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TMI Blog2010 (7) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... editor. It has been held that it shall be necessary for the Tribunal to decide the question of priority by keeping in mind the principles underlying section 73 of the Code of Civil Procedure. It has been further held that under section 73 of the Code of Civil Procedure, sharing of the sale proceeds is permissible only if the person seeking such share has obtained a decree or an order of adjudication from the Tribunal and also complied with other conditions laid down under section 73 of the Code of Civil Procedure. The contention of Shri Kansal is wholly misconceived. The discussion in the aforesaid paras is in respect of the facts of the case. Allahabad Bank, as an unsecured creditor, has sold property of the company on the strength of a money decree obtained from the DRT. The question of appropriation raised was in respect of the said sale consideration. Therefore, the contention that the Tribunal has jurisdiction only in respect of the money realised, is untenable. The applicant is a secured creditor, who has opted to stand outside the winding up. The secured assets have been put to sale by the PSIDC including the assets secured in favour of the applicant. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e defendants therein jointly and severally along with interest at 19.5 per cent per annum with quarterly rests from the date of filing of the suit till its realisation. A finding was returned that respondent No. 2 has sold the entire unit including the assets, such as, plant and machinery though not entitled to do so. The appeals against the aforesaid orders passed by the DRT were dismissed on 18-8-2009, but the appeals filed by the guarantor were allowed partly. The Debts Recovery Appellate Tribunal (for short "the DRAT") has maintained the decree for recovery of the amount of Rs. 1,41,83,391.33 with pendente lite and future interest at 9 per cent per annum, till actual recovery from PSIDC with costs reckoned on the aforesaid amount. 3. It is also pleaded that in similar circumstances, the other secured creditors, i.e., State Bank of India and State Bank of Patiala, were also granted permission to execute the recovery certificates vide order dated 30-1-2004, passed by this court, a copy of which has been appended as annexure P4, with the following directions : "(i)by virtue of the provisions of section 171 of the Indian Contract Act, 1872, the applicant-banks have lien over th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t disputed that PSIDC has surplus of Rs. 21,26,15,094.78. 7. Respondent Nos. 5 to 8 in their reply have referred to a communication made by the consortium of banks including the applicant on 2-8-1997, in view of the advertisement brought out by the PSIDC for sale of factory, land, building, plant and machinery, to the effect that consortium banks are secured creditors inasmuch as their charge on the company's fixed assets is fully registered with the Registrar of Companies under section 125 of the Companies Act and that consortium banks have prior charge on the sale proceeds/lease money. It is also pointed out that PSIDC has sold the property on 26-9-1997, i.e., 14 days prior to the winding up order passed on 9-10-1997 and that the official liquidator has filed C. P. No. 89 of 2002 seeking direction to the PSIDC to return the entire sale consideration of Rs. 45 crores along with interest with effect from 9-10-1997, till the date of payment. It is also pointed out that a communication dated 11-11-1997, was written by the banks to the official liquidator to the effect that the consortium of banks be kept out of the winding up proceedings after sale of assets. It is, thus, sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -9-1996, in respect of payment of dues to the growers of sugar cane and utilisation of nearly 22 lakhs quintals of sugar cane standing in the fields. This court constituted a Committee for sale of sugar molasses (bagasse) with a direction that the expenses to be borne by the concerned bank-PSIDC and the company subject to further directions as may be issued. Subsequently, an order of winding up was passed on 9-10-1997, allowing the petition for winding up with the following observations : "Mr. J. S. Narang, senior advocate and P. D. Mehta, advocate, have appeared on behalf of the consortium of State Bank of India, State Bank of Patiala and Canara Bank. The only objection raised by Mr. Narang to the winding up of the respondent-company is that consortium of banks being the secured creditors of the company, the securities charged to the said banks cannot be sold or disposed of in any manner, interfered with by the official liquidator if the company is ordered to be wound up and the official liquidator is appointed by this court. After hearing counsel and going through the record, prayer made in this petition is allowed and the respondent-company is ordered to be wound up. Order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate amount is lying deposited with the Hon'ble High Court, the applicant-bank shall be at liberty to take steps in accordance with law to lay hands on the same too. It is also held that the bank is a secured creditor as its charge has been duly registered with the Registrar of Companies, as is evident from exhibit A5, the charge certificate." Such finding has been affirmed in appeal by the DRAT, when it was held by the Debts Recovery Appellate Tribunal, to the following effect : ". . . the inventory/seizure memo prepared by PSIDC at the time of takeover was even signed by the officials of the three banks. The presence of the three banks at the time of takeover of the fixed assets including plant and machinery of the borrower company by PSIDC on July 17, 1996, is also an undeniable fact. Plant and machinery and accessories were hypothecated as first charge in favour of three banks, viz., Canara Bank, State Bank of India, State Bank of Patiala, whereas stocks of finished goods, raw material, by-products and allied products were pledged/hypothecated in favour of State Bank of Patiala and State Bank of India. Obviously, the three banks consented and acquiesced for an illegal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the certificate under section 25 etc., the provisions of the RDB Act, 1993, confer exclusive jurisdiction in the Tribunal and the Recovery Officer in respect of debts payable to banks and financial institutions and there can be no interference by the company court under section 442 read with section 537 or under section 446 of the Companies Act, 1956. In respect of the 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. The provisions of the RDB Act, 1993, are to the above extent inconsistent with the provisions of the Companies Act, 1956, and the latter Act has to yield to the provisions of the former. This position holds good 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 is necessary for initiating or continuing the proceedings under the RDB Act, 1993. Point Nos. 2 and 3 are decided accordingly in favour of the appellant and against the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made to paragraphs 54 and 56 of the judgment. 21. However, I find that the contention of Shri Kansal is wholly misconceived. The discussion in the aforesaid paras is in respect of the facts of the case. Allahabad Bank, as an unsecured creditor, has sold property of the company on the strength of a money decree obtained from the DRT. The question of appropriation raised was in respect of the said sale consideration. Therefore, the contention that the Tribunal has jurisdiction only in respect of the money realised, is untenable. Question No. 4 22. The hon'ble Supreme Court in Allahabad Bank's case (supra), has also examined that the secured creditors fall under two categories : (i) those who go before the company court, and (ii) those who opt to stand outside the winding up to realise their security. In respect of such secured creditor, the following findings are relevant (page 92) : "The second class of secured creditors referred to above are those who come under section 529A(1)(b) read with proviso (c) to section 529(1). These are those who opt to stand outside the winding up to realise their security. Inasmuch as section 19(19) permits distribution to secured creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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