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LPL Infrastructures Limited v/s Kumar's Metallurgical Corporation Limited


Company & Directors' Information:- C K INFRASTRUCTURES LIMITED [Active] CIN = U70200DL1997PLC089706

Company & Directors' Information:- D B INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U04520MP2006PTC018493

Company & Directors' Information:- R S INFRASTRUCTURES LIMITED [Active] CIN = U45201PB1997PLC020316

Company & Directors' Information:- K R INFRASTRUCTURES LIMITED [Active] CIN = U73100TG1992PLC013995

Company & Directors' Information:- L.P.L. INFRASTRUCTURES LIMITED [Active] CIN = U74210TG1991PLC012371

Company & Directors' Information:- I M B INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70102DL2009PTC195079

Company & Directors' Information:- Y K M INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45202CH2006PTC029960

Company & Directors' Information:- R 3 INFRASTRUCTURES LIMITED [Active] CIN = U45400DL2014PLC268953

Company & Directors' Information:- P G M INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U01119AP2007PTC054326

Company & Directors' Information:- N H INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45209CH2010PTC032243

Company & Directors' Information:- Y D INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70102UP2009PTC037603

Company & Directors' Information:- C 4 INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201MH2013PTC242843

Company & Directors' Information:- B S V R INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45209TG2009PTC064901

Company & Directors' Information:- V AND K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200TG2001PTC036581

Company & Directors' Information:- J L INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200TN2008PTC066965

Company & Directors' Information:- T & C INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U70102TG2008PTC060995

Company & Directors' Information:- U R C INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200TG2008PTC058894

Company & Directors' Information:- R V A INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70102UP2013PTC056289

Company & Directors' Information:- S R G INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74110DL2005PTC134967

Company & Directors' Information:- S R G INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70101DL2005PTC134967

Company & Directors' Information:- N. C. R. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45400UP2008PTC034623

Company & Directors' Information:- P T INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U51909DL2007PTC159635

Company & Directors' Information:- S. L. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45203PB2007PTC031300

Company & Directors' Information:- V C H INFRASTRUCTURES PRIVATE LIMITED [Under Process of Striking Off] CIN = U45203KL2011PTC028762

Company & Directors' Information:- P A INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45208TN2009PTC071929

Company & Directors' Information:- A E K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45309TN2009PTC071702

Company & Directors' Information:- K G N INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74200DL2007PTC167982

Company & Directors' Information:- M A M INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70109KA2012PTC062160

Company & Directors' Information:- P N INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45201OR2010PTC012647

Company & Directors' Information:- R S INFRASTRUCTURES INDIA PRIVATE LIMITED [Strike Off] CIN = U45206TN2013PTC091533

Company & Directors' Information:- J S K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200MH2005PTC156097

Company & Directors' Information:- S A INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45400WB2013PTC192691

Company & Directors' Information:- L & W INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200DL2008PTC182372

Company & Directors' Information:- K R R INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U70102TG2008PTC061194

Company & Directors' Information:- INFRASTRUCTURES PRIVATE LIMITED [Under Process of Striking Off] CIN = U45200JH2007PTC012792

Company & Directors' Information:- S AND A INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45206UR2012PTC000345

Company & Directors' Information:- J & K INFRASTRUCTURES LIMITED [Active] CIN = U40101JK2009PLC003034

Company & Directors' Information:- V. J. S. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74999UP2008PTC035636

Company & Directors' Information:- K R M INFRASTRUCTURES (INDIA) PRIVATE LIMITED [Strike Off] CIN = U45209TG2011PTC073850

Company & Directors' Information:- M D INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201CH2001PTC024224

Company & Directors' Information:- V K INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45400UP2008PTC034415

Company & Directors' Information:- K Y INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201DL2004PTC127815

Company & Directors' Information:- A K C INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200KL2010PTC025716

Company & Directors' Information:- D N D INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45203PN2008PTC133243

Company & Directors' Information:- G V R INFRASTRUCTURES INDIA PRIVATE LIMITED [Strike Off] CIN = U45209AP2008PTC059504

Company & Directors' Information:- K & K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74120KA2006PTC040900

Company & Directors' Information:- A & G INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U31900PB2012PTC036358

Company & Directors' Information:- Y R INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201RJ2015PTC047298

Company & Directors' Information:- U D INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45400MH2010PTC203382

Company & Directors' Information:- J W INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74120MH2015PTC268554

Company & Directors' Information:- G AND G INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45200MH2004PTC147316

Company & Directors' Information:- A. N. Y. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45206MH2013PTC243735

