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TMI Blog2013 (3) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... only one remedy, i.e., to challenge the order passed by the Recovery Officer before the DRT. Be it noted, an order passed under Section 30 of the RDB Act by the DRT is appealable. Thus, we are inclined to conclude and hold that the Official Liquidator can only take recourse to the mode of appeal and further appeal under the RDB Act and not approach the Company Court to set aside the auction or confirmation of sale when a sale has been confirmed by the Recovery Officer under the RDB Act. Taking notice of the decision in M.V. Janardhan Reddy (2008 (5) TMI 401 - SUPREME COURT OF INDIA) wherein the sale was aside by the Company Judge. It may be stated here that the Company Court had imposed a condition that the permission of the Company Court shall be obtained before the sale of the properties, immoveable or moveable, is confirmed or finalized. On the aforesaid basis, this Court opined that when the bank was permitted to go ahead with the proposed sale of the assets of the company under liquidation by way of auction but such sale was subject to confirmation by the Company Court and all the parties were aware about the condition as to confirmation of sale by the Company Court, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was filed before the learned Company Judge in the High Court of Judicature at Allahabad who, vide order dated 26.7.2000, had passed an order for winding up of the company, as a consequence of which the Official Liquidator had taken over the possession of the assets of the company on 24.7.2002. After receipt of the Recovery Certificate, the Recovery Officer attached the immoveable properties of the wound-up company by order dated 29.8.2002. The moveable properties of the company were attached as per order dated 23.12.2003. At this juncture, the Allahabad Bank filed an application before the Company Court for impleading it as a necessary party and protect its rights getting it out of the winding up proceedings. A prayer was made before the Company Court to grant permission to proceed with the sale of the attached properties by the Recovery Officer, Debt Recovery Tribunal (DRT). The learned Company Judge, on 13.2.2004, granted permission for proceeding with the attachment and sale of the assets for recovery of the dues under the RDB Act. It is worth stating here that no condition was imposed. 4. After auction and confirmation of sale by the DRT, the auction-purchaser filed an appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth that the Company Court had no jurisdiction to set aside the sale held by the Recovery Officer under the RDB Act. The said submission of the Bank was resisted principally on the ground that it is the duty of the Official Liquidator and the Company Court to watch the best interest of the company and in exercise of such power of supervision, if there is any irregularity in conducting the auction for obtaining adequate price, the same is liable to be lancinated by the Company Court. The Division Bench referred to the earlier orders passed by the Company Court, the provisions of the RDB Act, grant of permission by the Company Court to the Allahabad Bank to remain outside the winding up proceeding to realize the debt of the appellant by associating itself in the recovery proceeding in accordance with the RDB Act, the direction issued to the Official Liquidator to give access to the Recovery Officer to proceed with the recovery of legal and valid dues of the Bank and the non-imposition of any condition that the sale required prior approval of the learned Company Judge and, heavily relying on the decisions rendered in Allahabad Bank v. Canara Bank [2000] 4 SCC 406 and Rajasthan State F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds in unproductive assets, the value of which deteriorates with the passage of time. Reference has been made to the "Tiwari Committee Report" which had suggested for setting up of special tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. 10. The purpose of the RDB Act, as is evincible, is to provide for establishment of tribunals and Appellate Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto. Section 17 of the RDB Act deals with jurisdiction, powers and authority of the tribunals. It confers jurisdiction on the tribunal to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions. It also states about the powers of the Appellate Tribunal. Section 18 creates a bar of jurisdiction stating that no court or other authority shall have, or be entitled to exercise any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) relating to the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being pertinent, is set out hereinbelow: - "34. Act to have over-riding effect. (1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. (2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984), the Sick Industrial Companies (special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)." We have referred to the Objects and Reasons and the relevant provisions of the RDB Act to highlight that it is a comprehensive Code dealing with all the facets pertaining to adjudication, appeal and realization of the dues payable to the banks and financial institutions. 12. Presently, we shall advert to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. No dual jurisdiction at different stages are contemplated." [Emphasis supplied] 14. While dealing with the issue whether the RDB Act overrides the provisions of Sections 442, 446 and 537 of the 1956 Act, after analyzing the said provisions and delving into the concept of leave and control by the Company Court, the learned Judges relied on the pronouncement in Damji Valji Shah v. LIC of India AIR 1966 SC 135 and came to hold that there is no need for the appellant bank to seek leave of the Company Court to proceed with the claim before the DRT or in respect of the execution proceedings before the Recovery Officer. It was also categorically held that the said litigation cannot be transferred to the Company Court. In the ultimate eventuate, the bench ruled that in view of Section 34 of the RDB Act, the tribunal has exclusive jurisdiction and, hence, the Company Court cannot use its powers under Section 442 of the 1956 Act against the tribunal/Recovery Officer and, therefore, Sections 442, 446 and 537 of the 1956 Act could not be applied against the tribunal. Be it noted, emphasis was laid on speed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bly an unsecured creditor and, accordingly, the larger Bench opined that the finding of this Court in Allahabad Bank's case to the aforesaid extent did not lay down the correct law. The said exposition of law has further been reiterated in Jitendra Nath Singh v. Official Liquidator and others [2013] 1 SCC 462. We have referred to the aforesaid decisions only to highlight that this part of the judgment in Allahabad Bank's case has been overruled. 