KARNATAKA STATE FINANCIAL Vs. STATE

JUDGEMENT

(1.) THIS application has been filed on behalf of the Karnataka State Financial Corporation by learned counsel and learned counsel submits that the sole purpose of filing the application was in order to place before the court a submission on a correct point of procedure. Learned counsel submitted that the Karnataka State Financial Corporation is neither the petitioner nor respondent in the proceedings but that the Karnataka State Financial Corporation is virtually standing outside the proceedings and is represented by learned counsel for a limited purpose, i.e., since the Karnataka State Financial Corporation is the largest secured creditor it is proper and necessary that it be represented at all stages of these proceedings as various submissions need to be advanced even with regard to all issues concerning the properties involved in the winding up proceedings. In this background, learned counsel submitted that the direction to deposit a sum of Rs. 5,000 towards initial expenses of the official liquidator ought not to have been passed because the liability to meet the initial expenses devolves on the original petitioner or applicants. Learned counsel submitted that if at any further stage in the winding up proceedings the occasion arises for the parties to bear certain costs and if at that stage the court or the official liquidator so directs it may be competent for any or all of the creditors to be asked to contribute towards the costs but this ought not to be done at the initial stage.

(2.) I do not dispute that normally this court has not been directing the banks or financial institutions who stand outside the winding up proceedings to deposit certain amounts against the original costs, however there are exceptions and there have been instances where I have directed the banks and financial institutions to bear the costs towards advertisement, etc., because they also have an interest and a financial stake in the proceedings in securing the best available prices and recoveries and in securing the assets, etc. In this background, to my mind there is absolutely no harm if the court in its discretion, in appropriate proceedings, directs the financial institutions who can well afford to deposit some amount towards the cost of the official liquidator. The discretion of the court would depend on many factors one of them being that if the other creditors namely the petitioners before the court are relatively small whose capacity would be limited, this cannot act as a ground on which the office of the official liquidator will be cramped for funds and would find it difficult to carry out its functions. In this background, the financial institutions and banks whose be arability is much higher than that of individual creditors can certainly be requested to contribute towards the expenses as the overriding consideration is that they have much larger claims and much more money at stake. It is for these reasons that the order was passed in this case. Had there been any illegality in the order or irregularity in the order or unfairness in the order, I would have reconsidered it but in this background I am of the view that the order was perfectly justified and consequently that no relief is tenable on Company Application No. 683 of 1998. The company application accordingly fails and stands dismissed.