K. Ravichandra Babu, J.

1. Company Application No. 41 of 2016 in C.P. No. 413 of 2015, is filed seeking for a direction to the Official Liquidator to hand over the physical possession of the schedule property to the applicant. The case of the applicant is as follows:

(a) The applicant bank has been providing financial assistance from time to time to the second respondent company since 2007 and the original limit sanctioned was Rs. 8 crores. The said financial assistance was periodically renewed, however, by reducing the limit to Rs. 6.77 crores through sanctioned letter dated 14.02.2013. As security for the said facilities, the respondents 4 to 6 herein in the year 2007, had mortgaged their personal immovable properties measuring an extent of 3.26 acres together with building thereon in R.S. Nos. 1439/3, 1440/2 and 1440/3A situate at Veerapandi village, Theni Taluk. The fourth respondent also mortgaged the property measuring 52 cents in S. No. 1440/1B2 situate at Veerapandi village by depositing the original title deeds with the applicant. The said mortgages created by the respondents 4 to 6 were extended by them in favour of the applicant from time to time. The Memorandum of Deposit of Title Deeds dated 17.02.2014 executed in connection with extension of the above said mortgage was duly registered before the Sub Registrar, Theni as Doc. No. 1143/2014. The second respondent company has been operating and carrying its factory activities in the aforesaid mortgaged properties and they were only the personal assets of the respondents 4 to 6 herein. The second respondent company had also hypothecated various machineries by executing deed of hypothecation, last of which was made on 22.03.2013. The above creation of charge over the movable assets was also duly registered before the Registrar of Companies. Therefore, the applicant has exclusive first charge over the above said land and building owned by the respondents 4 to 6 and also on the companys movable assets. The schedule given in the judges summon are the above referred immovable property and movable assets.

(b) The second respondent company and the mortgagors viz., respondents committed default in the repayment of the loan. Hence, the applicant was forced to initiate recovery proceedings against the secured assets and the mortgagors. A notice under Sec. 13(2) of the SARFAESI Act was issued by the applicant on 28.02.2014. As they failed to respond, the applicant issued a symbolic possession notice on 28.11.2014, which was affixed on the secured asset and also have been duly published in the newspaper as per the provisions contemplated under the above said Act and Rules. The applicant in order to obtain physical vacant possession of the immovable properties mortgaged, filed an application before the District Magistrate, Theni on 18.05.2015 under Sec. 14 of the SARFAESI Act and also filed a recovery application before the Debts Recovery Tribunal, Madurai in O.A. No. 142 of 2015, which is pending.

(c) Without considering the above said facts and circumstances, the Official Liquidator has taken the physical possession of the entire secured assets in pursuant to a company petition filed by the third respondent herein, who is unsecured creditor for winding up of the second respondent company. When the applicant received a letter dated 19.11.2015 from the first respondent informing about the order passed by this court on 01.10.2015, appointing the Official Liquidator as the Provisional Liquidator of the second respondent company, a reply was sent on 25.11.2015 to the Official Liquidator informing about the steps taken by the applicant under the provisions of the SARFAESI by also enclosing all the relevant notices issued under those proceedings. However, the Official Liquidator had taken possession of the factory premises of the second respondent on 25.11.2015.

(d) When the subject matter immovable properties and movable properties assets are mortgaged in favour of the applicant and thus, they being the secured creditors, the Official Liquidator cannot take physical possession of the same as they do not belong to the second respondent company at all. Therefore, the present application is filed for handing over the physical possession of the subject matter properties to the applicant to take further steps to sell the secured assets under SARFAESI proceedings to realise the present outstanding sum of Rs. 7,51,66,900.87/ - as on 01.12.2015. The applicant bank being a secured creditor is entitled to wind up the outside proceedings and empowered to enforce the security interests.

