2000 (5) TMI 1034 - HC - Companies Law

Issues Involved:
1. Legality of the decree due to liquidation status of defendants.
2. Transferability of proceedings to the Debt Recovery Tribunal (DRT) under the RDB Act.
3. Liability of surety in relation to the principal debtor.
4. Legality of interest rate awarded in the decree.

Issue-wise Detailed Analysis:

1. Legality of the Decree Due to Liquidation Status of Defendants:
The defendant's counsel argued that the suit could not have continued without the permission of the company court under section 446 of the Companies Act, 1956, as defendants No. 1 and 4 had gone into liquidation. It was contended that permission had been obtained for one company but not the other, rendering the decree illegal and void. However, the court found that permission had been granted by the company court for both companies before the decree was passed. The court referenced orders dated December 9, 1977, and March 5, 1982, which granted Bank of India permission under section 446 of the Companies Act to proceed with the suit. Therefore, the contention was deemed without merit.

2. Transferability of Proceedings to the Debt Recovery Tribunal (DRT) under the RDB Act:
The defendant's counsel argued that proceedings under Order 9, rule 13 of the CPC are not contemplated under section 31 of the RDB Act and that the provisions of section 446 of the Companies Act override the RDB Act. The plaintiff's counsel contended that all suits and proceedings within the purview of the RDB Act pending on the appointed date automatically stand transferred to the Tribunal. The court referred to sections 17(1), 18, 31(1), and 34 of the RDB Act, concluding that the suit and all proceedings automatically stood transferred to the Tribunal by virtue of section 31 upon the establishment of the Tribunal. The court also cited the Supreme Court judgment in Allahabad Bank v. Canara Bank, which held that the provisions of the RDB Act override those of the Companies Act. Consequently, the court determined that the proceedings under Order 9, rule 13 CPC pending in this court were liable to be transferred to the Tribunal.

3. Liability of Surety in Relation to the Principal Debtor:
The defendant's counsel argued that the liability of defendant No. 3 as surety is co-existent with that of defendant No. 1, the principal debtor, and that the actual liability should be determined by the company court in winding-up proceedings. The court, however, held that the provisions of the RDB Act confer exclusive jurisdiction on the Tribunal to adjudicate the liability of the debtor to the bank. The court referenced the Supreme Court's interpretation in Allahabad Bank v. Canara Bank, which confirmed that the RDB Act's provisions take precedence over the Companies Act. Therefore, the execution against the surety could proceed under the Tribunal's jurisdiction.

4. Legality of Interest Rate Awarded in the Decree:
The defendant's counsel contended that the interest awarded at the rate of 19.25% per annum was illegal and without jurisdiction, citing rule 118(3) of the Companies (Court) Rules, 1959, which limits interest to 4% per annum. The court did not specifically address this contention in detail but implied that any objections regarding the decree's executability, including the interest rate, should be raised before the Tribunal where the execution proceedings are pending.

Conclusion:
The court concluded that all proceedings pending in this court are liable to be transferred to the Debt Recovery Tribunal. It ordered the transfer of I.A. Nos. 3542 of 1985, 4076 of 1985, and all other applications to the Tribunal. Additionally, I.A. No. 1179 of 2000 was dismissed as not maintainable. The parties were directed to appear before the Tribunal on July 4, 2000.

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