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TMI Blog2009 (3) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajagopal, Ramakrishnan and R. Ravichandran for the other Parties. JUDGMENT S. Rajeswaran, J. -- The facts are as under : 2. C. A. No. 1811 of 2005 was filed by a third party seeking for a direction directing the official liquidator to remove the security guards and hand over possession of the subject property. In the affidavit filed in support of the above application, it is stated by the third party that M/s. Deve Sugars Ltd. (in liquidation) was ordered to be wound up in C. P. No. 170 of 1995 and C. P. No. 35 of 1997 by an order dated September 16, 1999. The first respondent-official liquidator was appointed as the liquidator of the said company. The official liquidator took possession of the assets of the company situated at Harige Village, Shimoga District, Karnataka on April 28, 1999, in the presence of the Deputy Commissioner, Shimoga and Chief Manager of the State Bank of Mysore, a secured creditor of the company. 3. The State Bank of Mysore extended financial assistance to the company and secured their outstanding dues. The bank filed O. A. No. 440 of 1997 before the Debts Recovery Tribunal, Bangalore for recovery of a sum of Rs. 22,31,78,558.55. The said O. A., was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application. In the affidavit filed in support of the above application, it is stated by the President of the Sangha that the State Bank of Mysore approached this court for permission and this court in C. A. No. 1251 of 1999 permitted the bank on March 10, 2000, in O. A. No. 440 of 1997 and O. A. No. 1300 of 1997 by imposing a condition that the leave granted is subject to the condition that the official liquidator is impleaded and no coercive steps are taken against the assets of the company during or after the conclusion of the proceedings before the Tribunal. The members of the Sangha were appointed as security men by the official liquidator to protect the assets of the company with effect from August 1, 2001, on a monthly salary basis. In the mean time, the Debts Recovery Tribunal, Bangalore passed a decree in 2001 and ordered for sale by auction of the assets of the company on October 1, 2004. The workers' union objected to the sale and filed a writ petition before the High Court, Karnataka, seeking stay of the sale by auction proceedings as their salary and provident fund dues to the extent of Rs. 15 crores were due from the company. The High Court, Karnataka, by order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings before the Debts Recovery Tribunal and the writ petition filed by the Mazdoor Sangha. It is their contention that in spite of the conditional order passed by this court and the interim order passed by the High Court, Karnataka, the Recovery Officer of the Debts Recovery Tribunal, Bangalore in collusion with the State Bank of Mysore issued an official notice for sale of the properties on July 24, 2005, fixing the date of auction as August 11, 2005. They contented that the properties were sold for a meagre value of Rs. 10.25 crores. According to the impleaded second respondent, the value of the property based on Government valuation was Rs. 57 crores. They also filed a writ petition in W. P. No. 26564 of 2005 before the High Court, Karnataka, challenging the impugned sale proceedings and the same is pending. They are also taking steps for the revival of the company and an application was also filed to this effect before this court. It is their further contention that proper and necessary procedure was not followed by the Recovery Officer while selling the property in auction sale which is in the custody of the official liquidator. Therefore, the sale conducted by the Recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bts Recovery Tribunal, Bangalore without the participation and the presence of the official liquidator is vitiated. The official liquidator also received copies of the letters addressed to the CBI by the ex-shareholders/directors/promoters of the company in liquidation wherein certain allegations against the recovery officer has been made. Therefore, the official liquidator submitted that a fresh sale is to be conducted by the Debts Recovery Tribunal with the official liquidator and the sale proceeds should be deposited with this court. 11. The official liquidator also has taken out an application in C. A. No. 854 of 2006 to set aside the sale confirmed by the Debts Recovery Tribunal, to direct the third respondent Central Warehousing Corporation to remit the arrears of rent to the official liquidator and also to permit the official liquidator to sell the assets of the company in liquidation afresh. 12. C. A. No. 854 of 2006 was resisted by the first respondent-bank by filing a counter affidavit wherein they raised the question of maintainability of the application itself. According to the bank, all the legal formalities were duly complied with and the sale was confirmed in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffidavit filed in support of the above three applications, it is stated by the applicant that he preferred a claim for revival of the company and also for restructuring and arrangement of the creditors. In this connection, he filed an application in C. A. No. 1960 of 2006 for convening a meeting of the unsecured and trade creditors and the same was conducted as per the directions of this court. A report was also filed by the chairman before this court. 