Karnataka High Court
Hdfc Bank Limited vs The Recovery Officer-1 on 20 June, 2019
Author: Alok Aradhe
Bench: Alok Aradhe
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20th DAY OF JUNE 2019
BEFORE
THE HON'BLE MR. JUSTICE ALOK ARADHE
WRIT PETITION NO.21968 OF 2018 (GM-DRT)
BETWEEN:
HDFC BANK LIMITED
A BODY CORPORATE INCORPORATED
UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT HDFC BANK HOUSE
SENAPATI BAPAT MARG LOWER PAREL (W)
MUMBAI - 400 013
REPRESENTED BY ITS SENIOR MANAGER LEGAL
MR JUSTLIN J.
... PETITIONER
(By Mr. UDAYA HOLLA, SR. COUNSEL FOR
Mr. VASUDEVAN H N, ADV. )
AND:
1. THE RECOVERY OFFICER - I
DEBTS RECOVERY TRIBUNAL - 2
NO.4 2ND FLOOR JEEVAN MANGAL BUILDING
RESIDENCY ROAD
BENGALURU - 560 025.
2. STATE BANK OF INDIA
A BANKING CORPORATION CONSTITUTED UNDER
THE STATE BANK OF INDIA ACT 1955 (23 OF 1955)
HAVING ITS CORPORATE CENTRE AT STATE BANK BHAVAN,
MADAME CAMA ROAD, NARIMAN POINT,
MUMBAI 400021
AND HAVING ITS INDUSTRIAL FINANCE BRANCH AT 61
RESIDENCY PLAZA, RESIDENCY ROAD,
BENGALURU 580025.
3. BANK OF BARODA
A BODY CORPORATE UNDER
THE BANKING COMPANIES
2
(ACQUISITION AND TRANSFER OF UNDERTAKING)
ACT 1970 (5 OF 1970)
HAVING ITS HEAD OFFICE AT
BARODA HOUSE, P B NO.506,
MANDAVI, VADODARA 396006
ACTING THROUGH ITS BRANCH OFFICE AT
P.O.BOX 11745
SAMATA BUILDING, GENERAL BHOSALE MARG,
NARIMAN POINT, MUMBAI 400021.
4. CORPORATION BANK
A BODY CORPORATE UNDER
BANKING COMPANIES (ACQUISITION AND
TRANSFER OF UNDERTAKING) ACT, 1980 (40 OF 1980)
HAVING ITS CORPORATE OFFICE AT
MANGALADEVI TEMPLE ROAD, PANDESHWAR,
MANGALORE 575001
AND HAVING IT INDUSTRIAL
FINANCE BRANCH AT RALLARAM MEMORIAL BLDG.,
1ST FLOOR, CSI COMPOUND, MISSION ROAD,
BENGALURU - 560027.
5. THE FEDERAL BANK LIMITED
A COMPANY WITHIN THE MEANING OF
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
FEDERAL TOWERS, ALUVA 683101,
KERALA
AND HAVING ITS BRANCH AT ST MARKS ROAD
9, HALCYON COMPLEX, ST MARKS ROAD,
BENGALURU 560001.
6. IDBI BANK LIMITED
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT 1956 AND
A BANKING COMPANY WITHIN THE MEANING
OF THE BANKING REGULATION ACT, 1949
HAVING ITS HEAD OFFICE AT IDBI TOWER,
WTC COMPLEX, CUFFE PARADE,
MUMBAI 400005, MAHARASHTRA INDIA.
AND ACTING THROUGH ITS BRANCH
OFFICE AT CORPORATE BANKING GROUP-FAMG,
9TH FLOOR, IDBI TOWER,
3
WTC COMPLEX,
CUFFE PARADE, COLABA,
MUMBAI 400005.
7. INDIAN OVERSEAS BANK
A BODY CORPORATE UNDER THE BANKING COMPANIES
(ACQUISITION AND TRANSFER OF UNDERTAKING)
ACT, 1970
HAVING ITS CENTRAL OFFICE AT 763,
ANNA SALAI, CHENNAI 600002.
AND ITS BRANCH OFFICE AT HARIKRIPA,
26-A, S V ROAD, SANTACRUZ (W),
MUMBAI 400054.
8. JAMMU & KASHMIR BANK LIMITED
A BANKING COMPANY INCORPORATED UNDER
THE PROVISIONS OF THE JAMMU & KASHMIR
COMPANIES ACT
NO.XI OF 1977 (SAMVAR)
HAVING ITS REGISTERED OFFICE AT
CORPORATE HEAD QUARTER,
MAULANA AZAD ROAD, SRINAGAR,
KASHMIR 190001
AND ITS BRANCH OFFICE
AT SYED HOUSE, 124, S V SAVAKAR MARG,
MAHIM (WEST) MUMBAI 400016.
