2001 (4) TMI 941 - HC - Indian Laws

Summary

Issues Involved:
1. Jurisdiction of the Debt Recovery Tribunal (DRT) versus the Company Court.
2. Requirement of leave from the Company Court for actions by the DRT.
3. Applicability of the Companies Act vis-a-vis the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (the Act).
4. Role and authority of the Official Liquidator.
5. Interaction between the provisions of the Companies Act and the Act.

Detailed Analysis:

Jurisdiction of the Debt Recovery Tribunal (DRT) versus the Company Court:
The primary issue was whether the DRT could direct the provisional Official Liquidator to take certain actions without obtaining leave from the Company Court, especially in light of the Supreme Court's decision in Allahabad Bank v. Canara Bank. The Court noted that the DRT has exclusive jurisdiction in matters of adjudication and execution of debts owed to banks and financial institutions, as per Sections 17 and 18 of the Act. However, the Court emphasized that this exclusivity does not negate the necessity to follow the procedural mandates of the Companies Act when dealing with a company under liquidation.

Requirement of Leave from the Company Court:
The Court held that when a liquidator or provisional liquidator is appointed, the assets of the company are deemed to be in the custody of the Company Court. Therefore, any action by the DRT affecting these assets requires leave from the Company Court. This is to ensure that the judicial comity and the supervisory jurisdiction of the High Court under Article 227 of the Constitution are maintained. The Court underscored that the DRT must adhere to the procedural requirements laid down in Rule 31 of the Second Schedule of the Income Tax Act, which is incorporated by reference in the Act.

Applicability of the Companies Act vis-a-vis the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:
The Court examined the apparent conflict between the Companies Act and the Act. It referred to the Supreme Court's ruling in Allahabad Bank's case, which held that the DRT has exclusive jurisdiction in adjudication and execution stages. However, the High Court clarified that this does not extend to bypassing the procedural safeguards provided in the Companies Act. Specifically, the provisions of Sections 442, 446, 529-A, and 537 of the Companies Act must be harmoniously construed with the Act to give effect to both statutes.

Role and Authority of the Official Liquidator:
The Official Liquidator, appointed under the Companies Act, is responsible for taking custody and control of the company's assets. The Court highlighted that the liquidator acts under the authority of the Company Court, and any interference by the DRT without the Court's leave would undermine this authority. The Court stressed that the liquidator must cooperate with the DRT, but this cooperation is subject to the overarching control of the Company Court.

Interaction Between the Provisions of the Companies Act and the Act:
The Court reiterated that both statutes must be read harmoniously. It emphasized that while the DRT has exclusive jurisdiction in certain matters, this does not absolve it from complying with the procedural requirements of the Companies Act. The Court pointed out that the legislative intent behind both statutes must be respected, and the DRT must seek leave from the Company Court when dealing with the assets of a company under liquidation.

Conclusion:
The High Court concluded that the DRT must obtain leave from the Company Court before taking any action affecting the assets of a company under liquidation. This ensures that the procedural safeguards of the Companies Act are upheld, and the supervisory jurisdiction of the High Court is maintained. The Court refused to grant leave for an appeal to the Supreme Court, stating that the judgment was based on established principles laid down by the Apex Court.