16. According to the applicant, the State Bank of Mysore advanced certain amounts to M/s. Tungabadra Sugars Works Ltd., and an application in O. A. No. 440 of 1997 came to be filed before the Debts Recovery Tribunal, Bangalore for recovery of a sum of Rs. 22,31,78,558.55. In the recovery proceedings in D. C. P. No. 1912 dated August 10, 2001, the land measuring an extent of 126 acres and 14 guntas was brought for sale and the property was sold to the third respondent (applicant in C. A. No. 1811 of 2005). According to him, as per the conditional order passed by this court on March 10, 2000, in C. A. Nos. 1251 to 1253 of 1999, the sale ought not to have been conducted by the Debts Recovery Tribunal. He accused that the third responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covery Tribunal and two appeals in A. O. R. No 15 of 2006 and A. O. R. No. 1 of 2007 were filed before the Debts Recovery Tribunal, challenging the order of confirmation of sale. The Debts Recovery Tribunal already heard the appeals and reserved the matters for orders. The order was about to be passed on October 24, 2007. On the same day a memo was filed informing about the stay granted in the above applications. Hence, the order was not pronounced by the presiding officer. 20. Heard Thiru T. K. Seshadri, learned senior counsel for the applicant in C. A. No. 1811 of 2005 (third respondent in C. A. Nos. 2740 to 2742 of 2007), Thiru P. S. Raman, learned senior counsel for the applicant in C. A. Nos. 2740 to 2742 of 2007, Thiru M. Jeyakumar, the assistant official liquidator for the official liquidator, learned counsel for the second respondent in C. A. No. 1811 of 2005, learned counsel for the third respondent in C. A. No. 1811 of 2005 (the fourth respondent in C. A. No. 854 of 2006), learned counsel for the third respondent in C. A. No. 854 of 2006 and learned counsel for the State Bank of Mysore (the first respondent in C. A. No. 854 of 2006 and the second respondent in C. A. Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against a debtor, of a company, only so long as there is no order of winding up ; (2)The SFCs cannot unilaterally act to realise the mortgaged properties without the consent of the official liquidator representing workmen for the pari passu charge in their favour under the proviso to section 529 of the Companies Act, 1956 ; (3)If the official liquidator does not consent, the SFCs have to move the company court for appropriate directions to the official liquidator who is the pari passu charge holder on behalf of the work men. In any event, the official liquidator cannot act without seeking directions from the company court and under its supervision." 24. In [1996] 86 Comp. Cas. 255 ; [1996] 4 SCC 165 (Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies), the hon'ble Supreme Court while dealing with sections 446, 529(1) and (2), 529A and 537 of the Companies Act, 1956, observed as under (page 259) : "A combined reading of the aforesaid provisions leads to the following results : (i)A winding up court has jurisdiction, inter alia, to entertain or dispose of any suit or proceeding by or against the company, even if such suit or proceeding had been inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar creditors, it may be that the company court feels that to take care of the interest of other secured creditors, either the relief of leave does not deserve to be granted or that the proceeding is required to be transferred to it for disposal. It may be pointed out that sections 529 and 529A of the Act do contain provisions in so far as the priority of secured creditors' claims is concerned. Of course, the company court would not transfer the proceeding to it merely because of its convenience ignoring the difficulties which may have to be faced by the secured creditor, who may be at a place far away from the seat of the company court. The need to protect the company from unnecessary litigation and cost have, however, to be borne in mind by the company court. We are, therefore, of the view that the approach to be adopted in this regard by the company court does not deserve to be put in a straight jacket formula. The discretion to be exercised in this regard has to depend on the facts and circumstances of each case. While exercising this power we have no doubt that the company court would also bear in mind the rationale behind the enactment of the Recovery of Debts Due to Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany conducted without leave be held to be void. It is not necessary in this case to further comment upon, what are the powers of a liquidator, in voluntary winding up under the supervision of the court, relating to sale of property belonging to the company." 