Karnataka State Indu... v. Shivmoni Steel Tubes...

Patri Basavana Goud, J.:— Respondent No. 1 Shivmoni Steel Tubes Limited became a sick unit, and efforts for rehabilitation of the said sick unit not having met with any success in spite of reference to Board for Industrial and Financial Reconstruction (‘BIFR’ for short), & Respondent No. 3 Industrial Credit and Investment Corporation of India (‘ICICI’ for short) having been appointed as operating agency, Company Petition No. 157 of 1992 was registered for winding up the company on an order in that regard being passed by BIFR. An appeal to the appellate Authority for Industrial and Financial Reconstruction (AAIFR, for short) as against the said order of the BIFR also came to be dismissed, and when the said order of AAIFR was communicated to the Court, Company Petition No. 49 of 1994 was registered. Both the company Petitions were clubbed together and notices issued.

2. Among others, the secured creditors of the Company under liquidation are the present appellant Karnataka State Industrial Investment and Development Corporation Limited (KSIIDC), Respondent No. 2 Karnataka State Financial Corporation (KSFC), Respondent No. 4 Industrial Development Bank of India (IDBI) Respondent-5 Canara Bank and Respondent No. 6 Syndicate Bank. The said Canara Bank and the Syndicate Bank filed company Application No. 153 of 1995 seeking permission to sell the hypothecated plant and machineries. The Secretary of the Employees' Union of the Company also filed a company Application No. 150 of 1995 pleading the cause of the 300 workmen of the company who were to get about Rs. 80 lakhs.

3. On 8-9-1995, the Court passed an order to wind up the Company in view of the orders passed by BIFR and AAIFR.

4. In the meantime, the appellant KSIIDC, acting under Section 29 of the State Financial Corporations Act, 1951 (‘SFC Act, for short) took over the possession of the assets of the Company under liquidation on 29-7-1994, and advertised for sale in the ‘Deccan Harald’ and ‘Economic Times’ of 1-11-1994. In response to the said-advertisement, four offers were received, one of which was from Respondent No. 7 Insotex (India) Limited. The said respondent No. 7 offered to purchase the assets for a consideration of Rs. 451 lakhs, undertaking to make payment of Rs. 150 lakhs within seven days of the acceptance of the offer and the balance of Rs. 300/- lakhs after adjusting Earnest Money Deposit and in two half-yearly instalments of Rs. 150/- lakhs each, after the initial moratorium of one year. This offer included Company's liabilities towards Karnataka Electricity Board and the workers' dues. KSIIDC imposed a condition of charging interest at 18.3 per cent on the outstanding amount on quarterly rest basis with a default clause attracting penal interest at 2.5 per cent. Pari Passu charge holder having felt the offer of respondent No. 7 to be inadequate and having suggested further negotiations, KSIIDC held further negotiations with all the offerers, and the promoters of the Company were informed to bring better offers. Further discussions were held with each of the bidders. The offer of Respondent No. 7 at Rs. 451/- lakhs was recommended to be accepted. When KSIIDC had tentatively accepted the highest offer of respondent No. 7 for Rs. 451/- lakhs by the letter dated 31-5-1996/1-6-1995, it had imposed a condition regarding payment of interest. Respondent No. 7 having accepted the same by its letter 5-6-1995, had paid Rs. 150/- lakhs by cheque. After the above said further negotiations, when the said highest offer at Rs. 451/- lakhs of Respondent No. 7 was recommended to be accepted, ICICI suggested that there should be further negotiations with respondent No. 7 to improve the offer. Accordingly further negotiations were held, and on 30-9-1995, as taken by the learned Company Judge to be an undisputed fact, after such further negotiations, the sale price was finalised at Rs. 486/- lakhs with a down payment of Rs. 151/- lakhs and the balance of Rs. 335/- lakhs in two half-yearly instalments after the moratoriurn of one year at the rate of 18.5 per cent interest. KSIIDC accepted this offer. In the meantime, as noted earlier, on 8-9-1995, the Court had passed an order to wind up the company.

