2013 (7) TMI 1240 - HC - Companies Law

Court Confirms DRT Jurisdiction, Dismisses Ex-Director's Application for Lacking Locus Standi in Company Application No. 653/2012.

M/s Nagindas Kasturchand & Ors. And Mr Shashikant Pasari Versus The Official Liquidator, High Court, Bombay being liquidator of Rajen (Textile) Mill Pvt Ltd, Barshi (in liquidation) & Anr.

M/s Nagindas Kasturchand & Ors. And Mr Shashikant Pasari Versus The Official Liquidator, High Court, Bombay being liquidator of Rajen (Textile) Mill Pvt ... 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the applicant, an ex-director of the company in liquidation, has the locus standi to oppose the application filed by the Central Bank of India or to file an application for recalling the order passed by the court.Whether the order passed by the court in Company Application No. 653 of 2012, allowing the Central Bank of India to release all claims on the leasehold rights in favor of the property owners, should be recalled.Whether the Debt Recovery Tribunal (DRT) had the jurisdiction to permit the Central Bank of India to settle claims with third parties without a recovery certificate.Whether the Official Liquidator has any role or authority in the sale of the mortgaged properties in favor of the secured creditors.Whether the proposal made by the applicant to deposit a sum of Rs. 1.40 crores in court is viable and should be considered.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Locus Standi of the ApplicantRelevant Legal Framework and Precedents: The court considered the role of an ex-director in the liquidation proceedings and whether they have any standing to challenge orders passed by the court.Court's Interpretation and Reasoning: The court held that the applicant had no locus standi in the proceedings as the applicant was already heard by the DRT, and the appeal against the DRT's order was pending.Conclusion: The applicant did not have the standing to oppose the reliefs sought by the Central Bank of India or to file an application for recalling the order.Issue 2: Validity of the Court's Order in Company Application No. 653 of 2012Relevant Legal Framework and Precedents: The court referred to the judgment in the case of Allahabad Bank vs. Canara Bank and the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.Court's Interpretation and Reasoning: The court reasoned that the DRT had the jurisdiction to permit the settlement of claims and that the company court cannot interfere with the DRT's orders.Conclusion: The order passed by the court in Company Application No. 653 of 2012 was valid, and there was no basis for recalling it.Issue 3: Jurisdiction of the DRTRelevant Legal Framework and Precedents: The court analyzed the jurisdiction of the DRT under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.Court's Interpretation and Reasoning: The court held that even if no recovery certificate was issued, the DRT had the authority to grant permission for settling claims with third parties.Conclusion: The DRT had the jurisdiction to permit the Central Bank of India to settle claims with Mr. Prabhakar Barbole and others.Issue 4: Role of the Official LiquidatorRelevant Legal Framework and Precedents: The court referred to previous orders and judgments regarding the role and authority of the Official Liquidator in the sale of secured properties.Court's Interpretation and Reasoning: The court concluded that the Official Liquidator's role was limited and subject to the orders of the DRT.Conclusion: The Official Liquidator had no authority to object to the sale of the properties as per the DRT's orders.Issue 5: Applicant's Proposal to Deposit Rs. 1.40 CroresRelevant Legal Framework and Precedents: The court considered the applicant's proposal in light of the existing liabilities and the bank's rejection of the proposal.Court's Interpretation and Reasoning: The court found the applicant's proposal unreasonable and not viable, as it was conditional and did not cover the bank's claims.Conclusion: The proposal to deposit Rs. 1.40 crores was not accepted.3. SIGNIFICANT HOLDINGSCore Principles Established: The court reaffirmed the exclusive jurisdiction of the DRT in matters related to the execution of recovery certificates and the settlement of claims involving secured creditors.Final Determinations on Each Issue: The court dismissed the application for recalling the order passed in Company Application No. 653 of 2012, upheld the jurisdiction of the DRT, and confirmed the limited role of the Official Liquidator in the sale of secured properties.Verbatim Quotes of Crucial Legal Reasoning: 'The provisions of the DRT Act by virtue of section 34(1) have an overriding effect and that the recovery officer has an absolute power to execute the said recovery certificate by sale of immovable assets.'