9. PUNJAB & SIND BANK
A BODY CORPORATE UNDER THE BANKING COMPANIES
(ACQUISITION AND TRANSFER OF UNDERTAKING)
ACT, 1980
HAVING ITS HEAD OFFICE AT
21, RAJENDRA PLACE,
NEW DELHI 110008
AND HAVING AMONGST OTHERS,
A BRANCH OFFICE AT J K SOMANI BUILDING,
BRITISH HOTEL LANE, FORT,
MUMBAI 400023.
10. PUNJAB NATIONAL BANK
A BODY CORPORATE UNDER THE BANKING COMPANIES
(ACQUISITION AND TRANSFER OF UNDERTAKING)
ACT, 1970 (5 TO 1970)
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HAVING ITS HEAD OFFICE AT 7,
BHIKAJI CAMA PLACE, NEW DELHI 110607,
ACTING THROUGH ITS LARGE CORPORATE
BRANCH AT CENTENARY BUILDING, 28,
M G ROAD, BENGALURU 560001.
11.UCO BANK
A BODY CORPORATE CONSTITUTED UNDER
THE BANKING COMPANIES
(ACQUISITION AND TRANSFER OF UNDERTAKING)
ACT, 1970 AND
HAVING ITS HEAD OFFICE AT 10,
BTM SARANI, KOLKATA 700001,
WEST BENGAL, INDIA.
AND ITS BRANCH
OFFICE AT 1ST FLOOR, 13/22,
K G ROAD, BENGALURU 560009.
12.UNITED BANK OF INDIA
A BODY CORPORATE UNDER THE BANKING COMPANIES
(ACQUISITION AND TRANSFER OF UNDERTAKING)
ACT, 1970 (5 TO 1970)
HAVING ITS HEAD OFFICE AT 11,
HEMANTA BASU SARANI,
KOLKATA 700001 .
ACTING THROUGH ITS BRANCH
OFFICE AT 40, K G ROAD,
BENGALURU 560009.
13. JM FINANCIAL ASSET RECONSTRUCTION
CO.PVT. LTD,
HAVING ITS REGISTERED OFFICE AT 7TH FLOOR,
CNERGY, APPASAHEB MARATHE MARG,
PRABHADEVI,
MUMBAI 4000258.
... RESPONDENTS
(By SRI. KUMAR M N, CGC FOR R1
SMT. LAKSHMI IYENGAR, SR. COUNSEL FOR
SMT. ANUPAMA HEBBAR, ADV. ON IMPLEADING
APPLICANT ON IA 3/19
SRI S S NAGANANDA, SR. ADV FOR
SRI GANAPATHI HEGDE, ADV. FOR R2 - R13
SRI DHARMENDRA CHATUR, ADV IN IMPLEADING
APPLICANT ON IA 2/19 )
---
5
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO DIRECT THE
RESPONDENT NOT TO TAKE COERCIVE ACTION AGAINST THE
PETITIONER TILL THE PETITIONER APPROACH THE COMPANY
COURT FOR SUITABLE RELIEF.
THIS WRIT PETITION COMING ON FOR ORDERS THIS DAY,
THE COURT MADE THE FOLLOWING:-
ORDER
Sri.Udaya Holla, learned Senior counsel for Sri.Vasudevan H.N., learned counsel for the petitioner.
Sri.Kumar M.N., learned Central Government Counsel for the respondent No.1.
Smt.Lakshmy Iyengar, learned Senior counsel for Smt.Anupama Hebbar, learned counsel for impleading applicant on I.A.No.3/2019.
Sri.S.S.Nagananda, learned Senior counsel for Sri.Ganapathi Hegde, learned counsel for the respondent Nos.2 to 13.
Sri.Dharmendra Chatur, learned counsel for impleading applicant on I.A.No.2/2019.
2. In this petition under Articles 226 and 227 of the Constitution of India, the petitioner - Bank inter alia 6 seeks a writ of prohibition restraining the respondent No.1 not to take any coercive action against the petitioner till the petitioner approaches the Company Court for suitable relief. The petitioner also seeks a writ of certiorari for quashment of order dated 11.06.2018 by which respondent No.1 has issued an order informing the petitioner that its assets will be attached. The petitioner also seeks permission to deposit 2,97,103 shares of United Sprits Ltd. and 47,53,881 shares of Mangalore Chemicals and Fertilizers Ltd. with the Official Liquidator or to any other person which may be directed by this Court. The petitioner also seeks a writ of prohibition restraining the respondent No.1 from attaching the assets of the petitioner. In order to appreciate the petitioner's grievance, few relevant facts need mention which are stated hereinafter.