5. On 26-10-1995 KSIIDC filed Company Application No. 535 of 1995 before the Comapny Judge to recognise and record its rights as secured creditor to stand outside the winding up proceedings in enforcement of its security for realisation of the amount due to it, to approve the sale held in favour of respondent No. 7 and to appropriate the sale proceeds towards dues on pari passu basis.

6. On 14-12-1995, one Priyanka Builders filed Company Application No. 786 of 1995 offering total price of Rs. 5.02 crores on the same terms and conditions as had been offered by KSIIDC to Respondent No. 7. To demonstrate their bona fides, the said Priyanka Builders also produced copies of the bank drafts for a sum of Rs. 50/- lakhs which they had sent to the Official Liquidator. They sought for a direction for sale of land, building, plant and machinery of the Company under liquidation to them.

7. The Official Liquidator also filed Company Application No. 2 of 1996 under Sections 456 and 457 of the Companies Act, 1956 (‘Act’, for short) for declaration that the sale conducted by the KSIIDC in favour of Respondent No. 7 was void under Section 537 of the Act since the same had been finalised after winding up order and without leave of the Court, and to direct KSIIDC to re-auction the property in association with the Official Liquidator and subject to confirmation of the same by the Court.

8. Learned Company Judge heard all the above said Applications together and disposed them of by the order dated 16-2-1996 impugned herein, the operative portion of which reads thus:

“The applicant KSIIDC is permitted to stand outside the winding up and sell the plant and machinery and immoveable properties of the company in association with the official liquidator from the time of settling the terms of advertisement and in negotiating to secure the higher price and subject to the condition that the sale has to be confirmed by the Court and the sale proceeds are to be deposited in Court. Approval for the sale in favour of 7th respondent is refused.”

9. Aggrieved by the above said order of 16-2-1996, Respondent No. 7 Insotex (India) Limited filed an appeal in OSA No. 10 of 1996. The said appeal having come up for admission on 29-5-1996 was dismissed at the admission stage.

10. This appeal by the KSIIDC as against the above said common order dated 16-2-1996, having been heard on merits, is being disposed of by this order.

11. Learned counsel for the appellant KSIIDC Sri K. Gopal Hedge contends that KSIIDC, as a secured creditor and in exercise of its power under Section 29 of the SFC Act, has a right to stand outside the winding up and bring to sale the assets of the Company concerned without leave of the Court, and the said sale would not be void under Section 537 of the Act. He further contended that Section 46-B of the SFC Act had overriding effect, and would prevail upon the provisions of the Act in so far as the latter were inconsistent with the provisions of the SFC Act. It was further urged on behalf of the appellant that Respondent No. 7 having undertaken to pay the workers' dues and other secured creditors having had no objection for sale in favour of Respondent No. 7, and the appellant having offered to appropriate the sale proceeds towards dues on Pari Passu basis, and the repeated efforts having found that no offer higher than the one given by Respondent No. 7 could be accepted, there was no justification for not approving the sale in favour of Respondent No. 7 and there was no necessity at all for associating the Official Liquidator with the reauction.

12. Learned counsel for the contesting respondents urge thus: Where an industrial concern like the present Respondent No. 1 in respect of which the appellant seeks to invoke Section 29 of the SFC Act, also happens to be a company in the winding up, then, the Official Liquidator would be equally concerned as pari passu charge holder of the workmen's dues by virtue of the proviso to sub-section (1) of Section 529 of the Act. The provisions of the SFC Act as well the Act, therefore, shall have to be read consistently with each other, which is permitted by the latter part of Section 46-B of the SFC Act, and the question of repugnancy would not arise. Section 537 of the Act would thus inevitably apply and no sale could have been held without leave of the Court. Sale by the appellant in favour of Respondent No. 7 completed on 30th September, 1995 after passing of the winding up order on 8th September, 1995, is therefore void. Learned Company Judge was right in directing that the Official Liquidator also be associated with the appellant in conducting a fresh sale. These are the contentions of the learned counsel appearing for the contesting respondents.

