2011 (6) TMI 672 - HC - Companies Law

Winding up - Powers of Liquidator - secured creditors first charge holder - Debts Recovery Tribunal.

Issues Involved:
1. Entitlement of secured creditors to enforce their full claim under the certificate issued by the Debts Recovery Tribunal (DRT).
2. Competency of the Official Liquidator to restrict claims under the Company (Court) Rules.
3. Jurisdiction of the Company Court to entertain claims based on DRT certificates.
4. Jurisdiction of the Company Court to decide the validity of charges under the Companies Act.
5. Jurisdiction of the Company Court to decide if secured creditors have relinquished their securities.

Detailed Analysis:

Issue 1: Entitlement of Secured Creditors to Enforce Full Claim Under DRT Certificate
The secured creditors, having obtained certificates under section 19(22) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act), cannot enforce their full claims in the proceedings lodged under rule 163 of the Company (Court) Rules before the Official Liquidator. The Official Liquidator is bound by the provisions of the Companies Act and the Company (Court) Rules and can only partially accept claims up to the date of the winding-up order. Sections 25, 26, and 29 of the RDB Act provide the exclusive modes for executing such certificates, and the Official Liquidator is not empowered to enforce these certificates beyond the scope of the Company (Court) Rules.

Issue 2: Competency of the Official Liquidator to Restrict Claims
The Official Liquidator, acting under rule 163 of the Company (Court) Rules, is competent to restrict the claims of the secured creditors to the date of the winding-up order as per rule 154 and limit the interest to 4% per annum as per rules 156 and 179. The Official Liquidator must adhere to these rules while accepting or rejecting claims, and cannot deviate from them. The secured creditors' claims are thus restricted in accordance with these provisions.

Issue 3: Jurisdiction of the Company Court to Entertain Claims Based on DRT Certificates
The Company Court, under section 446 of the Companies Act, has limited jurisdiction to entertain and decide claims of secured creditors who have obtained DRT certificates, only to the extent that these claims are consistent with sections 529 and 529A of the Companies Act and rules 154, 156, and 179 of the Company (Court) Rules. For the full enforcement of claims based on DRT certificates, secured creditors must adopt the execution modes prescribed under the RDB Act. The Company Court cannot act in execution of these certificates, as this is not a mode prescribed under the RDB Act.

Issue 4: Jurisdiction of the Company Court to Decide the Validity of Charges
The Company Court does not have jurisdiction under section 446 of the Companies Act to determine whether the charges of the secured creditors are registered or to declare debts as unsecured due to non-compliance with section 125 of the Companies Act. The determination by the Debts Recovery Tribunal (DRT) regarding the registration of charges and the extent of secured claims is binding and cannot be re-opened by the Company Court.

Issue 5: Jurisdiction of the Company Court to Decide if Secured Creditors Have Relinquished Their Securities
The question of whether secured creditors have relinquished their securities is a mixed question of law and fact, which pertains to the executability of the DRT certificates. This question can only be raised and decided in the execution proceedings under the RDB Act and not by the Company Court under section 446 of the Companies Act. The Company Court's jurisdiction to deal with this question is ousted.

Conclusion:
1. The secured creditors cannot enforce their full claims under DRT certificates in the proceedings before the Official Liquidator.
2. The Official Liquidator is competent to restrict claims as per the Company (Court) Rules.
3. The Company Court has limited jurisdiction to entertain claims based on DRT certificates, consistent with sections 529 and 529A of the Companies Act.
4. The Company Court cannot determine the validity of charges under section 125 of the Companies Act.
5. The question of relinquishment of securities by secured creditors cannot be decided by the Company Court under section 446 of the Companies Act.

Orders:
1. The determination by the Official Liquidator on 12-2-2009 is confirmed.
2. Delay in filing Company Appeal Stamp No. 18418 of 2009 is condoned.
3. Company Appeals challenging the partial rejection of claims by the Official Liquidator are dismissed.
4. Company Applications seeking enforcement of DRT certificates are dismissed.
5. Secured creditors may adopt other proceedings for enforcement of their full claims under the RDB Act.
6. The contention of the Official Liquidator for reduction of claims under section 125 of the Companies Act is not entertained.
7. The question of relinquishment of securities cannot be decided under section 446 of the Companies Act.
8. The disbursement of dividend declared by the Official Liquidator shall be considered after the decision of the Apex Court.
9. Costs incurred by the Official Liquidator to be paid by the applicants/appellants.

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