# In the matter of Tata Iron & Steel Co. Ltd. vs. Jhalani Tools India Ltd.

> HC judgment dated 2023-07-19. Citation: TCN-2023-HC-00049. The case revolves around the winding-up proceedings of Jhalani Tools India Limited (JTIL). Tata…

- **Court:** HC
- **Order date:** 19 Jul 2023
- **Citation:** TCN-2023-HC-00049
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/high-courts-new-delhi/tata-iron-steel-co-ltd-vs-jhalani-tools-india-ltd-74aaf80b

## Summary

### Background

The case revolves around the winding-up proceedings of Jhalani Tools India Limited (JTIL). Tata Iron and Steel Company Limited (TISCO) initiated the proceedings due to JTIL's failure to repay a working capital loan. JTIL had also approached the Board for Industrial and Financial Reconstruction (BIFR) for revival. During the BIFR proceedings, a rehabilitation scheme was approved, and financial institutions and a consortium of banks sanctioned term loans and working capital facilities to JTIL. However, the company eventually faced liquidation. The Official Liquidator (OL) was appointed and tasked with disbursing payments to workmen and secured creditors. Dena Bank, a secured creditor and part of the consortium, filed an application contesting the computation of pro rata

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## Facts

Jhalani Tools India Limited (JTIL) was engaged in manufacturing hand tools with six factories. Tata Iron and Steel Company Limited (TISCO) provided a working capital loan of Rs. 9 crores, which JTIL failed to repay, leading to the initial company petition. JTIL also went before the Board for Industrial and Financial Reconstruction (BIFR) under Case No. 288/1987. A rehabilitation scheme was approved in 1987. Industrial Bank of India (IDBI) and Industrial Investment Bank of India (IIBI) sanctioned term loans. From March 1988, a consortium sanctioned working capital term loans (WCTL) of approximately Rs. 5.74 crores. In 1991, the company extended mortgages created in 1983 in favor of SICOM Ltd., Punjab & Sind Bank, and Bank of America. By 1998, JTIL settled amounts

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## Issues and analysis

### Issue 1: Whether the second charge held by the Consortium can be considered equivalent to their first charge …

**Ratio:** The court held that first and second charge holders cannot be treated equally in

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**Reasoning:** The court reasoned that the legislative intent of Section 529A of the Companies Act,

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**Interpretation:** The court interpreted Section 529A and Section 48 of the Transfer of Property

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**Application:** The court applied the ratio to the facts of the case, holding that Dena Bank's

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## Parties

- **Judges:** Sanjeev N…
- **Appellants:** M/S TATA IRON &…
- **Respondents:** M/S JHALANI TOOLS…
- **Other parties:** Kohi…

## Timeline

- **1987-01-01 — BIFR Proce…**: JTIL went before the Board for Industrial and Financial Reconstruction (BIFR) under Case…
- **1987-01-01 — Rehabilitation Scheme…**: A rehabilitation scheme was…

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