12A. The question of the provisions of the SFC Act overriding the provisions of the Act by virtue of Section 46-B of the SFC Act would arise only in the case of repugnancy between the said two Acts. So long as the industrial concern, in respect of which KSIIDC invokes Section 29 of the SFC Act, does not come within the provisions of the Act concerning winding up, the matter would be covered exclusively by the provisions of the SFC Act. In that event, KSIIDC as secured creditor would be well within its right to invoke Section 29 of the SFC Act and to take possession of the assets of the said industrial concern and to deal with it in the manner as provided under Section 29 of the SFC Act. But the moment the winding up of the said industrial concern commences or is deemed to commence within the meaning of Section 441 of the Act, then, the provisions of the SFC Act shall be read together with the provisions of the Act for the reasons to be presently stated. Such a course of action is very much permissible by the latter part of Section 46-B of the SFC Act itself, which provides that, save as stated in the earlier part of the said Section, the provisions of the said SFC Act shall be in addition to and not in derogation of any other law for the time being applicable to an industrial concern.

13. The winding up process in respect of the company concerned herein started on an order passed by the BIFR, on communication of which, Company Petition No. 157 of 1992 was registered. The winding up order was passed by the learned Company Judge on 8-9-1995. Section 537(1)(b) of the Act provides that where any company is wound up or is subject to the supervision of the Court, any sale held, without leave of the Court, of any of the properties or effects of the company after the commencement of winding up, shall be void. Assuming for a moment that the matter is not clear as to on what date exactly the winding up of Respondent No. 1 company commenced or deemed to commence within the meaning of Section 441 of the Act, there is no dispute that the winding up order was passed on 8-9-1995. As will be presently seen, the sale by KSIIDC in favour of Respondent No. 7 Insotex (India) Limited was completed after this winding up order dated 8-9-1995; and, as such, without reference to the date of commencement of winding up, the sale so held after the date of winding up order would render it void under Section 537(1)(b) of the Act. We may revert to this context after considering the question as to when exactly the sale by KSIIDC in favour of Respondent No. 7 was completed.

According to the learned counsel for the appellant KSIIDC and Respondent No. 7 Insotex (India) Limited, the sale by KSIIDC in favour of Respondent No. 7 had been completed, with Respondent No. 7, by its letter 5-6-1995, accepting the conditions imposed, as regards payment of interest, by KSIIDC, and paying Rs. 150/- lakhs by cheque. This, according to the said learned counsel, was much prior to the date of passing of winding up order. Learned counsel for the other respondents, however, point to the other circumstances which make it amply clear that the sale was not completed as on 5-6-1995. Even according to KSIIDC, when the highest offer of Rs. 451/- lakhs of respondent No. 7 was-recommended to be accepted, ICICI suggested that there should be further negotiations with Respondent No. 7 to improve the offer. Accordingly, further negotiations with Respondent No. 7 were held, and it was only on 30-9-1995, as taken by the learned Company Judge to be an undisputed fact, the sale price was finalised at Rs. 486/- lakhs with down payment of Rs. 1517- lakhs and the balance of Rs. 335/- lakhs in half yearly instalments alter the moratorium period of one year at the rate of 18.5 per cent interest. Thus, it was only on 30-9-1995 that the sale could be taken as haying been completed. By then, i.e on 1995, the Court had already passed the winding up order.

It is in the above context that the sale in favour of Respondent No. 7 is said to attract the provisions of Section 537(1)(b) of the Act, Learned counsel for the KSIIDC Sri K. Gopula Hegde urges that since KSIIDC as a secured creditor would be entitled to stand outside the winding up and to bring to sale the assets of Respondent No. 1 Company in its own right and in exercise of the powers under Section 29 of the SFC Act, without seeking the aid of the Court in that regard, KSIIDC would not require leave of the Court for that purpose and Section 537 of the Act would be inapplicable in such a situation. He further urges that there is no change in this position even if Sections 529 and 529A of the Act were to be taken into consideration, inasmuch as, the purchaser Respondent No. 7 Insotex (India) Limited had given an unequivocal undertaking that the workers' dues would be paid. Sri K. Gopala Hegde also points out that the sale transaction in favour of respondent No. 7 was to the satisfaction of all secured creditors, and, in addition, had taken care of the workers' dues and there were no allegations of lack of bona fides, and as such, the right of KSIIDC in standing outside the winding up and selling the assets of Respondent No. 1 company in enforcing its (KSIIDC's) security needs to be recognised. Sri Gopala Hegde relied upon a decision of the Supreme Court in M.K Ranganathan v. 1. Government Of Madras reported in (1955) 2 SCR 374: (AIR 1955 SC 604) in this regard. The Supreme Court was dealing with the provisions of Section 232 of the Indian Companies Act, 1913 analogous to the provisions of Section 537 of the Act. It was held therein that the secured creditor was outside the winding up and could realise his security without leave of the Court. This decision of the Supreme Court certainly supports the case of the appellant KSIIDC. But the said decision had no provision corresponding to Sections 529 and 529A of the Act. Consideration of Section 537 of the Act (Section 232 of the Indian Companies Act, 1913) in the light of Sections 529 and 529A, therefore, did not arise before the Supreme Court in the said decision.