3. The petitioner is a body corporate incorporated under the Companies Act, 1956 (hereinafter referred to as 'the Act' for short). The State Bank of India initiated 7 recovery proceedings before the Debts Recovery Tribunal, Bengaluru against M/s. United Breweries (Holding) Ltd. (hereinafter referred to as 'the UBHL' for short). The Debt Recovery Tribunal allowed the original application on 19.01.2017 and issued a recovery certificate. Thereafter, the Financial Institutions have initiated the proceedings for recovery before the Recovery Officer. The UBHL was ordered to be wound up by this Court by an order dated 07.02.2017 and an Official Liquidator has been appointed under Section 449 of the Act. It is the case of the petitioner that it had sanctioned and disbursed over draft facilities for a sum of `50 cores only, to UBHL in two installments namely, `32 crores vide sanction letter dated 08.10.2010 and `18 crores vide sanction letter dated 03.12.2012. The aforesaid amount was secured by UBHL in favour of the petitioner by executing several documents. The aforesaid amount was also secured by pledging the shares of UBHL with the petitioner. Accordingly, a memorandum relating to pledge of shares, stocks and 8 securities creating pledge in respect of 2,97,103 shares of United Sprits Ltd. and 47,53,881 shares of Mangalore Chemicals and Fertilizers Ltd. was executed in favour of the petitioner - Bank.
4. It is averred in the writ petition that despite notices and reminders, UBHL did not make payment of the outstanding amounts. The respondent - Bank thereupon, in exercise of statutory powers appropriated an amount of `15,58,36,734.76 from the amounts available with the Bank against the total outstanding dues inclusive of interest due and payable by UBHL. In the recovery proceedings initiated by the Financial Institutions, a show cause notice dated 23.03.2018 for attachment of assets of the petitioner was issued to it for non-compliance of the orders for attachment of shares and consequent direction to sell the shares and deposit the proceeds. Thereafter, an order dated 11.06.2018 was passed by which the assets of the 9 petitioner were attached. In the aforesaid factual background, the petitioner has approached this Court.
5. Learned Senior counsel for the petitioner submitted that UBHL had created a pledge in respect of the shares in question in favour of the petitioner and the petitioner is aggrieved by the action of the Recovery Officer in seeking to attach the assets of the petitioner - Bank. It is further submitted that the petitioner is ready and willing to surrender the shares either with the Recovery Officer or with the Official Liquidator or before the Registry of this Court, as may be directed by this Court.
6. On the other hand, learned Senior counsel for respondent Nos.2 to 13 submitted that UBHL had created a pledge in favour of the petitioner - Bank. It is also urged that the Tribunal has passed an order on 19.01.2017 and an order of winding up of UBHL was passed by this Court in Co.P.No.162/2013 on 07.02.2017. However, the Official Liquidator till today 10 has not taken any action. It is also pointed out that the order passed by the Debt Recovery Tribunal has attained finality as the same has also been affirmed by the Debt Recovery Appellate Tribunal. It is argued that the grievance raised by either the Company or the Official Liquidator cannot be entertained in this petition and they cannot be permitted to enlarge the scope of the writ petition. Reference has been made to the decision of the Supreme Court in 'ALLAHABAD BANK Vs. CANARA BANK AND ANOTHER' (2000) 4 SCC 406 in support of his submission that even where a winding up petition is pending or winding up order has been passed, the adjudication of the liability and execution of certificate in respect of debt payable to the Banks and Financial Institutions are respectively within exclusive jurisdiction of Debt Recovery Tribunal and in such a case the Company Court's jurisdiction under Sections 442, 537 and 446 of the Act is ousted. Learned Senior Counsel has also pointed that the Division Bench of this Court in OSA No.5/2017 has 11 directed the Official Liquidator not to precipitate the matter during the pendency of the appeal. Reliance has also been placed on the decision rendered by this Court dated 27.02.2019 passed in W.P.No.36447/2018.
7. On the other hand, learned counsel for the Company submitted that on winding up of the Company, the property of the Company becomes custodial legis of the Company Court. Reference has been made to Section 456(2) of the Act. It is further submitted that the Financial Institutions are unsecured creditors and they cannot be permitted to bypass the procedure prescribed under the Act and have to seek leave of the Court under Section 446(2) of the Act.
