TaxTMI 
TaxTMI 
2016 (7) TMI 438
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....ties of the company - Deve Sugars Ltd.. The Official 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 ....
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....upon a judgment rendered by this Court in Civil Appeal No. 2536 of 2000 (reported 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 H....
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.... Court. The bid of Anita International of Rs. 10.25 crores was accepted. The bidder deposited 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. Th....
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.... proceedings initiated by N. Ponnusamy, the High Court by its order dated 24.10.2007, passed an ex parte 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 w....
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.... auction (on 11.8.2005) the Recovery Officer received only two bids. Despite the above, he closed the bid on 11.8.2005 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 unambigu....
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....of the properties of Deve Sugars Ltd. by the Recovery Officer on 11.8.2005, was liable to be set aside. So also, the 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....
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....ined in Chapter V of the Act and is covered by Sections 25 to 30. It is not the intendment of the Act that while the basic liability of the defendant is to be decided by the Tribunal 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 bank....
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....equiring leave of the Company Court or permitting transfer. ..... xxx xxx xxx 31. It may also be noticed that in the LIC Act of 1956, there was no provision like Section 34 of the RDB Act giving overriding effect to the provisions 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)(....
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....ce was also placed on Andhra Bank v. Official Liquidator (2005) 5 SCC 75. The instant judgment was relied upon to support the conclusions drawn by learned counsel, while placing reliance on the Allahabad Bank case. Learned counsel invited our attention to the position 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....
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....ra State Financial Corpn. v. Official Liquidator was approved. The reference to a larger Bench was occasioned by the fact that the decision in Allahabad Bank v. Canara Bank was not adverted to in this decision. This decision recognises that, whether a creditor is standing outside the winding up or not, 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 w....
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....nd the views expressed by this Court in the decisions referred to above. In this situation, we find no reason to interfere with the decision of the High Court. We clarify that there is no inconsistency between the decisions in Allahabad Bank v. Canara Bank and in International Coach Builders Ltd. v. Karnataka 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 C....
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....urt for appropriate directions regarding the realisation of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-in-liquidation." (emphasis supplied) Relying on the above judgment, learned counsel for the appellant emphatically pointed out, that the sale of the properties 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....
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....port and also to permit the Bank to effect sale of the properties of the Company under liquidation through the Recovery Officer of the Debts Recovery Tribunal, in terms of the conditions of auction-sale notice dated 2-2-2005. It is also stated that though sale notice was ordered, no sale was conducted as no permission was obtained from this court. The Official Liquidator also filed a report reporting that there is no objection 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....
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.... "23. From the aforesaid verdict, it is vivid that the larger Bench in Rajasthan State Financial Corpn. case approved the law laid down in Allahabad Bank. In fact, it is noticeable that the larger Bench has observed that in Allahabad Bank case, a view has been taken that the RDB Act being a subsequent legislation and being a special law would prevail over the general law, the 1956 Act, but the said argument is not available as far as the SFC Act is concerned. xxx xxx xxx 24. From 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. xx....
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....l invited our attention to the scope of interference with reference to a public auction, wherein third party rights have emerged, especially when the third parties are independent of the disputants, and also, with reference to seeking recourse to a statutory remedy available to a party against the impugned order. The conclusions recorded by this Court in the Sadashiv Prasad Singh case6, as were pointedly brought to our notice, are being extracted hereunder: "23. At the time of hearing, we were thinking of remanding the 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 ....
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....e attachment of the property in question or the proclamations and notices issued in newspapers in connection with the auction thereof. 23.5. All these facts cumulatively lead to the conclusion that after 26-10-2005, Harender Singh had lost all interest in the property in question and had therefore, remained a silent spectator to various orders which came to be passed from time to time. He had, therefore, no equitable right in his favour to assail the auction-purchase made by Sadashiv Prasad Sinha on 28-8-2008. 23.6. Finally, the public auction under reference was held on 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 ....
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....precipitated until the appeal filed by the petitioners is disposed of. All the contentions are left upon." (emphasis supplied) Based on the above, it was contended, that it was not open to the appellants to raise a challenge with reference to a third party sale, especially when the same was in the nature of a public auction conducted by a Recovery Officer, while giving effect to an order passed by the Debts Recovery Tribunal, strictly within the jurisdiction of the provisions of the RDB Act. And also, the determination of this Court not to interfere lightly with the rights which came to be vested in such 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 oppor....
