TaxTMI 
TaxTMI 
2016 (9) TMI 266
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....he applicant, a company registered under the Companies Act, 1956, came to be rejected. 2 The above company application was preferred before the Company Court in the backdrop of certain facts that IFCI Ltd. a company registered under the Companies Act, 1956 and a public Financial Institution in terms of Section 4A(1)(ii) of the Companies Act, 1956 and established under Section 3 of the Industrial Finance Corporation Act, 1948 and thus creation of the statute empowered to transact business as specified in Section 23 of The Industrial Finance Corporation Act, 1948, provided financial facilities to M/s. Mahendra Petrochemicals Limited [for short, `M/s. MPL'], the company in liquidation, which were secured by the company in liquidation against all the movable and immovable assets of the company in liquidation. Section 23 of The Industrial Finance Corporation Act, 1948 is about nature of business which the Corporation may transact, as defined in clauses [a] to [p] also include granting loans or advances to industrial concerns as per clause [i]. IFCI Limited was the first charge holder and M/s. MPL defaulted in making the payment of the dues in respect of the financial facilities gra....
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.... Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short `SARFAESI Act') by creating an impasse. 4 The above application was vehemently opposed by learned counsel appearing for the respondent - Bank of Baroda on the ground that such an agreement was entered into by the applicant with sole intention of defrauding the rights of the secured creditors and in violation of provisions of Sections 531 and 536 of the Companies Act, 1956 and proceedings for winding up the company were initiated in the year 1996 and final order was passed on 19.04.2010. The MoU dated 01.01.2004 was entered into between the appellant and company in liquidation and thereafter Deed of Assignment was executed between the appellant and the IFCI Ltd. on 28.07.2010 and subsequently appellant challenged the order of winding up dated 19.04.2010 passed by learned Company Judge by filing O.J. Appeal No.42 of 2010 in which Deed of Assignment was not produced. That prayer of not taking possession by Official Liquidator made in Company Application No.238 of 2010 was rejected. Even another application being Company Application No.345 of 2011 also preferred by the appl....
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....tract Act and other relevant provisions of the Companies Act, 1956 and the judgment relied on by learned counsels for the parties, dismissed application on the limited ground that appellant was not entitled to get any benefit under SARFAESI Act and cannot be termed as secured creditor and, therefore, reliance placed by the appellant on provisions of Section 130 of the Transfer of Property Act was void. 8 That O.J. Misc. Civil Application No.170 of 2015 came to be filed by the appellant to recall CAV judgment dated 31.07.2015 passed in Company Application No.248 of 2014, as above, and the above application was filed under Rule 9 of the Companies (Court) Rules, 1959 which gives inherent powers to the Company Court, on the ground that appellant did not pray that appellant may be permitted to be substituted in place of IFCI Ltd. as secured creditor for the purpose of SARFAESI Act, but it was a simple application for substitution in place of IFCI Ltd. by virtue of contract or by Deed of Assignment and provisions of SARFAESI Act would not apply. 9 The above application to recall also came to be rejected by assigning reasons and relying on various decisions about powers available with t....
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.... the Code of Civil procedure. It is submitted by learned counsel for the appellant that impugned judgment and order dated 31.07.2015 is therefore required to be quashed and set aside. It is further submitted that irrespective of the fact that the appellant is not a defined entity under the SARFAESI Act still by virtue of Deed of Assignment, the appellant was entitled to be substituted in the proceedings of liquidation of the company. 10.1 Mr. Pahwa, learned counsel for the appellant has relied on the following decisions in support of his submission that appellant's right to be substituted in place of IFCI Limited: [a] Deccan Chronicle Holdings Ltd. vs. IL & FS Trust Co. Ltd. [(2015)64 Taxman 326 (AP)]. [b] Mafatlal Denim Ltd. [Company Application No. 376 of 2012]. [c] Mafatlal Denim Ltd. vs. Sicom Ltd. & Ors. [SLP (C) 7887 of 2010. [d] Aar Kay Concast Ltd. vs. Reliance Capital Ltd. [(2011)12 Taxman 454 (P & H)]. [e] Managing Director, M/s. LVSR Farms Pvt. Ltd. vs. OL of High Court of A.P & Ors. [f] Rumonia Marketing Pvt. Ltd. vs. OL of Mardia Steels Ltd. & Anr. [Company Application No.59/2007]. [g] ICICI Bank Limited v Official Liquidator of APS Star Industries Limi....
