TaxTMI 
TaxTMI 
2016 (7) TMI 438
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....cial Liquidator took possession of the assets of the company situate at Harige (in District Shimoga, in the State of Karnataka), on 28.9.1999. 3. The State Bank of Mysore had also extended some loans to Deve Sugars Ltd.. When Deve Sugars Ltd. defaulted in the repayment of the loans, the State Bank of Mysore filed Original Application Nos. 440 of 1997 and 1300 of 1997, before the Debts Recovery Tribunal, Bangalore, (hereinafter referred to as, the DRT, Bangalore) for the recovery of Rs. 22,31,78,558.55. During the course of the instant proceedings, the DRT, Bangalore issued a recovery certificate in the sum of Rs. 8.40 crores. It would be relevant to mention, that the State Bank of Mysore also filed Company Application Nos.1251-1253 of 1999, in the pending Company Petition No.170 of 1995, before the High Court at Madras, seeking leave to proceed with the recovery proceedings before the DRT, Bangalore, under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as, the RDB Act). 4. The Company Court in the High Court at Madras, while granting leave to the State Bank of Mysore, passed the following order on 10.3.2000 (while disposing of Com....
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....eported as Allahabad Bank v. Canara Bank (2000) 4 SCC 406). While not entertaining Company Application No.1300 of 2003, the Registry of the High Court recorded the following endorsement: "ORDER As per order in Civil Appeal no.2536/00 as reported in 2000 (3) SCC 205. Leave is not necessary." 7. Consequent upon the return of Company Application No.1300 of 2003, it came to be assumed by the State Bank of Mysore, that leave of the High Court, was not required for the sale of the assets of Deve Sugars Ltd.. Accordingly, the State Bank of Mysore approached the Recovery Officer, for the disposal of the assets of Deve Sugars Ltd., in continuation of the recovery certificate issued by the DRT dated 15.5.2002. On the above prayer of the State Bank of Mysore, the Recovery Officer issued a proclamation of sale in Form-13, by following the procedure prescribed under the RDB Act. The auction of the properties of Deve Sugars Ltd., in the first instance, was fixed for 1.10.2014. 8. At the instant juncture, the workers' union (Tungabadra Sugar Works Mazdoor Sangh), of Deve Sugars Ltd., approached the High Court of Karnataka, by filing Writ Petition No.37991 of 2004. Through the above writ pet....
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....the bid amount, within the stipulated period. No challenge was raised against the auction conducted on 11.8.2005, within the postulated period of 30 days, as is permissible in terms of the Rules framed under the RDB Act. The Recovery Officer ordered the confirmation of the sale of the auctioned property, after the expiry of statutory period, expressed in Rules 60, 61, and 62 of the Second Schedule of the Income Tax Act (as is applicable to proceedings, before Debts Recovery Tribunals), on 12.9.2005. 10. On 20.9.2005, the Recovery Officer appointed a Receiver, to take possession of the property, sold at the auction. The Court Commissioner allegedly took over possession of some of the properties, and handed over the same to the auction purchaser - Anita International. At the instant juncture, the appellant - Anita International, filed Company Application No.1811 of 2005 before the High Court at Madras for removal of the security agency. At the said juncture, Videocon International Ltd. and Tapti Machines Pvt. Ltd. filed Writ Petition No.26564 of 2005 before the High Court of Karnataka. The above writ petition, and Writ Petition No.37991 of 2004 (filed by the workers' union) were hea....
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....arte interim order of stay. Anita International and State Bank of Mysore, filed detailed objections, to the applications filed by the Official Liquidator, as well as, by the aforementioned N. Ponnusamy. All the applications filed in C.A. No.1811 of 2005 were taken up for consideration, collectively. By a common order dated 3.3.2009, the application filed by the Official Liquidator was dismissed, by holding that the Official Liquidator was a party before the Karnataka High Court (in the proceedings which were disposed of by a common order dated 27.10.2006), and in consonance with the above order, the Official Liquidator was obliged to file an appeal, to challenge the auction sale (dated 11.8.2005), as well as, the order of confirmation (dated 12.9.2005) passed by the Recovery Officer. Likewise, the proceedings initiated by N. Ponnusamy, also did not yield any result. His claim was also rejected on the ground, that he too could have availed of the remedy of filing an appeal, to assail the orders passed by the Recovery Officer. The other applications, which came up for hearing jointly were likewise dismissed, as the said applicants, had already availed of the appellate remedy, before ....