14. Sri Gopala Hegde, learned counsel for the appellant KSIIDC refers to certain other decisions in support of his contention. In State Industrial and Investment Corporation of Maharashtra Limited v. Maharashtra State Financial Corporation reported in (1988) 64 Com Cas 102, where a secured creditor exercises its power to sell outside the winding up and without intervention of the Court, the Bombay High Court has held that such a sale was not void as Section 537 of the Act does not apply. In Aryavarta Plywood Limited (In Liquidation) v. Rajasthan State Industrial and Investment Corporation Limited, reported in (1990) 1 Com LJ 222, the Delhi High Court held that the sale in exercise of powers under Section 29 of the SFC Act without seeking aid of the Court in enforcing the said right was permissible and Section 537 of the Act did not apply to such a case. Both these decisions relied upon the earlier decision of the Supreme Court in Ranganathan's case (AIR 1955 SC 604).

In Boolani Engineering Corporation v. Asup Synthetics and Chemicals Limited, reported in (1994) 81 Com Cas 872 (Raj), relying upon the Ranganathan's case and on the decision of the Bombay High Court reported in (1988) 64 Com Cas 102 referred to earlier, the Rajasthan High Court held that where a secured creditor, by invoking Section 29 of the SFC Act, puts the property to sale for realisation of its dues, by remaining outside the winding up, Section 537 of the Act would not apply. In State Bank of India v. Spintex Tubes and Constructions Limited, reported in (1995) Com Cas 290 (Raj) relying upon the decision of the Delhi High Court in Aryavarta Plywood Limited case (supra) and that of the Rajasthan High Court in Boolani Engineering Corporation case (supra), the Rajasthan High Court held that where a secure creditor exercises its powers under Section 29 of the SFC Act, no leave of the Court was necessary.

15. As seen above, all the other decisions relied upon by the appellant's counsel Sri K. Gopala Hegde, mainly relied upon the decision of the Supreme Court in Ranganathan's case (AIR 1955 SC 604) where the impact of the proviso to sub-section (1) of Section 529 of the Act and Section 529A of the Act, both of which were inserted by the Companies (Amendment) Act, 1985, on Section 537 of the Act (corresponding to Section 232 of the Indian Companies Act, 1913 with which the Supreme Court was dealing), had not arisen for consideration at all.

16. A Division Bench of this Court itself in International Coach Builders Limited (In Liquidation) v. Karnataka State Financial Corporation, reported in ILR 1992 Kant 2207, while confirming the order of the learned Company Judge granting permission to the KSFC, a secured creditor, to stand outside the winding up and to sell the assets of the company under liquidation in exercise of its statutory powers under Section 29 of the SFC Act subject to the undertaking given by the KSFC respecting the workmen's dues, held thus:

“17. For the foregoing reasons, we are not left in doubt that the permission granted to the KSFC, a secured creditor of the Company (ICBL) in winding-up, to sell that Company's assets, which are already in its possession and constitute security for repayment of the loan, and realise its security subject to payment of workmen's dues as undertaken by it by standing outside such winding up, is well in accordance with the provisions of Section 529, as amended, and Section 529A, as inserted into, the Companies Act and Section 29 and Section 46B of the State Financial Corporations Act, 1951.”