2. The Official Liquidator filed a report dated 10.02.2016, wherein it is stated as follows:

This Court by an order dated 01.10.2015 in C.P. No. 413 of 2014, wound up the said Company and the Official Liquidator has become the Provisional Liquidator. The company in provisional liquidation is located at No. 87, Cumbum Road, Theni and the officials of the Official Liquidator proceeded to the said address and they have taken possession of the company in provisional liquidation. As per the records available with the Registrar of Companies, there are two secured creditors of the company in liquidation viz.,

a) M/s. IDBI Bank Ltd. Chennai -15,

b) M/s. IDBI Bank Ltd., Madurai -1.

The assets of the company in provisional liquidation so taken possession by the Official Liquidator consists of machinery and other movables together with land and building. The value of the properties will fetch more value than the due amount payable to the applicant bank which is only to the extent of Rs. 7,51,66,900.87/ - as on 01.12.2015 by the company in liquidation. Therefore, this court can permit the Official Liquidator to inventorize and value the entire movable and immovable assets of the company in liquidation including hypothecated assets of the applicant bank separately by engaging an approved valuer, as the physical possession of the properties is already vested with the custody of this court under the control of the Official Liquidator.

3. By reporting so, the Official Liquidator prayed for the following directions:

(a) To take this report on record.

(b) To permit the Official Liquidator to engage an approved valuer on the panel of this office to inventorize and value the entire movable and immovable of the company in provisional liquidation including hypothecated assets of the applicant bank herein.

c) In case this Honble High Court is inclined to consider the relief sought for by the applicant, the applicant may please be directed to comply/fulfill the following issues: -

1) To submit all the proposal for sale of assets to the Official Liquidator and the details of valuation obtained for the conduct of the sale for the purpose of determining the upset price.

2) To direct the applicant to bear and pay all the expenses incurred by the Official Liquidator including the security expenses to protect the assets of the company in liquidation.

3) To direct the applicant to place the details of their claim and all the expenses incurred before this Honble court, before making appropriations towards their outstanding dues.

4) To direct the applicant to remit to the Official Liquidator priority payments such as EPF dues and workmen dues in pro rata as per pari -passu with secured creditors under the 529/529A of the Companies Act, 1956.

5) To direct the applicant to deposit surplus proceeds of sale to the Official Liquidator."

4. A reply affidavit was filed by the applicant to report of the Official Liquidator wherein it is stated as follows: The report of the Official Liquidator confirmed that only the applicant bank is the Secured Creditor and however, he has taken possession of the secured assets inspite of a letter dated 23.11.2015 given by the applicant informing about the action taken under SARFAESI. The Official Liquidator has no power to take possession under such circumstances. As per the recent decision of the Apex Court reported in : 2015 SC 1011, Pegasus Assets Reconstruction P. Ltd. v/s. M/s. Haryana Concast Limited & Another, a Secured Creditor has right to enforce its security interest without intervention of the Court or Tribunal. If at all, there is any grievance by the borrower, which is the Company in liquidation and has been replaced by the liquidator, they have to seek redressal of grievance under Sec. 17 and 18 of the SARFAESI Act. In the event of sale, the applicant bank is willing to share the sale proceeds of the movable assets as per Sec. 529(A) of the Companies Act read with Sec. 13(9) of the SARFAESI Act, the Official Liquidator has no claim either over the immovable properties or its sale proceeds which being the personal assets of the guarantors.

5. A counter affidavit is filed by the second respondent company wherein it isstated as follows:

The company was unable to repay the principal and servicing the interest from February, 2014 onwards and IDBI Bank declared their account as NPA and subsequently, issued SARFAESI notice on 28.08.2014 and also taken symbolic possession on 28.11.2014. Subsequent to the filing of the winding up petition before this court and ordering appointment of the Provisional Liquidator, the Official Liquidator has taken possession of the properties on 26.11.2015. The present company petition was initiated by an unsecured creditor while the secured creditor has knocked the doors of the Debts Recovery Tribunal.

6. Company Application No. 1251 of 2015 in C.P. No. 414 of 2014 is filed to permit the applicant Bank to take recovery measures to sell the secured properties independently belonging to the second respondent company and stand outside the winding up proceedings to be initiated by the Official Liquidator.

