Professional Documents
Culture Documents
CP719/2002a/wOLRNO.188/14
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And
Asha Bhosale
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Mr. J.P. Sen, Senior Advocate i/b Mr. Rakesh Reddy, Advocate for the Official
Liquidator.
Dr. Virendra V. Tulzapurkar, Senior Advocate a/w Mr. Hiren Kamod and Mr.
Nikhil Sharma i/b W.S. Kane & Co. for Magnasound Media Pvt. Ltd.
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Mr. Chetan Kapadia, i/b Mr. Rahul Kadam for Mr. Shashi Gopal.
Mr. Amit Jamsandekar a/w Mr. Dhiraj Mhetre i/b Desai & Diwanji for Sony Music
Entertainment India.
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JUDGMENT
1.
a Deed of Assignment dated 14.03.2012 executed by Mr. Shashi Gopal, an exdirector of Magnasound India Ltd. (MSIL), the Company (In Liqn.), in
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were the subject matter of the purported Deed of Assignment and also for
directions to restrain MMPL and Sony Music from dealing with these assets.
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2.
exercise of his rights as a Subrogee, has after the winding up order sold assets
belonging to the Company (In Liqn.) without the leave of this Court, without
valuation and without inviting public offers to a related party at a price
randomly fixed by the Assignor (Mr. Shashi Gopal) and the Assignee (MMPL).
It is submitted on this basis that the Assignment is void as contrary to Sections
536(2) and 537(1)(b) of the Companies Act, 1956.
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3.
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recording copyrights in such manner as the bank shall think fit, but by giving 15 days
notice to the borrower and either by public auction, private Contract or tender
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Petitioner Asha Bhosle for winding up the company on account of its failure to
discharge its payment obligations to the Petitioner. On 30.4.2003, the OL, High
Court, Bombay came to be appointed as the Provisional Liquidator of the
Company. Meanwhile, the Company also appears to have been in default of its
obligations to UBI as a result of which UBI filed OA No.186 of 2004 before the
DRT, Mumbai for recovery of their dues and enforcement of their securities
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5.
Memo filed by UBI and the guarantors of the Company in Liquidation. The
compromise memo provided that the guarantors would submit to a decree on
admission in a sum of Rs. 8,56,33,265/- in favour of UBI. The said memo also
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recorded an OTS offer that had been accepted by the Bank for payment of a
sum of Rs. 520.06 lacs before September, 2006 by the Guarantors on which the
claim of the Bank was to stand fully satisfied. The compromise memo further
recorded that the guarantors were in a position only to pay Rs. 281.02 lacs and
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not the entire OTS amount. The guarantors were given an opportunity by the
compromise memo to revive the lapsed OTS for a further period of one year on
certain terms and conditions recorded in the compromise memo. The balance
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OTS amount of Rs.239.04 lacs was to be paid, inter alia, by the sale of the
Masters belonging to the Company in Liquidation after taking possession
from the Official Liquidator and obtaining permission from the DRT. The
Masters were to be brought to sale through DRT, with the Guarantors to
arrange for buyers at a minimum price of Rs. 150 lakhs. In the event of there
being a surplus over and above Rs. 150 Lakhs, the surplus was to go to the bank,
while any shortfall was to be made good by the Guarantors.
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The Compromise Decree does not seem to have been fully complied with
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Liquidation and a guarantor) filed a Misc. Application before the DRT, inter
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alia, for purchase of the assets of the Company in Liquidation. The OL filed a
reply dated 27.5.2008 in this Misc. Application where he noted that the assets
may be sold by public auction only in one lot after publication of necessary
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sale notice and not by way of private treaty at any cost. On 20.6.2008, the said
Shashi Gopal filed an application for withdrawal of his Misc. Application. The
8.
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of the balance dues of the bank. Accordingly, Shashi Gopal paid over to UBI
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the sum of Rs. 212 lakhs then outstanding. On this payment being made, a
Deed of Subrogation dated 25.6.2009 was executed between UBI and Shashi
Gopal under which the Bank purported to subrogate to Shashi Gopal complete
rights of Bank against MSIL in recovery of debt due under Consent Decree dated
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that there appears to be no workers claims lodged before the Official Liquidator
and hence there is no pari passu charge in respect of the assets of the MSIL mentioned
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9.
