HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B. Company Application No. 12/2018 M/s Karnav Leather Chemicals Ltd ----Petitioner Versus Provisional Liquidator And Ors ----Respondents Connected With S.B. Company Petition No. 29/2003 For Petitioner(s) : Mr. K.K. Sharma, Sr. Adv. With Mr. Amol Vyas For Respondent(s) : Mr. Atma Sah, OL Mr. Vijay Choudhary with Mr. Ransingh Gurjar Mr. Vikash Jain with Mr. Shashank Jain HON'BLE MR. JUSTICE MAHENDAR KUMAR GOYAL

Order

08/08/2025 On last date, i.e., 25.07.2025, learned counsel for the respondent-Canara Bank, after arguing for some time to establish that every party including it intended to create pari passu charge, prayed for and was granted time to demonstrate that mere intention of the parties to create the pari passu charge is sufficient for its creation. Today, he fairly admits that he could not find such law/citation. Rather, learned counsel for the applicant, relying upon a Division Bench judgment of the Hon’ble Telangana High Court in the case of Andhra Pradesh State Financial Corporation, Mahabubnagar vs. Kotak Mahindra Bank, Hyderabad and Others: AIR 2019 Telangana 53, would submit that for creation of the pari passu charge, execution of the contract between the parties is necessary in absence whereof, mere willingness of the parties to create such charge is of no consequence. He, therefore, prays that the Official Liquidator may be directed to reject claim of first charge by the respondent- Canara Bank over the immovable properties (land and building) of the company in liquidation.

Heard. Considered.

In the case of Andhra Pradesh State Financial Corporation, Mahabubnagar (supra), Division Bench of the Telangana High Court, relying upon the judgment of the Hon’ble Supreme Court of India in the case of ICICI Bank Ltd. vs.

SIDCO Leathers Ltd.: (2006) 10 SCC 452, held as under:

“36.While dealing with the inter se rights of priorities between two sets of secured creditors under Section 529-A of the Companies Act, the Supreme Court held in ICICI Bank Ltd., v. SIDCO Leathers Ltd. (2006) 10 SCC 452: (AIR 2006 SC 2088) that under Section 48 of the Transfer of Property Act, the claim of the first charge holder will prevail over the claim of the second charge holder. The Court went on to point out that such a valuable right, having regard to the legal position as obtaining in common law as also under the provisions of the Transfer of Property Act, could not be taken away even by the provisions of the Companies Act. The Court pointed out that the deprivation of a legal right existing in favour of a person cannot be presumed even while construing a statute. Therefore, the expression of a willingness, by their letter dated 26.07.2010 to cede a first pari-passu charge over the properties, will not automatically result in the creation of the pari-passu charge for the 1st respondent along with the petitioner. Just as the petitioner has had a pari-passu agreement with the 2nd respondent bank, executed on 24.11.2006, there must have been an agreement constituting a special contract between the petitioner and the 1st respondent, for creating a first pari-passu charge in favour of the petitioner. Admittedly, no pari-passu agreement was entered into between the petitioner and the 1st respondent, as was done between the petitioner and the 2nd respondent bank. Therefore, the mere execution of a Memorandum of Entry by the borrower or the 2nd respondent in favour of the 1st respondent or a mere expression of no- objection by the petitioner vide their letter, dated 27.06.2010, is not sufficient to create a first pari-passu charge in favour of the 1st respondent. The registration of the charge with the Registrar of Companies under Section 125 of the Companies Act, 1956 is actually a formality that follows the creation of the first pari-passu charge. The filing of Form No.8 and the registration of a charge, is a procedural formality that follows the actual creation of a charge. The entry in the R