2005 (1) TMI 404 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Official Liquidator versus the Recovery Officer under the DRT Act for the sale of immovable properties.
2. Applicability and overriding effect of the DRT Act over the Companies Act.
3. Role of the Official Liquidator in cases where the Recovery Certificate is issued or pending.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Official Liquidator versus the Recovery Officer under the DRT Act for the sale of immovable properties:
The primary legal question posed was whether the sale of immovable properties should be conducted by the Official Liquidator in winding-up proceedings under the Companies Act or by the Debt Recovery Officer in execution of the recovery certificate issued by the Debt Recovery Tribunal (DRT). The court determined that once a Recovery Certificate is issued by the DRT, the jurisdiction to execute the sale of immovable properties secured in favor of banks and financial institutions lies exclusively with the Recovery Officer. The Official Liquidator does not have the authority to proceed with the sale of such properties.

2. Applicability and overriding effect of the DRT Act over the Companies Act:
The judgment relied heavily on the precedent set by the Supreme Court in *Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 (SC)*, which held that the provisions of Sections 17 and 18 of the DRT Act are exclusive for adjudication and execution of the recovery certificate. The DRT Act, by virtue of Section 34, has an overriding effect over other laws, including the Companies Act, where inconsistencies arise. The court emphasized that the Recovery Officer has exclusive jurisdiction for the execution of the recovery certificate and that the Company Court cannot interfere with this process.

3. Role of the Official Liquidator in cases where the Recovery Certificate is issued or pending:
In scenarios where the Recovery Certificate has not yet been issued but recovery proceedings are pending before the DRT, the Official Liquidator must seek directions from the DRT regarding the assets secured in favor of banks and financial institutions. The Official Liquidator is required to hold the assets until the DRT provides appropriate directions. If directed by the DRT, the Official Liquidator must hand over the assets to a private receiver appointed by the DRT, subject to recovery of costs, charges, and expenses incurred.

The court dismissed the Official Liquidator's contention that he retains jurisdiction to dispose of assets even when a Recovery Certificate has been issued, referencing the Supreme Court judgment in *International Coach Builders Ltd. v. Karnataka State Financial Corpn. [2003] 114 Comp. Cas. 6141*. The court clarified that this judgment does not apply to the present case, as it dealt with the conflict between the Companies Act and the State Financial Corporations Act, not the DRT Act.

Conclusion:
The court concluded that the Official Liquidator is not empowered to dispose of immovable properties secured in favor of banks and financial institutions when a Recovery Certificate has been issued by the DRT. The Recovery Officer has exclusive jurisdiction in such matters. The Official Liquidator must hand over the assets to the Recovery Officer or as directed by the DRT and seek recovery of any expenses incurred from the sale proceeds through the DRT.

The reports in the respective company petitions were disposed of accordingly, with directions for the Official Liquidator to return earnest money deposits to bidders and to make necessary applications to the DRT for recovery of costs. The court expressed gratitude to the amicus curiae for assisting in the matter.