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2014 (2) TMI 1354 - HC - Companies LawWinding up of Company - Restraint from Sale of the land, buildings, plant and machinery etc. of the company in liquidation by the State Bank of India (SBI) - direction to the SBI to hand over the entire auctioned assets to the Official Liquidator - Section 456 of the Companies Act - Maintainability of the application - HELD THAT - In the present case, we are concerned with same question but so far as the Companies Act and the SARFAESI Act are concerned. The difference between the RDB Act and the SARFAESI Act may be immediately noticed inasmuch under the SARFAESI Act, the security is realized by the secured creditor without intervention of the Court whereas under the RDB Act, a recovery officer of DRT sells assets of debtor to recover dues, as certified by DRT. The decision of the Delhi High Court in KOTAK MAHINDRA BANK LTD. AND MOHAN TRACTORS PVT LTD. VERSUS MEGNOSTAR TELECOMMUNICATIONS PVT. LTD. ANR 2012 (9) TMI 1092 - DELHI HIGH COURT is relevant to be noticed where an identical issue fell for consideration. In that case also, it was answered by holding that the Official Liquidator will have to approach the DRT under Section 17 of the SARFAESI Act, if he seeks to challenge the sale held by the secured creditor under Section 13(4) of the SARFAESI Act. The view of the Delhi High Court commends acceptance. In view of the answer to the question of maintainability, against the applicant, it is not necessary to deal with the factual aspects and the grounds for setting aside the sale, as urged by the applicants. Application dismissed being not maintainable.
Issues Involved:
1. Maintainability of the application filed by the Official Liquidator. 2. Validity of the sale conducted by SBI under the SARFAESI Act. Detailed Analysis: 1. Maintainability of the Application: The primary issue was whether the application filed by the Official Liquidator to set aside the sale conducted by SBI under the SARFAESI Act was maintainable. The court examined the relevant legal provisions and precedents, including Sections 442, 446, and 537 of the Companies Act, and Section 35 of the SARFAESI Act. The court noted that the SARFAESI Act allows secured creditors to realize their security without court intervention, and Section 17 of the SARFAESI Act provides a remedy for aggrieved parties to approach the Debt Recovery Tribunal (DRT). The court referred to the Supreme Court's decision in Allahabad Bank v. Canara Bank, which established that the DRT has exclusive jurisdiction over matters related to the recovery of debts due to banks and financial institutions, overriding the jurisdiction of the company court. The court also considered the Delhi High Court's decision in Kotak Mahindra Bank Ltd. v. Megnostar Telecommunications Pvt. Ltd., which held that the Official Liquidator must approach the DRT under Section 17 of the SARFAESI Act to challenge a sale conducted by a secured creditor. Based on these precedents, the court concluded that the Official Liquidator's application was not maintainable in the company court and should be pursued before the DRT. Consequently, COMPA. No. 525 of 2013 filed by the Official Liquidator was dismissed, with a direction to approach the DRT within four weeks. 2. Validity of the Sale: Although the court dismissed the application on the grounds of maintainability, it briefly addressed the validity of the sale conducted by SBI under the SARFAESI Act. The Official Liquidator and other applicants contended that the sale was unauthorized and undervalued. They argued that the sale violated Sections 456 and 536 of the Companies Act, as SBI did not obtain leave from the company court to stay outside the winding-up proceedings. SBI and the auction purchaser defended the sale, asserting that it was conducted under the SARFAESI Act, which has an overriding effect over other laws, including the Companies Act. They relied on the Supreme Court's decision in Pravin Gada v. Central Bank of India, which upheld the validity of sales conducted under the SARFAESI Act. The court noted that the SARFAESI Act provides a mechanism for secured creditors to recover their dues expeditiously, and the DRT is the appropriate forum to address any grievances related to such sales. Given the dismissal of the application on maintainability grounds, the court did not delve into the factual aspects of the sale's validity. Conclusion: The court dismissed COMPA. No. 525 of 2013 filed by the Official Liquidator, directing him to approach the DRT within four weeks. The court maintained the status quo regarding the asset for this period to allow the Official Liquidator to seek appropriate interim relief from the DRT. Consequently, related applications (COMPA. Nos. 572, 573, and 597 of 2013) were also dismissed, with all parties directed to follow the DRT process.
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