JUDGMENT A.K. Banerji, J.
1. The abovenoted application A-13 has been filed by the Industrial Development Bank of India (hereinafter referred to as "the applicant-bank") under Sections 446(1), 453 and 537 of the Companies Act, 1956 ("the Act" in short), inter alia, seeking the following reliefs :
1. To grant leave under Section 446(1) of the Act for institution of a suit against the respondent-company in the High Court of Judicature at Bombay for realisation of amounts due to the applicant.
2. To grant leave under Section 453 of the Act for appointment of court receiver, the High Court of Bombay, for the mortgaged and hypothecated properties of the respondent company.
3. To grant leave under Section 537 of the Act for recovery of its dues by sale of the movable and immovable properties of the respondent-company charged in favour of the applicant as security for repayment of such dues and for enforcement of execution and distress proceedings as directed by the Bombay High Court.
2. The relevant facts in brief as set out in this application are that the applicant-bank granted term loans aggregating to Rs. 1,40,00,000 (rupees one crore forty lakhs) to the respondent-company and as security therefor the said respondent-company executed deeds of hypothecation in favour of the applicant, on the basis of which the applicant has a first charge by way of hypothecation on all movable and immovable properties including plant and machinery, etc., as well as stock of raw material, finished and unfinished goods. The payments of the applicant's dues have also been guaranteed by respondents Nos. 2 and 3. The applicant made a demand on the respondent-company for making payment of the amount fallen due but as they failed and neglected the payment, the applicant will have to file a suit against the respondent-company and the guarantors. It has been stated that the applicant is a secured creditor and stands outside the winding up proceedings.
3. The respondent-company was declared a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985, and was recommended to be wound up by the BIFR on December 21, 1993. This court, accepting the recommendations of the BIFR, directed that the company be wound up and appointed the official liquidator, attached to this court as the liquidator of the company. Subsequently, however, the operation of this order was stayed as the court was informed that an appeal had been preferred against the recommendations of the BIFR before the appellate authority. The stay order was subsequently vacated by this court on October 4, 1994, as the appeal had been dismissed by the appellate authority. The present application was filed, thereafter, by the applicant-bank for the reliefs mentioned above.
4. The official liquidator has filed a counter-affidavit to this application. A rejoinder affidavit has been filed by the applicant to the said counter-affidavit. I have heard Sri R. P. Agarwal, learned counsel for the applicant-bank, the official liquidator. It has been contended by Sri Agarwal that as the applicant-bank is a secured creditor, it is entitled to pursue its remedies for enforcement of the mortgaged security as a matter of right by remaining outside the winding up proceedings. It has been further contended that the applicant is also entitled to obtain leave of the court for an order for appointment of a receiver over all the mortgaged and hypothecated properties of the respondent-company, under Section 453 of the Act and further for grant of leave under Section 537 of the Act for recovery of its dues by sale of the movable and immovable properties of the respondent-company charged in favour of the applicant as security for repayment of such dues. On the other hand, the official liquidator has contended that permission to file the suit can be granted by this court, however, the said suit should be directed to be filed before this court under Section 446(3) of the Act as the winding up proceedings are pending here. It has also been contended that as all the properties of the respondent-company are deemed to be under the custody of this court after the winding up order and as the official liquidator has been made in charge thereof no question of appointment of a receiver in the said suit arises and neither can any leave be granted for sale of the movable and immovable properties of the respondent-company by the applicant.
5. I have considered the respective submission made by the parties and have also gone through the record of this case. Section 446(1) of the Act is plain, clear and unambiguous. The mandate of the section is that after a winding up order has been made, no suit or legal proceedings shall be proceeded with against the company except with the leave of the company court and subject to such terms as the court may impose. It is admitted that the applicant-bank was a secured creditor. The Supreme Court in the case of M.K. Ranganathan v. Government of Madras [1955] 25 Comp Cas 344 has held that if a secured creditor files a suit for the realisation of a security, he is bound to obtain leave of the winding up court as provided in the Act, "although such leave would almost automatically be granted". It is noteworthy that the official liquidator has not objected to the grant of leave for filing of the suit by the applicant-bank but has contended that it should be transferred to the winding up court under Section 446(3) of the Act which lays down that any suit or proceeding against the company which is pending in any court other than the winding up court notwithstanding any other law for the time being in force should be transferred to and be disposed of by the said court. So far as this submission is concerned, in the present case, the applicant-bank is yet to file the suit and the same has not been instituted so far. Besides, the head office of the bank is situate at Bombay and it would be convenient for the applicant-bank which is a secured creditor to file a suit and pursue the same at Bombay. The permission, therefore, to institute the suit at Bombay cannot be refused only because it will be in'convenient for the official liquidator to contest the suit before that court. However, as noticed above, an order under Section 446(1) of the Act is subject to such terms as the court may impose. Taking into consideration the said aspect of the matter, I am of the view that the permission to continue the suit as prayed by the applicant can be granted subject to the conditions that the applicant-bank deposits with the official liquidator a sum of Rs. 15,000 (rupees fifteen thousand only) towards costs and expenses to be incurred by the official liquidator in engaging a counsel and for contesting the suit at Bombay. I also consider it expedient to direct that if the suit to be instituted by the applicant-bank is decreed by the court the said decree shall not be executed without obtaining further orders from this court.