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....der dated 27.9.2009, passed by the High Court at Madras, ought not to be interfered with. 19. While substantiating the first contention noticed in the foregoing paragraph, it was asserted, that for recovery of a debt due to a bank, it can file a winding up petition before a Company Court under the Companies Act, or alternatively, it can file a recovery petition before the jurisdictional Debts Recovery Tribunal, under the provisions of the RDB Act. Accordingly, it was pointed out, that a recovery suit could be withdrawn to a Company Court, and the recovery of the debt sought by the bank, could be agitated before the Company Court. 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....
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....aid 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 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 comp....
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....rever required as a rule, subject to reasonable conditions. This would preserve the integrity of the substantive right of the secured creditor. The terms to be imposed should facilitate, rather than obstruct, the realisation of security. Further, wherever a receiver has been appointed prior to the commencement of the winding-up proceedings, he should be permitted to continue in general run of cases. As to the suits to be filed after the winding-up proceeding has commenced, the learned counsel urged that such a permission should normally be granted by the winding-up court. On this being done, when the question of appointment of receiver would arise, the civil court would do so if a case for 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 bec....
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.... Section 446 of the Companies Act, 1956. The same are reproduced below: "446. Suits stayed on winding up order. - (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the (Tribunal) and subject to such terms as the (Tribunal) may impose. (2) (Tribunal) shall, notwithstanding anything, contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of - (a) any suit or proceeding by or against the company; (b) any claim made by or against the 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 ....
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....bserving that once an order is declared non est by the court only then the judgment of nullity would operate erga omnes i.e. for and against everyone concerned. Such a declaration is permissible if the court comes to the conclusion that the author of the order lacks inherent jurisdiction/competence and therefore, it comes to the conclusion that the order suffers from patent and latent invalidity." 19. Thus, from the above it emerges that even if the order/notification is void/voidable, the party aggrieved by the same cannot decide that the said order/notification is not binding upon it. It has to approach the court for seeking such declaration. The order may be hypothetically a nullity and even if its invalidity is challenged before the court in a given circumstance, the court may refuse 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 ....
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....edings conducted on 11.8.2005 and the confirmation thereof on 12.9.2005, were valid? It was submitted, that even if, for arguments sake, the order dated 10.3.2000 passed by the Company Court of the High Court at Madras was now to be set aside, the same would not validate the aforementioned illegality and unauthorized actions of the Recovery Officer, for giving effect to the recovery certificate issued by the DRT. To support the aforementioned proposition, learned senior counsel placed reliance on the Official Liquidator, Uttar Pradesh and Uttarakhand case5, and drew the attention of this Court to the factual position recorded in paragraphs 2 and 3 thereof, which are reproduced hereunder: "2. Regard being had to the controversy involved which is in the realm of pure question of law, it is not necessary to exposit the facts in detail. Hence, the necessitous facts are adumbrated herein. 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....
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.... that if the Company Court as well as DRT can exercise jurisdiction in respect of the same auction or sale after adjudication by DRT, there would be duality of exercise of jurisdiction which the RDB Act does not envisage. By way of an example, the learned Senior Counsel has submitted that there are some categories of persons who can go before DRT challenging the sale and if the Official Liquidator approaches the Company Court, then such a situation would only bring anarchy in the realm of adjudication. The aforesaid submission of the learned Senior Counsel commends acceptance as the intendment of the legislature is that the dues of the banks and financial institutions are realised in promptitude. It is to be noted that when there is inflation in the economy, the value of the mortgaged property/assets depreciates with the efflux of time. If more time is consumed, it would be really difficult on the part of the 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 Ben....
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....nce, it is not an authority for the proposition that the Official Liquidator can approach the Company Court to set aside the auction or sale conducted by the Recovery Officer of DRT. 37. In view of the aforesaid analysis, we concur with the view expressed by the Division Bench and hold that the Official Liquidator can prefer an appeal before DRT. As he was prosecuting the lis in all genuineness before the Company Court and defending the order before the Division Bench, we grant him four weeks' time to file an appeal after following the due procedure. On such an appeal being preferred, DRT shall deal with the appeal in accordance with law. DRT is directed to decide the appeal within a period of two months after offering an opportunity of hearing to all concerned. Till the appeal is disposed of, the interim order passed by this Court shall remain in force. We hasten to clarify that we have not expressed anything on 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 ....
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....nt. This is the general principle and this is what Section 9-A reiterates. Take this very case. The plaintiff asked for temporary injunction. An ad interim injunction was granted. Then the defendants came forward objecting to the grant of injunction and also raising an objection to the jurisdiction of the court. The court overruled the objection as to jurisdiction and made the interim injunction absolute. The defendants filed an appeal against the decision on the question of jurisdiction. While that appeal was pending, several other interim orders were passed both by the civil court as well as by the High Court. Ultimately, no doubt, the High Court has found that the civil court had no jurisdiction to entertain the suit but all this took about six years. Can it be said that orders passed by the civil court and the High Court during this period of six years were all non est and that it is open to the defendants to flout them merrily, without fear of any consequence. 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 disobey....