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....8.2005 itself. Insofar as the above two bids are concerned, it was felt, that there was for all intents and purposes only a singular bid. One of the bidders was Anita International - the appellant herein, and the other bid was by Synergy Steel Ltd. - a sister company of the appellant - Anita International. In sum and substance therefore, the Recovery Officer closed the bid, after receiving a singular bid. Sixthly, after holding the auction on 11.8.2005, the Recovery Officer confirmed the sale in favour of Anita International on 12.9.2005. This could not have been done, in view of the order dated 10.3.2000 passed by the High Court at Madras, wherein it was directed, that no coercive steps would be taken against the assets of the company under liquidation, during or after the conclusion of the proceedings before the DRT, Bangalore. And as such, the State Bank of Mysore could not have proceeded with, the sale of the assets of Deve Sugars Ltd. 13. While dealing with the proposition of law declared by this Court in the Allahabad Bank case, wherein this Court had unambiguously concluded, that the provisions of the RDB Act required, Debts Recovery Tribunals alone, to decide applications....
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.... confirmation of the sale, by the Recovery Officer on 12.9.2015. 14. Having concluded as above, the High Court vide the impugned order dated 17.9.2009, directed as under: "Hence the following judgment is made: (i) The auction sale in question is set aside; (ii) The auction purchaser is entitled to refund of the monies paid by him towards the auction sale which is now set aside; (iii) In the interest of all the creditors and also the workers' union, a fresh sale is ordered to be made by the Recovery Officer after following the procedural formalities and after preparation of a fresh valuation done by the panel of valuers appointed by the Company Court with the association of the Official Liquidator and on acceptance of the same by the Company Court in order to ensure a proper price is fetched for the assets of the company in liquidation." 15. While assailing the impugned order passed by the High Court dated 17.9.2009, it was the vehement contention of learned counsel for the appellant, that the Company Court in the High Court at Madras, had no jurisdiction in respect of the proceedings which fell within the legitimate domain of the RDB Act. To canvass the above proposition,....
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....under Section 17, the banks/financial institutions should go to the civil court or the Company Court or some other authority outside the Act for the actual realisation of the amount. The certificate granted under Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. No dual jurisdictions at different stages are contemplated. Further, Section 34 of the Act gives overriding effect to the provisions of the RDB Act. ..... xxx xxx xxx The provisions of Section 34(1) clearly state that the RDB Act overrides other laws to the extent of "inconsistency". In our opinion, the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner. 24. There is one more reason as to why it must be held that the jurisdiction of the Recovery Officer is exclusive. The Tiwari Committee which recommended the constitution of a Special Tribunal in 1981 for recovery of debts due to banks and financial institutions stated in its report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the adjudication of the liability but also in regard to the executi....
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....ions of the LIC Act. Still this Court upheld the exclusive jurisdiction of the LIC Tribunal ..... xxx xxx xxx 71. But the point here is that the occasion for such a claim by a secured creditor (here Canara Bank) against realisations by other creditors (like Allahabad Bank) under Section 529-A read with proviso (c) to Section 529(1) can arise before the Tribunal only if Canara Bank has stood outside winding-up and realised amounts and if it shows that out of the amounts privately realised by it, some portion has been rateably taken away by the liquidator under clauses (a) and (b) of the proviso to Section 529(1). It is only then that it can claim that it is to be reimbursed at the same level as a secured creditor with priority over the realisations of other creditors lying in the Tribunal. None of these conditions is satisfied by Canara Bank. Thus, Canara Bank does not belong to the class of secured creditors covered by Section 529-A(1)(b). xxx xxx xxx 73. If none of the conditions required for applying Section 19(19) and Section 529-A is, therefore, satisfied, then the claim of Canara Bank before the Tribunal can only be on the basis of principles underlying Section 73 CPC. T....
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....expressed in paragraph 19 of the cited judgment, which is extracted hereunder: "19. As regards Point (6), however, this Court at para 76 of the judgment held: "The next question is whether the amounts realised under the RDB Act at the instance of the appellant can be straight away released in its favour. Now, even if Section 19(19) read with Section 529-A of the Companies Act does not help the respondent Canara Bank, the said provisions can still have an impact on the appellant Allahabad Bank which has no doubt a decree in its favour passed by the Tribunal. Its dues are unsecured. The 'workmen's dues' have priority over all other creditors, secured and unsecured because of Section 529-A(1)(a). There is no material before us to hold that the workmen's dues of the defendant Company have all been paid. In view of the general principles laid down in National Textile Workers' Union v. P.R. Ramakrishnan (1983) 1 SCC 228 there is an obligation resting on this Court to see that no secured or unsecured creditors including banks or financial institutions, are paid before the workmen's dues are paid. We are, therefore, unable to release any amounts in favour of the appellant Bank straight....