7. The case of the applicant is as follows:

a) The second respondent company availed cash credit, Term loans, Export packing credit, WC term loan, Corporate term loans, FITL, Letter of Credit, Bank Guarantee facilities aggregating to the tune of Rs. 271.68 crores which includes the loan liability of consortium member banks viz., SBI, Karur Vysya Bank Ltd., Axis Bank, IDBI Bank Ltd., and executed the loan security documents on 22.10.2012. To secure the repayment of loan, the second respondent company had executed loan security documents and memorandum relating to deposit of title deeds confirming the creation of equitable mortgage in favour of the consortium banks. The second respondent had also acknowledged the subsistence of the loan liability by executing the confirmation of balances and revival letter and other documents from time to time. The second respondent also filed form 8 before the Registrar of Companies thereby confirming the charge created on the movable and immovable securities of the second respondent company. Subsequent to the availing of the loan facilities, the second respondent has not paid the principal and interest regularly inspite of several demands and reminders. Thus, the loan account had become NPA on 31.12.2011. The applicant bank initiated SARFAESI proceedings against the second respondent under Sec. 13(2) of the SARFAESI Act on 05.02.2015 and possession notice under Sec. 13(4) of the said Act on 29.04.2015. Accordingly, symbolic possession of the secured property was taken. As on 31.05.2015, the second respondent is liable to pay a sum of Rs. 74,81,32,797.77 together with accrued interest.

b) The first respondent herein as an unsecured creditor filed the above company petition for winding up. The applicant bank has first charge over the immovable property of the second respondent company and the first respondent being an unsecured creditor can recover its outstanding only after satisfying the claim of the applicant bank. Therefore, the applicant may be permitted to take recovery measures to sell the secured properties independently and outside the winding up proceedings initiated by the first respondent. The applicant bank will keep informed of the sale proceedings to the official liquidator and undertake to pay the statutory dues as may be directed by this court.

8. The official liquidator filed a report dated 10.02.2016 wherein it is stated as follows:

This court by its order dated 01.10.2015, appointed the Provisional Liquidator with direction to take charge of the assets of the company. Accordingly, the Official Liquidator has taken possession of the assets and books of accounts of the company on 01.12.2015. The company in provisional liquidation is located at Mariammankovilpatty, Theni and possession of the company was taken in the presence of representatives of the secured creditors viz., State bank of India, Karur Vysya Bank and petitioning creditor. As per the records available with the Registrar of Companies, the following are the secured creditors of the company in liquidation:

a) Karur Vysya Bank Limited,

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b) State Bank of India

c) IDBI Bank Limited.

The value of the properties will fetch more value than the due amount payable to the applicant bank which is only to the extent of Rs. 74,81,32,797.77 as on 31.05.2015. During the course of taking possession of the company in provisional liquidation, the authorised representatives of the Ex -Managing Director of the company in provisional liquidation informed that the company in liquidation is also having the following units located its nearby area.

1. Shri Renuga Textiles Ltd., Bodi Road, Theni.

2. Shri Renuga Textiles -Yarn Dyeing Division at Bodi Road.

3. Shri Renuga Soft & Towels - Unit II, Bodi Road.

4. Shri Renuga Textiles - Power Plant -I, Bodi Road.

5. Shri Renuga Soft & Towels - Processing Unit at Bodi Road.

6. Shri Renuga Soft & Towels - Fabric Division, Bodi Road.

7. Shri Renuga Textiles Ltd., Unit -II, Thappakundu.

8. Shri Renuga Soft Towels Unit -I, Boothipuram Road, Theni.

9. Shri Renuga Soft Towels -Spinning Division, Bodi Road, Theni.

10. By reporting so, the Official Liquidator sought the following directions:

"a) To take this report on record.

b) To appoint a Sale Committee to sell all the movable and immovable properties of the company in provisional liquidation including hypothecated assets of the applicant bank herein after getting a valuation by engaging the services of an approved valuer and to direct the sale committee to remit the realization to the Official Liquidator upon sale of assets.

c) In case this Honble High Court is inclined to consider the relief sought for by the applicant, the applicant may please be directed to comply/fulfill the following issues: -

1) To submit all the proposal for sale of assets to the Official Liquidator and the details of valuation obtained for the conduct of the sale for the purpose of determining the upset price.