6. Shri Agarwal has, however, contended that it will not be reasonable to impose such conditions on the applicant-bank. I am, however, unable to agree. It is well-settled that the court is not bereft of power to incorporate any terms while granting such leave and it is explicitly made clear by the phraseology "subject to such terms as the court may impose" incorporated in Sub-section (1) of Section 446 of the Act. The official liquidator has to safeguard the interest of the general body of creditors, contributors and workmen affected by the liquidation proceedings. For that reason, he will have to contest the proceedings of the suit before the Bombay High Court on behalf of the company and require funds for the said purpose. Presently he has no funds of the company in his hands. The condition, therefore, imposed by the court directing the applicant-bank to deposit a sum of Rs. 15,000 (rupees fifteen thousand only) with the official liquidator for contesting the proceedings of the suit cannot be said to be unreasonable. It is always open to the applicant to seek appropriate directions from the trial court for adding the aforesaid amount to the decree as costs of the suit because the suit stands decreed by the said court. Similarly, as the applicant-bank is not the only secured creditor but under the provisions of Section 529A of the Act even the workman of the company is a pari passu chargeholder along with the secured creditor, this condition can be imposed by the court that after obtaining a decree further orders regarding the execution of the same should be obtained from this court which is winding up the company. I am, therefore, of the view that the conditions imposed by this court while granting permission to institute the suit to the applicant is valid and justified.
7. So far as the prayer made by the applicant-bank for appointment of a receiver over the charged properties and for sale of the same is concerned, I am of the view that the said prayers cannot be allowed, in view of the fact that the official liquidator has already been appointed and under the provisions of Section 468 of the Act is entitled to the custody of all money, property, books and papers of the company. The position of the official liquidator is more or less that of a receiver as manifest from the provisions of rule 233 of the Companies (Court) Rules, 1959. It will, therefore, be neither expedient nor proper to grant leave for appointment of a receiver under Section 453 of the Act as prayed by the applicant-bank. The official liquidator shall also safeguard and protect the rights of the creditors including the applicant-bank. Similarly, the prayer for grant of leave under Section 537 of the Act for recovery of the dues of the applicant-bank by sale of the assets of the respondent-company, cannot be granted at this stage. It has been laid down by the Supreme Court in the case of Bansidhar Shankar Led v. Mohd. Ibrahim [1971] 41 Comp Cas 21 that the assets of the company ordered to be wound up by the court shall be administered for the benefit of all the creditors, and that some creditors only shall not obtain an advantage over others by instituting or prosecuting proceedings against the company. The section is intended to maintain the control of the court which has made an order for winding up on proceedings which may be pending against the company or may be initiated after the order of winding up, and the court may remain seized of all those matters so that its affairs arc administered equitably and in an orderly fashion. Therefore, it will not be in the interest of the liquidation proceedings to permit the applicant-bank to sell the charged properties of the respondent-company without taking into consideration the interest of other creditors including the workmen.
8. As a result, the application A-13 is partly allowed in the light of the observations made above and leave to institute a suit against the respondent-company before the High Court of Judicature at Bombay, under section 446(1) of the Act is granted with these conditions, firstly, that the applicant-bank will deposit a sum of Rs. 15,000 (rupees fifteen thousand) with the official liquidator within six weeks from today and, secondly, that the decree, if any, obtained by the applicant-bank against the respondent-company in the aforesaid suit shall not be executed without obtaining further orders from this court where the winding up proceedings are pending. The parties shall bear their own costs of this application.