STATE OF PUNJAB Vs. GRINDLAYS BANK LIMITED

JUDGEMENT

(1.) This is an appeal against the order of the learned single Judge by which he held that the respondent bank was entitled to precedence as a secured creditor and was entitled to draw the entire amount, of Rs. 6,75,000.00 being the sale proceeds of Jullundur property in partial discharge of the amounts due to the bank under the equitable mortgage.

(2.) . M/s. Globe Motors Ltd. created a mortgage by depositing of title deeds relating to two properties one at Jullundur and the other at Jhandewalan, New Delhi to the extent of Rs. 40,00,000 on 7.2.77. This charge was duly registered with the Registrar of Companies under Section 125 of the Companies Act. On 23.8.1969 the bank wrote to Mr. Mundra who had propounded a scheme informing him that in their books a sum of about Rs. 57 lakhs and over was due and suggesting that a board resolution would be required for the acknowledgement of the liabilities then due to the bank This was again followed by another letter of 14.4.1970 in which in continuation of the earlier letter the Managing Committee of the Company, M/s. Globe Motors was informed that an amount of over Rs. 61 lakhs was due and asking them to pass a resolution acknowledging the liability and requesting the bank to adjust the amount to the extent of Rs. 30 lakhs secured dy hypothecation of raw materials and unfinished goods in the steel plant and a loan of Rs. 301 lakhs secured by shares and title deec's mentioned in letter of 23.8.1969. In pursuance of this the Bank passed a resolution dated 15.4.1970 that should the loan of Rs. 30 lakhs remain outstanding the bank may proceed to realise securities covering the loans without any further reference to the company.

(3.) . It appears that Excise and Taxation Commissioner, Jullundur attached the property at Jullundur for realisation of alleged arrears of sales tax against the company. The bank moved the company Judge for raising the attachment and for permission to sell the property at Jullundur. During the proceedings the property was sold and sale proceeds kept in tact subject to the order of Court. The State of Punjab put in its claim for being treated as a preferential creditor on the ground that some arrears of Sales Tax were due to it. This was resisted by the bank who claimed a preferential right on the ground of being a secured creditor. The learned Judge has found in favour of the Bank. The State of Punjab has now come up in appeal.