A secured creditor may claim a pari-passu charge on a company's assets for additional financial support provided at the direction of the BIFR, even if the other secured creditors did not give their consent, provided that the charge was properly registered.

Ashim Kumar Banerjee, J.

1. Incident That Gave Rise To The Present Litigation:

Basant Paper Mills Limited, subsequently known as Manjusa Paper Mills Limited obtained credit facilities from various financial institutions including Syndicate Bank and IDBI. The claim of the Syndicate Bank was secured by mortgage of property restricted to Rs. 20 lakhs. IDBI, IFCI, LIC and other financial institutions were also having pari-passu charge over the assets. The company became sick and was referred to the Board of Industrial and Financial Reconstruction (BIFR). BIFR formulated a scheme and asked the Syndicate Bank and Indian Overseas Bank to invest further sums to revamp the companys financial position. Syndicate Bank and Indian Overseas Bank thus invested further sums approximately Rs. 4.68 crores on condition that they would have pari-passu charge covering the further financial support that the other financial institutions should have agreed. The BIFR accordingly approved the scheme. Syndicate Bank would claim, they registered the charge covering the increased financial support that they gave to the company. The company also agreed to such proposal of the Bank, Bank accordingly registered its charge with the Registrar of Companies covering their increased financial stake. The company ultimately did not survive. This Court passed an order of winding up on July 16, 1997. The Syndicate Bank also obtained a decree from the Debt Recovery Tribunal of Delhi to the extent of Rs. 28,35,31,238/- along with the interest at the rate of 11 per cent per annum. The Official Liquidator sold the assets of company for a sum of Rs. 4.01 crores. The present dispute would start from there. Official Liquidator invited claims from the creditors. By an order dated November 30, 2007, the Official Liquidator admitted the claim of the Bank to the extent of Rs. 15,46,60,497. Nobody objected to such settlement. IFCI also got their claim settled to the extent of Rs. 4.4 crores as a preferential claim. Disbursements were also made on ad hoc basis. Syndicate Bank, however, did not receive any sum, as claimed by them. IDBI subsequently filed an application being C.A. No. 392 of 2008 without any notice to the Syndicate Bank wherein the learned Company Judge set aside the earlier settlement. We find from the record, IDBI got ad hoc payment of Rs. 50 lakhs, IFCI Rs. 20 lakhs and Standard and Chattered Bank Rs. 15 lakhs. However, the Syndicate Bank was not paid a single furthering as would appear from the page 180. The Official Liquidator also could not give any plausible explanation as to how those payments were made to the exclusion of Syndicate Bank. The Official Liquidator in its report would contend, the Bank did not make any claim to the extent, it had any charge on the land and building. Surprisingly, the learned advocate appearing for the other financial institutions namely, IDBI, IFCI appeared before the learned Company Judge and pointed out that the claim of the Syndicate Bank over the security was restricted to Rs. 20 lakhs that was not brought to the notice of the Official Liquidator. His Lordship set aside the earlier settlement and directed resettlement. The order was passed in absence of the Bank, no notice was ever served upon the Syndicate Bank. The Bank came to know from the letter of the Official Liquidator and immediately they objected to the same. The Court also recorded foul play as would appear from the order dated March 19, 2010 appearing at pages 327-330. The learned Judge directed an investigation to be made. Syndicate Bank was also permitted to take appropriate steps in the matter. The matter appeared before the other Company Judge on change of determination. Vide order dated September 2, 2011, the learned Company Judge directed fresh determination after hearing all the secured creditors giving a reasoned decision. Accordingly, the Official Liquidator conducted a fresh adjudication and rejected the claim of the Bank beyond Rs. 20 lakhs.