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Issues Involved:
1. Jurisdiction of Debt Recovery Tribunal (DRT) to sell assets of a company under liquidation. 2. Validity of the sale of assets of the company (in liquidation) by the Recovery Officer and the issuance of the sale certificate. Issue 1: Jurisdiction of Debt Recovery Tribunal (DRT) to sell assets of a company under liquidation The DRT Act provides for the establishment of Tribunals and Appellate Tribunals for the expeditious adjudication of disputes raised by Banks and Financial Institutions for recovering their dues. Section 17 confers exclusive jurisdiction on the Tribunal to entertain, adjudicate, and decide applications filed by banks and financial institutions. Section 18 creates a bar on any other Court or authority from exercising jurisdiction in relation to the matters specified in Section 17, except for the Supreme Court and High Courts under Articles 226 and 227 of the Constitution. Section 19(19) provides for the distribution of sale proceeds among secured creditors in accordance with Section 529A of the Companies Act, 1956. Section 34 of the DRT Act overrides other laws to the extent of inconsistency. The Tribunal is vested with exclusive jurisdiction for adjudication and execution in relation to disputes relating to the recovery of debts due to banks and financial institutions, and no other Court or authority, including the Civil Court and Company Court, will have jurisdiction. Issue 2: Validity of the sale of assets of the company (in liquidation) by the Recovery Officer and the issuance of the sale certificate The application of Section 537(1) of the Companies Act, 1956, which voids any attachment, distress, execution, or sale held without the leave of the Company Court after the commencement of winding up, was considered. The winding up of a company is deemed to commence at the time of the presentation of the petition for winding up under Section 441(2) of the Companies Act. Hence, any sale conducted without the association of the Official Liquidator (OL) would be void. In this case, the winding up petition was filed on 19.06.1999, admitted on 30.03.2000, and advertised on 23.02.2001. The DRT allowed the application on 26.06.2000, and the Recovery Officer ordered the attachment of the property on 27.06.2005, auctioned it on 05.10.2005, confirmed the sale on 16.11.2005, and issued the sale certificate on 02.02.2006. Since the winding up petition had already been admitted and advertised, the secured creditor cannot claim lack of knowledge of the winding up proceedings. Conclusion: 1. The DRT is empowered to sell the assets of a company under liquidation at the instance of a secured creditor without the leave of the Company Court but must associate the Official Liquidator as he is deemed to have a pari-passu charge over the assets under Section 529A of the Companies Act, 1956. 2. The sale of the assets of the company (in liquidation) made by the Recovery Officer of the DRT and the issuance of the sale certificate in favor of the second respondent is liable to be set aside. Order: 1. The application is allowed. 2. The auction conducted on 05.10.2005, the sale confirmation on 16.11.2005, and the sale certificate issued on 02.02.2006 are set aside. 3. Respondents are directed to hand over possession of the property to the Official Liquidator within four weeks. 4. The DRT shall intimate the Sub-Registrar to make necessary entries regarding the cancellation of the sale. 5. The DRT is at liberty to sell the property only after associating the Official Liquidator. 6. The amount paid by the second respondent shall be refunded by the first respondent. 7. The second respondent is at liberty to participate in the new auction. 8. No order as to costs.
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