2004 (11) TMI 334 - HC - Companies Law

Issues Involved:
1. Whether winding-up proceedings under the Companies Act can be initiated by a Bank or Financial Institution after instituting recovery proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act).

Issue-wise Detailed Analysis:

1. Maintainability of Winding-Up Petition Post Recovery Proceedings:
The core issue in both appeals was whether a winding-up petition under the Companies Act could be maintained after recovery proceedings had been initiated under the RDB Act. The appellant banks had filed winding-up petitions under sections 433, 434, and 439 of the Companies Act, claiming the respondent companies were insolvent and unable to pay their debts. These petitions were filed after the banks had already initiated recovery proceedings before the Debt Recovery Tribunal (DRT).

2. Concurrent Jurisdiction and Choice of Forum:
The respondents contended that since the banks had already chosen the DRT for recovery, the winding-up petitions were not maintainable. They argued that the DRT had exclusive jurisdiction over debt recovery matters, citing sections 17, 18, and 34 of the RDB Act, and the Supreme Court's decision in Allahabad Bank v. Canara Bank. They also argued that the Company Court and DRT had concurrent jurisdiction, and once a forum was chosen, the other remedy was barred.

3. Distinction Between Recovery and Winding-Up Proceedings:
The appellants argued that winding-up proceedings and recovery proceedings were distinct and not alternative remedies. They cited the Supreme Court's decision in Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd., which clarified that a winding-up petition is not for money recovery but for declaring a company insolvent. They also referenced the decision of the Bombay High Court in Viral Filaments Ltd. v. Indusind Bank Ltd., which supported the view that DRT cannot wind up a company, a jurisdiction exclusive to the Company Court.

4. Analysis of Relevant Provisions and Precedents:
The Court examined sections 433 and 434 of the Companies Act and sections 17, 18, and 34 of the RDB Act. It noted that the RDB Act aimed at expeditious recovery of debts, while the Companies Act provided for winding up a company due to insolvency. The Court distinguished the purposes of the two proceedings, emphasizing that the DRT adjudicates debt recovery, while the Company Court determines insolvency and winding up.

5. Inconsistency and Overriding Effect:
The Court acknowledged that if there were inconsistencies between the RDB Act and the Companies Act, the former, being a special and later enactment, would prevail. However, it found no inconsistency between the two Acts, as they provided distinct remedies for different purposes. The Court held that section 34 of the RDB Act did not preclude winding-up proceedings under the Companies Act.

6. Conclusion and Remand:
The Court concluded that winding-up proceedings under the Companies Act could be maintained even after recovery proceedings under the RDB Act had been initiated. It set aside the impugned order in Company Appeal No. 2/2003 and remitted the matter back to the learned Company Judge for reconsideration. In Company Appeal No. 34/2004, the Court upheld the impugned order and directed the Company Court to consider the matter in light of its observations.

Summary:
The High Court of Delhi held that winding-up proceedings under the Companies Act are maintainable even if recovery proceedings under the RDB Act have been initiated. The Court clarified that the two proceedings serve different purposes: the RDB Act focuses on debt recovery, while the Companies Act addresses insolvency and winding up. The Court found no inconsistency between the two Acts and remitted the matters back to the Company Judge for further consideration.

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