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.... the distribution of the proceeds has to be in terms of Section 529 of the Companies Act read with Section 529-A of that Act in a case where the debtor is a company-in-liquidation. As far as we can see, there is no conflict on the question of the applicability of Section 529-A read with Section 529 of the Companies Act to cases where the debtor is a company and is in liquidation. The conflict, if any, is in the view that the Debts Recovery Tribunal could sell the properties of the company in terms of the Recovery of Debts Act. This view was taken in Allahabad Bank v. Canara Bank in view of the Recovery of Debts Act being a subsequent legislation and being a special law which would prevail over the general law, the Companies Act. This argument is not available as far as the SFC Act is concerned, since Section 529-A was introduced by Act 35 of 1985 and the overriding provision therein would prevail over the SFC Act of 1951 as amended in 1956 and notwithstanding Section 46-B of the SFC Act. As regards distribution of assets, there is no conflict. It seems to us that whether the assets are realised by a secured creditor even if it be by proceeding under the SFC Act or under the Recover....
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.... State Financial Corpn. in respect of the applicability of Sections 529 and 529-A of the Companies Act in the matter of distribution among the creditors. The right to sell under the SFC Act or under the Recovery of Debts Act by a creditor coming within those Acts and standing outside the winding up, is different from the distribution of the proceeds of the sale of the security. The distribution in a case where the debtor is a company in the process of being wound up, can only be in terms of Section 529-A read with Section 529 of the Companies Act. After all, the Liquidator represents the entire body of creditors and also holds a right on behalf of the workers to have a distribution pari passu with the secured creditors and the duty for further distribution of the proceeds on the basis of the preferences contained in Section 530 of the Companies Act under the directions of the Company Court. In other words, the distribution of the sale proceeds under the direction of the Company Court is his responsibility. To ensure the proper working out of the scheme of distribution, it is necessary to associate the Official Liquidator with the process of sale so that he can ensure, in the light ....
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....erties of a company in liquidation, should not be confused with the distribution of the sale proceeds of the company in liquidation amongst its creditors. It was submitted, that there could be no interference with the right of the Recovery Officer, to sell the assets of the company in liquidation, under the provisions of the RDB Act. But, that had nothing to do with the distribution of the proceeds of the sale. The distribution of the sale proceeds ought to be in consonance with the provisions of the Companies Act, wherein the debtor was a company in liquidation. (iv) Learned counsel then placed reliance on the M.V. Janardhan Reddy case. He invited the Court's attention to the following: "18. So far as the order passed by the learned Company Judge is concerned, it specifically and unequivocally stated that permission of the court should be obtained before sale is confirmed or finalised. That order was passed as early as on 13-8-1999. In an order dated 25-3-2005 also it was expressly mentioned that the sale was subject to confirmation of the court. It was an express condition imposed by the Company Court and as such it was not open to the Recovery Officer to confirm the sale and ....
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....on as to the proposed auction and also the valuation report as filed by the applicant Company. Under the above circumstances, the applicant Company is permitted to go ahead with the proposed sale of the assets of the Company under liquidation through public auction. But, however, the said sale, if any effected, shall be subject to the confirmation of this court. The applicant is accordingly granted permission to effect the sale, but the sale shall be required to be confirmed by this court. The application is accordingly disposed of." The above orders leave no room of doubt that the Bank was permitted to go ahead with the proposed sale of the assets of the Company under liquidation by way of auction but such sale was subject to confirmation by the Company Court. It is, therefore, clear that all parties were aware about the condition as to confirmation of sale by the Company Court. It was, therefore, not open to the Recovery Officer to confirm sale. The order passed and action taken by the Recovery Officer was in clear violation of and inconsistent with the specific condition imposed by the Company Court. In our considered opinion, therefore, the appellant cannot take any advan....
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....rom the aforesaid authorities, it clearly emerges that the sale has to be conducted by DRT with the association of the Official Liquidator. We may hasten to clarify that as the present controversy only relates to the sale, we are not going to say anything with regard to the distribution. However, it is noticeable that under Section 19(19) of the RDB Act, the legislature has clearly stated that distribution has to be done in accordance with Section 529-A of the 1956 Act. The purpose of stating so is that it is a complete code in itself and the Tribunal has the exclusive jurisdiction for the purpose of sale of the properties for realisation of the dues of the banks and financial institutions. xxx xxx xxx 31. The aforesaid analysis makes it luculent that DRT has exclusive jurisdiction to sell the properties in a proceeding instituted by the banks or financial institutions, but at the time of auction and sale, it is required to associate the Official Liquidator. The said principle has also been reiterated in Pravin Gada v. Central Bank of India (2013) 2 SCC 101. 32. Once the Official Liquidator is associated, needless to say, he has a role to see that there is no irregularity in c....
