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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 ..... certain properties were mortgaged, filed Original Application No. 153 of 1999 under Section 9 of the RDB Act for recovery of a sum of Rs. 39,93,47,701/- with interest from the company, namely, M/s. Rajindra Pipes Limited, which was decreed by the Debt Recovery Tribunal, Jabalpur (DRT) vide its order dated 7.3.2000. The Debt Recovery Certificate being DRC No. 164 of 2000 was issued for recovery of the aforesaid amount which was subsequently transferred to the DRT at Allahabad. Be it noted, Company Petition No. 113 of 1997 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and confirmation of sale dated 27.2.2009 on the foundation that the auction had not been properly held and directed the properties mortgaged with the Allahabad Bank to be auctioned after proper identification of the properties and obtaining of a fair valuation report from a Government approved valuer. 6. Being dissatisfied with the aforesaid order, the Allahabad Bank preferred Special Appeal No. 1815 of 2009 before the Division Bench. Apart from raising various contentions justifying the sale, a stand was put forth 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 outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsiderable difficulties in recovering loans and enforcement of securities charged with them and the procedure for recovery of debts due to the banks and financial institutions which were being followed had resulted in a significant portion of the funds being blocked. The Statement of Objects and Reasons of the RDB Act clearly emphasise the considerable difficulties faced by the banks and financial institutions in recovering loans and enforcement of securities charged with them. Emphasis has been laid on blocking of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 30 provides that any person aggrieved by an order of the Recovery Officer made under the RDB Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal. It confers powers on the tribunal to make such inquiry as it deems fit and confirm, modify or set aside the order made by the Recovery Officer in exercise of its powers under Sections 25 to 28 (both inclusive). 11. Section 34 lays down that the RDB Act would have overriding effect. Section 34, 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 Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to Section 34 of the RDB Act and opined thus: - "Even in regard to "execution", the jurisdiction of the Recovery Officer is exclusive. Now a procedure has been laid down in the Act for recovery of the debt as per the certificate issued by the Tribunal and this procedure is contained in Chapter V of the Act and is covered by Sections 25 to 30. It is not the intendment of the Act that while the basic liability of the defendant is to be decided by the Tribunal under Section 17, the banks/financial institutions should go to the civil court or the Company Court or some other authority outside the Act for the actual realization of the amount. The certificate granted under 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for initiating or continuing the proceedings under the RDB Act, 1993." [Emphasis added] 15. While dealing with the claim of the workmen, the Bench proceeded to state that the "workmen's dues" have priority over all other creditors, secured and unsecured, because of Section 529-A(1)(a) of the 1956 Act. Be it noted, this has been so stated in paragraph 76 of the decision in Allahabad Bank's case. The correctness of this statement was doubted and the matter was referred to the larger Bench. A three-Judge Bench in Andhra Bank v. Official Liquidator [2005] 5 SCC 75 opined that it was only a stray observation as such a question did not arise in the said case as Allahabad Bank was undisputably 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court the right to ensure that the distribution of the assets in terms of Section 529-A of the Companies Act takes place. Thereafter, the bench summed up the legal position. The pertinent part of the said summation is reproduced below: - (i) A Debt Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company in-liquidation, though its Recovery officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (iv) In a case where proceedings under the Recovery of Debts Due to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of the debtor to pay the debts due by him to the Company, the jurisdiction is, therefore, civil. It has been further observed that normally a creditor has to file a suit to enforce liability for payment of a debt due to him from his debtor. The Legislature has, by Section 187 of the 1956 Act, empowered the High Court in a summary proceeding to determine the liability and to pass an order for payment, but on that account, the real character of the jurisdiction exercised by the High Court is not altered. After further analyzing, the four-Judge Bench proceeded to state thus: - "The jurisdiction to deal with the claims of companies ordered to be wound up is conferred by the Indian Companies Act and to that extent the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary or an unreasonable manner." 26. We have referred to the said passage for the purpose of highlighting that an appeal lies to the DRT challenging the action of the Recovery Officer. In the case at hand, the Official Liquidator was not satisfied with the manner in which the auction was conducted and he thought it apposite to report to the learned Company Judge who set aside the auction. Needless to emphasise, the Official Liquidator has a role under the 1956 Act. He protects the interests of the workmen and the creditors and, hence, his association at the time of auction and sale has been thought appropriate by this Court. To put it differently, he has been conferred locus to put forth his stand in the said matters. 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 28. We will be failing in our duty if we do not take notice of the decision in M.V. Janardhan Reddy (supra) 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 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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