Company under Securitisation Act is to be associated with Official Liquidator in auction sale.

(PRAYER: Original Side Appeals filed under Order 36 Rule II of O.S. Rules read with Clause 15 of the Letters Patent against the order of the learned single Judge dated 05.07.2005 made in Company Application Nos.712 and 713 of 2005 in C.P.No.17 of 2004.)

A.P. Shah, C.J.

Whether an Asset Reconstruction company formed under the Securitisation and Re-construction of Financial Assets and Enforcement of Security Interest Act, 2002, hereinafter referred to for brevity’s sake as ‘Securitisation Act’, is entitled to be associated in the process of the sale of assets of a company under liquidation along with the Official Liquidator is the question which falls for our consideration in these appeals.

2. The facts leading to this appeal are that SIV Industries Limited (formerly South India Viscose Limited) run into financial difficulties and was declared as a sick industrial company within the meaning of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter called SICA) by order dated 09.07.2002. Attempts at re-habilitate proved unsuccessful. BIFR ultimately recommended that SIV Industries Limited should be wound up under Section 20(1) of SICA vide order dated 25.09.2003. Before BIFR, ICICI requested permission to take possession of the assets under Section 20(4) of the SICA. Accordingly, BIFR appointed ICICI as selling agent to dispose of the properties of SIV Industries Limited under Section 20(4) of the Act and to deposit the sale proceeds to the concerned High Court for distribution under Section 529-A and other provisions of the Companies Act, 1956. However, it appears that ICICI did not take any steps to sell the property. Meanwhile, by order dated 28.04.2004 SIV Industries Limited was ordered to be wound up by the Company Court and the Official Liquidator was appointed as Liquidator. The Official Liquidator has taken possession of the assets and has sold certain movables on 21.02.2005 and 11.05.2005. The Official Liquidator has also got the valuation done of certain properties and an application for sale has been filed for the sale of two residential flats belonging to the company under liquidation.

3. The appellant Asset Reconstruction Company (India) Limited is a company formed under the Securitisation Act and has been registered under the Companies Act as required under Section 3 of the Securitisation Act and in terms of Section 5 of the said Act, the appellant-company steps into the shoes of the banks or financial institutions empowered to take possession of the assets of the borrower including the right of transfer by way of lease, assignment, sale and realize the sale proceeds of the secured assets and to take over the management of the business of the borrower. The majority of the creditors have given consent for the appellant-company to formulate the modalities of the sale and also to appoint the appellant as Chairman of the Assets Sale Committee along with the Official Liquidator to dispose of the assets of the company in liquidation. The appellant has moved Company Application Nos.712 and 713 of 2005 before the Company Court seeking to appoint the appellant as agent of the Official Liquidator to complete the modalities of the sale along with the Official Liquidator. By the impugned order, both the applications were rejected by the Company Court holding that once the winding up of the company is ordered the assets and effects of the company shall be deemed to be in the custody of the High Court from the date of the order of winding up. The Official Liquidator on whom the assets rest could only act as per the directions of the Company Court and cannot act independently. In such event when the power to deal with the property is entrusted to the Official Liquidator by the Company Court in its discretion the power of the appellant company by its incorporation for the purpose of reconstruction under the Securitisation Act, cannot override the power of the Official Liquidator