VAISHNU ENGINEERING INDUSTRIES LTD Vs. STATE

JUDGEMENT

(1.) Before the 1st respondent-Company was ordered to be wound up by this Court on 15-2-1997, another respondent i.e., A.P. Industrial Development Corporation, which was a creditor of the Company, in exercise of powers under Section 29 of the A.P. State Financial Corporation Act, 1951, seized the assets of the Company. After seizure, the Industrial Development Corporation sold the assets of the Company to the 11th respondent. This sale took place prior to orders of winding up passed by the Court. The appellant-State Bank of India is one of the creditors of the Company in liquidation and it advanced amounts to the Company in liquidation against the security of current assets like raw-materials and semi-finished goods.

(2.) The case of the appellant before the Company Court was that the respondent Company in liquidation had pledged goods in favour of the Bank, within the meaning of expression under Section 172 of the Indian Contract Act, 1872 (hereinafter referred to as 'the Contract Act'). The goods pledged were lying in the factory premises of the Company in liquidation when the sale took place. The 11th respondent, after purchasing the fixed assets, took possession of the factory premises and called upon the applicant-appellant to remove the goods which were pledged in its favour by the Company in liquidation. The applicant, however, called upon the Official Liquidator to redeem the said pledged goods as liquidation orders of the Company had been passed. The applicant created a demand of Rs.3,37,63,184.42 on account of the pledge. The applicant also claimed interest. The notice given to the Official Liquidator did not evoke any response and petitioner filed an application before the Company Court. Before the Company Court, the Official Liquidator stated that he had no objection for the proposed sale of the pledged goods by the applicant-bank, but insisted that while permitting the bank to conduct auction of pledged goods, an order be made directing the bank to undertake to meet necessary contribution towards the workmen dues whenever Official Liquidator determines their dues. The Official Liquidator also prayed that orders be passed that the bank would keep him informed with the steps being taken for the sale of pledged goods. The learned Company Judge allowed the application of the applicant-bank permitting them to sell the goods, and also directed that the bank should also satisfy the demand of the Official Liquidator as and when made to meet the liability of the workmen. This part of the order is the bone of contention in the present appeal.

(3.) The contention of the appellant- bank is that in terms of the Contract Act, the bank was a pledgee and amounts advanced to the Company in liquidation were secured and Section 529 A of the Companies Act, 1956 (hereinafter referred to as 'the Companies Act') had no application. It is contended by learned Counsel appearing for the appellant that such a question is already concluded by a judgment of the Supreme Court in The Bank of Bihar v. The State of Bihar, AIR 1971 SC 1210, which was not appreciated by the learned Company Judge.