LexINDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. versus M/S SRINIVAS AGENCIES AND ORS. ETC. ETC.
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A B INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. v. MIS SRINIVAS AGENCIES AND ORS. ETC. ETC. FEBRUARY 22, 1996 [A.M. AHMADI, CJ AND B.L. HANSARIA, J.] Companies Act, 1956: Sections 446, 456, 457, 529, 529-A and 537. C Company-Winding up-Secured creditor-Extent of 1ight to realise debts-Approaching for other than Company Courts-Pemiissibility of-Leave by winding up Cowt to securi:d creditor to pursue remedy in Civil Coult-Held temis for leave imposed should be reasonable. Secured Credit01~Suit or proceedings relating to realisation of D debt-Transfer to Company Cowt dwing pendency of winding up proceed- ings-Pemiissibility of E Recove1y of debts due to Banks and Financial Institutions-Act, 1993-0bject of The questions in these appeals are : (i) what is the extent of right of secured creditors to realise their debts from the assets of a company which is under winding-up or has been wound up, by approaching fora other than the Company Court; and (ii) as to when a pending suit or proceeding relating to realisation of the debts by a secured creditor should be trans- F ferred to itself by a Company Court seized with the winding- up proceed- ing: G Disposing of the appeals, this Court HELD : 1. A secured creditor stands outside the winding up proceed- ings and under the law he can proceed to realise his security without the leave of the winding-up court, if by the time he initiated the action the company has not been wound up. [963-F] M.K. Ranganathan v. Government of Madras, (1955) 2 SCR 374, H referred to. 960 • . \ : [ l.C.I.C.I.LTD.v. AGENCIES [HANSARIA,J.] 961 2. A combined reading of Sections 446, 529 (1) and (2), 529-A and A 537 of the Companies Act, 1956 leads to the following results: (a) A winding-up Court has jurisdJction, inter alia, to entertain or dispose of any suit or proceeding by or against the company, even if such suit or proceedings had been instituted before an order for winding up had been made. This apart, the winding up court has jurisdiction to transfer B such a suit or proceeding to itself and dispose of the same; (b) when a winding-up.order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding, even if pending at the date of the winding-up order, can C proceed against the company, except by leave of the CompajY Court; and (c) any sale held, even without the leave of the winding-up court pursuant to order of a civil court on it being approached by a secured creditor to realise its debt will not ipso facto be void. Section 537, dealing with voidness of sale, operates when the sale is pursuant to attachment of D company court. This, however; would be the position where a Company has not been would up, but is in the process of being would up; (964-A; 967-B-E] 3. A secured creditor who has initiated a suit or proceeding in a civil Court is interested in realisation of his debt only, whereas the company court looks after the intert:st of all the creditors; so too, the workmen's E dues, which rank pari passu with debts due to secured creditors. This is brought home not only by section 529-A, which was inserted by the Com- panies (Amendment) Act, 1985, but also by the proviso to sub- section (1) of Sectior'i 529 inserted by the same Amendment Act. The winding-up court does these acts through a liquidator, who has been given wide powers by section 457 of the Act. As against this a receiver appointed by a Civil Court on being approached by secured creditor would basically look after the interest of that creditor, whose interest may in many cases be in conflict with that of liquidator. In case of such conflict the interest of liquidator has F to receive precedence over that of the receiver in as much as the former looks ~fter the interest of a large segment of creditors alongwith that of G workmen, whereas the latter confines his concern to the interest of the secured creditor on whose approach the receiver had been appointed. [967-G-H; 968-A-C] 4. It is no doubt correct that the interest of the secured creditor, who has taken recourse to an independent proceeding to realise his debt has H 962 SUPREME COURT REPORTS [1996] 2 S.C.R. A to be protected; but it is apparent this cannot be done at the cost of other secured. creditors. May be that in a particular case the secured creditor who has approached the civil Court happens to be one who has lent hu
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