2006 (3) TMI 335 - HC - Companies Law

Summary

Issues:
Setting aside of sale certificate issued by respondent No. 3 for assets of company in liquidation under Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Jurisdiction of Debts Recovery Tribunal without permission of court under Companies Act, 1956. Validity of sale confirmation in favor of auction purchaser. Official liquidator's right to determine workmen's dues and claim apportionment of sale proceeds.

Analysis:
1. The official liquidator sought to set aside the sale certificate issued for the assets of the company in liquidation under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The sale was conducted without seeking permission from the court as required under the Companies Act, 1956.

2. The petitioner argued that the Debts Recovery Tribunal lacked jurisdiction to proceed without court permission under section 446 of the Companies Act, 1956. The auction of the company's assets was conducted without informing about the winding-up status, leading to the sale confirmation in favor of the auction purchaser.

3. Respondent No. 1 contended that the sale was conducted in accordance with the Recovery Certificate, and the auction purchaser took possession before the official liquidator. The judgment highlighted the precedence of the Recovery of Debts Act over the Companies Act, emphasizing the Tribunal's exclusive jurisdiction in such matters.

4. The court referred to the Supreme Court judgments in Allahabad Bank v. Canara Bank and Rajasthan Financial Corporation v. Official Liquidator to determine the legal standing. It was established that the Recovery of Debts Act prevails over the Companies Act in cases of conflict, granting financial institutions the right to sell assets without requiring permission from the company court.

5. The judgment concluded that the sale conducted by respondent No. 1 was not illegal or void, as it was in line with the provisions of the Recovery of Debts Act. However, the official liquidator retains the right to determine workmen's dues and claim a share from the sale proceeds, ensuring fair distribution as per the Companies Act.

6. Ultimately, the court dismissed the application to set aside the sale certificate, stating that the sale shall be subject to the official liquidator's right to claim workmen's dues from the sale proceeds. This comprehensive analysis resolved the issues regarding the sale of assets of the company in liquidation under the relevant legal framework.