27. In [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406 (Allahabad Bank v. Canara Bank), the hon'ble Supreme Court held as under (page 76) : "In our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to banks or financial institutions. Once the Tribunal passes an order that the debt is due, the Tribunal has to issue a certificate under section 19(22) (formerly under section 19(7)) to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the word 'recover' in section 17 of the Act. It appears to us that basically the Tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate under section 19(22). Under section 18, the jurisdiction of any other court or authority which would otherwise have had jurisdiction but for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner. There is one more reason as to why it must be held that the jurisdiction of the Recovery Officer is exclusive. The Tiwari Committee which recommended the constitution of a Special Tribunal in 1981 for recovery of debts due to banks and financial institutions stated in its report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the adjudication of the liability but also in regard to the execution proceedings. It stated in annexure XI of its report that all 'execution proceedings' must be taken up only by the Special Tribunal under the Act. In our opinion, in view of the special procedure for recovery prescribed in Chapter V of the Act, and section 34, execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer. Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other court or authority much less the civil court or the company court can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine under that Act. It is not disputed that the Tribunal has jurisdiction under the Act to entertain and decide matters raised in the petition filed by the Corporation under section 15 of the Life Insurance Corporation Act. It must follow that the consequential provisions of sub-section (1) of section 446 of the Companies Act will not operate on the proceedings which may be pending before the Tribunal or which may be sought to be commenced before it (emphasis1 supplied) Just as the company court was held incompetent to stay or transfer and decide the claims made before the Life Insurance Corporation Tribunal because the company court could not decide the claims before the Life Insurance Corporation Tribunal, the said court cannot, in our view, decide the claims of banks and financial institutions. On the same parity of reasoning as in Damji Valji Shah's case [1965] 35 Comp. Cas. 755 (SC), there is no need for the appellant to seek leave of the company court to proceed with its claim before the Debt Recovery Tribunal or in respect of the execution proceedings before the Recovery Officer. Nor can they be transferred to the company court. It may also be noticed that in the Life Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. [1993] 78 Comp. Cas. 803 ; [1993] 2 SCC 144, where there was inconsistency between two special laws, the State Financial Corporations Act, 1951, and the Sick Industrial Companies (Special Provisions) Act, 1985. The latter contained section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi J. that both special statutes contained non obstante clauses but that the '1985 Act being a subsequent enactment, the non obstante clause therein would ordinarily prevail over the non obstante clause in section 46B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 statute is a special one'. Therefore, in view of section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts . . . The decision of the Rajasthan High Court in Rajasthan Finance Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the company within the meaning of section 171 of the same Act, the leave of the court is necessary and if no such leave is obtained, the remedy cannot be availed by the secured creditor. 29. In [2001] 106 Comp. Cas. 388 (Pennar Paterson Ltd. v. State Bank of Hyderabad), a Division Bench of the Andhra Pradesh High Court observed as under (page 352) : "It is now a well-settled principle of law that provisions of two statutes, when they appear to be in conflict with each other, must be read harmoniously and efforts should be made to give effect to the provisions of both the statutes . . . It is further a well-settled principle of law that when an order is passed by one court, the doctrine of amity or comity of reasons demands that no order contrary thereto or inconsistent therewith should be passed . . Although we do not intend to lay down a law to the effect that the Tribunal does not have plenary jurisdiction, as the said question does not arise for our consideration or assuming that the Tribunal has plenary jurisdiction having regard to the rule of exclusivity as envisaged by the apex court, the mode and manner laid down for recovery of the debts due to banking or financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of the case from the Tribunal to the company court and also that when there are two special laws, the provision in the later special Act has to prevail, and in view of the provision in section 34 of the RDB Act, it was held that the provision in the RDB Act would override the corresponding provisions in