The right of the secured creditor to stay outside the winding up proceedings is not absolute and the court has the jurisdiction to impose conditions to ensure that the pari passu charge in favor of the workmen is enforced effectively.

( 1 ) THE appellant, the A. P. State Financial Corporation, (for short "the Corporation"), in O. S. A. No. 18 of 1994, has challenged the order passed on 10/12/1993, by the learned single judge (Sri S. Dasaradharama Reddi J.) of this court in C. A. No. 122 of 1993 in R. C. C. No. 6 of 1991 by which the following conditions were imposed : 1. The petitioner should undertake to discharge its liability due to the workers, if any, under section 529a of the Companies Act, 1956. 2. The petitioner shall intimate at least 10 days in advance before the date fixed for receipt of tenders, to the official liquidator about the proposed sale of the properties of the company, and 3. The petitioner shall also obtain the permission of the court before finalising the tenders.

( 2 ) C. A. No. 122 of 1993 was filed by the corporation under section 446 (1) of the Companies Act, 1956, read with sections 29 and 46b of the State Financial Corporations Act, 1951 (for short "the SFC Act"), read with rule 9 of the Companies (Court) Rules seeking permission to pursue its remedies under the State Financial Corporations Act, 1951, by staying outside the liquidation proceedings. The company is liquidation in this case is Nagarjuna Papers Limited.

( 3 ) SIMILARLY, in O. S. A. No. 19 of 1994, the corporation has challenged the order passed on 31/12/1993, by the learned single judge of this court (Sri S. Dasaradharama Reddi J.) in C. A. No. 97 of 1993, in C. P. No. 20 of 1990, by which permission was granted to the appellant-corporation to take proceedings under section 29 of the State Financial Corporations Act, 1951, subject to similar conditions as stated above. The company in liquidation in this case is Chandra Pharmaceuticals Limited.

( 4 ) SINCE the conditions imposed in both the orders in appeal are similar and the grounds urged for and against the legality of the same are materially and substantially the same, both the appeals are being disposed of by this common order.

( 5 ) IN O. S. A. No. 18 of 1994, the case of the corporation is that it sanctioned various term loans to the respondent-company on the strength of hypothecation of plant, machinery, land, etc. As on 31/07/1993, an amount of Rs. 1,24,27,132 was due from the respondent-company to the corporation. The second respondent commenced commercial production in the month of June, 1982, but it could not achieve the production target due to various reasons, apart from ineffective management of the company. Further, according to the corporation, at the request of the directors of the respondent-company, Canara Bank extended various reliefs in the year 1983 for the revival of the unit, however, the respondent-company did not revive its operations, and the working of the unit came to a grinding halt in December, 1984, and, therefore, the Canara Bank file O. S. No. 1155 of 1990, on the file of the Second Additional Judge, City Civil Court, Hyderabad.

( 6 ) IN the meantime, by an order passed on 28/09/1992, this court directed the official liquidator to take over the assets and liabilities of the borrower company in R. C. C. No. 6 of 1991. The corporation therefore, took steps to seek the permission of this court to stay outside the liquidation proceedings.

( 7 ) IT is further the case of the corporation that two other financial institutions along with the appellant-corporation were having first charge over the assets of the borrower company in respect of the term loan sanctioned by them. According to the corporation, since the financial facilities granted to the borrower company were fully secured, the appellant corporation was entitled to realise the outstanding dues by proceedings under section 29 of the state Financial Corporations Act, 1951, without waiting for the result of the winding up proceedings. Further, according to the Corporation, if the current state of affairs of the borrower company persisted indefinitely, the corporation would not be able to realise its dues, and, there