This decision, however, was questioned in an appeal before the Supreme Court. The matter is still pending before the Supreme Court. While granting special leave, the Supreme Court made the following order:

“Meawhile, it appears appropriate that the respondent — Karnataka State Financial Corporation should sell the property acting jointly with the Official Liquidator under the supervision and in accordance with the directions of the learned Company Judge of the High Court and the sale proceeds be deposited in the Court and then distributed in accordance with the directions of the learned Company Judge.

Liberty to seek further directions in this behalf in case of any controversy arising in the performance of this task.”

17. The view contrary to the one urged by the appellant KSIIDC is however taken by the Bombay High Court in Maharashtra State Financial Corporation, Bombay v. Official Liquidator, Bombay High Court, reported in AIR 1993 Bombay 392. The decision of the Supreme Court in Ranganathan's case (AIR 1955 SC 604), the decision of Bombay High Court in (1988) 64 Com Cas 102, as also other decisions, were duly considered in the aforesaid decision of the Bombay High Court reported in AIR 1993 Bombay 392. The Bombay High Court finding that the Supreme Court in Ranganathan's case had no occasion to consider the impact of Sections 529 and 529A of the Act on the provisions of Section 537 of the Act, corresponding to Section 232 of the Indian Companies Act, 1913 which the Supreme Court was considering, proceeded to examine the matter in the light of the proviso to sub-section (1) of Section 529 and Section 529A inserted in the Act by the Companies (Amendment) Act, 1985 and to further consider whether such insertion made any difference to the position of the secured creditor with a right to sell the property directly without the intervention of the Court. Mrs. Justice Sujata Manohar of the Bombay High Court, as she then was, speaking for the Bench observed (at pp. 395 and 396 of AIR):

“The workmen's dues and the debt due to a secured creditor to the extent such a debt could not be realised by such a secured creditor because of the pari passu charge in favour of the workmen, or the workmen's portion in his security which he has lost because of the proviso to Section 529, will run pari passu with workmen's dues under Section 529A. In other words, the extent of his claim which a secured creditor could not realise out of his security because of the rights created in favour of the workmen because of their pari passu charge on the security, would get an over-riding preference for payment in winding up along with workmen's dues.

“11. Therefore, because of the Proviso to Section 529, the secured creditor is not the only mortgagee entitled to sell the security. He has a comortgagee (in the form of workmen) with an equivalent charge on the same security. These workmen are to be represented by the Official Liquidator. Therefore, when a secured creditor seeks to realise his security, he has also to contend with the Official Liquidator. The Official Liquidator is an interested party in the sale of the security in two capacities in such a situation — (1) as a representative of the pari passu charge holders; and (2) as an officer of the Court in the custody of the company's properties, who is responsible for the sale and distribution of the assets of the company in winding up. In both these capacities, he has an interest in the sale of the mortgaged security by the secured creditor.

“12. What are the rights of a pari passu charge holder? Can a mortgagees exercise his power of sale without the consent of a pari passu holders?

The meaning of the words ‘pari passu’ is defined in Jowitt's Dictionary of English Law, Volume II, 1959 Edition page 1294 as: “With equal step, equally, without preference”. The term is similarly defined in Black's Law Dictionary, 6th Edition, Page 1115 as, “By anequal progress ……. Used especially of creditors who, in marshalling assets, are entitled to receive out to the same fund without any precedence over each of other”.

Prem's Judicial Dictionary, Volume III, 1964 Edition, page 1217 also defines pari passu as: “With equal steps, that is to say, proceeding side by side at the same place”. Therefore, the rights of an Official Liquidation as representing the workmen run equally with the rights of secured creditors.

“13. In the case of Co-mortgagees, the Courts have held that the one co-mortgagee cannot sell or institute any proceeding for the sale of the mortgaged property without joining the other co-mortgagees. If the other co-mortgagees are not willing to join as plaintiffs they should be joined as defendants. This is because the mortgaged security is one and it must be realised as a whole by a common sale. Thus, in the case of Mohammed Ismail Maracair v. Doraisami Mudaliar, reported in AIR 1958 Mad 621. The Court considered the case of co-mortgagees and held as a proposition of law that a mortgage is one and indivisible in regard to the amount and security. The Court said that no suit can, therefore, be filed to enforce a mortgage which entails the disintegration of either the amount or the security.

