply to Court's query during hearing of present applic....
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....fficial Liquidator [2005] 8 SCC 190 (7) ICICI Bank Ltd. v. SIDCO Leathers Ltd. [2006] 67 SCL 383 (SC) (8) Bharat Petroleum Corpn. Ltd. v. Great Eastern Shipping Co. Ltd. [2008] 1 SCC 503 (9) Mumbai International Airport (P.) Ltd. v. Golden Chariot Airport [2010] 10 SCC 422 9.1 Per contra, learned counsel appearing for workmen has contended that in view of the provisions under Section 125 of the Act registration of charge is compulsory and any charge which is not registered with the Registrar of the Companies in accordance with the said provision will be void against the liquidator and the workmen or other secured and unsecured creditors can raise objections against claim made by a creditor on the basis of unregistered charge. He also contended that since the order by the learned tribunal is not registered with the Registrar in accordance with the said provision neither the applicant can claim status of secured creditor on the strength of the order by the learned tribunal nor their claim made on the basis of such order can be considered as secured claim and that therefore, such claim cannot be entertained under Section 529A read with Section 529 of the Act and such ....
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.... that the financial institutions viz. IFCI (present applicant), IDBI and ICICI have not complied with the requirement of Section 125 of the Act for registration of charge with the Registrar in respect of immovable property and that therefore the said financial institutions cannot claim status as secured creditors qua immovable property of the company. (i) Therefore, the workmen have opposed the claim of the applicant and other financial institutions for disbursement by presetting their claim as claim by secured creditors. (j) In the report dated 21.9.2011 by the chartered accountant or in the report filed by OL including the aforesaid last report dated 12.10.2011 the position related to charge, if any, against movable property of the company is not clarified with reference to the requirement prescribed and contemplated under Section 125 of the Act. (k) It is not disputed by the creditor/s - applicant/s that the charge of the applicant is not registered in accordance with Section 125 of the Act. So as to come out of the said difficulty, reliance is placed on the order dated 12.3.2004 passed by the learned tribunal. (l) In the application No. 293 o....
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.... of the applicant bank; failing which, the bank may proceed to sell the movable assets and mortgaged and other immovable properties of the said respondents and adjust the sale proceeds towards the amount due. This period of one month will not bar the Recovery Officer to issue demand notice. (C) Issue recovery certificate accordingly and parties be informed. (D) Bill for the cost of the suit be drawn in accordance with the Form No. 2 of the Appendix D to the Code of Civil Procedure 1908 read with relevant rules and regulations applicable under the Act." 11.3 So far as the relevant provision under said Section 125 of the Act is concerned, the said provision reads thus:- "125. Certain charges to be void against liquidator or creditors unless registered. - (1) Subject to the provisions of this Part, every charge created on or after the 1st day of April, 1914, by a company and being a charge to which this section applies shall, so far as any security on the company's property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the instrument, if any, by which the c....
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.... in accordance with provision under Section 125 of the Act will not acquire status of, and will not be treated as, "secured charge" for the purpose of Section 529-A and Section 529 of the Act and the creditor holding such unregistered charge will not be treated and considered, to that extent, a "secured creditor" in respect of the said charge. The relevant provision under Section 529 and Section 529-a read thus:- "529. Application of insolvency rules in winding up of insolvent companies. - (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to- (a) debts provable; (b) the valuation of annuities and future and contingent liabilities ; and (c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent: Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his secu....
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.... the termination of his employment before, or by the effect of, the winding up order or resolution; (iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such contract with insurers as is mentioned in section 14 the Workmen's Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company; (iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company; (c) "workmen's portion", in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of- (i) the amount of workmen's dues; and (ii) the amounts of the debts due to the secured creditors. Illustr....
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.... defined under Section 2(e) of Provincial Insolvency Act, 1920. The said definition reads thus:- "Section 2(e) Secured Creditor means a person holding a mortgage, charge or lien on the property of the debtor or any part thereof as a security for a debt due to him from the debtor." Thus, a person who holds a mortgage, charge or lien over a property of the debtor would be considered "secured creditor" under the Insolvency Act. So far as the term "charge" is concerned, Section 124 of the Act prescribes that :- "124. "Charge" to include mortgage in this Part. - In this Part, the expression "charge" includes a mortgage." Section 100 of the Transfer of Property Act defines the term "charge". The said section reads as follows:- "100. Charges. - Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained [which apply to a simple mortgage shall, so far as may be, apply to such charge]. Nothing in this section applies to the charge of a trustee on....
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....secured creditor and to claim priority and preferential payment at the time of disbursement of the proceeds realized upon disposal of company's assets, it is necessary that (I) the creditor must be holding "charge" over/against company's assets (given as security for recovery of debt) and (ii) such charge must be registered in accordance with section 125 of the Act. 12.6 In the background of applicable provision viz. Section 529 and Section 529-A read with Section 125 of the Act, the situation which would emerge is that if any creditor holds security against any asset of the company but if the charge in respect of such security is not registered within 30 days with the Registrar of Companies then such charge cannot be considered "secured charge" or secured debt for the purpose of Section 529 and 529-A of the Act and therefore while determining the aggregate of workmen's due and debt of the secured creditors the claim/debt in respect of which the charge is not registered, should be excluded. 12.7 When the facts of present case are examined in light of the above mentioned provisions it emerges from the record that in present case the dispute is with reference to the immovable p....
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....r in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property; (c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and (d) ........... (e) non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property: Provided ........... [(1A) ........." 14. According to clause (b) non-testamentary instruments which purport to or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest in immovable property of the value of Rs. 100/-; are required to be registered; and according to clause (c) the non-testamentary instruments under which payment of consideration on account ....
