TaxTMI 
TaxTMI 
2009 (3) TMI 580
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.... Harige Village, Shimoga District, Karnataka on April 28, 1999, in the presence of the Deputy Commissioner, Shimoga and Chief Manager of the State Bank of Mysore, a secured creditor of the company. 3. The State Bank of Mysore extended financial assistance to the company and secured their outstanding dues. The bank filed O. A. No. 440 of 1997 before the Debts Recovery Tribunal, Bangalore for recovery of a sum of Rs. 22,31,78,558.55. The said O. A., was decreed by the Debts Recovery Tribunal (DRT) and the Recovery Officer in consultation with the bank issued an official notice for sale of the properties in various news papers on July 24, 2005, fixing the date of auction as August 11, 2005. The first respondent/official liquidator herein was a party before the Debts Recovery Tribunal, Bangalore. In fact, the official liquidator raised his objections before the Debts Recovery Tribunal, Bangalore and only thereafter, the auction was directed to be held by the Debts Recovery Tribunal (DRT). The applicant herein participated in the auction and his offer of Rs. 10.25 crores being the highest was accepted by the Recovery Officer. The applicant deposited 25 per cent, of Rs. 10.25 crores on ....
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....basis. In the mean time, the Debts Recovery Tribunal, Bangalore passed a decree in 2001 and ordered for sale by auction of the assets of the company on October 1, 2004. The workers' union objected to the sale and filed a writ petition before the High Court, Karnataka, seeking stay of the sale by auction proceedings as their salary and provident fund dues to the extent of Rs. 15 crores were due from the company. The High Court, Karnataka, by order dated September 27, 2004, passed an interim order to the effect that the sale is subject to the result of the petition. In view of the order passed on September 27, 2004, the Recovery Officer of the Debts Recovery Tribunal, postponed the auction proceedings to be held on October 1, 2004. But, again the Debts Recovery Tribunal called for the auction of the property by fixing the date on August 11, 2005. The Employees' Sangha filed a fresh affidavit before the High Court, Karnataka in W. P. No. 3799 of 2004 objecting to the methods adopted by the Debts Recovery Tribunal. That apart, M/s. Tapti Machinery, who are the petitioners for winding up of the company and also a creditor of the company objected to the sale and filed objections separate....
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....Court, Karnataka, challenging the impugned sale proceedings and the same is pending. They are also taking steps for the revival of the company and an application was also filed to this effect before this court. It is their further contention that proper and necessary procedure was not followed by the Recovery Officer while selling the property in auction sale which is in the custody of the official liquidator. Therefore, the sale conducted by the Recovery Officer has no legal sanctity and the application filed by the auction purchaser seeking possession of the property is to be dismissed. 9. The Employees Sangha which was impleaded as the third party in C. A. No. 1811 of 2005 also filed a counter affidavit opposing C. A. No. 1811 of 2005. Their contention is also that the sale is bad as the same was sold in total violation and the interim orders passed by this court as well as the order of the Karnataka High Court. Therefore, they also sought for the dismissal of the application. 10. The official liquidator has also filed a report dated January 31, 2006. In his report, the official liquidator stated that he took possession of the available assets of the company on September 28, 1....
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....ng Corporation to remit the arrears of rent to the official liquidator and also to permit the official liquidator to sell the assets of the company in liquidation afresh. 12. C. A. No. 854 of 2006 was resisted by the first respondent-bank by filing a counter affidavit wherein they raised the question of maintainability of the application itself. According to the bank, all the legal formalities were duly complied with and the sale was confirmed in favour of the applicant in C. A. No. 1811 of 2005. It is pointed out in the counter that after the auction, neither the official liquidator nor any other person challenged the auction in a manner provided under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Having allowed the auction to become final, now it is not open to the official liquidator to challenge the auction before this court under the provisions of the Companies Act, 1956, which is not maintainable in law. It was admitted that the bank obtained leave before this court to proceed with the sale on March 10, 2000, in C. A. Nos. 1251 to 1253 of 1999. Subsequently, the legal position was clarified by the Supreme Court and the law is now settled that the b....
