UNION OF INDIA Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) This is a combined application by the Union of India under Sections 457(3), 528 and 539(7)(f) of the Companies Act, 19.56, read with Rules 7, 9, 149 and 177 of the Companies (Court) Rules, 1959, for treating the petitioner, Union of India, as a secured creditor in respect of its claim for Rs. 2.02 crores, and for the respondent, official liquidator, to be directed to execute a deed of assignment and/or reconveyance in favour of the Union of India in respect of the said claim and also for a return of the title deeds and the original mortgage deeds lying with the respondent in respect of immovable properties in Calcutta and delay in filing proof of debt and/or preferring the petitioner's claim for Rs. 43.17 lakhs as an ordinary creditor to be condoned and for an injunction restraining the respondents from making any disbursement to any creditor out of the money lying in the hands of the respondent.

(2.) From the facts of this case which are not in dispute it appears that prior to the said company, India Electric Works Ltd., being wound up by an order of this court, an agreement was entered into with the Staff Bank of India, Calcutta, for the advance of money and/or overdraft facilities for running the business of the company by way of cash credit account on various terms and conditions which are set out in the letter dated the 16th of January, 1963, a copy of which is annexed to the affidavit in support of this application by and under which it transpires that pursuant to the correspondence between the company and the Stale Bank of India, a cash credit accommodation was sanctioned to the company on the terms and conditions set out in the said letter dated the 16th of January, 1963, from the State Bank of India to the company, the limit being Rs. 85,00,000 and the security being hypothecation of the company's whole assets, stock-in-trade, raw materials, book debts, stores and all other assets together with a guarantee of the President of India. There were two accounts, one being account No. 1, the Cash Credit Account and the other being account No. 2, wherein the limit was Rs. 55,00,000 and the advance was guaranteed by the President of India, and as a collateral security by way of equitable mortgage of the entire immovable properties of the company including the plants and machineries was created in favour of the bank. It appears that the company has already executed a deed of hypothecation dated 2nd of January, 1963, wherein and whereunder, the company hypothecated both movable and immovable properties of the company in favour of the bank and created a first charge on its assets in mortgage in favour of the bank. On or about the 4th of January, 1963, the company deposited with the bank the title deeds of its immovable properties with an intent to create security on these immovable properties for the due payment of the advances made and to be made to the company by the bank under the said arrangement. It further appears that on or about the 8th of November, 1960, the company was taken over under Section 18A of the Industries (Development and Regulation) Act, 1951.

(3.) The State Bank of India presented a winding-up petition some time in 1967 being Company Petition No. 67 of 1967 and by an order dated the 27th of August, 1968, a winding-up order was passed by this court. After the said winding-up order and the liquidation of the company, the entire claim together with accrued interest thereon of the bank aggregating to Rs. 2,02,71,371 was paid by the Central Govt. to the said State Bank of India and obtained a deed of assignment executed by the State Bank of India in favour of the Union of India being dated the 16th of December, 1970, in respect of the mortgage by and between the bank and the company. It is submitted that by virtue of the said assignment the Central Govt. has the right of subrogation under the said deed of assignment and, as such, the Central Govt. stepped into the shoes of the State Bank of India and became a secured creditor of the company (in liquidation) in respect of the said claim for Rs. 2,02,71,371. It is alleged that the title deeds of the immovable properties were handed over to the official liquidator so as to enable him to execute a reconveyance in respect of the said properties in favour of the Central Govt. There was certain correspondence between the official liquidator and the Central Govt., being letters dated the 7th of August, 1970, and 4th November, 1975.