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Hrushikesh Panda Vs. Orissa State Finance Corporation - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtOrissa High Court
Decided On
Case NumberMiscellaneous Case No. 48 of 1985
Judge
Reported in60(1985)CLT507; [1987]61CompCas448(Orissa)
ActsState Financial Corporations Act, 1951 - Sections 29; Companies Act, 1956 - Sections 456 and 529
AppellantHrushikesh Panda
RespondentOrissa State Finance Corporation
Appellant AdvocateS.P. Misra, Adv.
Respondent AdvocateR.N. Sinha and ;S.N. Sinha, Advs.
DispositionApplication dismissed
Cases ReferredPeerukannu Shahul Hameed v. Osanaru Pillai Ahammed Kannu
Excerpt:
.....law]. - misra that as per the resolution dated october 9, 1974, the corporation has taken over the management of the company, it can safely be concluded that management of the company includes managing the industrial concern effectively. management would include addition of assets as well as disposal of the existing assets in the interests of the company. misra submitted that the taking over of the industrial concern under section 29 of the act is without jurisdiction and is a nullity inasmuch as the preconditions for such taking over have not been satisfied. therefore, interesting though the point is, i refrain from answering the same in this proceeding......utkal equipments and chemicals ltd., under liquidation, has made a prayer to restrain the orissa state financial corporation (hereinafter referred to as 'the corporation ') from proceeding with the sale of the company's assets --immovable or movable--pursuant to the paper publication dated august 9, 1985. a further prayer has been made to direct the official liquidator t6 carry on the sale under his supervision. objection has been filed to this application by the corporation. the substance of the objection is that having taken over the industrial concern in exercise of the power under section 29 of the state financial corporations act, 1951, the corporation has complete jurisdiction to deal with the property and this court exercising the jurisdiction under the companies act, on the.....
Judgment:

S.C. Mohapatra, J.

1. In this application, the applicant who is a shareholder and the ex-managing director of the company, M/s. Utkal Equipments and Chemicals Ltd., under liquidation, has made a prayer to restrain the Orissa State Financial Corporation (hereinafter referred to as 'the corporation ') from proceeding with the sale of the company's assets --immovable or movable--pursuant to the paper publication dated August 9, 1985. A further prayer has been made to direct the official liquidator t6 carry on the sale under his supervision. Objection has been filed to this application by the corporation. The substance of the objection is that having taken over the industrial concern in exercise of the power under Section 29 of the State Financial Corporations Act, 1951, the corporation has complete jurisdiction to deal with the property and this court exercising the jurisdiction under the Companies Act, on the facts and circumstances of this case, has got no jurisdiction to interfere with the power of the corporation.

2. Section 456 of the Companies Act, 1956 (hereinafter referred to as 'the Act'), provides that all the assets of the company shall be deemed to be in the custody of the court from the date of the order for the winding-up of the company. Section 529 of the Act provides that if a secured creditor instead of relinquishing his security and proving his debt proceeds to realise his security, he can pay the expenses incurred by the liquidator and get such security excluded from the charge of the liquidator. This provision had to be made in view of the decision in M.K. Ranganathan v. Govt. of Madras [1955] 25 Comp Cas 344 (SC) rendered under the Indian Companies Act, 1913. Thus, all the assets of the company are to come within the jurisdiction of the court as provided under Section 456 of the Act. Thereafter, a secured creditor can exclude his properties securing the debt to the company from the custody by paying the expenses incurred by the official liquidator.

3. Mr. S.P. Misra, learned counsel for the applicant, has taken me through the proceeding dated October 9, 1974, of the board of directors of the company. He has also taken me through the application filed by the corporation for giving possession of the property to it. These were all subject-matters of the liquidation proceedings and were before the courtwhen it passed the order of liquidation. While passing the order of liquidation, this court specifically observed :

'The official liquidator is directed to take over the assets (except those taken over by the Corporation under Section 29 of the State Financial Corporations Act) and the accounts and records of the company. '

4. The order of winding-up of the company was the subject-matter of challenge in an appeal to be affirmed by the Division Bench. Thus, the position is now clear that there cannot be any controversy whether the properties have been taken over by the corporation in exercise of the power under Section 29 of the State Financial Corporations Act. In disposing of a similar application filed by an unsecured creditor for similar relief, I have already held in my order dated March 22, 1985, that the corporation has taken over the possession and the official liquidator cannot be directed to take over charge of those assets.

5. Even assuming the submission of Mr. S.P. Misra that as per the resolution dated October 9, 1974, the corporation has taken over the management of the company, it can safely be concluded that management of the company includes managing the industrial concern effectively. Management would include addition of assets as well as disposal of the existing assets in the interests of the company. Therefore, in either view of the matter, the corporation would have right of disposal of the property. However, that question is academic in this case in view of the fact already accepted by this court that the industrial concern has been taken over in exercise of the power under Section 29 of the State Financial Corporations Act.

6. Mr. Misra submitted that the taking over of the industrial concern under Section 29 of the Act is without jurisdiction and is a nullity inasmuch as the preconditions for such taking over have not been satisfied. After the order of winding up of the company is passed, I am not competent to go into that question when in the order of winding up itself, the properties taken over by the corporation in exercise of the power under Section 29 of the Act have been excluded from being taken over by the official liquidator.

7. The submission of Mr. Sinha is that in exercise of the power under Section 29 of the Act, the corporation has been statutorily authorised to sell the assets of the industrial concern which are pledged, mortgaged hypothecated or assigned to the financial corporation. Once it is the specific stand of the corporation that the power under Section 29 of the Act is being exercised, the property advertised for sale would be subject to the limitations of Section 29 only. Whether the property satisfies the conditions under Section 29 is not to be taken into consideration by this court exercising powers under the Companies Act, since those properties have already been excluded from being taken over by the official liquidator in the winding up proceeding itself.

8. It was submitted by Mr. Misra relying upon a decision in Peerukannu Shahul Hameed v. Osanaru Pillai Ahammed Kannu, AIR 1970 Ker 81, that the mortgage or pledge in this case is in respect of the land only and not the buildings which were not in existence at the time the property was given as security. Mr. Sinha, in reply, submits that by applying the law in Section 70 of the Transfer of Property Act, the buildings would also become part of the security. Any decision by me in this forum on this question is likely to prejudice the parties in future if litigation arises on that score. Therefore, interesting though the point is, I refrain from answering the same in this proceeding.

9. Since Mr. Sinha submitted that the advertisement for sale which is sought to be obstructed in the application under Section 456 of the Act is covered within the mortgaged properties as per exhibit A series, they are, on the face of it, excluded from the jurisdiction of this court under the Act in a proceeding arising out of Companies Act Case No. 4 of 1977. I may observe that the effect of such sale is to be dealt with in an appropriate forum if at all the same is questioned and not in this proceeding since properties whose possession have been taken over under Section 29 of the State Financial Corporations Act have been excluded.

10. In the result, the application of the applicant, Sri H. K. Panda, has no merit. It is accordingly dismissed. In the peculiar circumstances of the case, there will be no order as to costs.


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