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TMI Blog2013 (7) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by this Court in Company Application No. 653 of 2012 filed by the Central Bank of India one of the secured creditor, this Court allowed the Central Bank of India to release all claims on the leasehold rights in favour of the owners of the properties which were mortgaged with the Central Bank of India, being Block Nos. 400, 401, 402, 403, 405 and 427 situate at village Barshi, Taluka Barshi, District Sholapur (hereinafter referred to as "the said properties) by accepting the sum of Rs. 1.40 Crores from the owners of the said properties and also directed the Official Liquidator to release and relinquish the leasehold rights held by M/s Rajan (Textile) Mills Pvt Ltd (in liquidation) in favour of the owners of the said properties and to execute necessary deeds and the documents as required. 2. Some of the relevant facts for the purpose of deciding this application are as under : (a) The said Company in liquidation M/s Rajan Textiles Pvt Ltd (hereinafter referred to as "the said Company) had mortgaged leasehold rights in respect of land bearing Block No.399, admeasuring 7 H. 92 R, Block No.400, 6 H. 38 R, admeasuring 7 H. 93 R, Block No.405 admeasuring 7 H and 34 R and block No.42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidator in Windingup proceedings in this Court. This Court held that since the properties which were subject-matter of security of the banks and financial institutions, such properties will have to be sold and disposed of by the recovery officer in pursuance of the recovery certificate issued by the DRT under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. By the said order, this Court directed the Official Liquidator to sale the properties, subject to the orders passed by the DRT in the said recovery proceedings which are pending before it. It was also made clear that the Official Liquidator shall hand over the possession of the premises as per the direction of the DRT subject to recovery of necessary security charges and other expenses incurred by the Official Liquidator for protecting the said property. It was recorded that the Central Bank of India had paid security charges in respect of various properties to the Official Liquidator as per the directions of this Court. (e) In the year 2004 Mr Prabhakar Barbole and others filed Company Application No.12 of 2004 in Company Petition No. 20 of 1984. By an order dated 23rd June, 2005, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Official Liquidator to hand over possession of the property after appeal period is over. The Central Bank of India preferred tenancy appeal (No.9 of 2006) in the Court of the Sub Divisional Officer, Sholapur Division, challenging the order in Tenancy Case No.1 of 2006 which were in respect of Block No.427. The Central Bank of India filed a separate tenancy appeal (No.10 of 2006) in respect of Block Nos. 402, 403 and 405 and Appeal No.8 of 2006 in respect of Block No.400 and 401. (i) By a separate order dated 24th April, 2007, the Sub Divisional Officer, Sholapur Division dismissed all the three appeals filed by the Central Bank of India. The Central Bank of India thereafter filed Revision Application No. 108 of 2007 and 109 of 2007 before the Divisional Commissioner, Pune Division. By an order passed by the Maharashtra Revenue Tribunal at Mumbai, all the three Revision Applications filed by the Central Bank of India were allowed and the orders passed by the Sub-Divisional Officer as well as the order passed by the Tahsildar were quashed and set aside and application preferred by Mr Prabhakar Barbole and others for possession of the said properties came to be rejected. Mr Prabha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t foreclosing any part or in full in any other mortgaged property, including the landed property i.e. leasehold and free hold, building, movable etc. mortgaged or otherwise to the bank against the loan taken by the said Bank whatsoever. The said one time settlement offer submitted by said Mr Shashikant Pasari is stated to be rejected by the Central Bank of India as the said offer was not improved inspite of letter dated 2nd November, 2012 from the Central Bank of India to the said Mr Shashikant Pasari. (l) On 31st October, 2012 the Central Bank of India filed CA No. 653 of 2012 in this Court, inter alia, praying for permission to release all claims of the leasehold rights in respect of the plots bearing Block Nos.400, 401, 402, 403, 405 and 427 situated at Barshi, Taluka Barshi, District Sholapur in favour of owners of the properties by accepting a sum of Rs. 1.40 crore and prayed for a direction against the Official Liquidator to release and relinquish leasehold rights by the said Company (in liquidation) in favour of the owners of the said properties and to execute necessary deeds and/or documents. A copy of the said Company Application was served by the Central Bank of India u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in favour of Mr. Prabhakar Barbole and others and no amount shall be claimed from the Official Liquidator in that regard. It is also stated that the Official Liquidator had invited claims of workers/creditors in response to which various claims were received by the Official Liquidator It is stated that the Central Bank of India shall be directed to file an Undertaking to the