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....arned counsels for the parties, we find at the outset that by Deed of Assignment dated 28.07.2010 following financial facilities [for short, `financial assets'] on MPL's executing agreement, security documents and such other deeds, writings and instruments including agreement of mortgage [for short, `agreements / security documents'] and list of such financial facilities is mentioned in Schedule A and other details in Schedule-D B attached to the Deed of Assignment: SCHEDULE A FINANCIAL ASSETS MAHENDRA PETROCHEMICALS LTD [Rs. in Lakhs] Facility Amount Sanctioned Amount disbursed Principal Outstanding [as on 30.6.2008] Interest & other dues / charges [as on 30.6.2010] Total Dues [Pri+Int] RTL 1000.00 1720.00 432.50 15773.30 16205.80 RTL 225.00 Corporate Loan 500.00 Grand Total 1725.00 1720.00 432.50 15773.30 16205.80 SUMMARY OF SCHEDULE B The contents of Schedule B are of Term Loan of Rs. 1000 lakhs , Additional Rupee Term Loan of Rs. 225 lakhs, Corporate Loan of Rs. 500 lakhs for which various loan agreements, deeds of hypothecation and joint equitable mortgage created by deposit of the deeds, interalia, in respect of its immovable pr....
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....ming part of Survey No.135 of Mouje Chatral, Taluka Kalol, District Gandhingar [then Mehsana] Gujarat State together with all buildings, sheds, columns, warehouse, etc. constructed / to be constructed there on and anything attached to the earth of permanently fastened to anything attached to the earth or any part thereof" The above Deed of Assignment, no doubt was registered on 28.07.2010 before the office of the SubRegistrar, KalolGandhinagar, signed by executant and claimant on behalf of assignor and assignee. 13.2 On perusal of the record of this appeal, it appears that the appellant upon a request made by the respondent - MPL, an amount of Rs. 70 lakhs was paid to MPL as interest to be deposited and towards consideration for using and occupying the land and building in question [which are subject matter of the liquidation proceedings before the Company Court] and that the appellant was to be into physical possession of the property for which the appellant made investment to the tune of Rs. 1,93,40,946/- and also for installation of new machinery and employing labourers. That MoU dated 01.01.2004 was entered into between the appellant - SSPL and MPL. As against the above, oth....
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....08 and hence measures initiated under Section 13(4) of SARFAESI Act by the secured creditors viz. financial institution / bank for recovery of their dues against their secured assets to which assignor was aware about assignment of deed appears to be not bonafide. That settlement of more than Rs. 160 crores of dues against paltry sum of Rs. 58 lakhs towards consideration is nothing but an eye wash to defeat measures undertaken by respondent banks under Section 13(4) of SARFAESI Act as well as winding up proceedings before the Company Court. It is also an admitted fact that applicant company is not registered under Section 5 of the SARFAESI Act and keeping in mind definition of Securitisation company, reconstruction company, banking company, financial institute in SARFAESI Act viz. 2[za], 2[v], 2[d] and 2[m] respectively, it was not open for the IFCI Ltd. assignor to enter into a Deed of Assignment with applicant bank. 13.4 Company Application No.238 of 2010 was filed by one M/s. Suzuki Parasrampuria Suitings Private Limited [SPSPL] and Company Application No.346 of 2010 was filed by M/s. Suzuki Suitings Private Limited [SSPL], the one claims to be the sister concern of the other. I....
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....gned order and as the appellants have declared that the appellants are not agitating the merits in the present appeal, we find that the impugned order passed by the learned Company Judge calls for no interference. Hence the order passed by the learned Company Judge on merits would remain in operation in the present matter. [2] Consequently, the appellants would be required to hand over the possession of the property but as the appellant is ready to submit the offer for Rs. 2.75 crores and is also ready to deposit the amount of Rs. 27,50,000.00, it is ordered that if the appellant deposits an amount of Rs. 27,50,000.00 within three weeks from today with the Official Liquidator, the Official Liquidator shall take symbolic possession of the property in question and the physical possession of the property in question may continue with the appellant, subject to finalization of the sale, as may be made by the learned Company Judge in the respective winding up proceedings upon the report of the Official Liquidator. There shall be additional condition to abide by the undertaking to deposit the accrued rent as well as future rent from time to time at Rs. 54,166.00 per month and such amount....
