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CASE NO.:

Appeal (civil) 2332 of 2006

PETITIONER:

ICICI BANK LTD.

RESPONDENT:

SIDCO LEATHERS LTD. & ORS.

DATE OF JUDGMENT: 28/04/2006

BENCH:

S.B. Sinha & P.K. Balasubramanyan

JUDGMENT:

J U D G M E N T

(Arising out of S.L.P. (C) No.23360/2004)

S.B. SINHA, J :

Leave granted.

Interpretation of Sections 529 and 529-A of the Companies Act, 1956

is involved in this appeal, which arises out of a judgment and order dated

4.8.2004 passed by the High Court of Judicature at Allahabad in Special

Appeal No.698 of 2002 affirming the judgment and order dated 24.5.2002

passed by a learned Singh Judge of the said Court.

The appellant herein is a Banking Company. It, along with Industrial

Finance Corporation of India (IFCI) and Industrial Development Bank of

India (IDBI), advanced the following amounts by way of loan to Respondent

No.1 with a view to give financial assistance to it in setting up a plant for

manufacture of leather boards:

a) IDBI Rupee Term Loans of Rs.193.2 lacs and

Foreign Currency loan of Italian Lira 1380900,000.

b) IFCI Rupee Term Loans of Rs.196.74 lacs,

Central Investment subsidy of Rs.25 lacs and Foreign

Currency loan of DM 2127,565.

c) ICICI Rupee Term Loans of Rs.96.61 lacs and

Foreign Currency loan of Italian Lira 1380900,000.

The Punjab National Bank (PNB) also advanced a loan to the said

Respondent for providing working capital funds. The 1st Respondent, in

order to secure the amounts lent to it, created a first charge in favour of the

appellant along with other financial institutions, i.e., Respondent Nos.3

(IFCI) and Respondent No.4 (IDBI) herein by way of equitable mortgage by

deposit of title deeds of its immovable property. A second charge was

created in favour of PNB by way of constructive delivery of title deeds

remaining in deposit with Respondent No.3 herein, clearly indicating that

the charge in favour of the latter was subject and subservient to charges in

favour of IFCI, IDBI and ICICI.

On an application for winding up of the 1st Respondent made before

the High Court of Judicature at Allahabad, an order was passed on

16.12.1993 directing its winding up whereupon an Official Liquidator was

appointed. The borrowing facilities of the said Respondent had been

terminated. A suit for recovery of the credited sum was filed by the

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appellant along with the Respondent Nos.3 and 4 herein against the 1st

Respondent in the High court of Judicature at Bombay, which was numbered

as Suit No.2789/1995. The said suit was thereafter transferred to the Debt

Recovery Tribunal, Bombay. Recovery proceedings are admittedly pending

adjudication.

The Official Liquidator was one of the defendants. Liberty was

granted by the Debt Recovery Tribunal to the appellant herein and the other

respondents to obtain permission of the Company Court, i.e., High Court of

Judicature at Allahabad to continue the prosecution of the said suit.

Thereupon, an application under Section 446 of the Companies Act, 1956

was filed by the plaintiffs in the said suit stating that they were Secured

Creditors and had decided to remain outside the winding up proceedings

being desirous of realizing the Security in the suit. The permission to

continue the proceedings in the said Suit No.2789/95 was granted by the

High Court of Judicature at Allahabad on 30.8.1995. In the said suit,

however, the Respondent No.2 herein, PNB, was not impleaded as a party.

PNB filed a Civil Suit in the Court of Civil Judge, Fatehpur (U.P.) on

15.10.1998, which was numbered as Suit No.2/98, for recovery of money

payable to it by the 1st Respondent. In its plaint it was, inter alia, averred:

"That the defendant No.1 company had secured

various other financial facilities from the Defendant

Nos.4, 5 and 6 in whose favour the Defendant No.1

company had created Equi