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....winding up proceedings had been initiated by other creditors), secure. The interest of the creditors before the Company Court could be secure, only if the sale of the properties of the company under winding up was made by conforming to the crystalised practices in getting the best price. Referring to the conclusions drawn in the impugned order, it was submitted, that the auction sale conducted by the Recovery Officer was farcical, as it was, with the sole object of extending benefits to the appellant - Anita International. It was therefore asserted, that the Division Bench of the High Court was fully justified in setting aside the order passed by the learned Single Judge. 27. Mr. P. Chidambaram, learned senior counsel in rejoinder and in response to the three contentions advanced at the hands of the respondents, invited this Court's attention to Sections 18, 19 and 34 of the RDB Act. The same are extracted hereunder: "18. Bar of Jurisdiction.- On and from the appointed 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 2....
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....ate proceedings under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) to recover debts, whether due before or after the date of commencement of the Enforcement of the Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 from any person instead of making an application under this Chapter. (1B) In case, a bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of section 2 has filed an application under this Chapter and subsequently opts to withdraw the application for the purpose of initiating proceeding under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) to recover debts, it may do so with the permission of the Tribunal and every such application seeking permission from the Tribunal to withdraw the application made under sub-section (1A) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application: Provided that in case the Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor. (2) Where a bank or a financial in....
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.... on imposing such costs as may be considered necessary. (6) Where the defendant claims to set-off against the applicant's demand any ascertained sum of money legally recoverable by him from such applicant, the defendant may, at the first hearing of the application, but not afterwards unless permitted by the Tribunal, present a written statement containing the particulars of the debt sought to be set-off. (7) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Tribunal to pass a final order in respect both of the original claim and of the set-off. (8) A defendant in an application may, in addition to his right of pleading a set-off under sub-section (6), set up, by way of counter-claim against the claim of the applicant, any right or claim in respect of a cause of action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not. (9) A counter-claim under sub-sect....
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....properties claimed by the applicant as the properties secured in his favor or otherwise owned by the defendant as appears sufficient to satisfy any certificate for the recovery of debt. (14) The applicant shall, unless the Tribunal otherwise directs, specify the property required to be attached and the estimated value thereof. (15) The Tribunal may also in the order direct the conditional attachment of the whole or any portion of the property specified under sub-section (14). (16) If an order of attachment is made without complying with the provisions of sub-section (13), such attachment shall be void. (17) In the case of disobedience of an order made by the Tribunal under sub-sections (12), (13) and (18) or breach of any of the terms on which the order was made, the Tribunal may order the properties of the person guilty of such disobedience or breach to be attached and may also order such person to be detained in the civil prison for a term not exceeding three months, unless in the meantime the Tribunal directs his release. (18) Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order,- (a) a....
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....ed that the property is situated within the local limits of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated: Provided that in a case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it. (24) The application made to the Tribunal under sub-section (1) or sub-section (2) shall be dealt with by it as expeditiously as possible and endeavor shall be made by it to dispose of the application finally within one hundred and eighty days from the date of receipt of the application. (25) The Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. xxx xxx xxx 34. Act to have over-riding effect.- (1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in ....
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....on Act on this position." (emphasis supplied) Reliance was also placed on Dhurandhar Prasad Singh v. Jai Prakash University (2001) 6 SCC 534, and the Court's attention was drawn to the following observations: "20. de Smith, Woolf and Jowell in their treatise Judicial Review of Administrative Action, 5th Edn., para 5-044, have summarised the concept of void and voidable as follows: "Behind the simple dichotomy of void and voidable acts (invalid and valid until declared to be invalid) lurk terminological and conceptual problems of excruciating complexity. The problems arose from the premise that if an act, order or decision is ultra vires in the sense of outside jurisdiction, it was said to be invalid, or null and void. If it is intra vires it was, of course, valid. If it is flawed by an error perpetrated within the area of authority or jurisdiction, it was usually said to be voidable; that is, valid till set aside on appeal or in the past quashed by certiorari for error of law on the face of the record." 21. Clive Lewis in his work Judicial Remedies in Public Law at p. 131 has explained the expressions "void and voidable" as follows: "A chal....