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....nt, the physical possession of the property in question shall be handed over by the appellant within six weeks as per the undertaking failing which the official liquidator shall be at liberty to take possession of the property with the help of the police. [7] It is observed and directed that the rights and contentions of both the sides on the aspects of assignment of debt and the consequential aspects thereto before the appropriate forum shall remain open and shall not be prejudiced in any manner by the present order. All the parties shall cooperate in finalization of the sale proceedings. [8] Present order is also without prejudice to the rights and contentions of the appellants to get refund of the amount of Rs. 70 lacs, if otherwise permissible in law. However, it is observed that in the event such aspect is not finalized at any stage, the appellants shall not be relieved from the undertaking given to this court for the offer of Rs. 2.75 crores and the other aspects relating to for the sale of the property in question. [9] It is also observed and clarified that until the physical possession is retained by the appellants as per the above referred arrangement, the appellants s....
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....s of the company in liquidation based on reports filed by Official Liquidator, who is an eye and ear of the Company Court cannot simply ignore or brush aside legitimate claim of other secured creditors in such a scenario. 13.8 In the case of Sesa Industries Ltd. v. Krishna H. Bajaj & Ors. [AIR 2011 SC 1070], the Apex Court in para 39 held as under: "39. An Official Liquidator acts as a watchdog of the Company Court, reposed with the duty of satisfying the Court that the affairs of the company, being dissolved, have not been carried out in a manner prejudicial to the interests of its members and the interest of the public at large. In essence, the Official Liquidator assists the Court in appreciating 25 1951 SCR 277 26 AIR 1968 SC 615 3 the other side of the picture before it, and it is only upon consideration of the amalgamation scheme, together with the report of the Official Liquidator, that the Court can arrive at a final conclusion that the scheme is in keeping with the mandate of the Act and that of public interest in general. It, therefore, follows that for examining the questions as to why the transferorcompany came into existence; for what purpose it was set up; who were ....
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....52 of the judgment of the Apex Court in the case of ICICI Bank Ltd. [supra] and definition of banking company, financial institution, reconstruction company, Securitisation company under SARFAESI Act and also that the applicant company was not a bank or a banking company or a financial institution or a securitization company or reconstruction company and, therefore, the appellant was not to be permitted to be substituted in place of IFCI as secured creditor for the purpose of SARFAESI Act. The above clear findings were in the context of submissions made and pleadings in the application and reply and considered by the learned Company Judge to which we are in agreement and in addition to other factual aspects noted and discussed by us hereinabove. That somersault was made in application filed under Rule 9 of the Rules, 1959 that no such status as a secured creditor under SARFAESI Act claimed by the appellant, was rightly rejected by the learned Company Judge. Even applicability of Section 130 of the Transfer of Properties Act in the facts of the case was considered by learned Company Judge is also based on submissions made by learned counsel for the appellant in the context of its cl....
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....In the case of Mafatlal Denim Ltd. [supra] [ii], during the pendency of the petition before the Hon'ble Supreme Court there was an assignment of debt between Sicom Limited in favour of Mishapar Investments Ltd. and the substitution in pursuance to the deed of assignment was allowed. [d] In the case of Aar Kay Concast Ltd. [supra], The High Court of Punjab and Haryana, held that an assignee was eligible to take recourse of filing a winding up petition after procuring the debt from another company. After the assignment of the debt, the assignee had preferred a winding up petition in which an objection was raised about maintainability of the locus of the assignee to litigate on and for the assignor, the Court overruled the objection and dismissed the appeal. SLP against the order of the Division Bench came to be dismissed. [e] In the case of Managing Director, M/s. LVSR Farms Pvt. Ltd. [supra], when A Private Limited Company had taken debt from Central Finance Institutions (CFI's) / banks and had made an application for being considered as a secured creditor, the Andhra Pradesh High Court allowed that application. Reference has also been placed on Rule 9 of the Companies Cou....
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....Pvt. Ltd. [supra], a private limited company had moved an application for being substituted in place of ICICI Bank pursuant to the deed of assignment and this Court permitted to represent the debt of the assignor bank pursuant to the deed of assignment. [g] In the case of ICICI [supra] question required to be decided was "whether inter se transfer of Non Performing Assets [NPA] by the banks is illegal under the Banking Regulation Act, 1949 as held by the Gujarat High Court in the judgment under challenge". The Apex Court referred to provisions of Banking Regulation Act, 1949 and scope of banking business in the context of RBI Guidelines expanding scope of banking business which was held to be not limited to core banking of accepting deposits and lending, but also Banking Regulation Act, 1949 leaves ample scope for banking companies to undertake such additional businesses as are not violative of prohibitive and restrictive statutory provisions and RBI can formulate policy enabling banking companies to engage in such additional activities and in the process it can define what constituting "banking business". After defining NPA and object of the guidelines issued by RBI dated 13.07.....