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2016 (7) TMI 475 - HC - Companies LawExecution of a recovery certificate issued by the Debt Recovery Tribunal under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Held that - Having held that this Court has no jurisdiction to entertain a challenge to the order passed by the Recovery Officer rejecting the objections to an auction sale and confirming the bid of the highest bidder at an auction held by him following a recovery certificate issued by the DRT resulting from an adjudication of an application under Section 19 of the Act of 1993 filed by the secured creditor or seek to appropriate the Recovery Officer s power to confirm a bid at an auction sale held by the Recovery Officer, even on permission being granted by a Company Court to a secured creditor to stay outside winding up in respect of a company in liquidation having suffered a certificate of recovery under the Act of 1993, the inevitable consequence will be to remit the applicants before this Court M/s. Bhawani Stone Crushers Pvt. Ltd. as also the Commercial Taxes Department to their remedy of appeal under Section 30 of the Act of 1993 against the order dated 11.12.2015, passed by the Recovery Officer, DRTJ. In the facts of the case, the delay in filing the appeals for the period during which the objectors have been before this Court i.e. from the date of filing of applications for impleadment and counter application till the date of this order would stand excluded a la Section 14 of the Limitation Act. The appeals be filed within a period of two weeks from today. In the event of appeals being so filed and held to be within limitation or limitation being otherwise condoned under Section 5 of the Limitation Act, 1963, the Appellate Authority is directed to dispose them of within a period of three months of their presentation. The claim of the applicants-M/s. SPC Infrastructure Ltd. and Delhi Tax-Mac Traders to possession of the properties purchased at the auction of 19.01.2015 would abide the decision in the appeals. All applications stand disposed of accordingly.
Issues Involved:
1. Jurisdiction of Company Court in execution of recovery certificate issued by Debt Recovery Tribunal (DRT). 2. Confirmation and supervision of auction sales by the Recovery Officer, DRT. 3. Claims of the Commercial Taxes Department regarding unpaid dues. 4. Validity of auction sale and objections raised by counter-applicants. 5. Jurisdictional conflict between Company Court and DRT in matters of recovery and adjudication. Issue-wise Detailed Analysis: 1. Jurisdiction of Company Court in execution of recovery certificate issued by Debt Recovery Tribunal (DRT): The core issue was whether the Company Court has jurisdiction over the execution of a recovery certificate issued by the DRT under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The judgment clarified that the DRT has exclusive jurisdiction in matters relating to the recovery of debts by secured creditors, even when the debtor company is under liquidation. The Company Court's role is limited to ensuring the Official Liquidator's participation in the sale process to protect the interests of the workers and other stakeholders. The judgment referenced the Supreme Court's rulings in *Allahabad Bank vs. Canara Bank* and *Official Liquidator, Uttar Pradesh & Uttarakhand vs. Allahabad Bank*, which established that the DRT's jurisdiction is exclusive and overriding. 2. Confirmation and supervision of auction sales by the Recovery Officer, DRT: The judgment addressed the confirmation of the auction sale conducted by the Recovery Officer, DRTJ. The secured creditor, IFCI Ltd., had sought permission from the Company Court to stay outside the winding-up proceedings and sell the mortgaged properties. The Company Court granted this permission, stipulating that the sale would be subject to its confirmation. However, subsequent orders by the Company Court on 18.09.2015 and 04.12.2015 directed the Recovery Officer to decide on the confirmation of the sale and objections thereto. The Court held that the Recovery Officer's confirmation of the auction sale on 11.12.2015 was valid and within jurisdiction, as it complied with the Court's directions. 3. Claims of the Commercial Taxes Department regarding unpaid dues: The Commercial Taxes Department claimed a significant amount in unpaid sales tax/VAT dues from the company in liquidation. They argued that their claim should have priority over other claims, including those of secured creditors, based on Section 47 of the Rajasthan Value Added Tax Act, 2003, and Section 50 of the Rajasthan Sales Tax Act, 1994. The Court acknowledged these claims but reiterated that the DRT has exclusive jurisdiction over the execution of recovery certificates. The Commercial Taxes Department was directed to pursue their claims through the appropriate appellate mechanisms under the Act of 1993. 4. Validity of auction sale and objections raised by counter-applicants: Counter-applicants, including M/s. Bhawani Stone Crushers Pvt. Ltd., challenged the validity of the auction sale, alleging cartelization and inadequate bid amounts. They cited the Supreme Court's judgment in *M.V. Janardhan Reddy vs. Vijaya Bank & Ors.* to argue that the Recovery Officer lacked jurisdiction to confirm the sale. However, the Court distinguished the facts of the present case from *M.V. Janardhan Reddy*, noting that the Company Court had permitted the Recovery Officer to confirm the sale. The objections to the auction sale were dismissed, and the counter-applicants were directed to pursue their remedies through appeals under the Act of 1993. 5. Jurisdictional conflict between Company Court and DRT in matters of recovery and adjudication: The judgment underscored the exclusive jurisdiction of the DRT in matters of recovery and adjudication of debts due to banks and financial institutions. It reiterated that the Company Court cannot interfere with the DRT's proceedings or execution of recovery certificates. The Court emphasized that any aggrieved party, including the Official Liquidator, must seek remedies through the appellate mechanisms provided under the Act of 1993, rather than approaching the Company Court. Conclusion: The applications challenging the Recovery Officer's order dated 11.12.2015 were dismissed as misdirected and not maintainable. The Court directed the applicants to pursue their appeals under Section 30 of the Act of 1993. The judgment reaffirmed the exclusive jurisdiction of the DRT in recovery proceedings and clarified the limited role of the Company Court in such matters. The security amounts deposited by the applicants were ordered to be refunded, acknowledging that their applications were not wholly without legal foundation.
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