On the same day, UBI served upon the OL an application for leave to
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withdraw the recovery proceedings pending before the DRT. By his report
dated 26.6.2009, the OL recorded that he had no objection if leave was granted
10.
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recorded that the Bank had handed over possession of a Bungalow at Lonavala,
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one of the secured assets, alongwith the hypothecated assets lying therein. The
letter also recorded that the Bank did not have any other claim with respect to
the assets of the Company in Liquidation. In July 2009, Shashi Gopal filed a
Misc. Application no.632 of 2009 before the DRT seeking a direction to the OL
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custody of UBI , the secured creditor, are handed over to Mr. Shashi Gopal and kept
under his custody . Accordingly, an order came to be passed by the DRAT on
5.8.2009 directing that the hypothecated assets be handed over to Mr. Shashi
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Gopal. Pursuant to the said order, these assets were handed over to Mr. Shashi
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Gopal in his capacity as a subrogee claimed that all royalties if any payable by
music societies, Phonographic performance Ltd (PPL) and Indian Performing Rights
Society LTD (IPRS) are payable to me from 1996 onwards in respect of the use of
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Masters of Magnasound India Ltd if they have not already been paid. By this
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letter, Mr. Shashi Gopal sought a no objection letter from the OL in this regard.
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Liquidation. By this letter, the Subrogee was expressly told to maintain status
quo. Mr. Shashi Gopal did not attend the meeting so fixed.
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Register maintained by the OL that the said letter dated 9.5.2011 was received
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by the office of the OL on 10.5.2011. It appears, however, that the said letter
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asserts that it is in these circumstances that no reply was sent to the said letter.
On 21.5.2011, a public notice was issued by one MMPL Pvt Ltd in the
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Free Press Journal and Navshakti in respect of its intention to acquire the entire
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copyright in the repertoire of the Company in Liquidation. The said notice did
not come to the attention of the OL. Thereafter, a Deed of Assignment dated
14.3.2012 appears to have been entered into by the said Mr. Shashi Gopal and
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with Sony Music Entertainment Private Limited (Sony Music) for a license to
be granted in favour of Sony in respect of a part of the repertoire of the
Company in Liquidation. The Notices issued by Sony Music appear to have
come to the attention of the Petitioner hereinabove who by a letter dated
13.4.2012 called upon the OL to file an objection in response to the aforesaid
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notice.
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that the assets of the Company in Liquidation vested in him and that any rights
in its repertoire could not be transferred or assigned without the permission of
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this Court. The OL also sought a copy of the documents on the basis of which
the public notice had been issued. A meeting was thereafter held on 24.4.2012
in the office of the Deputy OL at which the representatives of Sony Music also
remained present. At this meeting, these representatives undertook not to deal
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with the proposed acquisition/ licence in respect of the assets mentioned in the public
notice dated 11.4.2012.
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15.
where Sony Music purported to claim that it was satisfied beyond reasonable
doubt that the title of MMPL with respect to the assets mentioned in the public notice
including the repertoire is free, clear and marketable as well as free from all
encumbrances. The letter went on to assert that the Company in Liquidation
was not the owner of the said repertoire and that the undertaking given by the
representatives of Sony Music at the meeting held on 24.4.2012 was wrongly
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taken and therefore stood withdrawn. By his reply dated 14.5.2012, the OL
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recorded that the attempt being made by Sony Music to withdraw their
undertaking was ill conceived and called upon them to maintain status quo
until the rights, if any, of MMPL in the catalogue/repertoire of the Company in
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16.