effect that they shall deposit with the Official Liquidator proportionate amount due to the workers of the Company (in liquidation) in terms of Section 529A of the Companies Act, 1956 and other claims. (m) By an order dated 12th February, 2013 passed by this Court after considering the pleadings and documents and after hearing the learned counsel for the Central Bank of India and also the Assistant Official Liquidator, this Court allowed the said C.A. No.653 of 2012 in terms of prayer clause (a) and (b). This Court also accepted the Undertaking rendered by the C.B.I. in paragraph No.3 of the affidavit dated 8th February, 2013 to the effect that the said Bank shall deposit proportionate amount, if any, due to workers of the said Company ( in liquidation) in terms of Section 529A of the Companies Act, 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plea that DRT could not have sanctioned and/or permitted the Central Bank of India to settle the claims of third parties and transfer the Mortgaged properties in favour of such party. It is submitted that such application could have been made only in this Court and not before the DRT. It is submitted that as the recovery certificate has not been issued by the DRT, Central Bank of India could not have applied for permitting bank to settle claims with Prabhakar Barbole and others. It is submitted that the DRT had no power to settle or mediate. It is submitted that Company Court ought to have gone into the issue as to whether permission should be granted to the Central Bank of India to sell the right, title and interest of the Central Bank of India in the mortgaged properties in favour of Mr Prabhakar Barbole and others. It is submitted that at this stage Company Court ought to have enquired as to whether amount offered by such third party was as per gross valuation of the property and whether such permission in favour of the Central Bank of India would be in the interest of Company (in liquidation), its shareholders and creditors. It is submitted that in view of Section 60 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. Mr. Sakhare, placed reliance on the order dated 16th December, 2004 of this Court. Paragraph Nos. 1 and 2 of the said order read thus : "1. In the present case it is an admitted position that the recovery proceedings are pending before the D.R.T. The said recovery proceedings are instituted by various banks and financial institutions. In view of the pendency of the said recovery proceedings which is initiated by the secured creditors, it is not possible to sanction the sale of the properties at the instance of Official Liquidator in the present windingup proceedings. In my view the properties which are the subject of security of the banks and financial institutions will have to be sold and disposed of by the recovery officer in pursuance of the recovery certificate issued by the D.R.T. under the provisions of The Recovery of Debts Due to Banks and Financial Institutions Act, 1993. In view thereof I reject the present report made by the Official Liquidator. However, I direct the Official Liquidator to hold the properties subject to the orders passed by the D.R.T. in the said recovery proceedings which are pending before it. It is made clear that the Official Liquidator will h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that in all proceedings the applicant herein was present and after hearing the applicants, these orders were passed in favour of Mr Prabhakar A Barbole. It is submitted that in the last eight years no objection of any nature has been raised by the applicant herein opposing the applications filed by Mr Prabhakar Barbole in respect of rights claimed in respect of properties in question. It is submitted by the learned senior counsel that even Mr Prabhakar Barbole also succeeded in various proceedings filed before the Authorities under the provisions of the Bombay Tenancy and Agricultural Lands Act. Writ petitions filed by Mr Prabhakar Barbole are admitted by this Court which are admitted. It is submitted that sale in favour of Prabhakar Barbole has not been challenged by the applicant. 8. Mr Sakhare, learned senior counsel also placed reliance on the judgment of the Supreme Court in the case of Allahabad Bank vs. Canara Bank, AIR 2000 (SC) 1535 and also judgment of this Court in Company Petition No. 2151 of 1977. By order and judgment dated 14th January, 2005 in Company Petition No.2151 of 1977 this Court adverted to the judgment of the Supreme Court in the case of Allahabad Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue at hand. In the said case also the apex court has considered the scheme of the provisions of the DRT Act as well as the Companies Act (1 of 1956) particularly the provisions of winding up of the company. The apex court while considering the said scheme has formulated the question which is directly relevant in the present case. The apex court has considered whether the jurisdiction of the recovery officer is exclusive for execution of the recovery certificate and while answering the aforesaid question formulated, the apex court has stated as under (page 77) : "22. We hold that the provisions of Sections 17 and 18 of the RDB Act are exclusive so far as the question of adjudication of the liability of the defendant to the appellant-bank is concerned. (ii) Execution of certificate by Recovery Officer : Is his jurisdiction exclusive. 23. