2006 (1) TMI 251 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Special Court versus Debt Recovery Tribunal (D.R.T.) regarding the sale of property of a notified person under the Special Courts Act.
2. Applicability of Section 9A of the Special Courts Act.
3. Overriding effect of the D.R.T. Act over the Special Courts Act.
4. Execution of certificates for recovery of debts against properties attached under the Special Courts Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Special Court vs. Debt Recovery Tribunal (D.R.T.):

The primary issue is whether the property of a person notified under the Special Courts Act can be sold in execution of a certificate obtained under the Debt Recovery Act. The petitioner, declared as a notified party, had all properties attached under Section 3(3) of the Special Courts Act. The respondent bank filed an application against the petitioner, which led to a dispute over whether the custodian under the Special Courts Act should be a necessary party. The D.R.T. and the appellate tribunal rejected the petitioner's contention that the custodian should be joined as a party, asserting that the petitioner was sued as a guarantor, not as a mortgagor or pledger of properties.

2. Applicability of Section 9A of the Special Courts Act:

The petitioner argued that Section 9A of the Special Courts Act grants exclusive jurisdiction to the Special Court over properties of a notified party. The respondent bank contended that Section 9A was inapplicable since the petitioner was sued in a personal capacity as a guarantor. The D.R.T. and appellate tribunal upheld this view, stating that the Special Courts Act did not apply to the petitioner's case.

3. Overriding Effect of the D.R.T. Act:

The respondent bank and intervenor argued that the D.R.T. Act, being subsequent legislation, should have overriding effect under Sections 17, 18, and 34. They cited the Supreme Court's judgment in Allahabad Bank v. Canara Bank, which held that the D.R.T. Act prevails over conflicting laws. However, the court noted that the Special Courts Act, particularly Section 9A, confers specific jurisdiction to the Special Court over attached properties, indicating a need for harmonious construction of both Acts.

4. Execution of Certificates for Recovery of Debts:

The court examined whether the D.R.T. could execute certificates against properties attached under the Special Courts Act. It concluded that while the D.R.T. has jurisdiction over claims for recovery of debts, it cannot execute certificates against properties already attached by the Special Courts Act. The Special Court retains jurisdiction over such properties, and financial institutions must seek directions from the Special Court for execution against attached properties.

Conclusion:

The court held that the D.R.T. has exclusive jurisdiction over claims for recovery of debts but cannot execute certificates against properties attached under the Special Courts Act. The Special Court retains jurisdiction over attached properties, and financial institutions must approach the Special Court for execution. The judgment harmonizes the provisions of both Acts, ensuring that the Special Court's powers under Sections 3(4), (5), and 9A are not rendered redundant. The rule was made partly absolute, with no order as to costs.