2003 (10) TMI 414 - HC - Companies Law

High Court upholds Recovery Officer's receiver appointment for company assets in debt default case, directs appeal to Appellate Tribunal.

The High Court dismissed the writ petition challenging the Recovery Officer's appointment of a receiver for a company's assets due to debt default. It ... Recovery officer Issues Involved:1. Power of the Recovery Officer to appoint a receiver.2. Justification for the appointment of the receiver.3. Availability of an alternative remedy by way of an appeal to the Debts Recovery Appellate Tribunal.4. Jurisdiction of the High Court under Articles 226 and 227 of the Constitution.Detailed Analysis:1. Power of the Recovery Officer to Appoint a Receiver:The primary issue was whether the Recovery Officer, under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, had the authority to appoint a receiver for a company incorporated under the Companies Act, 1954. The Tribunal's decision on 21st February 2003, which upheld the Recovery Officer's orders dated 13th and 16th January 2003, was challenged. The Tribunal observed that the matter in question related to the powers of the Recovery Officer to appoint a Receiver and attach the assets of the petitioner company.2. Justification for the Appointment of the Receiver:The Tribunal's order dated 21st February 2003 also addressed whether the appointment of the receiver was justified on the facts of the case. The petitioners had defaulted on repaying debts to a nationalized bank, leading to the issuance of recovery certificates. The Tribunal found that the Recovery Officer was within his rights to appoint a receiver and attach the assets of the petitioner company, including those held in a joint venture with its sister concern.3. Availability of an Alternative Remedy by Way of an Appeal to the Debts Recovery Appellate Tribunal:A significant preliminary objection raised by the respondent was that the petitioners had an alternative remedy by way of an appeal to the Debts Recovery Appellate Tribunal under Section 20 of the Act. The High Court agreed, noting that the statute provided for an appeal against the Tribunal's order to the Appellate Tribunal. The High Court emphasized that the petitioners should be relegated to this alternative remedy, as the Act provided a clear hierarchy of appeals.4. Jurisdiction of the High Court under Articles 226 and 227 of the Constitution:The petitioners argued that even though an alternative remedy was available, the High Court could still exercise its jurisdiction under Articles 226 and 227 of the Constitution. However, the High Court referred to the Supreme Court's guidance in cases like Punjab National Bank v. O.C. Krishnan and Harbanslal Sahnia v. Indian Oil Corpn. Ltd., which stated that the High Court should refrain from exercising its jurisdiction when an alternative remedy is available, unless there is a violation of fundamental rights, principles of natural justice, or lack of jurisdiction by the Tribunal. The High Court found no such violations in this case and thus declined to interfere.Conclusion:The High Court dismissed the writ petition, directing the petitioners to file an appeal with the Appellate Tribunal within 15 days. The interim order passed on 26th February 2003 was to continue until the Appellate Tribunal took up the appeal for hearing. The petitioners were also ordered to pay costs of Rs. 20,000 to the respondent before the Appellate Tribunal entertained the appeal.