That, therefore, normally all the mortgagees should join. But if some of them refuse to join, they should be included as defendants. Such mortgagees — defendants are not pro forma parties but are necessary parties in that the mortgage right vests in them along with the plaintiff — mortgagees.

“14. The Privy Council, in the case of Sunitibala Debi v. Dharae Sundari Debt, reported in AIR 1919 PC 24, said in the case of two mortgagees holding as tenants-in-common that the right of either mortgagee who desires to realise the mortgaged property and obtain payment of the debt, if the consent of the co-mortgagee cannot be obtained, is to add the co-mortgagee as a defendant to the suit and to ask for the proper mortage decree. It is, therefore, necessary that when a sale of a mortgaged property takes place, both the charge holders should join in the sale.

“15. The same ratio, in our view, would substantially apply to two charge holders who have a pari passu charge for the recovery of their dues. It may be that unlike a co-mortgagee, a pari passu charge holder can receive payment of his mortgage debt from the mortgagor and release his charge independently. But when it comes to realising the security, both the pari passu charge holder must join or realise the security simultaneously. The sale proceeds are required to be divided proportionately between them in the same proportion as their dues. Hence, when a sale takes placed, it is for the simultaneous recovery of claims of all pari passu charge holders.”

It was further observed in paragraph 23 thus:

“also, the statutory right which is given to a financial corporation under Section 29 to sell the property has to be exercised consistently with the rights of a pari passu charge holder in whose favour a statutory charge is created by the Proviso to Section 529 of the Companies Act when the company is in liquidation. Therefore, such a power can be exercised only with the concurrence of the Official Liquidator and the Official Liquidator is required to take the permission of the Court before giving such concurrence since he is an officer of the Court and is required to act under the directions of the Court while exercising his powers on behalf of the workers.”

Referring to the contention that because of Section 46B of the SFC Act, provisions of Section 29 of the said Act would prevail over the provisions of Section 529 of the Companies Act, it was observed thus (at p. 400 of AIR):

“We however, did not see any inconsistency between the provisions of Section 29 of the State Financial Corporations Act and Section 529 of the Companies Act. Section 29 of the State Financial Corporations Act merely confers certain powers on the mortgagee. It does not cover a situation where there is a pari passu charge-holder. Therefore, the power to sell which is given to a financial corporation under Section 29 has to be exercised consistently with the right of a pari paxsu chargeholder. Such a right can be exercised with the consent of the pari passu chargeholder or on orders of the Court after making him a party to the proceedings to enforce the security. Since the chargeholder is the Official Liquidator, his power to consent is subject to the sanction of the Court.”

18. Having due regard to the fact that an appeal against the decision of the Division Bench of this High Court in International Coach Builders Limited case (ILR 1992 Kant 2207) (supra) is admitted and the Supreme Court has given certain directions while so granting Special Leave to Appeal, directing the secured creditor to act jointly with the Official Liquidator under the supervision and in accordance with the directions of the learned Company Judge for effecting the sale, we are of opinion that the other decisions referred to above and relied upon by Sri Gopala Hegde, learned counsel for the KSIIDC, the appellant, need to be distinguished firstly on the ground that the Supreme Court in Ranganathan's case (AIR 1955 SC 604) did not have an occasion to consider the impact of Sections 529 and 529A of the Act on Section 537 of the Act, and secondly on the ground that the rest of the decisions were based mainly on the said decision of the Supreme Court in Ranganathan's case. It is only Mrs. Justice Sujata Manohar of the Bombay High Court, as she then was, speaking for the Bench in Maharashtra State Financial Corporation case (supra — AIR 1993 Bombay 392), who has dealt with every aspect of the matter concerning the sale of assets of a company in winding up when the secured creditor prefers to stand outside the winding up and enforces his security in exercise of the power under Section 29 of the SFC Act. We fully agree with the exposition of law as made by Mrs. Justice Sujata Manohar in this regard.

