LexM/S. BAKEMANS INDUSTRIES PVT. LTD. versus M/S. NEW CAWNPORE FLOUR MILLS AND OTHERS
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[2008) 9 S.C.R. 705 M/S. BAKEMANS INDUSTRIES PVT. LTD. A v. M/S. NEW CAWNPORE FLOUR MILLS AND OTHERS (Civil Appeal No. 3628 of 2008) MAY 16, 2008 B [S.B. SINHA AND V.S. SIRPURKAR, JJ.] Companies Act, 1956 - ss. 433, 529 A and 457 -Finan- cier initiating action against defaulting company under State Financial Corporation Act, 1951 - Court permitting the Finan- c cier to hold sale of the proceeds of the defaulting company - Simultaneous proceedings of winding of the Company by other creditors before company court- Subsequently, Financier sub- miffing itself to the jurisdiction of company court - Sale held under supervision of the company court in disregard to the D provisions of Companies Act - Propriety of - HELD: Order of ·~ Company court is unsustainable - The order of Company Court being in total disregard of the mandatory provisions of the Companies Act, is without jurisdiction - Financier having subjected itself to the jurisdiction of Company Judge, waived E its rights under 1951 Act and hence the proceedings before Company court cannot be said to be under 1951 Act- Com- pany court since exercising power u/s 433 of Companies Act was under statutory obligation to consider the pari passu claim of the workmen and other claimants along with the claim of the Financier and thus was bound to follow the provisions of F Companies Act! Companies Rules - Sale having been held in violation of the provisions of the Companies Act, is not sus- tainable - Direction issued to company court to decide the case afresh in accordance with the provisions of the Compa- " nies Act and hold fresh auction - State Financial Corporation G Act, 1951 - s. 29. ~ Words and Phrases: 705 H 706 SUPREME COURT REPORTS [2008] 9 S.C.R. A 'The Court' - Meaning of in the context of s. 2(11) of Com- panies Act, 1956. A Financier (SICOM) advanced a loan to the appel- lant-company. On default, SICOM issued notices u/s 29 of State Financial Corporations Act, 1951; and for taking 8 possession of the properties of the company and its sis- ter concern. Writ Petition filed against the notices were withdrawn by the appellant. ... Respondent No. 1 and others filed applications for c winding-up of the appellant-company. SICOM issued an- other notice u/s 29 of 1951 Act. Thereafter, took over pos- session of one of the factories of the appellant which was a going concern. Appellant, as per an agreement with an NRI Bank en- D tered into an arbitration proceeding, wherein the Tribunal opined that taking over the unit was illegal, and directed to handover the unit to the appellant. Execution petition was filed against the appellant-company and also its sis- ter concern. During the pendency of the execution peti- E tion, another arbitration proceeding was initiated, wherein a prayer was made to appoint a receiver. A proceeding. under Debt Recovery tribunal was also initiated by a Bank. A Receiver was appointed there. Appellant, in the meantime, on the basis of the award F of Board of Conciliation took possession of the unit from the SICOM. SICOM, thereafter filed application in the pend- ing execution proceeding seeking possession of the unit. Court granted status quo. G High court directed the appellant to deposit a par- ticular amount, failing which SICOM was given liberty to )> proceed with the statutory remedies for sale of the prop·· ,.. erty. In the meantime SICOM filed valuation report in re .. H spect of the unit which was prepared by a Public Sector MIS. BAKEMANS INDUSTRIES PVT. LTD. v. MIS. 707 NEW CAWNPORE FLOUR MILLS Organization. Finally SICOM was given liberty to proceed A with the sale. Thereafter respondent No. 4 filed application seek- ing permission to inspect the unit on the ground that they had negotiated with the appellant-company for taking over B the entire unit. Appellant also questioned the jurisdiction of the executing court to proceed with the matter of sale. The Court negating the contention, proceeded with the sale process. Respondent No. 4 offered its bid price. In the company applications, Provisional Liquidator c was appointed. However, on the application of SICOM, Company Judge directed not to disturb its possession. Executing Court transferred the petition pending before it, to the Company Judge. Company Judge did not find the offer of respondent No. 4 to be proper and gave D the appellant-company an opportunity to bring a better offer. Company Judge ac
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