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....ery proceedings in D. C. P. No. 1912 dated August 10, 2001, the land measuring an extent of 126 acres and 14 guntas was brought for sale and the property was sold to the third respondent (applicant in C. A. No. 1811 of 2005). According to him, as per the conditional order passed by this court on March 10, 2000, in C. A. Nos. 1251 to 1253 of 1999, the sale ought not to have been conducted by the Debts Recovery Tribunal. He accused that the third respondent who is the purchaser of the assets colluded with the Recovery Officer and purchased the property by committing fraud. According to him all the procedures in this regard were violated by the Debts Recovery Tribunal and the Recovery Officer. It is further stated that the assets are very valuable and as per his scheme, even the unsecured creditor could be settled and further business operations of the company could be revived. Hence, he filed C. A. Nos. 2740 to 2742 of 2007 for the aforesaid reliefs. 17. This court by order dated October 24, 2007, granted stay of all further proceedings in O. A. No. 440 of 1997 and D. C. P. No. 1912 dated August 10, 2001, pending on the file of the Debts Recovery Tribunal, Bangalore. 18. The second....
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....kumar, the assistant official liquidator for the official liquidator, learned counsel for the second respondent in C. A. No. 1811 of 2005, learned counsel for the third respondent in C. A. No. 1811 of 2005 (the fourth respondent in C. A. No. 854 of 2006), learned counsel for the third respondent in C. A. No. 854 of 2006 and learned counsel for the State Bank of Mysore (the first respondent in C. A. No. 854 of 2006 and the second respondent in C. A. Nos. 2740 to 2742 of 2007). 21. I have considered the entire materials on record besides the judgments cited by all of them in support of their submissions. 22. In [2005] 128 Comp. Cas. 387 ; [2005] 8 SCC 190 (Rajasthan Financial Corporation v. Official Liquidator), the hon'ble Supreme Court observed as under (page 400) : "In the light of the discussion as above, we think it proper to sum up the legal position thus : (i)A Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, would be entitled to order the sale and to sell the properties of the debtor, even if a company in liquidation, through its Recovery Officer but only after notice to the official liquidator or the liquidator....
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....ent Corporation of India Ltd. v. Srinivas Agencies), the hon'ble Supreme Court while dealing with sections 446, 529(1) and (2), 529A and 537 of the Companies Act, 1956, observed as under (page 259) : "A combined reading of the aforesaid provisions leads to the following results : (i)A winding up court has jurisdiction, inter alia, to entertain or dispose of any suit or proceeding by or against the company, even if such suit or proceeding had been instituted before an order for winding up had been made. This apart, the winding up court has jurisdiction to transfer such a suit or proceeding to itself and dispose of the same. These follow from sub-sections (2) and (3) of section 446. (ii)When a winding up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding, even if pending at the date of the winding up order, can proceed against the company, except by leave of the company court vide sub-section (1) of section 446. (iii)Any sale held, even without the leave of the winding up court pursuant to an order of a civil court on it being approached by a secured creditor to realise its debt will not ipso facto be voi....
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....ne in mind by the company court. We are, therefore, of the view that the approach to be adopted in this regard by the company court does not deserve to be put in a straight jacket formula. The discretion to be exercised in this regard has to depend on the facts and circumstances of each case. While exercising this power we have no doubt that the company court would also bear in mind the rationale behind the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, to which reference has been made above. We make the same observation regarding the terms which a company court should like to impose while granting leave. It need not be stated that the terms to be imposed have to be reasonable, which would, of course, vary from case to case. According to us, such an approach, would maintain the integrity of that secured creditor who had approached the civil court or desires to do so, and would take care of the interest of other secured creditors as well which the company court is duty bound to do. The company court shall also apprise itself about the fact whether dues of workmen are outstanding ; if so, the extent of the same. It would be seen whether after t....