Company & Directors' Information:- J V S M S INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45200TG2010PTC070371

Company & Directors' Information:- K S V V INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45209TG2010PTC069359

Company & Directors' Information:- A V R INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45400DL2009PTC186399

Company & Directors' Information:- A P S INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U70109DL2013PTC248564

Company & Directors' Information:- R R INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70109DL2006PTC150324

Company & Directors' Information:- S D P INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45200HR2013PTC048666

Company & Directors' Information:- B P K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45203KA2009PTC049331

Company & Directors' Information:- T M R INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45400TG2007PTC054647

    Company Petition No.45 of 2007

    Decided On, 23 January 2008

    At, High Court of Andhra Pradesh

    By, THE HONOURABLE MR. JUSTICE V.V.S. RAO

    For the Petitioner: C. Kodanda ram, P. Vikram, C. Gunaranjan, Advocates. For the Respondent: R1, S. Ravi, Advocate.



Judgment Text

The company petition is filed under Section 433(e), 434(1)(a)&(c) read with Section 439(1)(b) of the Companies Act, 1956 for winding up of respondent company on the ground that the latter is unable to pay its dues within three months from the date of receipt of delivering demand by petitioner for an amount of Rs.5,35,99,090/- In a nutshell, the case of petitioner is as follows. The petitioner, namely, M/s.LPL Infrastructures Limited (LPL, for brevity) is a public limited company engaged in the business of execution of civil construction contracts. The respondent, namely M/s.Kumar Metallurgical Corporation Limited (KMC, for brevity) is a public limited company registered under the Companies Act having its registered office at Vattimarty village, Chityal Mandal, Nalgonda District. It is engaged in the business of manufacturing sponge iron. The respondent engaged LPL for production of equipment and machinery for construction of sponge iron plant and ancillary buildings at Chityal and issued two work orders, dated 14.05.1991 and 04.03.1992. The total value of work is Rs.4,07,00,000/-.


The bills for the executed works are not paid. The matter was referred to an arbitrator - Retired High Court Judge, who passed awards for total amount of Rs.5,35,17,380/-. The respondent moved applications under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act, for brevity) being O.P.Nos.700 and 702 of 2003 on the file of the Court of the XIV Additional Chief Judge, City Civil Court, Hyderabad, to set aside awards. They were allowed in part to the extent of interest. Aggrieved by the same, respondent filed C.M.A.Nos.291 and 581 of 2006 before this Court. By order, dated 13.04.2006, this Court directed respondent to deposit a sum of Rs.32,00,000/- within a period of eight weeks from the date of order. Subsequently, by another order, dated 27.07.2006 in C.M.A.No.581 of 2006, this Court directed respondent to deposit half of the decretal amount within six weeks. The amount was not deposited. The total outstanding due is at Rs.5,35,99,090/-.


The petitioner filed execution petitions on the file of Court of the XIV Additional Chief Judge, City Civil Court, Hyderabad and the same are binding. The financial institutions that lent money to respondent declared loan account as non performing asset (NPA) and transferred account to Asset Reconstruction Company (India) Limited (ARCIL). They invoked Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, for brevity) and gave possession notice to take over assets of the company. Debts Recovery Tribunal (DRT), Hyderabad, set aside the same in S.A.No.15 of 2005, dated 07.02.2005. ARCIL filed Appeal No.10 of 2005 before Debts Recovery Appellate Tribunal (DRAT), Chennai, which by order, dated 28.02.2006 reversed the order of the DRT. Subsequently, DRT also appointed Receiver for respondent company. Deputy Commercial Tax Officer, Nalgonda, issued notice dated 10.10.2006, to respondent for committing willful default in paying statutory taxes to a tune of Rs.1,35,30,048/-. The respondent also failed to comply with the provisions of Companies Act and therefore, Registrar of Companies filed complaints under Section 168 of Companies Act before the Court of Special Judge for Economic Offences. In these cases, being C.C.Nos.55 to 63 of 2004, the Special Judge convicted the Managing Director of respondent company.


In the said background, LPL issued a statutory notice, dated 09.02.2007 calling upon respondent to pay an amount of Rs.5,35,99,090/- in default of which company petition under Section 433(e) of Companies Act would be filed. The same was received by respondent, who gave a reply dated 26.02.2007 informing that ARCIL exercised its right as secured creditor and claimed possession of entire plant, machinery, land and buildings of company and that there is a litigation between ARCIL and a third party with reference to the assets of company and therefore, LPL cannot proceed against the assets of respondent company. It is therefore alleged that respondent company is not able to pay its debts and therefore, it would be in the interest of creditors, statutory authorities and public to wind up the respondent company. Respondent filed counter opposing the company petition. The liability to pay any amount to LPL is denied. The award passed by arbitrator and the efforts of respondent to get it set aside, however, not denied. The action taken by ARCIL under SARFAESI Act is also not denied. It is further stated that on 20.01.2005, the District Magistrate passed an order under Section 14 of the SARFAESI Act authorizing Mandal Executive Magistrate (MRO), Chityal to take possession of the mortgaged properties and handover them to authorized agent of ARCIL. Thereafter, copies of possession notice that assets of respondent company have been taken over possession by ARCIL were reported in the newspapers, dated 24.01.2005.


