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The Supreme Court posed this question while hearing a petition filed by Vijay Mallya's United Breweries challenging the decision of the Karnataka High Court upholding the order to wind up the company.
The Supreme Court today asked whether a company's assets that have been attached by the authorities can be considered for liquidation for settlement of debts and dues.
This question came from the Bench of Justices UU Lalit and Vineet Saran that was hearing a petition filed by Vijay Mallya's United Breweries against the decision of the Karnataka High Court upholding the order to wind up the company.
Today, the Apex Court was informed by Senior Advocate CS Vaidyanathan that the submission of the company that its assets are greater than its liabilities and therefore its winding up may not be directed, was not accepted by the High Court.
The Supreme Court then enquired about the properties that were attached through proceedings under the Prevention of Money Laundering Act (PMLA) against Mallya. It sought to know if these properties can be considered for liquidation instead of directing for winding up of the company.
While the Court was initially inclined to issue notice in the petition, Solicitor General Tushar Mehta, representing State Bank of India (SBI), strongly urged the Court not to issue notice. He argued that the proceedings before Indian courts were being misused in the extradition proceedings.
Justice Lalit, however, made the Court's limited point of consideration clear. He said,
"What is bothering us is that (Senior Counsel) CS Vaidyanathan has submitted that some properties are lying under attachment and proceedings have been initiated for winding up of the company."
The Court sought to simplify the scope of the question it will consider, and asked whether the company should be wound up without the properties already under attachment being taken into consideration.
"Once assets are attached, does that mean these assets cannot be considered to be part of proceedings when company is considered for winding up?", Justice Lalit asked. He added,
"Normally, winding up of a company is avoided if possible."
Mehta submitted that under the PMLA, criminal proceedings take place, and Mallya would be prosecuted. In the event the attached properties are found to be proceeds of crime, they are liable to be confiscated and cannot be used for settlement, the SG added.
"We are dealing with a fugitive offender, not an innocent man", said SG Mehta,
"We are dealing with the company, not the man", Justice Saran reminded Mehta.
Justice Saran also objected to the argument concerning extradition. He said that extradition concerns the Government of India, not the SBI, for which Mehta was appearing. The SG, however, said that the Bank and the government are not adversaries.
Mehta also raised the issue of national interest, prompting the Court to ask Mehta to "don both the hats next time".
Advocate Laxmi Iyengar, representing the official liquidator, apprised the Court that the liquidator has sought for all the documents and statements concerning the accounts of the company. However, some of these remain seized under the Central Bureau of Investigation's (CBI) possession.
The Court also asked why the banks have challenged the order of attachment of property. Mehta sought to take instructions to answer the same.
While notice was not issued, the Court made it clear that it wanted the questions it raised to be addressed by the parties. The matter will now be heard on September 8.