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the said proceedings. The apex court in the case of Allahabad Bank v. Canara Bank : MANU/SC/0262/2000 : AIR 2000 SC 1535, has in paras. 30, 49 and 50 held as under (pages 79 and 88 of 101 Comp Cas) : "30. The learned Attorney General has, in this connection, relied upon Damji Valji Shah v. Life Insurance Corporation of India MANU/SC/0230/1965 : [1965] 3 SCR 665 , to contend that for initiating and continuing proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, no leave of the company court is necessary under Section 446. In that case, a Tribunal was constituted under the Life Insurance Corporation Act, 1956. The question was whether under Section 446 of the Companies Act, 1956, the said proceedings could be stayed and later be transferred to the company court and adjudicated in that court. It was held that the said proceedings could not be transferred. Section 15 of the Life Insurance Corporation Act, 1956--which we may say, roughly corresponds to Section 17 of the RDB Act--enabled the Life Insurance Corporation of India to file a case before a special Tribunal and recover various amounts from the erstwhile life insurance companies i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49. For the aforesaid reasons, we hold that at the stage of adjudication under Section 17 and execution 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly the following observation (headnote) : "The official liquidator is the representative of the workmen entitled to enforce such pari passu charge. He would be in the position of a co-mortgagee. The statutory right of the corporation to sell the property under Section 19(19) of the 1951 Act has now to be exercised in tandem with the rights of the pari passu charge in favour of the workmen created by the proviso to Section 529 of the Companies Act. The realisation of the security can therefore be done by the secured creditor either by satisfaction of the pari passu charge or by a suit in which the pari passu charge holder would be a party defendant. In other words, the existence of the pari passu charge holder being represented by the official liquidator would necessarily bring in the supervision of the company court as the official liquidator cannot act without directions from and the supervision of the company court. The realisation of the security can only be done by both charge holders joining and realising the security simultaneously. If a sale takes place, it can only be simultaneously for recovery of the claim of all pari passu charge holders and the sale proceeds a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed on behalf of the liquidator that there was lease of long duration. If so, the company was a statutory tenant under the Rent Act. The statutory tenancy confers the right to be in possession but if the tenant does not any more require use of the premises, the provisions of the Rent Act and especially sections 13 and 15 completely prohibit giving the possession of the premises on licence or on sub-lease. The learned company judge, therefore, spelt out a third way of parting with the possession by the liquidator, namely, that he may give the premises to the second respondent under a caretaker's agreement. This caretaker's agreement appears to us to be an euphemism for collecting compensation which is nothing else but the charge for use and occupation of the premises exclusively by the second respondent. Whether it is sublease or licence does not call for decision. For the purpose of the present proceedings it is enough for us to say that the company and its liquidator no more need the premises for its own use. The liquidator does not need the use of the premises for carrying on the winding up activities of the company because he sought direction for parting with possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was argued that since the applicant has already taken recourse to remedy of eviction as permitted by the provisions of the Rent Act, the relief claimed in the present application is unavailable. I find no substance in this argument. Merely because the landlord has instituted suit for eviction against the tenant, who happens to be company in liquidation, that alone cannot be the basis of non-suiting the landlord to invoke the present remedy which is an independent and special remedy available to him by virtue of the provisions of the Companies Act. Whereas, having regard to the purport of the Companies Act and the law enunciated by the Apex Court in Ravindra Ishwardas Sethna's case (supra), there will be no impediment for the landlord to take recourse to the remedy under the provisions of the Companies Act on the established fact that the premises were no longer required for the business of the Company in liquidation or by the official liquidator. 6. That takes me to the third objection raised on behalf of the workers' union. It was contended that it was obligatory to give notice to all the creditors before passing any order on this application because it would amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said order granted by any competent court. It is submitted that no such offer can be accepted at this stage. 