By their Advocates reply dated 6.6.2012, Sony Music claimed that UBI
had disposed of the repertoire with the prior consent of the OL as recorded in
an order of the DRAT and that in view of the entire repertoire being disposed
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of with prior consent as alleged, the Company in Liquidation was not the owner
of the said Repertoire. The letter further claimed that the OL had travelled
beyond his jurisdiction in taking an undertaking from Sony Music in relation to
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the said Repertoire and that the undertaking was invalid and bad in law. The
letter also recorded that Sony Music had already entered into an agreement
with MMPL under which Sony Music had been granted an exclusive license for
the said Repertoire. By this letter however, Sony Music did not furnish to the
OL copies of the agreements executed by them.
17.
It is only in the course of the hearing of the above report that Sony Music
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on record by Sony Music regarding the revenue generated by them under the
said Agreements. It is significant, however that Sony Music entered into the
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Company Application No, 498 of 2012, inter alia, impugning the purported
transfer by Shashi Gopal of the hypothecated assets in favour of MMPL.
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In the course of his oral submissions, Mr. Sen, learned Senior Advocate
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cannot assign its debt to a non banking entity nor can it assign a
recovery certificate or the benefit of a consent decree to such an
entity. In this behalf, he relied on the Judgment of the Honble
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b)
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benefit of any security that the bank held for recovery of the
money paid by him. The principal debtor being a Company in
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d)
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f)
have not yet been adjudicated, he must apply to the company court
seeking directions for sale;
That the fact that the OL has not objected to the subrogation in
favour of Shashi Gopal does not constitute an admission of
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g)
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h)
That the law requires him to adopt every precaution in this respect
including obtaining a valuation and selling the property by public
notice. In this connection, he placed reliance on the Judgments of
the Honble Apex Court in Gajraj Jain v. State of Bihar & Ors.11;
FCS Software Solutions Ltd. v. LA Medical Devices Ltd. & Ors.12;
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i)
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the issue as to whether a sale by a third party would fall within the
ambit of these sections. The plain language of the section would
indicate that they would. That is certainly within the mischief
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k)
l)That
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reply:
That Section 536(2) of the Companies Act has no application to the sale
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Sankalchand Himatlal Seth 24, & Utkal Contractors and Joinery Pvt. Ltd. &
Ors. v. State of Orissa and Ors.25 ; the Judgment of the House of Lords in
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b)
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enforce his security without the leave of the Company court. He relied
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Chemicals Pvt. Ltd.29, and SICOM v. MSFC30. Such a sale would not fall
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present case;
d)
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e)
are not entitled to priority or to a pari passu charge under Section 529-A
of the Companies Act;
That in any event, Sections 536(2) and 537(1)(b) are not an absolute bar
to a sale and protect any sale in the interest of the company. He relied on
the Judgments of the Apex Court and of various High Courts in Pankaj
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(Holdings) Ltd.32 & Sunita Vasudeo Warke v. Official Liquidator & Ors.33.
The present sale by Shashi Gopal in exercise of his rights as a subrogee is
one such;
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qua the company and was only required to issue a notice to the Official
Liquidator prior to the sale of the hypothecated securities even by private
That in any event, the Official Liquidator had alleged neither fraud nor an
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That his client was in any event willing to deposit a sum of Rs.
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21.
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covers which were originally handed over to the Official Liquidator in good
condition, were received by the subrogee in a poor condition. He further
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contended that the subrogee was therefore obliged to spend considerable time
and money to restore the master tapes and photo cards to render them usable.
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under the consent decree in its favour, such overflow would have enured to the
benefit only of UBI and not the workmen.
Mr. Amit Jamsandekar, Learned Counsel for Sony Music, submitted that
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his client had bonafide acquired rights from MMPL. He further urged that
after acquisition of the rights, Sony Music had invested tremendous amount
of money, skills, labour and resources to commercially exploit the copyright
acquired by them. On this basis, he contends that it would be inequitable to set
aside the Agreements executed by MMPL in their favour.
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23.
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Thereafter Advocates for the parties except Sony Music Entertainment India
filed their written submissions on 13th May, 2015 i.e. during court vacations.
