A.P. STATE FINANCIAL CORPORATION versus OFFICIAL LIQUIDATOR

Citation: [2000] SUPP. 2 S.C.R. 288 · Decided: 09-08-2000 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: Dismissed

Judgment (excerpt)

A 
B 
c 
D 
A.P. STATE FINANCIAL CORPORATION 
v. 
OFFICIAL LIQUIDATOR 
AUGUST 9, 2000 
[S. RAJENDRA BABU AND S.N. PHUKAN, JJ.] 
State Financial Corporation Act, 1951 : 
Sections 29 and 46-Financial Corporation-Liquidation proceedings-
Staying outside of-Conditions-Imposing of-A company took loan from Fi-
nancial Corporation and went into liquidation-Company Judge allowed Fi-
nancial Corporation to stay outside liquidation proceedings and imposed 
certain conditions-Validity of-Held : Right to sell property of debtor com-
pany not absolute but is subject to S.529( I) proviso and non obstante clause in 
S.529-A of Companies Act for pari passu charge of workmen-Hence, Com-
pany Judge rightly imposed the conditions-Further, High Court erred in 
holding that it is not necessary for Financial Corporation to seek permission 
to stay outside liquidation proceedings. 
Companies Act, 1956: 
E 
Sections 529 and 529-A proviso-Objects of-To protect dues of the 
F 
G 
workmen. 
Interpretation of Statutes : 
Non-obstante clause-Insertion of-Jn subsequent enactment-Effect of-
Held : Non obstante clause of a subsequent general Act prevails over prior 
special Act. 
The appellant was a Corporation established under the State Finan-
cial Corporation Act, 1951. Two companies, which had obtained loan from 
the appellant-Corporation, were in liquidation and the liquidation pro· 
ceedings wei:e pending before the Company Judge of the High Court. In 
order to realise the dues, the appellant filed two separate applications 
under Section 446(1) of the Companies Act, 1956 read with Sections 29 and 
46 of the Act of 1951 before the Company Judge for staying outside the 
liquidation proceedings. 
H 
The Company Judge allowed the applications subject to the follow· 
288 
A.P. STATE FINANCIALCORPN. v. OFFICIAL LIQUIDATOR 
289 
ing conditions : 
(a) The appellant would undertake to discharge its liability due to 
the workers, if any, under Section 529-A of the Companies Act. 
(b) The appellant would inform the Official Liquidator in advance 
A 
about the proposed sale of the properties of the company; and 
B 
(c) The appellant would also obtain the permission of the Court 
before finalising the tenders. 
The Division Bench while dismissing the appeal held that it was not 
at all necessary for the appellant-Corporation to have approached the 
High Court for permission to stay outside the winding up proceedings. 
Hence this appeal. 
On behalf of the appellant-Corporation it was contended that the 
Act of 1951 being a special Act, the power of the appellant-Corporation to 
invoke the provisions of Section 29 of the 1951 Act was absolute and 
cannot be restricted; and that this power was not subject to the provisions 
of the Companies Act for a pari passu charge of the workmen. 
Dismissing the appeal, this Court 
HELD: 1. The State Financial Corporation Act, 1951 is a special Act 
for grant of financial assistance to industrial concerns with a view to 
boosting up industrialisation and also for the recovery of such financial 
assistance if it becomes bad and similarly the Companies Act, 1956 deals 
c 
D 
E 
with companies including winding up of such companies. The proviso to 
Section 529(1) and Section 529 of the Companies Act being a subsequent 
F 
enactment, the non-obstante clause in Section 529-A prevails over Section 
29 of the Act of 1951. Therefore, the statutory right to sell the property 
under Section 29 of the Act of 1951 has to be exercised with the rights of 
pari passu charge to the workmen created by the proviso to Section 529 of 
the Companies Act. Under the proviso to Section 529(1), the liquidator 
shall be entitled to represent the workmen and enforce the above pari 
passu charge. Therefore, the Company Conrt was fully justified in impos-
ing the conditions in question to enable the Official Liquidator to dis-
charge his function properly under the supervision of the Company Court 
as the new Section 529-A of the Companies Act confers upon a Company 
Court a duty to ensure that the workmen's dues are paid in priority to ·an 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
290 
SUPREME COURT REPORTS 
[2000] SUPP. 2 S.C.R. 
other debts in accordance with the provisions of the above Section. The 
legislature has amended the Companies Act in 1985 with a social purpose 
viz. to protect dues of the workmen. [293-E-H] 
2. The opinion of the High Court that it was not necessary for the 
Financial Corporation to approach the Court for permission to stay out-

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