12. Mr. Nair, learned counsel appearing for Central Bank of India submits that the Central Bank is the secured creditors of the company in liquidation which had mortgaged leasehold rights of the land in question to the bank. The company in liquidation was not the owner of the said plots. The learned counsel submits that the valuation report was obtained by the bank for calculating the estimate income of unexpired part of lease of the properties in question. It is submitted that by virtue of proposal made by Mr. Prabhakar Barbole and Others, the Central Bank of India had agreed for release of leasehold rights in land bearing gat no. 400, 401, 402, 403, 405 and 427 in favour of the owners on payment of Rs. 1.40 Crores. In addition to the said payment, the Central Bank of India would also get substantial amount by sale of ownership land bearing gat no. 399 admeasuring approximately about 20 acres and also from the sale of the building, structures, chimney etc. situated on the land bearing gat no. 427. It is submitted that in view of these facts, the Central Bank of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial Liquidator are very limited and the properties alleged to be held by the Official Liquidator are subject to the orders passed by the D.R.T. This court has already made it clear that the properties which are subject of securities to banks and financial institutions will have to be sold and disposed of by the Recovery officer in pursuance of the recovery certificate issued by the D.R.T., under the provisions of Recovery of Debts (due to Banks and Financial Institutions) Act, 1993. The learned counsel placed strong reliance on the order passed by this court on 18th December, 2004 in company petition which was filed in the same company Petition and also placed reliance on the judgment of this court delivered on 14th January, 2005 in Company Petition No. 215 of 1997. Learned counsel submits that the company court cannot reverse the order passed by the D.R.T. It is submitted that Recovery of Debt Due to Banks and Financial Institutions Act, 1993 is self contained code and it is not open to contend in the company proceedings that the order passed by the D.R.T., allowing the Bank to settle the claims of the owners of the properties is illegal. It is submitted that in view of the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on lease for the benefit of an industrial or commercial undertaking has no application, and (2) having regard to the proviso to Section 43C of the 1948 Act the auction sale and the subsequent assignment of the lease hold rights were void. 4. Before us we proceed to consider the merits of these contentions it seems to us that the suits for possession must fail on a preliminary ground, as urged by Mr. Bal, counsel for the respondents. In the plaint the plaintiff in each case asks for a declaration that the auction sale and the conveyance are both void. Giving effect to this contention means that the leases in favour of Barsi Mills remain live leases and Barsi Mills continue to be the tenant of the lands. If this his the position, the suits for possession are premature because the leases for 99 years have not yet run out. Further, the declaration asked for cannot be made in the absence of the liquidator representing Barsi Mills, but Barsi Mills have not been impleaded in the suits. It is well-known that a company until it is dissolved retains its distinct entity, though in the case of a company the liquidation the administration of its affairs passes to the liquidator. Clearly the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch industrial or commercial undertaking. But apart from this, there is an obvious answer to this contention as pointed out by counsel for the respondents. The lands in question were given on lease to Barsi Mills in 1943 when the Bombay Tenancy Act, 1939 was in operation. That Act defined 'land' as meaning land which was used for agricultural purposes including, inter alia, the sites of farm buildings appurtenant thereto. The definition of land in the 1948 Act so far as it is material for the present purpose, is : "land" means land which is used for Agricultural purposes, and includes (a) the sites of form buildings appurtenant to land used for agricultural purposes, and (b) the sites of dwelling houses occupied by agriculturists, agricultural labourers or artisans and land appurtenant to such dwelling houses." 16. Mr. Balsara, learned counsel submits that no recovery certificate has been issued by the Debt Recovery Tribunal. It is submitted that as no recovery certificate is issued, the Central Bank of India had to apply for leave of the company court for directing the bank to settle the claim with Mr. Prabhakar Barbole and Ors. The Debt Recovery Tribunal had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to the order that may be passed by Debt Recovery Tribunal. Official Liquidator has been directed to handover possession of the properties as per directions of the Debt Recovery Tribunal subject to recovery of necessary security charges and other expenses incurred of the Official Liquidator for protecting the said property. It is not in dispute that Mr.Prabhakar Barbole and others had under two separate sale deeds acquired ownership rights in respect of the said property from the then owners. This court had granted leave in favour of Mr.Prabhakar Barbole and others to file appropriate proceedings against Official Liquidator in other courts in respect of the said properties after hearing applicant herein. Competent Authority had also allowed the said application filed by the owners for possession. Writ petition filed by the owners in this court arising out of such proceedings are admitted and are pending. 