19. It is no doubt true that on 29-7-1994, the appellant KSIIDC had taken over possession of the assets of the Company under liquidation, acting under Section 29 of the SFC Act. It is also true that no provisional Liquidator had been appointed under Section 450 of the Act. Nevertheless, by the time the appellant completed the sale transaction in favour of Respondent No. 7 on 30-9-1995, the winding up order had already been passed on 8-9-1995 and the Official Liquidator had already come into picture as liquidator of the Company under Section 449 of the Act. There were workmen's dues to the tune of Rs. 80 lakhs. Because of the proviso to sub-section (1) of Section 529 of the Act, KSIIDC is not the only secured creditor entitled to sell the security by invoking Section 29 of the SFC Act, KSIIDC has to contend with the pari passu charge in favour of the workmen's dues, the workmen being represented by the Official Liquidator. Official Liquidator would thus be an interested party in the sale of security. The Proviso to subjection (1) of Section 529 as also Section 529A of the Act, having created pari passu charge in favour of the workmen, same would affect the right of the appellant KSIIDC to sell the security directly by itself by invoking Section 29 of the SFC Act. The appellant is required to join the Official Liquidator in the sale, and, the property cannot be sold ignoring pari passu charge holder. Similarly, though the Official Liquidator by virtue of Section 457(1) of the Act has the power to sell the property of the company in winding up, and as a pari passu charge holder under Section 529 of the Act, he has the power to sell the said property with the sanction of the Court to realise the charge, he cannot sell the property all by himself ignoring the secured creditors like KSIIDC. Thus, both the secured creditor namely KSIIDC as also the Official Liquidator as the representative of the workmen, are to exercise the power to sell under the directions of the Court. The aspect of repugnancy between the provisions of two Acts i.e the SFC Act and the Companies Act, and, in that situation, the provisions of the SFC Act having overriding effect over the provisions of the Act, by virtue of Section 46B of the SFC Act, is not to be seriously considered because there is no inconsistency between the provisions of the said two Acts. Section 29 of the SFC Act merely confers certain powers on the secured creditor. It does not deal with a situation where there is pari passu charge holder. The power to sell which has been given to KSIIDC under Section 29 of the SFC Act has to be exercised consistently with the right of pari passu charge holder who, in the case of a company under liquidation, would be Official Liquidator, whose consent can be subject to sanction of the Court. Therefore, the statutory right given to the appellant KSIIDC under Section 29 of the SFC Act being required to be exercised consistently with the right of pari passu charge holder in whose favour statutory charge is created by the proviso to sub-section (1) of Section 529 of the Act when the company is in liquidation, and the Said pari passu charge holder being Official Liquidator who is required to act under the directions of the Court, leave of the Court would be necessary, and, any sale without such leave would be void under Section 537 of the Act. Learned Company Judge was therefore, right in declining to approve the sale in favour of Respondent No. 7 and giving fresh directions for resale of the property by the appellant KSIIDC by standing outside the winding up in association with the Official Liquidator right from the time of settling the terms of advertisement, and making the said resale subject to confirmation by the Court.

20. While thus finding that there is no merit in the appeal, the fact also remains that Respondent No. 7 has already parted with a sum of Rs. 150/- lakhs towards sale consideration as far back as on 5-6-1995. The price settled in favour of the said Respondent No. 7 was Rs. 486/- lakhs. In the circumstances, therefore, in the said resale, it would be appropriate that the first bid shall be taken as that of Respondent No. 7 at Rs. 496/- Jakhs, the difference of Rs. 10/- lakhs being on account of the fact that Respondent No. 7 had already parted a huge sum of Rs. 150/- lakhs as far back as on 5-6-1995. The first bid thus being of Respondent No. 7 at Rs. 496/- lakhs, if any other intending purchaser were to offer higher bid, then, the property could be sold in favour of the highest bidder. If no offer exceeding the said first bid at Rs. 496/- lakhs comes up, then, the property shall be sold to Respondent No. 7 for Rs. 486/- lakhs only. The process of sale shall be completed on or before 30th May, 1997. Excepting this modification, the other directions of the learned Company Judge shall stand.

21. Appeal is accordingly disposed of. No costs.

Order accordingly.