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....he matter to the Recovery Officer to investigate into the objection of Harender Singh under Rule 11 of the Second Schedule to the Income Tax Act, 1961. But considering the delay such a remand may cause, we have ourselves examined the objections of Harender Singh and rejected the objections for a variety of reasons: 23.1. Firstly, the contention raised at the hands of the respondents before the High Court, that the facts narrated by Harender Singh [the appellant in Special Leave Petition (C) No. 26550 of 2010] were a total sham, as he was actually the brother of one of the judgment-debtors, namely, Jagmohan Singh. And that Harender Singh had created an unbelievable story with the connivance and help of his brother, so as to save the property in question. The claim of Harender Singh in his objection petition was based on an unregistered agreement to sell dated 10-1-1991. Not only that such an agreement to sell would not vest any legal right in his favour, it is apparent that it may not have been difficult for him to have had the aforesaid agreement to sell notarised in connivance with his brother, for the purpose sought to be achieved. 23.2. Secondly, it is apparent from the fact....
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....n 28-8-2008. Thereafter the same was confirmed on 22-9-2008. Possession of the property was handed over to the auction-purchaser Sadashiv Prasad Sinha on 11-3-2009. The auction-purchaser initiated mutation proceedings in respect of the property in question. Harender Singh did not raise any objections in the said mutation proceedings. The said mutation proceedings were also finalised in favour of Sadashiv Prasad Sinha. Harender Singh approached the High Court through CWJC No. 16485 of 2009 only on 27-11-2009. We are of the view that the challenged raised by Harender Singh ought to have been rejected on the grounds of delay and laches, especially because third-party rights had emerged in the meantime. More so, because the auction-purchaser was a bona fide purchaser for consideration, having purchased the property in furtherance of a duly publicised public auction, interference by the High Court even on the ground of equity was clearly uncalled for. 24. For the reasons recorded hereinabove, we are of the view that the impugned order dated 17-5-2010 passed by the High Court allowing Letters Patent Appeal No. 844 of 2010 deserves to be set aside. The same is accordingly set aside. The....
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.... auction purchasers. Insofar as the appellate remedy of the contesting parties is concerned, reliance was placed on Section 30 of the RDB Act, which is extracted hereunder: "30. Appeal against the order of Recovery Officer.- (1) Notwithstanding anything contained in section 29, any person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal. (2) On receipt of an appeal under sub-section (1), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such inquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under Sections 25 to 28 (both inclusive)." Based on the above provision, it was the submission of learned senior counsel, that the wrong, if any, caused to the contesting respondents could have been set right only under Section 18 of the RDB Act. 18. Mr. C.A. Sundaram, Senior Advocate, endeavoured to repudiate the submissions advanced at the hands of learned counsel for the appellants, by advancing three contentions. Firstly, an order passed by a ....
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....rt. It was however pointed out, that the inverse was not permissible, inasmuch as, a winding up petition filed before the Company Court under the Companies Act, could not be withdrawn to a Debts Recovery Tribunal, under the provisions of the RDB Act. It was therefore the contention of learned counsel for the respondents, that since the State Bank of Mysore could seek recourse to the DRT, as well as the Company Court, as may be considered suitable or appropriate, the proceedings filed by the State Bank of Mysore, namely, Company Application Nos. 1250-1253 of 1999 in pending Company Petition No.170 of 1995 (and Company Petition No.35 of 1997) had been filed by the State Bank of Mysore, before a Court having jurisdiction. And therefore, a Court having jurisdiction in the matter, at the instance of the State Bank of Mysore, had passed the order dated 10.3.2000. By the order dated 10.3.2000, the Company Court in the High Court at Madras, allowed the prayer made by the State Bank of Mysore, to continue to proceed with the recovery proceedings initiated by it before the DRT, Bangalore. But while granting the above leave imposed two conditions, firstly, the Official Liquidator would be imp....
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....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 order of a civil court on it being approached by a secured creditor to realise its debt will not ipso facto be void, in view of the holding in Ranganathan case that Section 537, dealing with voidness of sale, operates when the sale is pursuant to attachment of company court. This, however, would be the position where a company has not been wound up, but is in the process of being wound up. 5. None of the parties has assailed the aforesaid propositions of law as well. The real bone of contention is as to when (i) leave of the winding-up court should be granted to a secured creditor to proceed with the suit after an order of winding up has been made; and (ii) when should a winding-up court transfer to itself any suit or proceeding by or against the company during the pendency of the winding-up proceeding. 6. The aforesaid questions arise because a secured creditor who has initiated a suit or proceeding in a civil court is interested in realisation of his debt only, whereas the company....