16. In International Coach Builders Ltd. v. Karnataka State Financial Corpn. [2003] 10 SCC 482, the question arose whether there was any conflict between the State Financial Corporation Act, 1951 and the Companies Act, 1956 and, in that context, the learned Judges relied on the decision in A.P. State Financial Corpn. v. Official Liquidator [2000] 7 SCC 291 and came to hold that there is no conflict between the provisions of the SFC Act and the 1956 Act and even the rights under Section 29 of the SFC Act are not intended to operate in the situation of winding-up of a company. It is further opined that even assuming that there is a conflict, the amendments made in Sections 529 and 529-A of the 1956 Act would override and control the rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the creditor concerned is to approach the Company Court for appropriate directions regarding the realization of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-in-liquidation." 18. From the aforesaid verdict, it is vivid that the larger Bench approved the law laid down in Allahabad Bank (supra). In fact, it is noticeable that the larger Bench has observed that in Allahabad Bank's case, a view has been taken that the RDB Act being a subsequent legislation and being a special law would prevail over the general law, the 1956 Act, but the said argument is not available as far as the SFC Act is concerned. 19. From the aforesaid authorities, it clearly emerges that the sale has to be conducted by the DRT with the association of the Official Liquidator. We may hasten to clarify that as the present controversy only relates to the sale, we are not going to say anything with regard to the distribution. However, it is noticeable that under Section 19(19) of the RDB Act, the legislature has clearly stated that distribution has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letters Patent are modified. There is, however, no difference in the character of the original civil jurisdiction which is conferred upon the High Court by Letters Patent and the jurisdiction conferred by special Acts. When in exercise of its authority conferred by a special statute the High Court in an application presented to it as a court of first instance declares liability to pay a debt, the jurisdiction exercised is original and civil and if the exercise of that jurisdiction does not depend upon any preliminary step invoking exercise of discretion of the High Court, the jurisdiction is ordinary." 22. The aforesaid enunciation makes it clear as crystal that while exercising jurisdiction under the 1956 Act, the High Court is exercising ordinary jurisdiction and not any extraordinary or inherent jurisdiction and that is why, the legislature has appropriately postulated that the jurisdiction of the High Court under Articles 226 and 227 of the Constitution would not be affected. 23. The aforesaid analysis makes it luculent that the DRT has exclusive jurisdiction to sell the properties in a proceeding instituted by the banks or financial institutions, but at the time of auction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Therefore, anyone who is aggrieved by any act done by the Recovery Officer can prefer an appeal. Such a statutory mode is provided under the RDB Act, which is a special enactment. The DRT has the powers under the RDB Act to make an enquiry as it deems fit and confirm, modify or set aside the order made by the Recovery Officer in exercise of powers under Sections 25 to 28 (both inclusive) of the RDB Act. Thus, the auction, sale and challenge are completely codified under the RDB Act, regard being had to the special nature of the legislation. 27. It has been submitted by Mr. Banerji, learned senior counsel, that if the Company Court as well as the DRT can exercise jurisdiction in respect of the same auction or sale after adjudication by the DRT, there would be duality of exercise of jurisdiction which the RDB Act does not envisage. By way of an example, the learned senior counsel has submitted that there are some categories of persons who can go before the DRT challenging the sale and if the Official Liquidator approaches the Company Court, then such a situation would only bring anarchy in the realm of adjudication. The aforesaid submission of the learned senior counsel commends ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that when the bank was permitted to go ahead with the proposed sale of the assets of the company under liquidation by way of auction but such sale was subject to confirmation by the Company Court and all the parties were aware about the condition as to confirmation of sale by the Company Court, it was not open to the Recovery Officer to confirm the sale and, therefore, the sale was set aside by the Company Court, being in violation of the order. Thus, we find that the facts in the said case were absolutely different and further this Court did not deal with the jurisdiction of the Company Court vis- -vis DRT as the said issue really did not arise. Hence, it is not an authority for the proposition that the Official Liquidator can approach the Company Court to set aside the auction or sale conducted by the Recovery Officer of the DRT. 29. In view of the aforesaid analysis, we concur with the view expressed by the Division Bench and hold that the Official Liquidator can prefer an appeal before the DRT. As he was prosecuting the lis in all genuineness before the Company Court and defending the order before the Division Bench, we grant him four weeks' time to file an appeal after fol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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