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TMI Blog2016 (5) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. So this goes to show that notice has been already given by the DRT to the official liquidator and he has been heard in the matter. Even according to the decision relied upon by the learned counsel for the applicants the relevant paragraphs are referred above. There is no bar for the DRT to proceed with the sale of the property. But before conducting such sale of the property, the official liquidator has to be heard in the matter. As I have already observed above, official liquidator has already appeared before the DRT and he has been heard. As the applicants has not availed the statutory remedies available to them under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 there are no reasons forthcoming in the applications also as to why they have not availed such statutory remedy before the filing the present applications. As I have already observed above that official Liquidator was notified about the proceedings he appeared in the matter before the DRT and the applications herein are also not from the Workmen/Employees of the Company in Liquidation and there is no allegation from the Official Liquidator that the recovery officer is conducting the sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988 and the document in this regard is produced at Annexure-A. 6. The further facts that a reference under Section 15(2) of the Sick Industrial Companies (Special provisions) Act, 1985, (hereinafter referred to as 'SICA' for short) of the respondent-company (In Liqn.,) was made to the BIFR. The BIFR on 26.10.1988, declared the respondent-company as sick despite a rehabilitation scheme sanctioned by BIFR during August 1990, failed to revive the respondent-company (In Liqn.,). It appears that the ICICI Bank and respondent No.4 Bank (IFCI) i.e., the operating agency banks declined to implement the scheme of rehabilitation. Respondent-company (In Liqn.,) preferred an appeal before the Appellate Authority for Industrial and Financial Reconstruction (hereinafter referred to as 'AAIFR' for short) against the aforesaid order passed by the 'BIFR', however the order passed by the BIFR was confirmed by the appellate authority on 10.09.1997. The BIFR finally passed an order dated 21.04.1997 recommending for winding up of respondent-company (In Liqn.,) and thereafter forwarded the matter to this Court, which is numbered as Co.P.No.67/1997 before this Court, against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heet in D.C.P.No.3096 as to re- commencement/continuance of recover proceedings on 24.02.2014 after having kept the same in abeyance from 10.12.2007. Section 537 of the Companies Act 1956, provides for the avoidances of certain attachments, executions, etc., in winding-up by Tribunal. In lieu of the above mentioned provisions of the SICA, 1985, and the Companies Act, 1956, and in lieu of the pendency of the instant liquidation proceedings against the respondent company no authority could have initiated/proceeded with any kind of action/distress/execution proceedings against the respondent company and/or its directors for recovery of their respective dues. Therefore, the original application proceedings in O.A.No.872/1999 could not have been presented by the IDBI, IFCI and ICICI Banks before the DRT, as the date of presentation of this petition is much prior to the initiation of the DRT proceedings. This certificate holder banks namely IDBI, IFCI and ICICI, had approached the DRT Bangalore on 5.7.1999 seeking to recover its dues from the respondent- company (In Liqn.,) in O.A.872/1999. In the pleadings in O.A.No.872/1999 before the DRT, the aforementioned banks have specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment in O.A.N0.872/1999 dated 22.12.2003, is produced at Annexure-C. The defendant No.2 in O.A.No.872/1999 before the respondent No.5-DRT i.e., Sri N.B. Rukmangada, who was the director of the respondent-company (In Liqn.,). arrived at an amicable one time settlement with regard to the decreetal amount of Bank No.1 i.e., IDBI and by way of a compromise memo dated 3.4.2006 settled the dues of IDBI in full and final settlement. In lieu of the aforesaid compromise memo dated 3.4.2006, the IDBI bank acknowledged receipt of an amount of ₹ 5.00 Lakhs towards discharge of certificate amount due to it as full and final settlement. It was consented by the IDBI Bank that no amount shall be recoverable any further from the defendants in O.A.872/1999 by the said bank in lieu of the aforesaid compromise. In lieu of the aforesaid compromise the DRT was pleased to issue an amended recovery certificate declaring the amount to be recovered by Bank No.2 i.e., IFCI, the respondent No.4 herein and bank No.3 i.e., ICICI. The copy of the compromise memo is as per Annexure-D and the copy of the amended recovery certificate is as per Annexure-E. The bank No.3 i.e., (ICICI) assigned its right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61,251 number equity shares of ₹ 10/- each in Cauvery Hydro Energy Limited, which are in the name of judgment debtor No.2 i.e., Sri N.B. Rukmangada and the same came to be allowed on 27.05.2015 by respondent No.2, a copy of the said application along with the warrant issued by respondent No.2 is produced at Annexure-H. Since the Respondent company (In Liqn.,) is represented by the Official Liquidator attached to this Court, the question of respondent No.3 IARC recovering any amounts from the applicants herein above as legal representatives of judgment debtor No.2 late Sri N.B. Rukmangada or from Cauvery Hydro Energy Ltd., does not arise at all. Respondent No.3 filed a memo dated 29.10.2015 before respondent No.2 that respondent No.3 has received an amount in sum of ₹ 54,53,736/- from the Official Liquidator representing the respondent company (In Liqn.,) and the said amount may be deducted from the certificate amount. Therefore, the question of recovering the remaining certificate amount from the applicants does not arise at all. Respondent No.3-IARC has on 29.12.2015 filed an application under Section 25 and 28 of the RDDB and FI Act, 1993, seeking for an order of an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracted for their benefit or for the benefit of the family. The personal guarantee of Sri N.B. Rukmangada was a limited liability with regard to respondent No.3 and respondent No.4. The judgment and decree passed by the DRT Bengaluru in O.A.872/1999 is violative of Sections 438 and 441(2) and 446 and 537 of the Companies Act, 1956. The judgment and decree