the Companies Act to the extent there is inconsistency between the two Acts. In respect of monies realised under the RDB Act, the question of priorities among the banks and financial institutions and other creditors can be decided only by the Tribunal under the RDB Act and in accordance with section 19(19) read with section 529A of the Companies Act and in no other manner. In view of this position, the apex court also held in categoric terms that the provisions of the RDB Act on the above aspects being inconsistent with the provisions of the Companies Act, do prevail over the provisions of the Companies Act during the pendency of the winding up petition against the debtor-company and also after a winding up order is passed. No leave of the company court, it was held, is necessary for initiating or continuing the proceedings under the RDB Act, 1993. The question of distribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal claiming priority over all creditors by virtue of section 529A(1) (b) of the Act. At the same time, his position would not improve from what it was originally and his priority would not extend to his entire unrealised sums which might be in excess of his security. The question whether the amount realised by a bank through the Tribunal can be straightaway released in its favour was also considered in the aforesaid decision. It was found that even if section 19(19) read with section 529A of the Companies Act does not help a secured creditor who has not approached the Tribunal or court for realisation of its money, those provisions can still have an impact in the matter. The workmen's dues have priority over all other creditors, secured or unsecured in view of section 529A(1)(a). The said priority will have to be protected. No secured or unsecured creditor including banks or financial institutions will have a right to be paid before the workmen's dues are paid." 31. In an unreported judgment of this court made in C. A. Nos. 10, 116, 701, 193 and 194 of 2002 in C. P. No. 39 of 1994 a learned single judge of this court observed as under : "It is clear from the above discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the applicant therein (ICICI Ltd.) to approach the Debts Recovery Tribunal, Bombay for necessary orders including the permission to sell the schedule mentioned properties through the Receiver appointed by the Debts Recovery Tribunal . . . In the light of what is stated above, I am of the view that the decision of the Supreme Court in the case of Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 ; [2000] 2 Comp. LJ 170 , the sale proceedings with regard to the assets of the company in liquidation will have to be continued only by the Debts Recovery Tribunal and not by the official liquidator and the applicant official liquidator will be consulted by the Recovery Officer while finalising the secured assets and distribution of the sale proceeds. I also accept the claim that the second respondent--ICICF's case under section 529 of the Companies Act in order to stand out side the winding up to realise its security. Apart from this, section 19(19) of the RDB Act, permits distribution of sale proceeds to secured creditors in accordance with section 529A, who stand outside the winding up proceedings." 32. In [2005] 127 Comp. Cas. 853 ; [2005] 64 SCL 429 (Divya Chemicals Ltd., In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being under the law of insolvency with respect to the estates of persons adjudged insolvent : Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security,-- (a)the liquidator shall be entitled to represent the workmen and enforce such charge ; (b)any amount realised by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of work men's dues ; and (c)so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of section 529A. (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the workmen's due or the debts due to the secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues shall have priority over all other debts. Once the workmen's portion is worked out in terms of proviso (c) to sub-section (1) of section 529, indisputably the claim of the workmen as also the secured creditors will have to be paid in terms of section 529A. This court in Allahabad Bank [2000] 101 Comp. Cas. 64, 93 (SC) held : The learned Attorney General on the other hand submitted that the first part of clause (c) of the proviso to section 529(1) is to be read along with the words "or the amount of the workmen's portion in his security, whichever is less". In other words, the priority of the secured creditor is only to the extent that any part of the said security is lost in favour of the workmen consequent to demands made by the liquidator under clauses (a), (b ) or the said proviso to section 529(1). No such situation has arisen so far. It is contended that where a secured creditor keeps himself outside as stated in the proviso to section 529(1) and seeks to recover his dues outside the company co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 Comp. Cas. 156 ; [2005] 6 Comp. LJ 463 (V.K. Seshasayee v. Official Liquidator) , this court held as under (page 161) : "In this