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....same were to be made out after hearing the liquidator, who would be a defendant in the suit. As regards transfer of the pending suit by the company court, the submission was that convenience may not be the guiding factor; the preservation of integrity of the substantive right of the creditor should be the main consideration. 10. To buttress his submission, Shri Salve has referred us to the Recovery of Debts due to Banks and Financial Institutions Act, 1993, which was recently enacted because of the considerable difficulty being experienced by financial institutions in recovering loans and enforcement securities charged with them. Earlier, recovery procedure used to block a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. An urgent need was, therefore, felt for successful implementation of the financial sector reforms, to work out a suitable mechanism through which dues to these institutions could be realised without delay. To achieve this purpose, the aforesaid Act visualises establishment of the Debts Recovery Tribunal(s) by the Central Government, with its own procedure which is speedy in nature. Section 18 of ....
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....e company (including claims by or against any of its branches in India); (c) any application made under section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or rise in course of the winding up of the company, whether such suit or proceeding has been instituted or is instituted or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960 ....." 22. With reference to the judgment rendered in the Allahabad Bank case, it was asserted, that this Court had merely concluded, that it was not necessary for a bank or a financial institution to seek leave of Company Court before initiating proceedings against a debtor under the provisions of the RDB Act. It was therefore pointed out, that there was no dissimilarity of the conclusions drawn by this Court in the Allahabad Bank case and the Srinivas Agencies case7. 23. In addition to the above, learned senior counsel for the respondents, placed reliance on Krishnadevi Malcha....
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.... to quash the same on various grounds including the standing of the petitioner or on the ground of delay or on the doctrine of waiver or any other legal reason. The order may be void for one purpose or for one person, it may not be so for another purpose or another person." (emphasis supplied) 24. In addition to the above, reliance was placed on Order XXI Rule 58 of the Code of Civil Procedure, which is extracted below: "58. Adjudication of claims to, or objections to attachment of, property. - (1) Where any claims preferred to, or any objection is made to the attachment of, any property attached in execution of a decree on the ground that such property is not liable to such attachment, the Court shall proceed to adjudicate upon the claim or objection in accordance with the provisions herein contained: Provided that no such claim or objection shall be entertained- (a) where, before the claim is preferred or objection is made, the property attached has already been sold; or (b) where the Court considers that the claim or objection was designedly or unnecessarily delayed. (2) All questions (including questions relating to right, title or interest in the property attached)....
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..... The respondent, Allahabad Bank, a secured creditor with whom certain properties were mortgaged, filed Original Application No. 153 of 1999 under Section 9 of the RDB Act for recovery of a sum of Rs. 39,93,47,701 with interest from the Company, namely, M/s Rajindra Pipes Ltd., which was decreed by the Debts Recovery Tribunal, Jabalpur (DRT) vide its order dated 7-3-2000. The debt recovery certificate being DRC No. 164 of 2000 was issued for recovery of the aforesaid amount which was subsequently transferred to DRT at Allahabad. Be it noted, Company Petition No. 113 of 1997 was filed before the learned Company Judge in the High Court of Judicature at Allahabad who, vide order dated 26-7-2000, had passed an order for winding up of the Company, as a consequence of which the Official Liquidator had taken over the possession of the assets of the Company on 24-7-2002. After receipt of the recovery certificate, the Recovery Officer attached the immovable properties of the wound-up company by order dated 29-8-2002. The movable properties of the company were attached as per order dated 23-12-2003. At this juncture, Allahabad Bank filed an application before the Company Court for impleading....
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....he banks and financial institutions to realise their dues. Therefore, this Court in Allahabad Bank case has opined that it is DRT which would have the exclusive jurisdiction when a matter is agitated before DRT. The dictum in the said case has been approved by the three-Judge Bench in Rajasthan State Financial Corpn. It is not a situation where the Official Liquidator can have a choice either to approach DRT or the Company Court. The language of the RDB Act, being clear, provides that any person aggrieved can prefer an appeal. The Official Liquidator whose association is mandatorily required can indubitably be regarded as a person aggrieved relating to the action taken by the Recovery Officer which would include the manner in which the auction is conducted or the sale is confirmed. Under these circumstances, the Official Liquidator cannot even take recourse to the doctrine of election. It is difficult to conceive that there are two remedies. It is well settled in law that if there is only one remedy, the doctrine of election does not apply and we are disposed to think that the Official Liquidator has only one remedy i.e. to challenge the order passed by the Recovery Officer before ....