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....er section 19(7)) to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the word 'recover' in section 17 of the Act. It appears to us that basically the Tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate under section 19(22). Under section 18, the jurisdiction of any other court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the Tribunal (this exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under article 226 or 227 of the Constitution). This is the effect of sections 17 and 18 of the Act. We hold that the provisions of sections 17 and 18 of the RDB Act are exclusive so far as the question of adjudication of the liability of the defendant to the appellant-bank is concerned. (ii) Execution of certificate by Recovery Officer : Is his jurisdiction exclusive : Even in regard to 'execution', the jurisdiction of the Recovery Officer is exclusive. Now a procedure has been laid down in the Act....
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....he special procedure for recovery prescribed in Chapter V of the Act, and section 34, execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer. Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other court or authority much less the civil court or the company court can go into the said questions relating to the liability and the recovery except as provided in the Act. Point No. 1 is decided accordingly . . . The learned Attorney General has, in this connection, relied upon Damji Valji Shah v. Life Insurance Corporation of India [1965] 35 Comp. Cas. 755 ; 3 SCR 565 ; AIR 1966 SC 135, to contend that for initiating and continuing proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, no leave of the company court is necessary under section 446. In that case, a Tribunal was constituted under the Life Insurance Corporation Act, 1956. The question was whether under section 446 of the Companies Act, 1956, the said proceedings could be stayed and later be transferred t....
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....n our view, decide the claims of banks and financial institutions. On the same parity of reasoning as in Damji Valji Shah's case [1965] 35 Comp. Cas. 755 (SC), there is no need for the appellant to seek leave of the company court to proceed with its claim before the Debt Recovery Tribunal or in respect of the execution proceedings before the Recovery Officer. Nor can they be transferred to the company court. It may also be noticed that in the Life Insurance Corporation Act of 1956, there was no provision like section 34 of the RDB Act giving overriding effect to the provisions of the Life Insurance Corporation Act. Still this court upheld the exclusive jurisdiction of the Life Insurance Corporation Tribunal observing as follows (page 763) : 'the provisions of the special Act, i.e., the Life Insurance Corporation Act will override the provisions of the general Act, the Companies Act which is an Act relating to companies in general.' We are of the view that the appellant's case under the RDB Act- with an additional section like section 34-is on a stronger footing for holding that leave of the company court is not necessary under section 537 or under section 446 for the same reason....
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....enactment, the non obstante clause therein would ordinarily prevail over the non obstante clause in section 46B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 statute is a special one'. Therefore, in view of section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts . . . The decision of the Rajasthan High Court in Rajasthan Finance Corporation v. Official Liquidator [1963] 2 Comp. LJ 309 , relied upon for the respondent cannot be of any help. That was a case which concerned itself with the State Financial Corporations Act, 1951. Section 537 of the Companies Act was applied and it was held that the Companies Act did not yield to the provisions of the State Financial Corporations Act, 1951. There was no provision in the State Financial Corporations Act, 1951, like section 34 which gave overriding effect to its provisions. For the aforesaid reasons, we hold that at the stage of adjudication under section 17 and execution of the certificate under section 25, etc., the provisions of the RDB Act, 1993, confer exclusive jurisdiction in the Tribunal and the Recovery Officer in....
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....no order contrary thereto or inconsistent therewith should be passed . . Although we do not intend to lay down a law to the effect that the Tribunal does not have plenary jurisdiction, as the said question does not arise for our consideration or assuming that the Tribunal has plenary jurisdiction having regard to the rule of exclusivity as envisaged by the apex court, the mode and manner laid down for recovery of the debts due to banking or financial institutions must, not only strictly, be adhered to having regard to the provisions contained in rule 31 of the Second Schedule appended to the Income-tax Act which has been incorporated by reference in section of the said Act. Even otherwise, when the property is in custody, leave of the court having plenary jurisdiction, keeping in view the principles adumbrated in Order 40 of the Code of Civil Procedure must be obtained." 30. [2001] 107 Comp. Cas. 296 ; [2002] 1 Comp. LJ 191 (Remanika Silks (P.) Ltd. (in liquidation) , In re), the Kerala High Court observed as under (page 303) : "What was considered in Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406 was the impact of a still later enactment, namely, th....