context, the provisions of section 19(19) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and section 529A of the Companies Act are referable. While considering both the provisions, the Supreme Court in Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406, has held that even the priorities among the various creditors can be decided only by the Debts Recovery Tribunal in accordance with the provisions of section 19(19) of the Recovery of Debts Due to Banks and Financial Institutions Act, read with section 529A of the Companies Act . . . The Supreme Court in a recent decision in Andhra Bank v. Official Liquidator [2005] 124 Comp. Cas. 453 ; [2005] 4 Comp. LJ 33, has explained the above judgment by holding that the language of section 529A is also clear and unequivocal in terms whereof the workmen's dues or the debts due to the secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues shall have priority over all other debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards associating the official liquidator with the sale, the fixing of the upset price or the reserve price, confirmation of the sale, holding of the sale proceeds and distribution thereof among the creditors in terms of sections 529A and 529 of the Companies Act." 36. In the unreported judgment dated August 10, 2007, made in W. A. (MD). Nos. 145 and 146 of 2007--since reported in (K. Chidambara Manickam v. Shakeena [2009] 152 Comp. Cas. 196) a Division Bench of this court held as under (page 207) : "At the outset, it is to be stated that nothing survives in the notice dated November 14, 2005, to adjudicate, as on the date of filing of the writ petitions, the entire proceedings under section 13(4) of the Act have come to an end and become final, by issuance of the sale certificate under sub-rule (7) of rule 9 of the Rules on January 6, 2006. The writ petitions have been prepared and signed by the parties only on January 19, 2006. In such circumstances, the proper course for the borrowers would be to prefer an appeal before the Appellate Tribunal against the order of the Tribunal dated January 10, 2006, under the provisions of the SARFAESI Act. The borrowers, however, have appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enugopal Chetty [1994] 1 LW 491 (Mad.) and the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, squarely applies to the case on hand and we, therefore, have no incertitude to hold that the sale which took place on December 19, 2005, has become final when it is confirmed in favour of the auction purchaser and the auction purchaser is vested with rights in relation to the property purchased in auction on issuance of the sale certificate and he has become the absolute owner of the property. Further, as held by the Division Bench of this court in S. Arumugham v. C.K. Venugopal Chetty and the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, the sale certificate issued in favour of the appellant does not require any registration in view of section 17(2)(xii) of the Registration Act as the same has been granted pursuant to the sale held in public auction by the authorised officer under the SARFAESI Act. The finding of the learned single judge that the sale is not complete without registration of the sale certificate, therefore, is not sustainable in law and the same is liable to be set aside . . . In view of our finding on this point, we h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in [2000] 2 LW 216 (U. Nilan v. Kannayyan), unless and until the appeal filed by the respondent-company is disposed of before the appellate forum, the question of treating the sale as absolute does not arise. As the apex court pointed out, the appeal is a continuation of the proceedings initiated in the lower court. The apex court referring to Order 21, rule 92 of the CPC held as follows : 'The entire legal position was reviewed by the court in Maganlal v. Jaiswal Industries Neemach [1989] 3 SCR 696 and it was held that the sale does not become absolute or irrevocable merely on passing an order confirming the sale under Order 21, rule 92 but it would attain finality on the disposal of the appeal, if any, filed against an order refusing to set aside the sale' . . . In the circumstances, the application preferred by the auction purchaser in C. A. No. 1412 of 2006 is hereby rejected, reserving however, the liberty to move this court as and when the Appeal No. 6 of 2006 is disposed of. The order of stay granted shall continue until further orders. C. A. No. 1411 of 2006 to implead the auction purchaser is ordered. As far as C. A. No. 1167 of 2006 is concerned, the official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the RDB Act is exclusive, we cannot agree with the view taken by the High Court merely because the appellant had given his consent to the transfer of the execution petition to the Tribunal. It is well-settled in law that consent cannot confer jurisdiction . . . Learned counsel for the respondent-bank relied on section 446(1) of the Companies Act which states that when a winding up order is passed or the official liquidator is appointed as a provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with against