LexLAXMI FIBRES LTD. versus AP. INDUSTRIAL DEV. CORPN. LTD. & ORS.
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[2015) 8 S.C.R. 829 LAXMI FIBRES LTD. v. AP. INDUSTRIAL DEV. CORPN. LTD. & ORS. (Civil Appeal No.5805 of 2005) AUGUST 07, 2015 [VIKRAMAJIT SEN AND SHIVA KIRT! SINGH, JJ.] State Financial Corporations Act, 1959 - s. 29 - Power A B of Official Liquidator- To adjudicate and quantify the claim C of statutory corporations who have been permitted by the Company Judge to stand outside the liquidation proceeding subject to certain conditions - Held: Official Liquidator cannot assume jurisdiction to sit in adjudication and decide entitlement of the financial corporation when it has opted to D stand outside the liquidation proceeding as a secured creditor - They will not.be reduced to the status of unsecured creditors and equally will not be required to prove their debt which they are entitled to realize under the provisions of the SFC Act subject to right of the workers to receive their wages also as E secured creditors on pari passu basis. Dismissing the appeals, the Court HELD: The rights ofa financial corporation available F under the provisions of the State Financial Corporations Act, 1959 have been compromised or impeded by the amendment of 1985 in the Companies Act, particularly the proviso added to Section 529(1) and Section 529A, only to a limited extent and for the limited purpose of G securing the right of the workers for distribution of their wages as pari passu charge. But such limited impediment to their rights under the SFC Act will not alter the status of State financial corporations as secured 829 H 830 SUPREME COURT REPORTS [2015] 8 S.C.R. A creditors and they will not be required to prove their debt which they are entitled to realize under the provisions of the SFC Act subject to right of the workers to receive their wages also as secured creditors on pari passu · basis. The control of the Company Judge and the Official B Liquidator if authorized, can extend only to ensure that the said purpose of Section 529A is effectively achieved. Like any other affected person, if the Company represented by the Official Liquidator has reasons to be aggrieved by claims made by a financial corporation C under the SFC Act, its remedy would be to initiate appropriate civil proceedings to challenge such claim or debt of a State financial corporation before an appropriate forum and not to assume jurisdiction to sit D in adjudication and decide entitlement of the financial corporation when it has opted to stand outside the liquidation proceeding as a secured creditor. The statutory powers of SFCs have "suffered only a limited impediment only to serve the purpose of protecting E workers' dues. After ensuring that this purpose is achieved or ensured, the State Financial Corporations can continue to enjoy their statutory rights as secured creditors. They will not be reduced to the status of unsecured creditors and equally will not be required to F prove their debts nor will be required to stand in line with other unsecured creditors. Thus, there is no error in the order of the Division Bench.[Para 10,8, 11] [836-B, F-H; 837-A-D] G A.P State Financial Corporation v. Official Liquidator 2000 (2) Suppl. SCR 288: (2000) 7 SCC 291; International Coach Builders Ltd. v. Karnataka Slate Financial Corpn. 2003 (2) SCR 631: (2003) 10 SCC 482; Rajasthan State Financial Corpn. v. Official Liquidator 2005 (3) Suppl. SCR H 1073: (~005) 8 SCC 190- referred to. LAXMI FIBRES LTD. v. A.P. INDUSTRIAL DEV CORPN. 831 LTD. Case Law Reference · 2000 (2) Suppl. SCR 288 referred to. 2003 (2) SCR 631 referred to. 2005 (3) Suppl. SCR 1073 referred to. Para 5, 6 Para 5, 7 Para 5, 9 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5805 of 2005. A B From the Judgment and Order dated 07.01.2004 of the C High Court of Judicature of Andhra Pradesh at Hyderabad in Original Side Appeal No. 85 of.2003. With C.A. NOS. 5803AND 5804 OF 2005. G. Ramakrishna Prasad, Suyodhan Byrapaneni, Filza Moonis for the Appellant. D A.V. Rangam, Buddy A. Ranganadhan, D.V. Raghu E Vamsy, T.V. Ratnam, Y. Prabhakara Rao for the Respondents. The Judgment of the Court was delivered by SHIVA KIRTI SINGH, J. Civil Appeal No.5805 of 2005 1. In this appeal preferred by the appellant-company under liquidation represented by the Official Liquidator the question F of law arising for consideration is whether the Official Liquidator G can claim any power or jurisdiction in itself to adjudicate
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