Sony Music Entertainment India filed its written submissions on 11 th June,
2015. I have considered the oral as well as written submissions made/filed by
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the parties and the Judgments relied upon by them. The first issue that arises
for consideration is as to whether Shashi Gopal, in his capacity as a subrogee,
was entitled to sell any of the hypothecated securities without the leave of the
Company Court. The contention advanced on behalf of the Official Liquidator
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that a recovery certificate issued by the Debt Recovery Tribunal or the benefit
of a Consent Decree passed by it is incapable of assignment to a non banking
entity reflects the true legal position. A non banking entity is not entitled
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24.
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Subrogation dated 25.06.09, UBI does not appear to have assigned its debt,
decretal or otherwise, to Mr. Shashi Gopal but has merely transferred in his
favour the benefit of the securities held on account of his being a subrogee.
This is a benefit to which Mr. Shashi Gopal would have been even otherwise
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That being so, Mr. Shashi Gopal can rely if at all only on the terms of the
Deeds of Hypothecation that had been executed by the Company in
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of the Companies Act, 1956. The principle laid down by the Honble Supreme
Court in MK Ranganathan v. Govt. of Madras (supra) that a secured creditor is
entitled to stand outside the winding up and enforce his security by sale
without reference to the OL or the Company Court pre-dated the introduction
of Section 529A which places workers on par with secured creditors and is no
longer good law. This position has been recognized in the judgment of the
Honble Supreme Court in International Coach Builders (supra) and several
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judgments that follow it. As would be evident from the paragraphs reproduced
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creditors and as such entitled to exercise their rights under the mortgage
as also the statutory rights conferred on them by Section 29 of SFC Act
without interference of courts. Hence,it is urged that the SFCs can sell
the mortgaged and charged properties without reference to any court,
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required to consider the meaning of the provision any sale held without
leave of the Court of any of the properties used in Section 232(1) of the
Companies Act, 1913 which rendered such sales void. It was held that
these words refer only to sales held through the intervention of the court
and not to sales effected by the secured creditor outside the winding up
without intervention of the Court. This Court pointed out that the law
in England, and the provisions of the Companies Act in India, was the
name, namely, that the secured creditor had the right of realizing his
security by standing outside the winding up, in which case he was not
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15. The decision in Ranganathan (supra) held the field for considerable
period, both under the Companies Act, 1913 and the Companies Act,
1956. However, by amending Act 35 of 1985, amendments were carried
out in Section 529 and a new Section 529A was enacted. These
developments, in our view, brought about a qualitative change in the
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the Companies Act, 1956) was enacted. These developments, in our view,
brought about a qualitative change in the legal situation. It is important
to notice that M.K. Ranganathan (supra) was decided under the
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Companies Act, 1913 which did not have any provision corresponding to
the proviso to Section 529 or Section 529A of the Companies Act, 1956.
Obviously, therefore, Ranganathan could not have considered the impact
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17. As a result of the proviso added in Section 529, the security of every
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and proving his debt, opts to stand outside the winding up proceedings
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Clause (c) of the newly added proviso, so much of the debt due to the
secured creditor opting to realise security as could not be realized because
of the special created rights in favour of the workmen, or the amount of
the workmen's portion in the security, whichever is less, shall rank pari
passu with the workmen's dues under Section 529A. Section 529A
provides for overriding preferential payments of workmen's dues and
unrealised portion of the secured creditors dues, as provided in Clause (c)
of the proviso to Section 529.
19.