the company, except by leave of the court and subject to such terms as the court may impose. Learned counsel for respondent-bank relied on sub-section (3) of section 446 of the Companies Act, 1956, which states : '(3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court.' In this connection, it may be mentioned that section 446(3) of the Companies Act was om ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idator has a right to determine the dues of the workmen as provided under section 529A of the Companies Act. Therefore, as and when the official liquidator determines the dues, if any, payable to the workmen, it shall have a right to seek apportionment of the sale proceeds of the assets of the company from respondent No. 1. Thus, it is held that the financial institution possesses right to sell the property in terms of the provisions of the Act, thus, the issuance of the sale certificate on February 9, 2005, after its confirmation by the Recovery Officer on January 12, 2005, cannot be said to be illegal or void." 40. In [2006] 134 Comp. Cas. 237 (Times Guarantee Ltd. v. Branch Manager, Industrial Development Bank of India), this court observed as under (page 242) : "I heard learned counsel. The point on which the writ petition was filed by the unsecured creditor, who filed company petition and thereupon taking the matter to the Division Bench in O. S. A and getting the order of winding up setting aside on the false promise that the amount would be paid and thereby getting time and even thereafter failed to perform the promise and thereafter the order of the company court was got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no need for the appellant to seek leave of the company court to proceed with its claim before the Debts Recovery Tribunal or in respect of the execution proceedings before the Recovery Officer. Nor can they be transferred to the company court.' The Supreme Court further strengthened their view by pointing out as follows (page 80) : 'It may also be noticed that in the LIC Act of 1956, there was no provision like section 34 of the RDB Act giving overriding effect to the provisions of the LIC Act. Still this court upheld the exclusive jurisdiction of the LIC Tribunal observing as follows (page 763) : "the provisions of the Special Act, i.e., the LIC Act will override the provisions of the general Act, the Companies Act which is an Act relating to Companies in general." We are of the view that the appellant's case under the RDB Act-- with an additional section like section 34--is on a stronger footing for holding that leave of the company court is not necessary under section 537 or under section 446 for the same reasons. If the jurisdiction of the Tribunal is exclusive, the company court cannot also use its powers under section 442 against the Tribunal/Recovery Officer. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would repay the entire amount within 7 days on the conclusion of these writ petitions. Hence, he cannot be faulted for the same." 41. From the above judgments, the following legal principles are settled by the Supreme Court and the High Courts : (1)A Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, is entitled to order the sale and to sell the properties of the debtor even of a company in liquidation through its recovery officer, but, only after notice to the official liquidator or the liquidator appointed by the company court and after hearing him. (2)Even where a winding up petition is pending (or) a winding up order has been passed against the debtor company, the adjudication of law and execution of the certificate in respect of the debt payable to banks and financial institutions are respectively within the exclusive jurisdiction of the Debts Recovery Tribunal and the Recovery Officer and in such a case, the company court's jurisdiction under sections 442, 537 and 446 of the Companies Act, 1956, stands ousted. (3)No leave of the company court is necessary for initiating proceedings under the Recovery of Debts Due to Banks and Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terson Ltd. v. State Bank of Hydera bad), is not good law in view of the judgment of the hon'ble Supreme Court in [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406 (Allahabad Bank v. Canara Bank) . (16) The sale proceedings with regard to the assets of the company in liquidation will have to be continued only by the Debts Recovery Tribunal and not by the official liquidator. (17)The official liquidator is to be consulted by the Recovery Officer while finalising the secured assets and distribution of the sale proceeds. (18)In a case where the Recovery Certificate is not yet issued by the Debts Recovery Tribunal, but, proceedings for recovery of debts are pending before the Debts Recovery Tribunal, the official liquidator cannot proceed and dispose of the immovable assets which are secured in favour of the banks and financial institutions. (19)Once the Recovery Certificate is issued by the Debts Recovery Tribunal in favour of the banks and financial institutions, who are secured creditors, then sale of immovable properties cannot be carried out by the official liquidator