The main legal point established in the judgment is that the second charge cannot be considered equivalent to the first charge for the purpose of pari passu distribution of dues under the Companies Act, 1956 and the Sick Industrial Companies (Special Provisions) Act, 1985.

JUDGMENT

Sanjeev Narula, J.

CO.APPL. 1313/2018 (on behalf of Dena Bank/ secured creditor seeking appropriate directions)

1. Despite explicit court directives issued on 10th July 2018 instructing the Official Liquidator ("OL") to disburse payments towards the admitted claims of workmen, the situation remains largely unchanged with a majority of such claims yet to be settled. The key contributor to the present of affairs is the above-captioned application filed by Dena Bank,^{1[Dena Bank merged with Bank of Baroda on 01 April 2019 and the merged entity is presently known as Bank of Baroda. For convenience, Applicant is hereinafter referred to as Dena Bank.]} a secured creditor and the Lead Bank of a consortium of banks^{2[Kotak Mahindra Bank, Indian Overseas Bank, Syndicate Bank, Canara Bank, and JP Morgan.]} ("Consortium"). Dena Bank's instant application pertains to Consortium's second charge on certain assets belonging to the company in liquidation i.e., Jhalani Tools India Limited ("JTIL" or "Company"). They assert that this second charge ranks at par with their first charge. Consequently, this judgment will address Dena Bank's aforenoted contention, but at the same time also deal with the claims of interest on outstanding dues, presented by the Company's workmen, while contesting Dena Bank's afore-noted prayer.

Course of events leading to the present deadlock

2. JTIL was engaged in the business of manufacturing hand tools and other steel and iron implements, with six factories located in four different locations - three in Faridabad and one each in Aurangabad, Jalna and Kundli. Over time, all these units/ factories ceased operations. Tata Iron and Steel Company Limited ("TISCO") sanctioned a working capital loan of Rs. 9 crores to the Company and failure to repay the same led to the filing of the present petition. In parallel, JTIL had gone before the Board for Industrial and Financial Reconstruction ("BIFR") under Case No. 288/1987 for revival of the Company as a `sick industrial company' as per Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA").

Proceedings before the BIFR

3. During the BIFR proceedings, a rehabilitation scheme was approved in 1987. Pursuant to this scheme, two financial institutions, Industrial Bank of India ("IDBI") and Industrial Investment Bank of India ("IIBI") (together, "Financial Institutions" or "FIs") sanctioned a term loan ("TL") of Rs. 1 crore and 1.56 crores respectively. In addition to this, as part of the said scheme, from March 1988 onwards, the Consortium sanctioned/ released various facilities including TLs/ working capital term loans ("WCTL") of approx. Rs. 5.74 crores to the Company. In 1991, the Company extended mortgages that were created in 1983 in favour of other banks, namely, SICOM Ltd., Punjab & Sind Bank and Bank of America. Further, in 1993, the Consortium approved additional facilities such as cash credit/ overdraft/ packing credit/ bills purchased/ IPRS claim bills purchase/ letter of credit etc. with an aggregate limit of approximately Rs. 32 crores.

By 1998, the Company had settled all outstanding amounts owed to SICOM Ltd., Punjab & Sind Bank and Bank of America. As a result, SICOM Ltd. returned the original title deeds of various immovable properties of the Company that had been mortgaged. These deeds were subsequently transferred to Dena Bank to secure the outstanding loans.

Revival of proceedings before the Company Court

4. In view of BIFR proceedings, hearings in the present company petition were indefinitely postponed. On 17th July 2000, the BIFR recommended winding up of JTIL under Section 20(2) of SICA. This reference was registered as CO. PET. 18/2001 and was consequently listed alongside the instant petition. Subsequently, on 01st March 2003, the instant petition was revived, and the OL attached with this Court as appointed as Provisional Liquidator vide order dated 18th March, 2003. The OL took over the custody and assumed possession of various propert