19. It is not in dispute that the said company in liquidation did not have ownership rights in respect of such properties but had only leasehold rights to the extent of unexpired period under the said two lease deeds. It is not in dispute that since last 45 years, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts which are secured in favour of the bank and the financial institutions. In such an event, the Official Liquidator has to seek direction from the Debt Recovery Tribunal in respect of such assets held by the secured creditors. 21. Without going into the allegations of the applicants, that no recovery certificate has been issued by the Debt Recovery Tribunal and thus Debt Recovery Tribunal could not have passed any order allowing Central Bank of India to settle the claims with Mr. Prabhakar Barbole and others, in my view, even if no recovery certificate is issued by the Debt Recovery Tribunal, fact remains that the recovery proceedings filed by the secured creditors in whose favour decree against the company in liquidation has been passed, are pending before Debt Recovery Tribunal. In my view, this court thus cannot sanction any sale in favour of such secured creditors in respect of the properties of the company in liquidation. 22. It is not in dispute that on application made by the Central Bank of India, after hearing the applicant herein, Debt Recovery Tribunal has already passed an order permitting the Central Bank of India to settle the claims with Mr.Prabhakar Barbole and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while granting permission in favour of the Central Bank of India to settle the claims with Mr.Prabhakar Barbole and others. Rights of the applicant if any is to challenge the said order passed by Debt Recovery Tribunal. It is stated by the applicant that the appeal has been preferred before the Debt Recovery Appellate Tribunal and the same is pending. In my view, the applicant thus had no locus of appearing in this proceedings for opposing the reliefs sought by the Central Bank of India and also to file this proceedings for recalling the orders passed by this court on the application made by the Central Bank of India. This court has passed order in furtherance of the order passed by the Debt Recovery Tribunal. By an order dated 16th December, 2004 in this company petition, this court has already held that Official Liquidator has to handover possession of the premises as per directions of the Debt Recovery Tribunal. Reliefs claimed by the Central Bank of India in this proceedings is consequential to the orders passed by the Debt Recovery Tribunal in favour of the Central Bank of India which has not been stayed and/or set aside by any competent court. In my view application thus file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly carrying on winding up proceedings. It has been held that the only course open to the Official Liquidator would be to surrender possession to the landlord and save recurring liability to pay rent. It has been held that the Official Liquidator cannot be allowed to lend its aid to flout the provisions of the Rent Act so as to earn money by unfair and impermissible use of the premises. In my view, in execution of the decree passed by this court, Central Bank of India in whose favour lease hold rights of the company in liquidation was mortgaged and which has to spend substantial amount of security charges and other expenses is entitled to execute decree and recover its dues by appropriating the sale proceeds. No order restraining the decree holder from selling such property and to appropriate the sale proceeds towards its dues in satisfaction of decree can be passed by Company Court. In my view Official Liquidator even otherwise could not have raised any objection in the secured creditors selling and/or transferring the rights mortgaged in its favour in execution of decree which has become final. The Official Liquidator atmost could have considered whether amount agreed between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty is also justified to oppose the proposal made by the applicant at this stage to deposit Rs. 1.40 crores in this court on the condition that the order passed by this court is set aside. 29. On perusal of the record, in my view, there is no substance in the allegations of collusion made by the applicant between the Central Bank of India and the Official Liquidator. No such allegations are made in the pleadings. On perusal of the record, it is clear that Official Liquidator has acted independently and has not colluded with the Central Bank of India as alleged. Though at one stage, it was stand of the Official Liquidator that company in liquidation was the owner of the said properties, on having advised by advocate that the company in liquidation was not the legal owner but only has leasehold rights, Official Liquidator has rightly taken a correct stand in affidavit in reply. In my view Official Liquidator has thus not given up any alleged ownership rights in the properties in question as company in liquidation did not have any such ownership rights. 30. In my view, no case is made out by the applicant for recalling the order passed by this court. There is no merit in any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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