passed by the DRT, Bengaluru in O.A.No.872/1999 is non-est in the eye of law and is liable to be set-aside/struck down in lieu of liquidation proceedings pending before this Court and the winding up order passed by this Court and subsequent winding up the respondent company. Therefore, the judgment and decree passed by the DRT in O.A.NO.872/1999 and the orders dated 27.05.2015 and 24.06.2015 passed by the respondent No.2-Recovery Officer (N.) DRT, Bengaluru, are in clear violation of Section 22 of SICA, 1985. Hence, filed the above applications praying the Court to pass the orders as prayed for. 9. During the course of hearing the above applications, when the Court asked the learned counsel for respondent No.3 that whether he wanted to file objections to the said applications, learned counsel has submitted that whatever the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lakhs. (5) 26.10.1988 respondent company declared as SICK industrial company by BIFR as per the document Annexure-A. (6) 10.09.1997 order of BIFR declaring respondent company as SICK was confirmed by the Appellate Authority AAIFR (7) 21.04.1997 BIFR recommends winding up of the respondent company (8) 13.5.1997 company petition No.167/1997 numbered by the High Court against the respondent company. (9) On 5.7.1999 OA.872/99 filed in the Debt Recovery Tribunal without leave of this Court and BIFR, by recovery banks IDBI IFCI and ICICI. 13. It is also the contention of the applicants that in the objection statement of the Official Liquidator produced at Annexure-B, the Debts Recovery Tribunal is notified about the pendency of winding up proceedings before this Court. So these factual aspects with the relevant dates are not in dispute even according to respondent No.3. Therefore, the question is whether the judgment and decree passed by the DRT in O.A.872/1999 is liable to be set-aside and also whether this Court can stay the execution proceedings in CA No.55/2006 in DCP No.3096 of O.A.872/1999 pending before respondent No.2. 14. I have perused the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h application has been made or is made before or after the order for the winding up of the company, or before or after commencement of the Companies (Amendment) Act, 1960] (65 of 1960) (3) ***Omitted by the Companies (Second Amendment Act) Act, 2002 (4) Nothing in sub-section (1) or sub- section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court.] Section 529A of the Act, 1956 reads as under:- Section 529A: Overriding preferential payment - Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company - (a) Workmen's dues; and (b) debts due to 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 be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions. 15. In the decision in Rajasthan Financial Corpn's case (supra) Their Lordships of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perties of the debtor, even if 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. (ii) A District Court entertaining an application under Section 31 of the SFC Act will have the power to order sale of the assets of a borrower company-in-liquidation, but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (iii) If a financial corporation acting under Section 29 of the SFC Act seeks to sell or otherwise transfer the assets of a debtor company-in-liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the company Court and acting in terms of the directions issued by that court as 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 the distribution thereof among the creditors in terms of Section 529-A and Section 529 of the Companies Act. (iv) In a case where proceedings under the Recovery of Debts Due To Banks and Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all the workmen of the company-in-liquidation. They are the legal representatives of one Sri N.B. Rukmangada, who was the director of the company-in-liquidation, who furnished guarantee to the financial institution when the company borrowed the loan from the said financial institution. After the demise of the said Sri N.B. Rukmangada, the guarantor, the present applicants claiming to be his legal representatives have filed the present application. The official liquidator had also appeared before the recovery officer in the case on hand, and he had also filed his statement while arguing on these applications. The official liquidator also made submission that in the above referred reported decisions, the interest of the workmen was involved but here in the case on hand, it is not so, because the applicants claiming to be the legal representatives of the said Sri. N.B. Rukmangada have no concern with the company in liquidation. So this goes to show that notice has been already given by the DRT to the official liquidator and he has been heard in the matter. Even according to the decision relied upon by the learned counsel for the applicants the relevant paragraphs are referred above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r setting aside the order appealed against. (5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal. (6) The appeal filed before the Appellate Tribunal under Sub-Section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal. 19. So when such statutory remedy was available to the applicants, they could have challenged the judgment and decree passed by the DRT and they could have canvassed all the points which they have urged before this Court in the company applications. In this connection, I have also perused the decision of the Hon'ble Supreme Court in Civil Appeal No.5990/2010 (arising out of SLP(C) No.10145/2010) decided on 26.7.2010 in the case of Satyawati Tondon (supra) wherein Their Lordships have observed at para Nos.18, 22 and 27 as under:- '18. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst an order passed by the Tribunal under Section 19 of the DRT Act and observed: 5. In our opinion, the order which was passed by the Tribunal directing sale of mortgaged property was appealable under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short the Act ). The High Court ought not to have exercised its jurisdiction under Article 227 in view of the provision for alternative remedy contained in the Act. We do not propose to go into the correctness of the decision of the High Court and whether the order passed by the Tribunal was correct or not has to be decided before an appropriate forum. 27. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.' 20. It is no d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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