2) To direct the applicant to bear and pay all the expenses incurred by the Official Liquidator including the security expenses to protect the assets of the company in liquidation.

3) To direct the applicant to place the details of their claim and all the expenses incurred before this Honble court, before making appropriations towards their outstanding dues.

4) To direct the applicant to remit to the Official Liquidator priority payments such as EPF dues and workmen dues in pro rata as per pari -passu with secured creditors under the 529/529A of the Companies Act, 1956.

5) To direct the applicant to deposit surplus proceeds of sale to the Official Liquidator."

9. The second respondent company filed a counter affidavit wherein it is stated as follows:

The company has been severely impacted due to the raw materials purchase at higher prices and since the projected cash flows do not support the servicing of the loans, the company has to consider the restructuring of the debts. The CDR mechanism was implemented and unfortunately the account was slipped into NPA during April 2014 due to financial crunch. The company was unable to repay the principal and servicing the interest from January 2014 onwards and all the lenders viz., SBI, IDBBI, KVB & AXIS bank has declared account as NPA and subsequently issued SARFAESI notice on 05.02.2015 and taken symbolic possession on 28.04.2014. In pursuant to the company petition filed by one of the creditor viz., the company petitioner herein, the Official Liquidator was appointed as Provisional Liquidator and he has taken possession on 01.12.2015. The Banks as the Secured Creditors invoked the proceedings under Securitization Act and the same is pending before the Debts Recovery Tribunal.

10. Learned counsel appearing for the respective applicants after reiterating the contentions raised in the affidavit filed in support of such applications, have submitted that both the applicants being the secured creditors are entitled to stand outside the winding up proceedings and deal with the properties secured to them by way of mortgage by resorting to the proceedings under the SARFAESI Act before the Debts Recovery Tribunal for recovery of the due payable by the company in liquidation.

11. In support of their submission, they relied on the recent decision of the Apex Court reported in : 2015 SC 1011, Pegasus Assets Reconstruction P. Ltd. v/s. M/s. Haryana Concast Limited & Another.

12. On the other hand, the learned Official Liquidator contended that though the applicants are admittedly secured creditors, since the interest of other creditors and employees of the Company, etc., is also involved, instead of granting the relief to the applicants as sought for, this court can appoint a Sale Committee after obtaining valuation report from the approved valuers and sell the property through such committee so that interest of parties can be protected. He also submitted that since he was appointed as Provisional Liquidator, all the assets of the company in liquidation vested with the provisional liquidator.

13. The learned counsel appearing for the respondent company in liquidation while sailing with the submissions of the applicant banks further submitted that the applicants being the secured creditors have priority over the unsecured creditors who have filed the present company petition.

14. Heard both sides and perused the materials placed before this Court.

15. The point for consideration in these applications is as to whether the applicants, being the secured creditors of the company in liquidation, are entitled to the relief as sought for in these applications.

16. I have already extracted the pleadings of the respective parties. Perusal of the same would show that there is no dispute to the facts and circumstances with regard to the availing of loan from these applicants by the company in liquidation and creation of charge over the respective properties in favour of the applicants herein. It is also an admitted fact that these applicants are secured creditors. It is also an admitted fact that these company petitions are filed by two separate unsecured creditors against the company in liquidation. Based on these admitted position of facts, the remaining question that has to be considered and decided is a s to whether these applicants, being the secured creditors, are entitled to stand outside the winding up proceedings and proceed against the properties secured by ay of creation of charge over the same independently under the SARFAESI proceedings for realization of their dues.