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result of the amendment to Section 529 a pari passu charge to the extent
of the workmen's portion is created on the security of every secured
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up. 'Pari Passu' means "with equal steps, equally, without preference"
(Jowitt's Dictionary, Vol.II, 1959 Edition 1294). Black's Law
Dictionary, 6th Edition, 115 defines it as "By an equal progress... Used
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The rights of the pari passu charge holders would run equally,
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temporally and
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the SFCs cannot act independently or by ignoring him for enforcing the
security. It is established law that in case of co-mortgages, all of them
should join in the suit for enforcing the security, but if some of them
refuse to join, they have to be included as defendants, not merely as
performa parties, but as necessary parties inasmuch as the mortgage
right vests in them along with the plaintiffs-mortgagees. (See in this
connection the judgment of the Privy Council in Sunitibala
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Debi v.Dharae Sundari Debi AIR 1919 PC 24. The same principle
would be substantially true and applicable in the case of a mortgagee and
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a pari passu charge-holder over the same security for realising the
security. The realization of the security can only be done by both the
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and relied upon judgments of different High Courts. The view taken by
the Bombay High Court commends itself to us. The Division Bench of
the said High Court pointed out that, like a secured creditor, the official
liquidator as a pari passu charge holder cannot independently bring the
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secured creditor. In either event, the Court while granting sanction may
impose appropriate condition and give directions regarding the conduct of
the sale, the fixing of the reserve bid, acceptance of the bid, confirmation
in realizing the security only for his benefit and to the extent necessary
for recovery of his outstanding. Prior to 1985 it might have been possible
for a secured creditor under Section 529 of the Companies Act, 1956, or
its predecessor, Section 232 of the Companies Act, 1913 as interpreted by
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this Court in M.K. Ranganathan case (supra), to opt to stand outside the
winding up and realise the security by bringing it to sale. This was
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mortgaged to more than one secured creditor, they had to either come to
an agreement, or in the event of disagreement, there had to be a suit in
which the dissenting mortgagee had to be sued as a necessary party
defendant. No doubt Section 29 of the SFC Act was intended to place the
SFCs on a better footing. But, in our view, this better footing is available
only so long as the debtor is not a company or is a going company. The
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now subjected to and operate only in conjunction with the special rights
given to the workmen, who as pari passu charge-holders are represented
by the official liquidator. We are, therefore, of the view that the
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of winding up;
the pari passu charge in their favour under the proviso to Section 529 of
the Companies Act, 1956.
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3. If the official liquidator does not consent, the SFCs have to move the
Company court for appropriate directions to the official liquidator who is
the pari passu charge holder on behalf of the workmen. In any event, the
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Company Court.
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having failed to adjudicate the claims of the workmen, no pari passu charge in
their favour could be said to exist which would limit the right of the subrogee to
deal with the hypothecated securities. This argument is clearly misconceived.
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The mere fact that the Official Liquidator has not yet adjudicated the claims of
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workmen would not disentitle them to a pari passu charge or leave a secured
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employees of the company who have filed claims with the Official Liquidator
are workmen entitled to priority under Section 529-A of the Companies Act.
The Official Liquidator has furnished a list of persons who have filed claims as
workmen. Their claims aggregate to Rs. 1,09,86,378.95/-. It has been argued
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the claims are unsupported by any documentary evidence. These are issues to
be determined by the Official Liquidator in the course of adjudication of the
claims. However, there does not appear to be the slightest doubt that atleast
some of the claims made before the Official Liquidator are by workmen of the
Company in Liquidation and that these claims are outstanding. That being so,
the ratio of the Judgment in International Coach Builders (supra) squarely
applies and the subrogee was obliged to seek directions from this Court with
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28.
objected to the recital in the Deed of Subrogation that no workers claims had
been received, Shashi Gopal was then free to deal with the hypothecated assets
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workers claims have been received and have not been adjudicated, he must
perforce apply to the Company Court seeking directions for sale. The fact that
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the OL has not objected to the subrogation in favour of Shashi Gopal does not
constitute an admission of everything in the Deed of Subrogation particularly
an incorrect recital that no workers claims have been received. The OL has no
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fact been made. That being so, the Subrogee was not entitled to sell the
hypothecated assets by private treaty without reference to the Company Court.
29.