in winding up proceedings and such sale is to be con ducted by the Recovery Officer in execution of the recovery cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. (29)All that the auction purchaser gets under the sale by the Debts Recovery Tribunal is only a symbolic delivery and the question of actual delivery has to be only from the company court which is the custodian of the property of the company in liquidation. (30)Unless and until there is a specific order by the company court to put the auction purchaser in possession, the question of the purchaser entering into the property and taking possession on the strength of the sale does not arise. (31)Unless and until the appeal filed is disposed of before the forum, the question of treating the sale as absolute does not arise. (32)Till the disposal of the appeal, the proceedings for sale need not be taken up to be finally decided. (33)Section 446(3) of the Companies Act was omitted by the Companies (Second Amendment) Act, 2002 and as a result, the High Court has no power to transfer the execution petition to the Debts Recovery Tribunal. (34)Section 446 has no application, once the RDB Act applies because section 34 expressly gives over-riding effect to the provisions of the 1956 Act. (35)The RDB Act, 1993, is a special law and hence will prevail over the general law, in the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mainly contended by learned counsel appearing for the applicant in the above company applications that the leave granted by this court on March 10, 2000 in C. A. Nos. 1251 to 1253 of 1999 is a conditional leave subject to the condition that the official liquidator is impleaded and no coercive steps are taken against the assets of the company during or after the conclusion of the proceedings before the Tribunal. This order, according to learned senior counsel is neither cancelled nor modified and therefore, the sale made on August 11, 2005, will not bind the company in liquidation or the official liquidator. 46. I am unable to accept this submission for the reason that now the law has been settled by the hon'ble Supreme Court that the secured creditor need not get any leave from the company court to proceed with the sale proceedings of the assets of the company in liquidation. What is mandatory is that the official liquidator should be a party and notice should be issued to him. This was undoubtedly complied with by the secured creditor and the Debts Recovery Tribunal in this case and in such circumstances it cannot be said that the sale is not binding on the company in liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that M/s. Tapti Machineries P. Ltd., has taken over the assets and liabilities of M/s. Tungabadra Sugar Works Ltd. When Tapti Machineries P. Ltd., had defaulted in re-payment of its dues, recovery proceedings were initiated by the State Bank of Mysore before the Debts Recovery Tribunal by filing O. A. No. 440 of 1997 for recovery of Rs. 22.31 crores. The High Court adverted to the fact that the official liquidator was heard and he also filed his objections. The High Court was of the view that the objections submitted by the official liquidator and the workers' union were rejected by the Tribunal in a casual and lackadaisical manner. But, the High Court did not entertain the writ petition as there is an alternative and efficacious remedy under the RDB Act and therefore, the High Court disposed of both the writ petitions with a direction to avail of the alternative remedy within a period of six weeks. Since some adverse remarks were made by the learned single judge of the High Court, the auction purchaser filed an appeal in W. A. No. 2051 of 2006 and the Division Bench, on February 23, 2007, disposed of the appeal by making it clear that the appellate authority is required to exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the property. The decision of the Division Bench of this court dated August 10, 2007, made in W. A. Nos. 145 and 146 of 2007--since reported in (K. Chidambara Manickam v. Shakeena [2009] 152 Comp. Cas. 196), was very much relied on in this regard. 54. In the above judgment, the Division Bench held that the sale of the secured asset in public auction as per section 13(4) of the SARFAESI Act which ended in issuance of a sale certificate is a complete and absolute sale for the purposes of the Act. If that being so, even in the present case, it is to be considered that after the sale was confirmed in favour of the auction purchaser, the sale is a complete and absolute one. It is true that challenging the sale, an appeal has been filed and the same is pending before the Debts Recovery Tribunal (DRT). But merely filing an appeal without obtaining any order of stay of further proceedings will not operate against the interest of the auction purchaser in taking possession of the property. I am of the considered view that filing an appeal itself will not automatically stay all further proceedings. A petition for stay should be filed and orders should be obtained staying all further ..... X X X X Extracts X X X X X X X X Extracts X X X X
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