2002 (12) TMI 496 - SC - Companies Law

Whether when the Debt Recovery Tribunal under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 exercises its power under section 19(18)(e) and appoints a Commissioner for preparation of an inventory of the properties of the defendants? Whether prior leave of the company judge under the provisions of the Companies Act is necessary, since the company in question is under liquidation and a provisional liquidator has been appointed? Held that - As in the case on hand, in view of the limited direction that has been issued by the Tribunal, we see no question of any confrontation or usurping of the jurisdiction of the learned company judge or divesting the custody of the official liquidator, which custody, he has assumed by virtue of section 456 of the Companies Act. The limited direction of the Tribunal was to appoint an Advocate Commissioner and requiring the Commissioner to have an inventory of the properties, which direction undoubtedly the Tribunal possesses under section 19(18)(e) of the Debts Recovery Tribunal Act. For such direction issued by the Tribunal in exercise of power under section 19(18)(e) of the Act, no prior permission of the company judge under section 446 is necessary. In fact, the official liquidator should have co-operated with the Commissioner in making an inventory of the properties of which he continues to be in custody after being appointed as a provisional liquidator. Therefore, set aside the impugned judgment of the High Court and direct that the provisional liquidator shall permit the Advocate Commissioner to have an inventory of the properties of the company.

Summary

Issues:
1. Whether prior leave of the company judge is necessary when the Debt Recovery Tribunal appoints a Commissioner for preparation of an inventory of properties of a company under liquidation.

Analysis:
The case involved an appeal against the order of the Division Bench of the Andhra Pradesh High Court concerning the necessity of prior leave of the company judge when the Debt Recovery Tribunal appoints a Commissioner for inventory preparation of a company under liquidation. The appellant-bank issued notices to the company and guarantors for outstanding debts, leading to the appointment of a provisional liquidator by the High Court. Subsequently, the Tribunal appointed an Advocate Commissioner for inventory preparation, which was challenged by the liquidator. The Division Bench held that the Tribunal should not pass orders on matters under the company judge's jurisdiction, and the properties were under the provisional liquidator's custody. The appellant contended that prior leave of the company court was not necessary, citing a previous court decision. On the other hand, the respondent argued that the liquidator, under the Companies Act, had control over the properties, requiring the company court's permission for any directions. It was suggested that the matter might need consideration by a larger Bench to avoid conflicts between the Tribunal and the company judge.

The Supreme Court analyzed the Tribunal's power to appoint a Commissioner for property inventory under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Court noted that the Tribunal's jurisdiction was exclusive, except for the Supreme Court and High Courts under specific circumstances. The Court referred to a previous case where it was established that no leave of the company court was necessary for proceedings under the Recovery of Debts Act. The respondent argued that the provisional liquidator's custody of properties mandated the company court's permission for any Tribunal directions. However, the Court found that the Tribunal's limited direction to appoint an Advocate Commissioner for inventory did not require prior permission from the company judge. The Court held that the official liquidator should cooperate with the Commissioner for inventory preparation, as mandated by the Tribunal's power under the Act. Consequently, the Court set aside the High Court's judgment and directed the provisional liquidator to allow the Advocate Commissioner to proceed with the inventory of the company's properties. The appeal was disposed of accordingly.