DRT has exclusive jurisdiction to sell properties in a proceeding instituted by banks or financial institutions, but at the time of auction and sale, it is required to associate Official Liquidator.

COMPA.No.525 of 2013:

This application is filed by the Official Liquidator on behalf of the company in liquidation seeking to set aside the sale of the land, buildings, plant and machinery etc. of the company in liquidation by the State Bank of India (SBI) in favour of third respondent and for direction to the SBI to hand over the entire auctioned assets to the Official Liquidator.

2. It is stated in the affidavit filed by the Official Liquidator that CP.No.171 of 2011 seeking winding up of the petitioner company was allowed on 09.11.2012 and the Official Liquidator was appointed as the Liquidator of the company. The Official Liquidator, accordingly, took steps to secure possession of all assets of the company. The company’s office cum factory, which is subject matter of the present application, is said to be located at, IDA Gazulamandyam, Renigunta, Chittoor District hereinafter referred to as ‘asset’. It is stated that SBI is one of the secured creditors of the company in liquidation and that SBI along with other secured creditors exercised their rights under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) and took physical possession of the entire asset of the company in liquidation and deployed their security to protect it. Thereafter, the secured creditor had auctioned the property on 13.10.2012 under the SARFAESI Act and the highest bid of the third respondent was accepted.

3. In the meantime, the Official Liquidator made spot inspection of the asset comprising of an extent of Ac.27.63 cents with plant, machinery and building and took photographs and affixed a copy of the winding up order on the aid factory premises but he could not take physical possession. The second unit of the company is situated at B-29, SIPCOT Industrial Complex, Gumidipoondi, Tiruvalluru District, Tamil Nadu. On 29.01.2013, the Official Liquidator reached the second unit to take possession where the officials of the secured creditor were present and in their presence, the Official Liquidator is stated to have taken possession of that unit and appointed security guards of M/s. National Security Agency, Chennai.

4. The sale conducted by SBI under the SARFAESI Act in favour of the third respondent to the extent of unit I of the company in liquidator at Renigunta, Chittoor District, is, therefore, questioned in the present application on the ground that in terms of Section 456 of the Companies Act, all assets, records and books of the company under winding up proceedings vest with the Court and on winding up order, being passed, the same binds all the creditors. Thus, the SBI, which has auctioned the company’s asset during the pendency of the winding up proceedings is wholly unauthorized and contrary to the mandate of Section 456 read with Section 536 of the Companies Act, as the said secured creditor had not obtained any leave of the company Court to stay outside the winding up proceedings. It is also stated that winding up petition was filed on 07.07.2011 and the winding up order, which is ultimately passed on 09.11.2012, relates back to the date of the presentation of the petition and as such, the sale of the said assets by SBI under the SARFAESI Act, being without reference to the company Court, is sought to be declared as void. Pending consideration of this COMPA.No.525 of 2013, this Court, by order dated 30.04.2013 in COMPA.No.315 of 2013, directed status quo to be maintained.

5. The aforesaid application is strongly contested by the SBI as well as the third respondent/auction purchaser by filing separate counter affidavits.

6. SBI filed a counter wherein they have traced the manner in which the loans were availed by the company in liquidation from the bank and the equitable mortgage of its immovable property created in favour of the bank including that of the property, in question. The bank further states that it has invoked the provisions of the SARFAESI Act against t