17. Answering the above said question is not so difficult in view of the settled proposition of law by the Honble Supreme Court in its recent decision reported in :

2015 SC 1011, Pegasus Assets Reconstruction P. Ltd. v/s. M/s. Haryana Concast Limited & Another, wherein at paragraph Nos. 24, 25 and 34 as follows:

"Since we have held earlier in favour of views of Delhi High Court, it is not necessary to burden this judgment with the case laws which support that view and have been noted by the High Court. We are in agreement with the submissions advanced on behalf of respondent Kotak Mahindra Bank as well as respondent No. 2 that there is no lacuna or ambiguity in the SARFAESI Act to warrant reading something more into it. For the purpose it has been enacted, it is a complete code and the earlier judgments rendered in the context of SFC Act or RDB Act vis -vis the Companies Act, cannot be held applicable on all force to the SARFAESI Act. There is nothing lacking in the Act so as to borrow anything from the Companies Act till the stage the secured assets are sold by the secured creditors in accordance with the provisions in the SARFAESI Act and the Rules. At the post sale stage, the rights of the persons or parties having any stake in the sale proceeds are also taken care of by sub -section (9) of Sec. 13 and its five provisos (not numbered). It is significant that as per sub -section (9) a sort of consensus is required amongst the secured creditors, if they are more than one, for the exercise of rights available under sub -section (4). If borrower is a company in liquidation, the sale proceeds have to be distributed in accordance with the provisions of Sec. 529A of the Companies Act even where the company is being wound up after coming into force of the SARFAESI Act, if the secured creditor of such company opts to stand out of the winding up proceedings, it is entitled to retain the sale proceeds of its secured assets after depositing the workmens dues with the liquidator in accordance with the provisions of Sec. 529A of the Company Act. The third proviso is also meant to work out the provisions of Sec. 529A of the Companies Act, in case the workmens dues cannot be ascertained, by relying upon communication of estimate of such dues by the liquidator to the secured creditor, who has to deposit the amount of such estimated dues with the liquidator and then it can retain the sale proceeds of the secured assets. The other two provisos also are in aid of the liquidator to discharge his duties and obligations arising under Sec. 529A of the Companies Act. Thus, it is evident that the required provisions of the Companies Act have been incorporated in the SARFAESI Act for harmonizing this Act with the Companies Act in respect of dues of workmen and their protection under Sec. 529A of the Companies Act. In view of such exercise already done by the legislature, there is no plausible reason as to take recourse to any provisions of the Companies Act and permit interference in the proceedings under the SARFAESI Act either by the Company Judge or the liquidator. As noted earlier, the Official Liquidator as a representative of the borrower company under winding up has to be associated, not for supplying any omission in the SARFAESI Act but because of express provisions therein as well as in the Rules. Hence the exercise of harmonizing that this Court had to undertake in the context of SFC Act or the RDB Act is no longer warranted in respect of SARFAESI Act vis -vis the Companies Act.

25. The aforesaid view commends itself to us also because of clear intention of the Parliament expressed in Sec. 13 of the SARFAESI Act that a secured creditor has the right to enforce its security interest without the intervention of the court or tribunal. At the same time, this Act takes care that in case of grievance, the borrower, which in the case of a company under liquidation would mean the liquidator, will have the right of seeking redressal under Ss. 17 and 18 of the SARFAESI Act.

..34....The judgment and order of the Delhi High Court is affirmed by holding that powers under the Companies Act cannot be wielded by the Company Judge to interfere with proceedings by a secured creditor to realize its secured interests as per provisions of the SARFAESI Act."

18. From the above categorical pronouncement made by the Apex Court, it is crystal clear that a secured creditor has right to enforce its secured interest independently without the intervention of the court which includes the company Court. In other words, it is evident from the above pronouncement that the secured creditors can always stand outside the winding up proceedings and resort to an independent proceedings in a manner known to law to recover the dues in respect of the properties given as security and by creating charge by the company in liquidation. Their right to do so, in fact, need not have a sanction or authority of the Court or Tribunal, as such right is already conferred on them, as the first charge holder of the property so secured. Admittedly, in these cases, those properties referred to in these applications are exclusively created as charge only in favour of the applicants as secured creditors and the present company petitioners are admittedly unsecured creditors. Therefore, it goes without saying that these applicants as secured creditors certainly will have preference over the claim of the unsecured creditors in respect of the property so secured. Consequently, the property so secured by creating charge in favour of these applicants ought not to have been taken possession by the Official Liquidator, if such fact was already brought to his knowledge.