The fact that the Official Liquidator did not reply to the letter dated
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which his Office failed to reply to the said letter. Even otherwise, a secured
creditor is not entitled to rely on the silence of the Official Liquidator to
exercise a unilateral right of sale without reference to the Company Court. The
Official Liquidator is merely an officer of the Court and acts under its
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directions. If the letter dated 9.5.2011 had come to his notice at the time of its
receipt, he would have had little choice but to place the matter before the
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move this Court for appropriate directions in the matter of sale of the
hypothecated securities. He certainly was not entitled to assume that he was
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was merely required to issue notice under Section 176 of the Contract Act to the
Official Liquidator, prior to a sale in any manner of his choosing, is entirely
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devoid of merit. At the very outset, it is doubtful whether Section 176 of the
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Contract Act which governs the rights of a pledgee would have any application
to the facts of the present case where the securities were hypothecated, not
pledged. Even otherwise, the argument is misconceived for more reasons than
one. The OL is not the owner of the hypothecated securities. He is merely a
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custodian of it as an officer of the Court. Further, it is clear from the law laid
down in International Coach Builders (supra) that once a company is in winding
up and the workers have a pari passu charge on the secured assets, no secured
creditor would be entitled to exercise a unilateral right of sale without reference
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to the Company Court by merely issuing a notice of such proposed action to the
OL.
Even otherwise, the manner in which the hypothecated assets were sold
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by Mr. Shashi Gopal leaves much to be desired. It was argued by Shashi Gopal
and MMPL that a subrogee does not stand in a fiduciary position towards the
principal debtor. This proposition is over broad. It appears to me clear from
the Judgments of the Honble Apex Court in Lallan Prasad (supra) and Jaya
Singh Dnyanu Mhoprekar (supra) that a pledgee or hypothecate would stand in a
fiduciary position qua the principal debtor to the limited extent that he has a
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duty to secure the best possible price while enforcing a security. It is on this
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account that the Apex Court in Gajraj Jain (supra) and FCS Software Solutions
(supra) mandates that a secured creditor exercising a unilateral power of sale
shall adopt every reasonable precaution including obtaining a valuation of the
asset proposed to be sold and inviting offers by public notice. Further, any sale
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nature, every suspicion of a secret profit must be dispelled. In the present case,
it is an admitted position that there has been no valuation prior to sale nor were
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offers invited from the public. The sale was effected, without the leave of the
Company Court, by private treaty in favour of a company which appears to
belong to the same group as the Company in Liquidation. Mr. P.M. Sudheer, a
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director of MMPL who has sworn affidavits on its behalf, appears to have been
employed as the Manager (Accounts) of the Company in Liquidation. He has
in fact made a claim before the OL in that capacity for his outstanding dues.
Given these facts, even if no leave were required to be obtained by the subrogee
prior to the sale of the hypothecated securities, the sale in the present case was
infirm and open to challenge by the OL.
KPPNair
The question then arises as to whether the sale is liable to be set aside
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32.
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under Section 536(2) or 537(1)(b) of the Companies Act. It has been contended
on behalf of Mr. Shashi Gopal and MMPL that any sale of the assets of a
Company in Liquidation by a third party would not fall within the ambit of
Section 536(2) and that the section would apply only to cases of sale of its assets
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by the company itself after the commencement of winding up. However, none
of the judgments cited in this behalf by the Subrogee involve cases where a third
party sought to sell the assets of the company and the question arose as to
whether such a sale would fall foul of Section 536(2). Any observations in these
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judgments have to be viewed in that context. The plain language of the Section
would in fact indicate that even sales sought to be effected by third parties of
the assets of a Company in Liquidation would fall within the prohibitive ambit
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of that section. A sale by a third party would certainly be within the mischief
sought to be remedied by the Section, namely, the prevention of any
KPPNair
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38
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33.
sale by a third party would in any event fall within the ambit of Section 537(1)
(b). The fact that the report of the OL has not made a reference to Section
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International Coach Builders (supra) then it would necessarily follow that a sale
effected without leave would be void under Sections 536(2) and/or 537(1) (b).
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In the present case, the Subrogee has made no application seeking the leave of
this Court, even ex post facto, for the sale of the said asset. The sale would
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34.
