2001 (7) TMI 1304 - HC - Companies Law

Company Court's Jurisdiction Upheld Over Winding-Up Petitions Despite Debt Recovery Tribunal

Maxlux Glass Private Limited Versus ICICI Limited Company

Maxlux Glass Private Limited Versus ICICI Limited Company - TMI Issues Involved:1. Jurisdiction of the Company Court under the Companies Act, 1956 vis-`a-vis the Debt Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.2. Interpretation of Sections 433 and 434 of the Companies Act, 1956.3. Interpretation of Sections 17, 18, and 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.4. The nature and purpose of winding up petitions.Detailed Analysis:Jurisdiction of the Company Court under the Companies Act, 1956 vis-`a-vis the Debt Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:The primary issue revolves around whether the Company Court retains jurisdiction to entertain a winding-up petition filed by a bank under Sections 433 and 434 of the Companies Act, 1956, despite the existence of the Debt Recovery Tribunal (DRT) established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The court examined the scope and purpose of both statutes. It was observed that while the DRT has exclusive jurisdiction for the adjudication and recovery of debts due to banks and financial institutions, the winding-up petition under the Companies Act serves a broader public interest by preventing insolvent companies from continuing operations.Interpretation of Sections 433 and 434 of the Companies Act, 1956:Sections 433 and 434 of the Companies Act, 1956 outline the grounds and conditions under which a company may be wound up by the court. Specifically, Section 433(e) states that a company may be wound up if it is unable to pay its debts. The court emphasized that winding-up petitions are not merely for the recovery of debts but also serve a public interest by ensuring that companies unable to meet their liabilities do not continue to operate, thereby protecting the public and other creditors.Interpretation of Sections 17, 18, and 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:Section 17 of the 1993 Act grants the DRT jurisdiction to entertain and decide applications for the recovery of debts due to banks and financial institutions. Section 18 bars other courts from exercising jurisdiction in matters specified in Section 17, except for the Supreme Court and High Courts under Articles 226 and 227 of the Constitution. Section 34 gives the Act an overriding effect over other laws. The court clarified that this overriding effect applies only in cases of inconsistency. Since winding-up petitions under the Companies Act serve additional purposes beyond debt recovery, they are not inconsistent with the 1993 Act.The Nature and Purpose of Winding Up Petitions:The court reiterated that winding-up petitions under Sections 433 and 434 of the Companies Act are not solely for debt recovery. They also aim to protect public interest by preventing insolvent companies from continuing operations, which could harm creditors and the public. The court referred to several precedents, including the Supreme Court's ruling in Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami, which held that winding-up petitions should not be used as a means to enforce debt payment but serve a broader purpose.Conclusion:The court concluded that the jurisdiction of the Company Court under the Companies Act, 1956, to entertain winding-up petitions is not ousted by the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The winding-up petition serves a dual purpose of debt recovery and public interest, which is not inconsistent with the 1993 Act. Therefore, the appeal was dismissed, and the order of the learned single judge was upheld.