In Brief
A private company borrowed from Karnataka State Financial Corporation (KSFC) and mortgaged its property. When the company faced financial difficulties, winding-up petitions were filed in 1987-1989. KSFC took possession of the property before the winding-up order was made in August 1993 and sold it to a third party in February 1994. The liquidator challenged the sale as void under Company law, arguing the winding-up order related back to the petition date. The Supreme Court dismissed the appeal, holding that while KSFC's statutory right to realize security cannot be taken away, the Official Liquidator must be associated with the sale to ensure proper price and protect workmen's pari passu rights. Distribution of proceeds must follow the statutory hierarchy under Sections 529-A and 529 of the Companies Act, with workmen's verified claims prioritized alongside secured creditors' portions.
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