It is further stated that though this Court passed orders directing respondent to deposit amounts, it could not deposit the amounts due to the action taken by ARCIL. The matter is listed before this Court for directions as to whether the petition should be advertised under Rule 99 of Companies (Court) Rules, 1959 (Rules, for brevity) in the manner provided by Rule 24 thereof. Therefore, at this stage, Court has to look to prima facie case as to whether creditor who alleges that respondent company owes certain amounts has prima facie proved allegation that respondent company is unable to pay its debts within three weeks after date of receipt of demand delivered at its registered office. In this case, a look at the brief narration of unpleasant history of respondent company as above would show that the company is at the centre of action by financial institutions and secured creditors who have taken company before DRAT, and this Court, besides being subjecting it to the rigorous recovery methods under SARFAESI Act for enforcement of security. The respondent was not even able to comply with payment orders of this Court. This is admitted in the counter. The statutory notice under Section 434 of Companies Act is also served. This is not denied. Therefore, without anything else, the company petition can be admitted and the advertisement petition can be ordered. The learned counsel for respondent, however, raised objection, which is as follows. When the management of a company is taken over by secured creditor, under Section 15(3)(c) of SARFAESI Act, no proceedings for winding up or for appointment of Receiver shall lie in any Court. This plea was not specifically taken in the counter. Learned counsel was permitted to raise the plea having regard to Section 15 of SARFAESI Act, which enumerates eventualities when possession and/or management is taken over by secured creditor in exercise of powers under SARFAESI Act. Disputing the contention, learned counsel for LPL submits that when the secured creditor obtains only possession from the debtor company, but does not take over the management, Section 15(3)(c) of SARFAESI Act does not bar winding up petition. The counsel brought to the notice of this Court, the decision of the Delhi High Court in the matter of M/s.Disco Electronics Limited (in liquidation)1, in which it was held that mere possession by State Financial Corporation does not bar winding up petition under Section 32E of State Financial Corporations Act, 1951 (SFC Act, for brevity), which is in pari materia with Section 15(3)(c) of the SARFAESI Act. On appeal, Division Bench of Delhi High Court reversed the same in Shivalik Agro Poly Products Limited v Disco Electronics Limited (AIR 2002 DELHI 10) holding that in Section 32E(1)(c) of SFC Act, the expression 'management' and 'possession' are used simultaneously. In Re Disco Electronics Limited (supra), the facts are as follows. Delhi High Court appointed Official Liquidator (OL) as provisional liquidator of Disco Electronics (DISCO, for brevity) on 29.09.1992. DISCO had availed loans from Delhi Financial Corporation (DFC). As there was default, action was initiated under Section 29 of SFC Act. DISCO then brought M/s.Shivalik Traders for purchase of properties. It was agreed to. But the purchaser failed to pay amount to DFC. DFC took possession of the industrial unit along with its machinery on 23.12.1992. Nevertheless DISCO was allowed to continue to be in possession as custodian. DFC again conducted sale. A bid for Rs.18 lakhs was obtained, but bidder withdrew.


An offer of Rs.8.5 lakhs was ultimately accepted by DFC. In the meanwhile, as noticed supra, provisional liquidator was directed to take over assets of DISCO. There was also an order of injunction with regard to possession of said property and restraint order from removing finished and semi-finished items and raw material from the premises. DFC proceeded to deliver possession to successful bidder. This action was assailed before the Company Judge by OL. The defence of DFC was that the provisions of SFC Act would override the provisions of Companies Act and that under Section 32E of the SFC Act, a winding up petition is incompetent. The learned company Judge overruling the objection of DFC held that jurisdiction of the company Court is not ousted. It is observed therein:


