2002 (10) TMI 711 - HC - Companies Law

Issues Involved:
1. Right of a secured creditor to seek transfer of assets to the Debts Recovery Tribunal (DRT).
2. Maintainability of the application filed by Syndicate Bank.
3. Application of the Companies Act vs. the DRT Act.
4. Jurisdiction and powers of the Company Court and the DRT.
5. Confirmation of sale of assets by the Official Liquidator.

Issue-wise Detailed Analysis:

1. Right of a Secured Creditor to Seek Transfer of Assets to the DRT:
The applicant, Syndicate Bank, sought a direction to the Official Liquidator to transfer all the assets of A.P. Steels Limited to the Recovery Officer of the DRT, based on a Certificate of Recovery issued by the DRT. The bank argued that under Section 34(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act), it was entitled to such a transfer. However, financial institutions like IDBI and ICICI opposed this, arguing that the application was belated and not maintainable, and that the remedy lay in filing an appropriate application before the Official Liquidator under Section 529A of the Companies Act, 1956.

2. Maintainability of the Application Filed by Syndicate Bank:
The court held that the application by Syndicate Bank was not maintainable. The DRT Act does not provide for an applicant before the DRT to move the Company Court for the transfer of assets to the Recovery Officer. The court emphasized that only the Recovery Officer could apply to the Company Court for such a transfer after the property is sold and the sale is confirmed. The bank did not raise any objections during the valuation process and failed to inform the court about the pending application before the DRT, which further undermined the maintainability of their application.

3. Application of the Companies Act vs. the DRT Act:
The court analyzed the relevant provisions of both the Companies Act and the DRT Act. It concluded that while the DRT Act provides for the recovery of debts due to banks and financial institutions, it does not deal with the winding up of companies. The Companies Act, being a general act, does not prevail over the DRT Act, which is a special and subsequent enactment. However, the court clarified that the DRT Act does not enable the transfer of assets custodia legis (in the custody of the court) to the Recovery Officer without following the due process under the Companies Act and the rules therein.

4. Jurisdiction and Powers of the Company Court and the DRT:
The court reiterated that the Company Court has the exclusive jurisdiction to deal with the assets of a company in liquidation. The properties of the company vest in the Company Court, and any sale of these properties must be sanctioned and confirmed by the court. The DRT's jurisdiction is limited to adjudicating liabilities and issuing Certificates of Recovery, which are to be enforced by the Recovery Officer following the procedures laid out in the DRT Act and the Income-tax Act.

5. Confirmation of Sale of Assets by the Official Liquidator:
The court noted that the Official Liquidator had followed due process in valuing and auctioning the assets of A.P. Steels Limited, with no objections from Syndicate Bank during the process. The court emphasized that the sale of assets and the application of proceeds must be handled by the Company Court, and any interference by the Recovery Officer must be in accordance with the confirmed sale and the court's directions.

Conclusion:
The court dismissed the application filed by Syndicate Bank, holding that it was not maintainable under the provisions of the DRT Act, Companies Act, and the relevant rules of the Income-tax Act. The court underscored the exclusive jurisdiction of the Company Court in handling the assets of a company in liquidation and clarified that the DRT Act does not permit the transfer of such assets without following the due process established by the Companies Act.

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