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....ic terms that the provisions of the RDB Act on the above aspects being inconsistent with the provisions of the Companies Act, do prevail over the provisions of the Companies Act during the pendency of the winding up petition against the debtor-company and also after a winding up order is passed. No leave of the company court, it was held, is necessary for initiating or continuing the proceedings under the RDB Act, 1993. The question of distribution of the amounts recovered by the Tribunal in such event was also considered in the Allahabad Bank's case [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406, aforementioned. It was held that where against the defendant-company no winding up order has been passed, the company is like any other defendant and if in such a situation a question of priority arises before the Tribunal, in respect of any monies realised under the RDB Act, as between the bank or financial institutions on the one hand and the other creditors on the other, it would be necessary for the Tribunal to decide such question of priority bearing in mind the principles underlying section 73 of the Civil Procedure Code and that section 22 of the RDB Act gives sufficiently wide power....
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.... secured or unsecured in view of section 529A(1)(a). The said priority will have to be protected. No secured or unsecured creditor including banks or financial institutions will have a right to be paid before the workmen's dues are paid." 31. In an unreported judgment of this court made in C. A. Nos. 10, 116, 701, 193 and 194 of 2002 in C. P. No. 39 of 1994 a learned single judge of this court observed as under : "It is clear from the above discussion, particularly paragraph 53, which I have already extracted show that in respect of monies realised under the RDB Act, the question of financial institutions and other creditors can only be decided by the Debts Recovery Tribunal under the RDB Act and in accordance with section 19(19) read with section 529A of the Companies Act and the said position of the debtor company, but also after winding up order is passed . . . Though learned counsel appearing for the official liquidator as well as the ex-directors of the company in liquidation very much relied on the Division Bench decision of the Andhra Pradesh High Court, in the light of the categorical pronouncement by the Supreme Court including their conclusion that the said principle i....
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....e sale proceeds. I also accept the claim that the second respondent-ICICF's case under section 529 of the Companies Act in order to stand out side the winding up to realise its security. Apart from this, section 19(19) of the RDB Act, permits distribution of sale proceeds to secured creditors in accordance with section 529A, who stand outside the winding up proceedings." 32. In [2005] 127 Comp. Cas. 853 ; [2005] 64 SCL 429 (Divya Chemicals Ltd., In re), the Bombay High Court held as under (page 862) : "In the aforesaid analysis of the proceedings of law I answer the question which has been framed by me in this judgment that the official liquidator is not empowered and or entitled to dispose of and or sale immovable properties which are secured in favour of the banks and financial institutions and in respect of which there is a recovery certificate issued by the Debts Recovery Tribunal." 33. In [2005] 124 Comp. Cas. 453 ; [2005] 5 SCC 75 (Andhra Bank v. Official Liquidator) the honourable Supreme Court held as under (page 466) : "The observations were presumably made having regard to the fact situation obtaining therein as the Allahabad Bank was an unsecured creditor and the Can....
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....g provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of section 529A. (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section : . . . (3) For the purposes of this section, section 529A and section 530,-. . . (c)"workmen's portion'" in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of- (i)the amount of workmen's dues ; and (ii)the amounts of the debts due to the secured creditors. Illustration.-The value of the security of a secured creditor of a company is Rs. 1,00,000. The total amount of the workmen's dues is Rs. 1,00,000. The amount of the debts due from the company to its secured creditors is Rs. 3,00,000. The aggregate of the amount of workmen's dues and of the amounts of debts due to secured creditors....