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....e gives a right and also provides for a forum for adjudication of rights, remedy has to be sought only under the provisions of that Act and the common law court has no jurisdiction; where an Act creates an obligation and enforces the performance in specified manner, "performance cannot be forced in any other manner". 11. The law does not permit any court/tribunal/authority/forum to usurp jurisdiction on any ground whatsoever, in case, such an authority does not have jurisdiction on the subject-matter. For the reason that it is not an objection as to the place of suing; "it is an objection going to the nullity of the order on the ground of want of jurisdiction". Thus, for assumption of jurisdiction by a court or a tribunal, existence of jurisdictional fact is a condition precedent. But once such jurisdictional fact is found to exist, the court or tribunal has power to decide on the adjudicatory facts or facts in issue. (Vide Setrucherla Ramabhadraraju v. Maharaja of Jeypore AIR 1919 PC 150; State of Gujarat v. Rajesh Kumar Chimanlal Barot AIR 1996 SC 2664; Harshad Chiman Lal Modi v. D.L.F. Universal Ltd. AIR 2005 SC 4446; and Carona Ltd. v. Parvathy Swaminathan & Sons AIR 2....
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....n the decision rendered by this Court in Radhy Shyam v. Shyam Behari Singh AIR 1971 SC 2337. "7. There can be no doubt that an application under O. XXI, Rule 90 to set aside an auction-sale concerns the rights of a person declared to be the purchaser. If the application is allowed, the sale is set aside and the purchaser is deprived of his right to have the sale confirmed by the Court under Rule 92. Such a right is a valuable right, in that, upon such confirmation the sale becomes absolute and the rights of ownership in the property so sold become vested in him. A decision in such a proceeding, therefore, must be said to be one determining the right of the auction-purchaser to have the sale confirmed and made absolute and of the judgment-debtor conferred by Rule 90 to have it set aside and a resale ordered. In our view an order in a proceeding under Order XXI, Rule 90, is a 'judgment' inasmuch as such a proceeding raises a controversy between the parties therein affecting their valuable rights and the order allowing the application certainly deprives the purchaser of rights accrued to him as a result of the auction-sale. We, therefore, agree with the High Court that a lett....
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....In these circumstances the learned Single Judge was right in expressing his reluctance to confirm the offer of Navalkha & Sons. He therefore decided to have an open bid as between the appellant and Darak in the Court itself on that very day. The complaint of Padam Chand Agarwal is that the second step taken by the Single Judge of holding an auction without giving wide publicity was not justified in law. Rule 273 of the Companies (Court) Rules provides that all sales shall be made by public auction or by inviting sealed tenders or in such manner as the Judge may direct. It appears that on April 17, 1964 at the instance of the Official Liquidator and at the instance of a contributory the Court had approved of the terms and conditions of sale which provide calling of sealed tenders. On December 24, 1964 the learned Judge realised the inefficacy of this Course and decided to abandon the original procedure and put the properties to auction. But having made up his mind to resort to auction the learned Judge confined the auction to only two persons namely the previous tenderer and the fresh tenderer. The auction in question no doubt was conducted in a public place but it was not a public ....
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....th the starting bid of ten lakh rupees." (emphasis supplied) 30. Based on the legal position declared by this Court in the above judgments, it was asserted, that the validity of the auction sale held on 11.8.2005 and the confirmation thereof on 12.9.2005 was natural and normal in the facts and circumstances of this case. In order to restore the aforestated validity, it was submitted, that the impugned order passed by the High Court deserved to be set aside. 31. We have given our thoughtful consideration to the complicated sequence of facts projected before us, as also, the legal submissions advanced at the hands of learned counsel for the rival parties. We shall now endeavour to record our conclusions, with reference to the issues canvassed. 32. In our considered view, the controversy projected for our consideration falls in a narrow compass. It is apposite, to crystalise the dimensions of the dispute. Deve Sugars Ltd. was ordered to be wound up on 16.4.1999 (in Company Petition No.170 of 1995). The Official Liquidator took possession of the assets of Deve Sugars Ltd. situated at Harige on 28.9.1999. The State Bank of Mysore filed Company Application Nos. 1251-1253 of 1....