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....n the merits of the case." (emphasis supplied) 25. Reliance was then placed on Order XXI Rule 54 of the Code of Civil Procedure, which is extracted hereunder: "54. Attachment of immovable property.- (1) Where the property is immovable, the attachment shall be made by an Order prohibiting the judgment debtor from transferring or charging the property in any way, and all persons from taking any benefit from such transfer or charge. (1)A The Order shall also require the judgment debtor to attend court on a specified date to take notice of the date to be fixed for settling the terms of the proclamation of sale. (2) The Order shall be proclaimed at some place on or adjacent to such property by beat of drum or other customary mode, and a copy of the Order shall be affixed on a conspicuous part of the property and then upon a conspicuous part of the court house, and also, where the property is land paying revenue to the government, in the office of the Collector of the District in which the land is situate and, where the property is land situate in village, also in the office of the Gram Panchayat, if any, having jurisdiction over that village." To support the contention advanced....
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....nce. Admittedly, this could not be done until the High Court's decision on the question of jurisdiction. The question is whether the said decision of the High Court means that no person can be punished for flouting or disobeying the interim/interlocutory orders while they were in force i.e. for violations and disobedience committed prior to the decision of the High Court on the question of jurisdiction. Holding that by virtue of the said decision of the High Court (on the question of jurisdiction), no one can be punished thereafter for disobedience or violation of the interim orders committed prior to the said decision of the High Court, would indeed be subversive of the rule of law and would seriously erode the dignity and the authority of the courts. We must repeat that this is not even a case where a suit was filed in the wrong court knowingly or only with a view to snatch an interim order. As pointed out hereinabove, the suit was filed in the civil court bona fide. We are of the opinion that in such a case the defendants cannot escape the consequences of their disobedience and violation of the interim injunction committed by them prior to the High Court's decision on the questi....
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....ed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17. Provided that any proceedings in relation to the recovery of debts due to any multi-State co-operative bank pending before the date of commencement of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) shall be continued and nothing contained in this section shall, after such commencement, apply to such proceedings. 19. Application to the Tribunal. - (1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction- (a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or (b) any of the defendants, where there are more than one, at the time ....
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....ection, it shall pass such orders after recording the reasons therefor. (2) Where a bank or a financial institution, which has to recover its debt from any person, has filed an application to the Tribunal under sub-section (1) and against the same person another bank or financial institution also has a claim to recover its debt, then, the later bank or financial institution may join the applicant bank or financial institution at any stage of the proceedings, before the final order is passed, by making an application to that Tribunal. (3) Every application under sub-section (1) or sub-section (2) shall be in such form and accompanied by such documents or other evidence and by such fee as may be prescribed: Provided that the fee may be prescribed having regard to the amount of debt to be recovered: Provided further that nothing contained in this sub-section relating to fee shall apply to cases transferred to the Tribunal under sub-section (1) of section 31. (3A) If any application filed before the Tribunal for recovery of any debt is settled prior to the commencement of the hearing before that Tribunal or at any stage of the proceedings before the final order is passed, the....
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....r sub-section (8) shall have the same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same application, both on the original claim and on the counter-claim. (10) The applicant shall be at liberty to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Tribunal. (11) Where the defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but in an independent action, the applicant may, at any time before issues are settled in relation to the counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, and the Tribunal may, on the hearing of such application, make such order as it thinks fit. (12) The Tribunal may make an interim order (whether by way of injunction or stay or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing of, any property and assets belonging to him without the prior permission of the Tribunal. (13)(A) Where, at any stage of the proceedings, the Tribunal is satisfied, by affidavit or othe....
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....f debt; (b) remove any person from the possession or custody of the property; (c) commit the same to the possession, custody or management of the receiver; (d) confer upon the receiver all such powers, as to bringing and defending suits in the courts or filing and defending application before the Tribunal and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and (e) appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof. (19) Where a certificate of recovery is issued against a company registered under the Companies Act, 1956 (1 of 1956) the Tribunal may order the sale proceeds of such company to be distributed among its secured creditors in accordance with the provisions of section 529A of the Companies Act, 1956 and to pay the surplus, if any, to the company. (20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass....
