Recovery proceedings against a sick company are not automatically barred if the Official Liquidator is heard and statutory appeal rights are ignored.

Recovery proceedings against a company under sickness and winding-up proceedings are not automatically void where the Official Liquidator has appeared and been heard, and where the applicants were not workmen. The court examined the interaction of the sick industrial company regime, company liquidation provisions, and recovery law, and held that the absence of leave of the Company Court did not by itself require setting aside the DRT judgment on these facts. It also held that the applications could not be entertained because the applicants had not exhausted the statutory appellate remedy against the DRT decree, and no exceptional reason justified bypassing that remedy. The challenge and stay request were therefore rejected.

---

---

Issues: (i) Whether the DRT judgment and the recovery proceedings were liable to be set aside on the ground that the company was under sick industrial company and winding-up proceedings, and that leave of the Company Court had not been obtained; (ii) Whether the applications could be entertained despite the availability of the statutory appellate remedy under the recovery legislation.

Issue (i): Whether the DRT judgment and the recovery proceedings were liable to be set aside on the ground that the company was under sick industrial company and winding-up proceedings, and that leave of the Company Court had not been obtained.

Analysis: The provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and Sections 446 and 529A of the Companies Act, 1956 were examined along with the governing principles on recovery proceedings against a company in liquidation. The order records that the Official Liquidator had already appeared before the DRT and was heard, and that the applicants were not workmen of the company. It was further noticed that the legal position does not create an absolute bar against the DRT proceeding with recovery, provided the Official Liquidator is associated and heard. The applicants had also not challenged the DRT judgment by the statutory appellate route.

Conclusion: The challenge based on SICA and the Companies Act failed, and the DRT judgment and recovery proceedings were not liable to be set aside on that ground.

Issue (ii): Whether the applications could be entertained despite the availability of the statutory appellate remedy under the recovery legislation.

Analysis: The Court considered Sections 17 and 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the principle that where an effective statutory remedy exists, it should ordinarily be pursued before invoking collateral proceedings. The order also relied on the restraint expected in interfering with recovery measures, especially where the applicants had not availed the appellate forum available against the DRT decree. No exceptional circumstance was shown to justify bypassing that remedy.

Conclusion: The applications were not maintainable in the face of the available statutory remedy and were rejected.

Final Conclusion: The Court declined to interfere with the DRT decree and the subsequent recovery steps, and the applications for setting aside the decree and for stay of recovery were dismissed.

Ratio Decidendi: Proceedings under the recovery law are not automatically invalid because the debtor is in liquidation, and interference will not be granted where the official liquidator has been heard and an effective statutory appellate remedy has not been exhausted.

---