In any event, the burden clearly lies on the person seeking to maintain a
sale (which is not in the ordinary course of business) under Sections 536(2) and
537 (1) (b) to prove that the sale was for the benefit of the Company. This Court
has so held on several occasions including in its Judgments in Hindustan
Transmissions Ltd. (supra) and Sunita Vasudeo Warke (supra). In the present
case, neither Shashi Gopal nor MMPL have made any attempt to discharge that
KPPNair
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39
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burden. In view of the burden being cast upon the person seeking leave to
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of Mr. Shashi Gopal that the OL has not alleged undervaluation in the sale is
entirely misconceived. The burden does not lie upon the OL to do so. In any
event, it is self evident that the assets have been undervalued. The agreements
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between MMPL and Sony Music belatedly disclosed in the course of the
hearing would themselves show that the assets were undervalued. While the
sale by Shashi Gopal in favour of MMPL of the entire repertoire was for a sum
of Rs. 1.5 crores, the agreements executed by MMPL in favour of Sony Music
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for part of the repertoire for a limited period is for a sum of Rs. 1.75 crores
without even taking into account any revenue overflow in which MMPL was
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entitled to share.
35.
(though not on affidavit) that the Master tapes were handed over to the OL in
good condition when he took over the assets of the Company in Liquidation
while their condition was very poor when they were handed over to Shashi
Gopal pursuant to directions of the DRT. He further claims that he was
constrained to devote considerable time and money to repairing/reconstructing
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40
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considerable resources on rendering the Master tapes usable. Apart from the
fact that the claims made by the two parties are somewhat at odds, no material
or particulars in support of these allegations including the amounts alleged to
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36.
Shashi Gopal has also contended, in support of his submission that the
sale ought not to be set aside, that if the hypothecated securities had been sold
by the DRT under the Consent Decree in favour of UBI, any overflow would
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have been appropriated by the bank and would not have enured to the benefit of
the workers. This argument loses sight of the fact that the hypothecated
securities were in fact not sold under the Consent Decree, but by the subrogee
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37.
KPPNair
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41
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25,77,000/-
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that the pari passu charge of the workmen would be to the extent of Rs.
security being offered, the challenge to the sale must necessarily fail. The offer,
however, proceeds on the premise that Rs. 1.5 crores is a fair price for the
As I have already noted, Shashi Gopal and
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hypothecated securities.
consideration of Rs. 1.5 crores was in fact a fair value for the hypothecated
securities. In the present case, there is some controversy as to the amount that
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om
OL. These amounts having been paid after the commencement of winding up,
he would not be entitled to any interest thereon unless there were a surplus
considerations which make the offer unacceptable, it is also curious that the
offer proceeds from MMPL rather than the subrogee. If anything, this itself is a
tacit admission that the amount of Rs. 1.5 crores that was paid by MMPL for
the hypothecated securities was an undervaluation.
KPPNair
CP719/2002a/wOLRNO.188/14
rt
42
That apart, the duty of the Official Liquidator and the Company Court is
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38.
to ensure that the interest of all stakeholders including the workers and
creditors, both secured and unsecured, are protected.
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is entirely conceivable that the amount to which the subrogee is entitled would
not exceed the value of all of these securities. It is therefore imperative that
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each security fetch the best possible price. The manner in which the repertoire
of the company in liquidation has been sold by the subrogee was however not
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39.
The circumstances of the present case leave little doubt that the sale
itself, without the leave of the court and given the manner in which it was
effected, was unlawful. However, this leaves open the question as to what order
would meet the ends of justice in the present case. The Official Liquidator not
having in his possession the masters or the agreements or indeed any
documents in respect of the repertoire which constitutes the hypothecated
KPPNair
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security, a valuation exercise to determine what ought to have been the fair
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value of the hypothecated security at the time of its sale by Shashi Gopal
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consideration fixed in the Agreements between MMPL and Sony Music can be
taken to represent the true market value of the rights transacted. The sale of
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a)
b)
KPPNair
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c)
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sixteen weeks from today. In doing so, the Official Liquidator shall
also consider whether the claims are in fact by persons who are
entitled to priority as workmen under Section 529-A of the
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d)
place a report before this Court for a distribution pari passu of the
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e)
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f)
MMPL, Shashi Gopal and Sony Music shall hand over forthwith to
the Official Liquidator all material and documents in respect of the
repertoire which constitutes the hypothecated securities including but
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