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.... to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984), the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)." Based on the aforesaid provisions, it was asserted, that the provisions of the RDB Act envisaged a complete ouster of the Company Court, and that neither the Company Court nor any other Court, could have exercised jurisdiction vested in the RDB Act. It was submitted, that the Official Liquidator has no participatory role under the RDB Act. The Official Liquidator has jurisdictional control, over the assets of a company under winding up, under the Companies Act. In this behalf, learned senior counsel for the appellant, placed reliance on Kiran Singh v. Chaman Paswan 1955 (1) SCR 117, and pointed out to the following observations recorded therein: "6. The answer to these contentions must depend on what the position in law is when a court entertains a suit or an appeal over whi....
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....r judicial review or by use of any statutory mechanism for appeal or review. Collateral challenges arise when the invalidity is raised in the course of some other proceedings, the purpose of which is not to establish invalidity but where questions of validity become relevant." Thereupon, reference was made to Jagmittar Sain Bhagat v. Director, Health Services, Haryana (2013) 10 SCC 136. In order to canvass the proposition, that jurisdiction of courts/forums cannot be conferred by consent of parties, or acquiescence or waiver. Reliance in this behalf was placed on the following conclusions drawn by this Court: "9. Indisputably, it is a settled legal proposition that conferment of jurisdiction is a legislative function and it can neither be conferred with the consent of the parties nor by a superior court, and if the court passes a decree having no jurisdiction over the matter, it would amount to nullity as the matter goes to the root of the cause. Such an issue can be raised at any stage of the proceedings. The finding of a court or tribunal becomes irrelevant and unenforceable/inexecutable once the forum is found to have no jurisdiction. Similarly, if a court/tribunal inherently....
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....the Companies Act. It was asserted, that the order passed by the High Court was an order in personam, and as such, the aforesaid order dated 10.3.2000 could not be considered as binding on the DRT, or for that matter, on the Recovery Officer of the DRT. For the above proposition, learned senior counsel placed reliance on the Andhra Bank case3, and drew the attention of this Court to the following conclusions recorded therein: "31. Section 446 of the Companies Act indisputably confers a wide power upon the Company Judge, but such a power can be exercised only upon consideration of the respective contentions of the parties raised in a suit or a proceeding or any claim made by or against the company. A question of determining the priorities would also fall for consideration if the parties claiming the same are before the court. Section 446 of the Companies Act ipso facto confers no power upon the court to pass interlocutory orders. The question as to whether the courts have inherent power to pass such orders, in our opinion, does not arise for consideration in this proceeding. Assuming such a power exists, it was imperative that the same should have been exercised on consideration o....
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....that the applicant has sustained injury by reason of such irregularity or fraud. Mere proof of a material irregularity such as the one under Rule 69 and inadequacy of price realised in such a sale, in other words injury, is, therefore, not sufficient. What has to be established is that there was not only inadequacy of the price but that that inadequacy was caused by reason of the material irregularity or fraud. A connection has thus to be established between the inadequacy of the price and the material irregularity." (emphasis supplied) Additionally, reliance was placed on Navalkha and Sons v. Sri Ramanya Das (1969) 3 SCC 537. And the Court's attention was drawn to the following observations: "7. In the present case the Division Bench has come to the conclusion that publicity was not as wide as originally proposed by the Commissioners in their affidavit. The publication was made in four dailies namely The Hindu, Indian Express, the Hindustan Times and The Statesman. There was no publication in the Times of India. Further out of the four newspapers in which publication was made only in two there were two insertions and in the remaining two there was only one insertion. This was....
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....public wherein every member of the public is at liberty to participate. No doubt, the device resorted to considerably raised the previous bid yet it was not an adequate price having regard to the market value of the property to which reference has already been made. The denial of opportunity to purchase the property by persons who would have taken part in the auction bid but for want of notice is a serious matter. In our opinion the learned Judge having decided on December 24, 1964 that the property should be put to auction should have directed auction by public sale instead of confining it to two persons alone. Since there was want of publicity and there was lack of opportunity to the public to take part in the auction the acceptance of the highest bid by the learned Judge was not a sound exercise of discretion. It is contended on behalf of the appellant that confirmation was discretionary with the Court and the Division Bench ought not to have interfered with the discretion exercised by the Company Judge. It is true that the discretion exercised by the Judge ought not to be interfered with unless the Judge has gone wrong on principle. As already pointed out the learned Company Ju....