I cannot accept the construction placed by Mr. Swatanter Kumar on the provisions of Sections 29 and 46B and 32E of the State Financial Corporations Act to mean total ouster of jurisdiction of the Company Court and that its provisions will always and in all circumstances prevail over all provisions of Companies Act even after winding up or provisional winding up. The legislature in its own wisdom amended the Companies Act and enacted provisions such as Section 529A and provisos to Section 529 in order to protect the wages of the workmen notwithstanding any law to the contrary, workmen's wages have now been put on par with the claims of secured creditors and their claims now rank pari passu with the claims of secured creditors. Thus a new category of secured creditors has been created whose interests are to be represented and taken care of by the Official Liquidator. The learned Judge also held that even when industrial unit is taken over by SFC, the ownership still remains with borrower and mere taking of possession of sick unit does not by itself oust jurisdiction of company Court. The relevant observations are as below. In my view, in the taking over of the possession under Section 29 of the State Financial Corporations Act, the owner always retains the right of ownership of the property does not pass on to the financial corporation, but it is only for certain purposes of affecting recovery, of its dues by the sale and to remove any impediments in their way that the statute by a deeming provision has granted to the financial corporation powers of the owner for the limited purpose of realizing the security, to convey good marketable title to the purchaser, and to defend any legal action, but the property does not absolutely vest in it. In Shivalik Agro Poly Products Limited (supra), Division Bench noticed that the appellant company - the successful bidder; was already given possession of the sick unit. A submission was made on behalf of the appellant that the concept of taking over possession is much larger than taking over of the management since a person in possession must necessarily be in management and that there would be no possession of taking over management on day to day basis and thus take over of the management is synonymous of taking over possession. This submission was countenanced by Division Bench with the following reasoning:


It has to be appreciated that present concern was not even a running concern and at the time when the possession was taken over and handed over to the appellant there could be no question of taking over the management of the company. Thus the expression 'management' and 'possession' would be synonymous, at least for the purposes of the present case inasmuch as Disco was not a running concern at the relevant date. The Act is a special Act providing security to the Financial Corporation for purposes of recovery of its dues and the rights of a Financial Corporation thus must be protected. It is an undisputed position that amounts were owed to the DFC and after notices DFC did take over the possession of the land and assets of the company. Complete procedure was followed and it is only after that the sale was confirmed in favour of the appellant company. The Financial Corporation thus become owner of the assets in view of Section 29(5) of the Act prior to its sale. Learned counsel for respondent - KMC placed strong reliance on Division Bench Judgment referred to hereinabove. His submission is that Section 15(3) of SARFAESI Act being in pari materia with Section 32E of SFC Act, the view taken by Delhi High Court has strong persuasive value. He therefore commends same view.


In comparison, Section 15(3) of SARFAESI Act and Section 32E(1) of SFC Act read as below. Section 15(3) of SARFAESI Act Section 32E(1) of SFC Act


15. Manner and effect of take over of management - (3) Where the management of the business of a borrower, being a company as defined in the Companies Act, 1956 (1 of 1956), is taken over by the secured creditor, then, notwithstanding anything contained in the said Act or in the memorandum or articles of association of such borrower,-


32E. Application of Act I of 1956:-


(1) Where the management of an industrial concern, being a company as defined in the Companies Act, 1956, is taken over by the financial Corporation, then, notwithstanding anything contained in the said Act or in the memorandum or articles of association of such concern- (a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company;


(a) it shall not be lawful for the shareholders of such concern or any other person to nominate or appoint any person to be a director of the concern;


(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the secured creditor; (b) no resolution passed at any meeting of the shareholders of such concern shall be given effect to unless approved by the Financial Corporation;(c) no proceeding for the winding up of such company or for the appointment of a receiver in respect thereof shall lie in any Court, except with the consent of the secured creditor.


(c) No proceeding for the winding up of such concern or for the appointment of a receiver in respect thereof shall lie in any Court, except with the consent of the Financial Corporation.


It is no doubt true that both the provisions express the same content and meaning. But, there is a difference in their operation and enforcement in two distinct situations. Section 15(1) of SARFAESI Act lays down the manner and effect of taking over of management by (i) securitization company or reconstruction company under clause (a) of Section 9; and (ii) secured creditor under Section 13(4)(b). It is done either by appointing directors or by appointment of an administrator of the business of the borrower. To understand this, it is necessary to refer to definition of 'securitization', 'securitization company', 'reconstruction company' and 'secured creditor' as defined in SARFAESI Act's dictionary clause.