8. Learned Senior counsel for the Official Liquidator has submitted that the Financial Institutions are not the secured creditors and therefore, their remedy is to file an application in a proceeding pending before the Company Court seeking appropriate relief. 12 In support of aforesaid submission, reference has been made to the decision of the Supreme Court in the case of 'ANITA INTERNATIONAL Vs. TUNGABADRA SUGAR WORKS MAZDOOR SANGH AND OTHERS' (2016) 9 SCC 44, decision of the Delhi High Court in the cases of 'M/s. IFCI LTD. Vs. M/s. KOSHIKA TELECOM' in Co.App. No.64/2013 and 'LEELA HOTELS LIMITED Vs. HOUSING AND URBAN DEVELOPMENT'.
9. Learned counsel for the Recovery Officer has submitted that the recovery certificate has been issued and the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 'the 1993 Act' for short) have an overriding effect.
10. I have considered the respective submissions made by the learned counsel for the parties and perused the record. The Supreme Court in the case of ALLAHABAD BANK, supra, has held that even when a 13 winding up order has been passed against a Company, the adjudication of liability, and execution of the recovery certificate in respect of debt payable to the financial institutions lies within the exclusive jurisdiction of Debt Recovery Tribunal and in such a case, the Company Courts jurisdiction under Sections 442, 537 and 446 of the Act stands ousted. It has further been held that no leave of the Company Court is necessary for initiating the proceeding under the 1993 Act nor can Company Court transfer to it or otherwise interfere with such proceeding. It has further been held that since the 1993 Act is a special law, it prevails over the general law, namely the Act. In view of aforesaid enunciation of law, there is no legal impediment in the Recovery Officer proceeding further with the recovery proceedings under the 1993 Act.
11. It is pertinent to note that the subject matter of this petition is the validity of the action initiated by the Recovery Officer with regard to attachment of 14 assets of the petitioner. Therefore, for this reason also, neither the Company nor the Official Liquidator can be permitted to widen the scope of the writ petition and to urge the contentions which even otherwise do not require consideration of this Court in this petition. Besides that, it is pertinent to mention here that an order of recovery was passed on 19.01.2017 and an order of winding up of the Company was passed on 07.02.2017. The Official Liquidator has not taken any action for a period of more than 2 years. Even otherwise, the Official Liquidator has been requested by a Division Bench of this Court by order dated 25.04.2017 passed in OSA No.5/2017 not to precipitate the matter during the pendency of the appeal. the aforesaid appeal is still pending before the Division Bench. Therefore, the Official Liquidator even otherwise cannot take any action in the matter even if the shares are surrendered in his favour.
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12. Sofar as decision relied upon by the learned counsel for the petitioner in the case of ANITA INTERNATIONAL, supra, is concerned, in the aforesaid decision, the Supreme Court has dealt with the validity of the conditions imposed by the Company Court for permitting the Financial Institution to proceed with the recovery proceeding before the Debt Recovery Tribunal. In the aforesaid context, it was held that the order passed by the Company Court was binding before the Debt Recovery Tribunal. Besides that, it is pertinent to mention here that in paragraph 51 of the aforesaid decision, the Supreme Court has held that the issue under consideration in the aforesaid decision is whether or not an order passed by the Company Court was binding on the Recovery Officer and whether the proceeding conducted by the Recovery Officer in violation of the above order were sustainable in law. The aforesaid issue does not arise for consideration in this petition. Therefore, the aforesaid decision has no application to the obtaining factual matrix of the case as 16 the petitioner - Bank in the instant case has sought quashment of order of attachment of assets and has sought permission to surrender the shares. Similarly the decision of the Delhi High Court in M/s. IFCI LTD., supra, deals with the function of the Official Liquidator to ensure that the claims of secured creditors are satisfied. The aforesaid decision therefore is also of no assistance to the respondents.
13. The petitioner has already expressed its willingness in surrendering the shares in question in favour of such authority as this Court may direct. In the fact situation of the case, I direct the petitioner to surrender the shares in question in favour of the Recovery Officer within a period of three weeks from the date of receipt of certified copy of the order passed today. Needless to state that in case petitioner surrenders the shares in favour of the Recovery Officer within a period of three weeks from the date of receipt of certified copy of the order passed today, the 17 impugned order of attachment dated 11.06.2018 shall stand quashed.
Accordingly, the petition is disposed of.
14. In view of the disposal of the writ petition, the pending interlocutory applications do not survive for consideration and are accordingly disposed of.
Sd/-
JUDGE RV