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....t... no coercive steps are taken against the assets of the company during or after the conclusion of the proceedings before the Tribunal..." 33. After the DRT, Bangalore issued the recovery certificate dated 15.5.2002, the State Bank of Mysore filed Company Application No. 1300 of 2003, with a prayer that the bank be permitted to seek execution of the recovery certificate. It is not a matter of dispute, that the Company Court in the High Court at Madras, neither heard nor passed any order on the above application. The admitted position is, that the Registry of the High Court, at its own, returned the above Company Application No.1300 of 2003, by recording an endorsement, that leave of the High Court was not necessary. The Recovery Officer thereafter proceeded with the sale of the properties of Deve Sugars Ltd. 34. Tungabadra Sugar Works Mazdoor Sangha, the workers' union of Deve Sugars Ltd., objected to the execution of the recovery certificate by the Recovery Officer. The Official Liquidator, who was ordered to be impleaded in the recovery proceedings initiated by the State Bank of Mysore, vide order dated 10.3.2000 (passed by the Company Court in the High Court at Madras), also....
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....ew, that the proceedings before the Recovery Officer, including the sale of the properties of Deve Sugars Ltd. on 11.8.2005 and the confirmation thereof on 12.9.2005, had been conducted in disregard of the order of the Company Court in the High Court at Madras, dated 10.3.2000 (in Company Application Nos. 1251-1253 of 1999). The sale and confirmation of the properties of Deve Sugars Ltd. in favour of Anita International were accordingly set aside. 39. The principal debate raised before this Court, revolves around the cause and effect of the order dated 10.3.2000, passed by the Company Court in the High Court at Madras. According to learned counsel for the appellants, the above order dated 10.3.2000 being wholly void and non est could not have any bearing on the proceedings conducted by the Recovery Officer, including the sale of the properties of Deve Sugars Ltd. on 11.8.2005, and also, the confirmation thereof by the Recovery Officer on 12.9.2005. According to the respondents, who support the impugned order dated 17.9.2009, the order dated 10.3.2000 was valid, and had a binding effect. And because, the proceedings conducted by the Recovery Officer were in total disregard of the o....
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....ant -Anita International has no concern with the distribution of the sale proceeds, and as such, the issue of distribution of the sale proceeds should not fall within the consideration of the present determination. 42. It is not possible for us to accept the contentions advanced on behalf of the appellants. In this behalf, it would be relevant to mention, that in the M.V. Janardhan Reddy case, the Company Court by an order dated 13.8.1999 required that its permission should be obtained before the Recovery Officer finalized the sale. Thereafter, the Company Court by an order dated 25.3.2005, directed that sale by the Recovery Officer, was subject to confirmation by the Company Court. In the above sequence of facts, this Court clearly held, that the condition imposed by the Company Court could not be violated by the Recovery Officer. It was concluded, that the sale made by the Recovery Officer in violation of the orders passed by the Company Court, was without the authority of law, the same was accordingly set aside. The explanation tendered by learned senior counsel representing the appellants was, that even in the above judgment, this Court had not disturbed the exclusive jurisdic....
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....quidator, Uttar Pradesh and Uttarakhand case5. In view of the above, we are of the considered view, that the pointed issue canvassed before us, at the hands of learned counsel for the appellants, stands answered against the appellant in paragraph 36 of the above judgment. We endorse, and are obliged to follow, the view expressed by this Court, as noticed above. Accordingly, we find no merit in the first contention advanced at the hands of learned counsel for the appellants. 44. Despite our above conclusion, it is imperative for us to notice, that for recovery of a debt due to a bank or a financial institution, the concerned bank or financial institution, can legitimately initiate proceedings, by filing a winding up petition before the jurisdictional Company Court, or alternatively, intervene in a pending winding up petition. Since there is no bar restraining a bank or a financial institution from approaching a Company Court, by filing a winding up petition, it is not possible to conclude, that the jurisdictional Company Court, is not possessed with the determinative authority/competence to entertain a claim raised by such bank or financial institution. In view of the above, it is ....
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....dity could not be corrected, even by the consent of the concerned parties. We are of the considered view, that the proposition debated and concluded in the judgments relied upon by learned counsel for the appellants (referred to above) are of no relevance, to the conclusions drawn in the foregoing paragraph. In our determination hereinabove, we have not held, that a void order can be legitimized. What we have concluded in the foregoing paragraph is, that while an order passed by a Court subsists, the same is liable to be complied with, till it is set aside. 47. The submission canvassed at the hands of learned counsel for the appellants, that the impugned sale dated 11.8.2005, and its confirmation on 12.9.2005, should not be interfered with on the ground of equity, as the appellant had made the entire payment in 2005, and the Recovery Officer had ordered confirmation of the sale, as no objection had been raised against the same. We find it difficult to persuade ourselves to accept the above contention. In this behalf, one cannot lose sight of the fact that the Official Liquidator, as well as, the workers' union had raised objections before the Recovery Officer at the very initial s....