2(z) "securitization" means acquisition of financial assets by any securitization company or reconstruction company from any originator, whether by raising of funds by such securitization company or reconstruction company from qualified institutional buyers by issue of security receipts representing undivided interest in such financial assets or otherwise; 2(za) "securitization company" means any company formed and registered under the Companies Act, 1956 (1 of 1956) for the purpose of securitization; 2(v) "reconstruction company" means a company formed and registered under the Companies Act, 1956 (1 of 1956) for the purpose of asset reconstruction; 2(zd) "secured creditor" means any bank or financial institution or any consortium or group of banks or financial institutions and includes- (i) debenture trustee appointed by any bank or financial institution; or (ii) securitization company or reconstruction company, whether acting as such or managing a trust set up by such securitization company or reconstruction company for the securitization or reconstruction, as the case may be; or (iii) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created for due repayment by any borrower of any financial assistance;


In this case, the financial institutions treated the account of respondent as NPA. Therefore, they transferred the mortgage to ARCIL, which is ex facie 'reconstruction company' as defined in Section 2(v) of SARFAESI Act and also a 'secured creditor' as defined in Section 2(zd) of SARFAESI Act. ARCIL has thus a dual role of being 'reconstruction company' as well as 'secured creditor' vis- -vis the respondent company. Be it noted that as claimed in their notice, dated 01.11.2004, under Section 13(2) of SARFAESI Act, issued to respondent, ARCIL is a reconstruction and securitization company registered with Reserve Bank of India under Section 3 of SARFAESI Act. It is nobody's case that ARCIL has appointed directors or administrator under Section 15(1) of SARFAESI Act. This is an important and relevant factor.


Coming to Section 15(3) of SARFAESI Act, it operates differently. Under Section 15(3) of SARFAESI Act, certain eventualities are prohibited only when the management of the business of the borrower company is taken over by secured creditor. ARCIL as alleged in KMC's counter affidavit, published in newspapers, dated 24.01.2005 that the assets of respondent company have been taken over. Does it mean or does it amount to ARCIL taking over the management of respondent?


As seen from Section 15(1) of SARFAESI Act, securitization company or reconstruction company is empowered and entitled to take over the management of borrower company under Section 9(a) and a secured creditor is empowered and entitled to take over management of the company under Section 13(4)(b) of SARFAESI Act, which reads as below.


13(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-


(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset;


(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset:


Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:


Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt.


(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;


(d) Require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. (emphasis supplied) The respondent along with his counter has annexed notice, dated 01.01.2004 under Section 13(4) of SARFAESI Act and the proceedings of District Collector, dated 20.01.2005 authorizing Mandal Executive Magistrate, Chityal, to take possession of mortgaged properties of respondent and handover them to ARCIL. Possession notice issued by the authorized officer of ARCIL as published in Eenadu telugu daily, dated 24.01.2005 is also annexed. These notices would not amount to taking over management under Section 13(4)(b) read with Section 15(1) and (3) of SARFAESI Act. When the Act provides method and manner of taking over management under Section 15(1) of SARFAESI Act, there cannot be any other method of taking over management.


The law contemplates take over of management by the securitization company or reconstruction company and/or secured credi

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tor by appointment of directors of borrower company or by appointment of an administrator of the business of the borrower. Both these are absent. Even if the respondent company is taken over possession under Section 15(3) of SARFAESI Act by ARCIL as secured creditor, unless the management is shown to have been taken over as per Section 15(1), Section 15(3)(c) of SARFAESI Act does not bar a winding up petition. This is also further supported by the fact that Section 13(4)(a) of SARFAESI Act speaks of taking possession of secured assets of the borrower and also take over of management of business of the borrower under Section 13(4)(b) of SARFAESI Act. Admittedly, respondent company stopped its business for various reasons and there is not even a whisper in the counter that it is ongoing company. In such a situation, there cannot be a take over of management of business of respondent company nor is it shown that management is taken over by ARCIL as provided under Section 15(1) of SARFAESI Act. The difference between the SFC Act and SARFAESI Act is Section 13(4)(a) and (b) and Section 15(1) of SARFAESI Act. Such provisions are absent in SFC Act. Therefore, the decision of Delhi High Court in Shivalik Agro Poly Products Limited (supra) is not an authority for the proposition that as and when possession is taken over by secured creditor or the securitization company/reconstruction company under Section 15(3) or Section 13(4)(a) of SARFAESI Act, winding up petition is barred. Such an interpretation would render core provisions in SARFAESI Act redundant. Secondly, it is always presumed that Parliament was aware of the provisions of SFC Act and other cognate laws when Sections 13(4) and 15(1) and (3) were enacted in SARFAESI Act. The difference, therefore, is very glaring and the decisions under SFC Act cannot furnish any guidance for interpreting provisions of SARFAESI Act. In the result, for the above reasons, the company petition is admitted. This Court directs that the petition shall be advertised in 'New Indian Express' published from Hyderabad, and 'Eenadu' telugu daily, Hyderabad Edition, having circulation in 'Nalgonda' in the manner provided by Rule 24 of Companies (Court) Rules, 1959. The advertisement shall be made within a period of three weeks from the date of receipt of copy of this order.
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