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....er words, the priority of the secured creditor is only to the extent that any part of the said security is lost in favour of the workmen consequent to demands made by the liquidator under clauses (a), (b ) or the said proviso to section 529(1). No such situation has arisen so far. It is contended that where a secured creditor keeps himself outside as stated in the proviso to section 529(1) and seeks to recover his dues outside the company court, if he loses part of his security towards workmen's dues, he gets reimbursed to that extent as a secured creditor, with an overriding priority under section 529A(1)(b). He gets priority over all other creditors before the Tribunal, to be compensated for this loss out of the monies that may have been realised at the instance of other creditors before the Tribunal. It is pointed out that the Canara Bank has neither realised any amount outside winding-up nor has it lost any part of its security towards workmen's dues. In our view, this contention of the learned Attorney General is well founded and is entitled to be accepted. In our opinion, the words "so much of the debt due to such secured creditor as could not be realised by him by virtue of....
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....cision in Andhra Bank v. Official Liquidator [2005] 124 Comp. Cas. 453 ; [2005] 4 Comp. LJ 33, has explained the above judgment by holding that the language of section 529A is also clear and unequivocal in terms whereof the workmen's dues or the debts due to the secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues shall have priority over all other debts. Once the workmen's claims are worked out in terms of proviso (c) of sub-section (1) of section 529, indisputably the claim of the workmen as also the secured creditors will have to be paid in terms of section 529A . . . For the foregoing discussions, I am of the considered view that the official liquidator ought to have participated in the proceedings pending before the Debts Recovery Tribunal-I, Mumbai, even before the sale was effected. Nevertheless, in the interest of the company and particularly in the interest of the secured creditors and the workmen, the official liquidator shall effectively represent the proceedings initiated by the ICICI Ltd., before the Debts Recovery Tribunal-I, Mumbai, in O. A. No. 355 of 2001 for the distribution of....
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....l, by issuance of the sale certificate under sub-rule (7) of rule 9 of the Rules on January 6, 2006. The writ petitions have been prepared and signed by the parties only on January 19, 2006. In such circumstances, the proper course for the borrowers would be to prefer an appeal before the Appellate Tribunal against the order of the Tribunal dated January 10, 2006, under the provisions of the SARFAESI Act. The borrowers, however, have approached this court invoking article 226 of the Constitution of India . . . In our considered view, the borrowers should have approached the secured creditor or the authorised officer before the date fixed for sale and not after the sale, as provided under sub-section (8) of section 13 of the SARFAESI Act. As discussed earlier, only if the borrowers approach the secured creditor or the authorised officer before the date fixed for sale or transfer and tender or pay all the dues to the secured creditor, the section creates a bar on the secured creditor or authorised officer to proceed further with the proposed sale or transfer. In this case, admittedly the date fixed for the sale was December 19, 2005. But, even according to the version of the borrowe....
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....quire any registration in view of section 17(2)(xii) of the Registration Act as the same has been granted pursuant to the sale held in public auction by the authorised officer under the SARFAESI Act. The finding of the learned single judge that the sale is not complete without registration of the sale certificate, therefore, is not sustainable in law and the same is liable to be set aside . . . In view of our finding on this point, we hold that the sale of the secured asset in public auction as per section 13(4) of the SARFAESI Act, which ended in issuance of a sale certificate as per rule 9(7) of the Rules is a complete and absolute sale for the purpose of the SARFAESI Act and the same need not be registered under the provisions of the Registration Act." 37. In the unreported judgment dated November 6, 2006, made in C. A. Nos. 461, 1167, 1411 and 1412 of 2006, in C. P. No. 122 of 1997 {Times Guarantee Financials Ltd. v. Rajalakshmi Mills Ltd.), this court held as under : "It may be seen that section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 adopted Schedules I and III of the Income-tax (Certificate Proceedings) Rules, 1962, as regards the re....