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.... Section 125 of the Act is one such special provision. 14.5 A charge, which, ordinarily may not require registration under Registration Act or the registration of which may be optional under Registration Act or other general laws, requires registration within 30 days with the Registrar of the Companies, for the purpose of Section 529 and 529-A of the Act, otherwise, in view of the provision under said sections the charge would be void against the liquidator, other secured creditors and the workmen. 15. At this stage slight diversion or detour is necessary. It is necessary to mention that from the order dated 12.3.2004 passed by the learned Tribunal it emerges that OL was impleaded as party defendant in the application before the learned tribunal. It also appears that the said order dated 12.3.2004 is not challenged by OL. Not only this, but it also appears from the record that even during proceeding before the learned tribunal OL did not oppose the claim of the bank that the documents of title of four immovable properties (bearing survey number 23, 25/1, 24/2 and 30/2) were deposited with it and that they were deposited by one of the Directors of the company. 15.1 However ....
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....hether, in view of the requirement prescribed under Section 125 of the Act, registration of charge created by decree or order of the Court is necessary or not. Differently put, the question which would then arise is as to whether an order or a decree by Court and charge created by / on account of Court's order or decree is not covered by the requirement prescribed under Section 125 of the Act. Therefore, in present case, it would be necessary to examine and understand the effect of the said order dated 12.3.2004 is concerned. 18.1 So far as the said order dated 12.3.2004 passed by the learned tribunal is concerned, learned tribunal has, by the said order, granted declaration that the applicant bank is entitled to recover a sum of Rs. 1,79,00,000/- with cost and further interest @ 12% per annum. 18.2 The learned Tribunal granted one month's time for such payment and further directed that in the event of failure to make payment within prescribed time the bank may proceed to sell the movable assets and mortgaged and other immovable properties of the respondents and that period of one month will not bar the Recovery Officer to issue demand Notice. Learned Tribunal also directed t....
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....uidator. We approve the principle laid down by the learned Single Judge of the Calcutta High Court. We also make it clear that an order or decree of a Court creating charge on the properties of a company has to be distinguished from a preliminary decree passed in a mortgage suit based on an unregistered charge which is hit by Section 125 of the Act. We shall advert to this aspect presently." [Emphasis supplied] 18.4 On plain reading of the said order and direction and in light of the observation by the Apex Court in the said decision in case of Indian Bank (supra) it comes out that the said order directs and stipulates that in the event of failure to make payment and settling the Bank's claims within one month the amount/dues can be realized by sale of movable assets and other immovable assets. It is directed therein that:- "(A) ............. (B) Respondent are given one month's time to settle the claim of the applicant bank; failing which, the bank may proceed to sell the movable assets and mortgaged and other immovable properties of the said respondents and adjust the sale proceeds towards the amount due............ (C) and (D)**" ** ** 18.5 Thus th....
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....urt, are concerned, the Apex Court has observed in paragraph Nos. 7, 18 and 19 of the decision in case of Indian Bank (supra) that:- "7. On a plain reading of sub-section (1) it become clear that if a company creates a charge of the nature enumerated in sub-section (4), after Ist day of April, 1914, on its properties, and fails to have the charge together with instrument, if any, by which the charge is created, registered with the Registrar of the Companies within thirty days, it shall be void against the liquidator and any creditor of the company. This, however, is subject to the provisions of Part-V of the Act. The proviso enables the Registrar to relax the period of limitation of thirty days on payment of specified additional fees, on being satisfied that there has been sufficient cause for not filing the particulars and instrument or a copy thereof within the specified period. Sub-sections (2) and (3) deal with repayment of money secured by the charge. Sub-section (2) provides that the provision of sub-section (1) shall not prejudice the contract or obligation for repayment of money secured by the charge and sub-section (3) says that when a charge becomes void under the sect....
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....e other hand, the decree extinguished the unregistered charge, the section would not apply. We are in respectful agreement with that principle. We hold that a judgment creditor will be entitled to relief from the Company Court accordingly. [Emphasis supplied] 19. Reverting to the facts of this case, on the construction of the decree we have already held that the charge was kept alive till August 28, 1982 and thereafter in default of payment of decree amount the sale order would take effect. In this case, admittedly the decree amount was not paid before August 28, 1982, as such the matter had passed from the domain of contract to the realm of the judgment. The official liquidator filed application on March 21, 1983 seeking to declare the decree as void. By that date what was operative in the decree as void. By that dates what was operative in the decree was not a mere unregistered charge but an order for sale of mortgaged property for realisation of decree amount. The preliminary decree cannot therefore be said to be void and inoperative." 18.8 The Apex Court observed that according to sub-section (1) of Section 125 of the Act if a company creates a charge on its properties an....
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....Court has kept the charge alive then the obligation created by section 125 would be applicable with all force. Differently put, if the unregistered charge has merged in the decree or order of the Court then the relationship would be governed by the terms of the decree or order of the Court which would not be affected by obligation under section 125 of the Act. 19. In light of the foregoing discussion of reasons it follows, so far as facts of present case and particularly the order by the learned Tribunal is concerned, that the observations and directions in the said order has extinguished the unregistered charge and the said unregistered charge, upon expiry of period of one month after the date of the order merged in the order of the Court. Accordingly as a result of and in view of the above noted observations and directions, the bank became entitled to realise its dues by sale of the immovable properties in question. The charge created by act or conduct of the parties/by a contract was kept alive for one month. During the said period the charge continued to be matter of contract but after one month the charge travelled into the realm of order of Court and merged into the order.....