2011 (1) TMI 1143 - HC - Companies Law

Winding up - applicant is a certificate debtor along with the company in liquidation in proceedings before the Debts Recovery Tribunal - applicant as well as the company in liquidation are debtors before the Debts Recovery Tribunal. Before it the applicant is liable as a guarantor. The same applicant is a respondent-director in the misfeasance proceedings started in connection with the liquidation proceedings Held that - Tribunal with the power to decide an application before it like a suit. It has power to decide set off and counter claims. Then in section 19(13A), the Tribunal has the power to pass an order asking for security, attachment of property and the like. If the Tribunal has the power to order attachment of property, the power to decide the title to that property is incidental to it, Recovery Officer does not have any such power, Recovery is underway. Misfeasance proceedings have not reached that stage before this court, recovery proceedings against applicant/respondent No. 2 will remain suspended till determination of this question by the Tribunal. This order is conditional upon the applicant

Summary

Issues:
Misfeasance proceedings in connection with liquidation of a company; Jurisdiction conflict between Debts Recovery Tribunal and Company Court; Adjudication of properties ownership; Exclusive jurisdiction of Debts Recovery Tribunal; Consultation between official liquidator and Debts Recovery Tribunal.

Analysis:
1. The judgment concerns misfeasance proceedings initiated by the official liquidator against a certificate debtor and a company in liquidation. The applicant, a guarantor in Debts Recovery Tribunal proceedings, is also a respondent-director in misfeasance proceedings before the court. The issue revolves around the ownership of three properties sought to be attached by the Tribunal, with the applicant denying ownership of two properties and claiming the third belongs to his advocate.

2. The judgment delves into the conflict of jurisdiction between the Debts Recovery Tribunal and the Company Court. The applicant argues that the Tribunal should not adjudicate the property ownership issue until the court determines the same in misfeasance proceedings, citing Section 543 of the Companies Act, 1956. The applicant's position is challenged by IFCI, asserting the exclusive jurisdiction of the Tribunal in adjudicating debts owed to banks and financial institutions.

3. The court references the Supreme Court decisions in Allahabad Bank v. Canara Bank and Rajasthan Financial Corpn. v. Official Liquidator to analyze the exclusive jurisdiction of the Debts Recovery Tribunal. The Allahabad Bank case emphasizes the Tribunal's authority in adjudicating debts owed to banks and financial institutions, with no interference permitted from the Company Court. The judgment highlights the need for consultation between the official liquidator and the Tribunal.

4. The judgment concludes by directing the Debts Recovery Tribunal to determine the ownership of the properties in question according to the principles of the Code of Civil Procedure. The recovery proceedings against the applicant are stayed pending the Tribunal's decision, emphasizing the need for a proper application within a specified timeframe. The court's decision aims to resolve the jurisdictional conflict and ensure a fair adjudication of the property ownership issue.

5. Overall, the judgment provides a detailed analysis of the jurisdictional conflict between the Debts Recovery Tribunal and the Company Court, emphasizing the need for proper adjudication of property ownership in misfeasance proceedings. It navigates through relevant legal principles and precedents to reach a decision that aims to uphold fairness and clarity in the resolution of the issues at hand.