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....o set aside the sale' . . . In the circumstances, the application preferred by the auction purchaser in C. A. No. 1412 of 2006 is hereby rejected, reserving however, the liberty to move this court as and when the Appeal No. 6 of 2006 is disposed of. The order of stay granted shall continue until further orders. C. A. No. 1411 of 2006 to implead the auction purchaser is ordered. As far as C. A. No. 1167 of 2006 is concerned, the official liquidator shall hand over possession of the documents, books of account and records to the ex-directors. It is hereby made clear that in view of the pendency of the proceedings before the appellate Tribunal on the sale effected to the applicant in C. A. No. 1412 of 2006, till a final decision is taken in the proceedings, the applicant in C. A. No. 1167 of 2006 shall file a report before this court as to the state of affairs on the running of the company once in six months, till a final decision is taken on the properties sold. With this observation, C. A. No. 1412 of 2006 is also rejected. There will, however, be no order as to costs." 38. In [2007] 135 Comp. Cas. 163 (Raghunath Rai Bareja v. Punjab National Bank), the honourable Supreme Court he....
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....n (3) of section 446 of the Companies Act, 1956, which states : '(3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court.' In this connection, it may be mentioned that section 446(3) of the Companies Act was omitted by the Companies (Second Amendment) Act, 2002 and evidently the High Court has overlooked this amendment. As a result in our opinion the High Court has no power to transfer the execution petition to the Debts Recovery Tribunal. At any event as held in Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406, section 446 has no application once the RDB Act applies because section 34 expressly gives overriding effect to the provisions of the RDB Act. Also, the RDB Act is a special law and hence will prevail over the general law in the Companies Act as held in Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406. In this connection, we may mention that in the impugned order dated May 26, 2005, the High Cour....
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.... under (page 242) : "I heard learned counsel. The point on which the writ petition was filed by the unsecured creditor, who filed company petition and thereupon taking the matter to the Division Bench in O. S. A and getting the order of winding up setting aside on the false promise that the amount would be paid and thereby getting time and even thereafter failed to perform the promise and thereafter the order of the company court was got to be revived cannot be appreciated. Even on the merits, the entire issue as to (1) Whether in respect of proceedings under the RDB Act at the stage of adjudication for the money due to the banks or financial institutions and at the stage of execution for recovery of monies under the RDB Act, the Tribunal and the Recovery Officers are conferred exclusive jurisdiction in their respective spheres ? (2) Whether for initiation of various proceedings by the banks and financial institutions under the RDB Act, leave of the company court is necessary under section 537 before a winding up order is passed against the company or before provisional liquidator is appointed under section 446(1) and whether the company court can pass orders of stay of proceeding....
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....ng to Companies in general." We are of the view that the appellant's case under the RDB Act- with an additional section like section 34-is on a stronger footing for holding that leave of the company court is not necessary under section 537 or under section 446 for the same reasons. If the jurisdiction of the Tribunal is exclusive, the company court cannot also use its powers under section 442 against the Tribunal/Recovery Officer. Thus, sections 442, 446 and 537 cannot be applied against the Tribunal.' In the proceedings before the Debts Recovery Tribunal-I, Chennai, the company in liquidation was represented by the official liquidator and even in the proceedings before the Recovery Officer, the official liquidator was a party. Therefore, the writ petition cannot be sustainable. Useful reference can be had to the judgment of the Supreme Court in the case of Rajasthan Financial Corporation v. Official Liquidator [2005] 128 Comp. Cas. 387 ; [2005] 8 SCC 190 and of the Division Bench of this court in Asset Reconstruction Company (India) Ltd. v. Official Liquidator [2006] 134 Comp. Cas. 267 (Mad).; [2006] 2 LW 442 ... Having regard to the above submission made on either side, I am o....
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....he certificate in respect of the debt payable to banks and financial institutions are respectively within the exclusive jurisdiction of the Debts Recovery Tribunal and the Recovery Officer and in such a case, the company court's jurisdiction under sections 442, 537 and 446 of the Companies Act, 1956, stands ousted. (3)No leave of the company court is necessary for initiating proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act), nor can the company court transfer to it (or) other wise interfere with such proceedings. (4)Even the priorities among various creditors can be decided only by the Debts Recovery Tribunal in accordance with section 19(10) of the RDB Act read with section 529A of the Companies Act. (5)The provisions of the RDB Act in this regard being inconsistent with those of the Companies Act override the provisions of the Companies Act. (6)In case of conflict between two special laws, the later one prevails over the former. (7)Sections 446 and 518 of the Companies Act confers wide and extraordinary powers on the company court on any matter arising in the course of winding up. (8)A secured creditor stands outside the win....