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.... AOR No.15 of 2006 and Videocon International Ltd. filed AOR No.1 of 2007. In both the above matters, a challenge was raised to the order passed by the Recovery Officer dated 12.9.2005, whereby the sale of properties of Deve Sugars Ltd. to Anita International, was confirmed. 37. It would be relevant to mention, that as against the reserve price of Rs. 10 crores, Anita International - the appellant herein, made a bid of Rs. 10.25 crores. The same was accepted by the Recovery Officer on 11.8.2005, and confirmed on 12.9.2005. One N. Ponnusamy filed Company Application Nos. 2740-2742 of 2007, before the Company Court in the High Court at Madras, wherein he assailed the sale and confirmation orders dated 11.8.2005 and 12.9.2005. In the above applications, it was inter alia asserted, that the reserve price of Rs. 10 crores was too low. The above company applications were dismissed on 3.3.2009. A challenge raised against the same, was also dismissed by the High Court at Madras. 38. The applications filed by the Official Liquidator and others were considered collectively (with Company Application Nos. 2740-2742 of 2007) and were rejected by a common order dated 3.3.2009, whereby all ....
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....be executed only through a Recovery Officer. It was submitted, that a Company Court has no jurisdiction, in the matter. Learned counsel for the appellants, substantiated the above assertion on the basis of the decisions rendered by this Court in the Allahabad Bank, the M.V. Janardhan Reddy, the Andhra Bank3, the Rajasthan State Financial Corporation4, and the Official Liquidator, Uttar Pradesh and Uttarakhand5 cases. 41. According to learned counsel for the appellants, it was apparent, that the action of a Recovery Officer in conducting sale proceedings and ordering the confirmation thereof for executing a recovery certificate fell squarely within his jurisdiction under the RDB Act. And his jurisdiction being exclusive, as declared by this Court could not be interfered with or set aside. It is in the above context, that it was also the pointed assertion of learned counsel representing the appellant, that the order passed by the Company Court in the High Court at Madras dated 10.3.2000 was without jurisdiction. Learned counsel representing the appellant however cautioned this Court, not to confuse the power of the Recovery Officer in executing recovery certificates (through sale ....
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....therefore, deserve to be set aside. 43. In addition to the above, reference may be made to the judgment rendered by this Court in the Official Liquidator, Uttar Pradesh and Uttarakhand case5. In paragraph 36 of the above judgment (extracted in paragraph xxx 24 xxx hereinabove), this Court has taken due notice of the proposition, with reference to a case where an order, had been passed by the Company Court. The proposition dealt with was in a situation where, the Company Court had imposed a condition on the Recovery Officer, that permission of the Company Court would be obtained, before the Recovery Officer conducted the sale and confirmation of the movable or immovable properties, of the debtor. It was held, that the order passed by the Company Court, was binding on the Recovery Officer. In the above judgment it was concluded, that it was not open to the Recovery Officer to confirm the sale of the properties at his own, and such a sale and confirmation of movable or immovable properties made by the Recovery Officer, without the permission of the Company Court, were liable to be set aside. This Court while recording its above conclusion, also expressed, that the above issue had n....
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....ide, on such grounds as may be available in law. However, till an order passed by a competent Court is set aside, as was also held by this Court in the Official Liquidator, Uttar Pradesh and Uttarakhand5 and the Jehal Tanti9 cases, the same would have the force of law, and any act/action carried out in violation thereof, would be liable to be set aside. We endorse the opinion expressed by this Court in the Jehal Tanti case9. In the above case, an earlier order of a Court was found to be without jurisdiction after six years. In other words, an order passed by a Court having no jurisdiction, had subsisted for six years. This Court held, that the said order could not have been violated while it subsisted. And further, that the violation of the order, before it is set aside, is liable to entail punishment, for its disobedience. For us to conclude otherwise, may have disastrous consequences. In the above situation, every cantankerous and quarrelsome litigant would be entitled to canvass, that in his wisdom, the judicial order detrimental to his interests, was void, voidable, or patently erroneous. And based on such plea, to avoid or disregard or even disobey the same. This course can ne....
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....judgments rendered by this Court, in support of the instant contention, is also unacceptable, as the factual position in the judgments relied upon, are inapplicable to the facts and circumstances of this case. In view of the above, we find no merit in the contention advanced. 48. It was also submitted on behalf of the appellants, that the sale conducted by the Recovery Officer on 11.8.2005, and the order of confirmation thereof passed by the Recovery Officer on 12.9.2005, ought to have been assailed only in proceedings under Section 30 of the RDB Act. It was submitted, that since an efficacious alternative remedy was available to the parties, which had approached the Company Court in the High Court at Madras, the interference at the hands of the High Court was neither just nor proper. The instant submission is wholly devoid of substance and deserves to be rejected. We are of the considered view, that there was sufficient justification for the parties to have approached the Company Court in the High Court at Madras, for the reason that they were seeking the enforcement of the order dated 10.3.2000, passed by the Company Court itself. The sale made by the Recovery Officer on 11.8.....