19. In so far as the Comp. Application No. 41 of 2016 is concerned, it is seen that except the movable machineries, the immovable properties shown in the said applications are belonging to the Directors of the Companies in their individual capacity and that they have been mortgaged by them in favour of the applicant bank. In any event, when admittedly those properties were mortgaged by creating charge over the same in favour of these applicant banks, the claim of the present applicants is having every justification.

20. No doubt, it is represented by the learned Official Liquidator that instead of handing over the properties to these secured creditors, a Sale Committee may be appointed for selling the property, so that interest of all the creditors and other employees of the company will be protected.

21. When it is the categorical pronouncement of the Apex Court that the secured Creditor can stand outside the winding up proceedings and exercise their right to recover the debt independently and that they can do so without the intervention of the Company Court or Tribunal, the effect of such pronouncement would only lead to the conclusion that the Company Court can also never interfere or intervene in respect of the proceedings either initiated or sought to be initiate d by the secured creditors independently for recovery of the dues under the SARFAESI proceedings. Any such direction as sought for by the Official Liquidator would only result in indirect interference with such independent proceedings, right of which has been conferred upon the secured creditors by the Apex Court in the above said decision. Therefore, this court rejects the prayer of the Official Liquidator to eng age an approved valuer to value the properties in dispute and also to appoint Sale Committee. At the same time, this Court cannot brush aside a particular contention raised by the Official Liquidator with regard to the valuation of the property stating that they may fetch more than the amount due and payable to the respective applicant Banks. In fact, in the reply affidavit filed by the applicant in C.A. No. 41 of 2016, it is stated that the applicant bank is willing to share the sale proceedings of the movable assets as per Sec. 529(A) of the Companies Act read with Sec. 13(9) of the SARFAESI Act. It is also stated that the Official Liquidator has no claim over the immovable properties or its sale proceeds being the personal assets of the guarantors. At this juncture, it is useful to note again to the above decision of the Apex Court (cited supra) wherein at paragraph No. 25, it has been stated that in case of grievance by the borrower which would mean the Official Liquidator in the case of company under liquidation, they have right of redressal seeking under Ss. 17 and 18 of the SARFAESI Act. Therefore, I am of the firm view that the Official Liquidator has to resort to the remedies available under such law by making appropriate applications under Ss. 17 and 18 of the SARFAESI Act, by seeking appropriate relief before the Debts Recovery Tribunal. When such remedies are available to the Official Liquidator, as has been held by the Apex Court, I do not think that any such direction need to be given in these applications, as sought for by the Official Liquidator. It is needless to state that the proceedings contemplated for winding up of the companies under the Companies Act is not with the sole object of recovering the dues by the creditors of Company. If that be the object, there would be no difference between the winding up proceedings by the Company Court and the money suit filed before the Civil Court for recovering the dues. On the other hand, the winding up proceedings itself is a scheme through which the company in liquidation would be set at rest finally, of course, during such process, by taking control of the assets of the company and meeting out the claim/demand of the creditors, employees, statutory authorities, etc., either in full or in part, depending upon the funds available from the assets, which are not otherwise secured by creating charge over the same by lawful means by any of the creditor. Therefore, the unsecured creditors who knock the doors of the Company Court cannot seek protection in respect of a particular asset of the company, if such asset is already created as a charge for the loan advanced by another creditor, whose position, undoubtedly being the secured creditor, is better than that of unsecured creditors. Therefore, these two applicants being the secured creditors have rightly filed these applications and entitled to succeed. Accordingly, both the applications are allowed and the Official Liquidator is directed to release the subject matter properties, which were taken possession by him, within two weeks from the date of receipt of copy of this order.

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