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....mmovable assets which are secured in favour of the banks and financial institutions. (19)Once the Recovery Certificate is issued by the Debts Recovery Tribunal in favour of the banks and financial institutions, who are secured creditors, then sale of immovable properties cannot be carried out by the official liquidator in winding up proceedings and such sale is to be con ducted by the Recovery Officer in execution of the recovery certificate issued by the Debts Recovery Tribunal. (20)Claims of secured creditors would rank pari passu with those of the workmen and the observation made by the Supreme Court to the contrary in Allahabad Bank's case [2000] 101 Comp. Cas. 64; [2000] 4 SCC 406, did not lay down the correct law. (21)The participation of the official liquidator in the proceedings before the Debts Recovery Tribunal is in discharge of his duties and as a necessary corollary, non-participating in the proceedings and not defending the interest of the company or the secured creditor or the workmen, would amount to failure in discharging the duties. (22)The right to sell under the SFC Act (or) RDB Act by a creditor coming within those Acts and standing outside the winding up i....
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....f the Companies Act was omitted by the Companies (Second Amendment) Act, 2002 and as a result, the High Court has no power to transfer the execution petition to the Debts Recovery Tribunal. (34)Section 446 has no application, once the RDB Act applies because section 34 expressly gives over-riding effect to the provisions of the 1956 Act. (35)The RDB Act, 1993, is a special law and hence will prevail over the general law, in the Companies Act. (36)The financial institutions possess right to sell the property in terms of the provisions of the RDB Act, 1993. (37)Once the sale is confirmed by the Recovery Officer and the sale certificate is issued, it cannot be said to be illegal or void. (38)Sanctity should be attached to the auction sale conducted for recovery of debts due to the banks and financial institutions. If such sales are disputed in courts for extraneous reasons, the intending purchasers would be forced to think twice before participating in the auction sale as they are also purchasing litigation. 42. In the light of the above legal principles, now let me consider the facts of the present case. 43. C. A. No. 854 of 2006 has been filed by the official liquidator to se....
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....need not get any leave from the company court to proceed with the sale proceedings of the assets of the company in liquidation. What is mandatory is that the official liquidator should be a party and notice should be issued to him. This was undoubtedly complied with by the secured creditor and the Debts Recovery Tribunal in this case and in such circumstances it cannot be said that the sale is not binding on the company in liquidation because of the order passed by this court on March 10, 2000. 47. Further, now it is also settled that it is the Debts Recovery Tribunal which has the exclusive jurisdiction to decide a matter of this nature and therefore, the pending proceedings before the Debts Recovery Tribunal could not be transferred to the company court to be decided along with C.P. No. 170 of 1995. When there is an effective and alternative remedy provided in the Act itself and a Tribunal was already constituted clothing with all the powers and jurisdiction, if any party is aggrieved that any of the provisions of the Special Act is violated, then that party should only approach that particular special Tribunal even if the assets are owned by the company in liquidation and they ....
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....B Act and therefore, the High Court disposed of both the writ petitions with a direction to avail of the alternative remedy within a period of six weeks. Since some adverse remarks were made by the learned single judge of the High Court, the auction purchaser filed an appeal in W. A. No. 2051 of 2006 and the Division Bench, on February 23, 2007, disposed of the appeal by making it clear that the appellate authority is required to examine the case of the parties independently without being influenced by the observations made by the learned single judge in the order dated October 27, 2006. It is also an admitted fact that appeals were already filed before the Debts Recovery Tribunal, Bangalore and the same were already heard and the orders were reserved. It is submitted that because of the stay order granted by this court, final orders could not be passed by the Debts Recovery Tribunal, Bangalore, in the appeal petitions. In such circumstances, when there is an effective alternative remedy to challenge the sale and the same has been availed by filing a statutory appeal, it is not open to the workers' union to maintain their objections to the application filed by the auction purchaser....