Madras High Court
B.Raju vs The Official Liquidator on 28 January, 2014
Bench: N.Paul Vasanthakumar, P.Devadass
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 28.01.2014
CORAM
THE HON'BLE MR.JUSTICE N.PAUL VASANTHAKUMAR
AND
THE HON'BLE MR.JUSTICE P.DEVADASS
O.S.A.Nos.389 to 391 of 2013
and
M.P.Nos. 1, 1, 1 and 2 of 2013
O.S.A.No. 389 of 2013:
1.B.Raju
2.R.Kamala ... Appellants
Vs.
1.The Official Liquidator
High Court, Madras,
As the liquidator of
Kaushik Switch Gears Pvt. Ltd.,
(In Liquidation).
2.M/s.State Bank of India,
Ambattur Branch,
Chennai. ... Respondents
O.S.A.No. 390 of 2013:
1.B.Raju
2.R.Kamala ... Appellants
Vs.
1.M/s.State Bank of India,
Ambattur Industrial Estate,
Mogappair West,
Chennai - 600 058
Now
M/s.State Bank of India,
S.A.R. Branch,
32, Montieth Road, Egmore, Chennai - 600 104.
2.M/s.Kaushik Switch Gears Pvt. Ltd.,
Rep. by Official Liquidator,
High Court, Chennai - 600 104.
3.K.Viswanathan (Deceased)
4.K.V.Banumathy ... Respondents
O.S.A.No. 391 of 2013:
1.B.Raju
2.R.Kamala ... Appellants
Vs.
1.M/s.State Bank of India,
Ambattur Industrial Estate,
Mogappair West,
Chennai - 600 058
Now
M/s.State Bank of India,
S.A.R. Branch,
32, Montieth Road,
Egmore, Chennai - 600 104.
2.M/s.Kaushik Switch Gears Pvt. Ltd.,
Rep. by Official Liquidator,
High Court, Chennai - 600 104.
3.K.Viswanathan (Deceased)
4.K.V.Banumathy ... Respondents
O.S.A.No. 389 of 2013:
Appeal against the Order dated 05.11.2013 made in the Ordinary Original Civil Jurisdiction in Comp. Appl. No.160 of 2013 in C.P.No.23 of 2003.
O.S.A.No. 390 of 2013:
Appeal against the Order dated 05.11.2013 made in the Ordinary Original Civil Jurisdiction in Tr.Comp. Appl. No. 1108 of 2013 in C.P.No. 23 of 2003.
O.S.A.No. 391 of 2013:
Appeal against the Order dated 05.11.2013 made in the Ordinary Original Civil Jurisdiction in Tr.Comp. Appl. No.1109 of 2013 in C.P.No. 23 of 2003.
For Appellants : Mr.P.H.Arvindpandian, Sr. Counsel for Mr.Kumarpal Chopra
Respondents : Mr.S.R.Sundar for R-1
(OSA.No.389/2013 and R-2 in
OSA.No.390 & 391 of 2013)
Mr.M.L.Ganesh for R-2 in OSA.No.389/13
and R-1 in OSA.Nos.390 &
391 of 2013)
*****
P.DEVADASS.J.,
COMMON JUDGMENT
Since these three Original Side Appeals are connected on factual matrix and on legal issues, they were heard together and are being disposed of by this common judgment.
2. These appeals presents certain interesting questions as to jurisdiction of the Tribunals constituted under the Recovery of Debts Due to Banks and Financial Institutions Act,1993 (hereinafter, in short, "RDB Act") and the Company Court(High Court) exercising jurisdiction under the Companies Act, 1956. In other words, it is RDB Act,1993 Vs. Companies Act,1956.
3. O.S.A.NO.389 of 2013 has been filed by respondents 1 & 2 in Comp.Appl.No.160 of 2013 in C.P.No.23 of 2003 wherein, the Company Court had transferred Appeal Nos. 1 & 2 of 2013 from Debt Recovery Tribunal[DRT] No.III, Chennai to the Company Court.
4. O.S.A.NO.390 of 2013 has been filed by applicants in Transfer C.A.No.1108 of 2013 in C.P.No.23 of 2003, to set aside the order dated 24.01.2013 passed in I.A.No.40 of 2012 in R.P.No.57 of 2008 in D.R.C. No.53 of 2008 in O.A.No.269 of 2007 by the Recovery Officer, DRT No.III, Chennai and stay the auction sale scheduled on 30.1.2013, which was dismissed by the Company Court by its common order dated 5.11.2013.
5. O.S.A.No.391 of 2013 has been filed by the applicants in Transfer C.A.No.1109 of 2013 in C.P.No.23 of 2003, to set aside the order dated 24.11.2013 passed in I.A.No.41 of 2012 in R.P.No.57 of 2008 in DRC No.53 of 2008 in O.A.No.269 of 2007 by the Recovery Officer, DRT No.III, Chennai and stay the auction sale scheduled on 30.1.2013, which was dismissed by the Company Court by its said common order dated 5.11.2013.
6. For the purpose of these appeals, noticing the following factual matrix is necessary.
(i) M/s.W.S.Industries India Ltd., Porur, Chennai, supplied insulators to M/s.Kaushik Switch Gears (P). Ltd., Chennai. In this regard, W.S.Industries claimed Rs.4,16,179/- from Kaushik Switch Gears. It was not paid. So, in the Company Court, W.S. Industries filed Company Petition No.23 of 2003 under Section 433(c) & (f), 434 1(c) and Section 439 (1)(R) of the Companies Act,1956 to wound up the debtor company and appoint the Official Liquidator as provisional liquidator.
(ii) Viswanathan and his wife Bhanumathy(respondents 3 & 4 in O.S.A.Nos.390 & 391 of 2013), who are Directors of Kaushik Switch Gears were allotted 3 grounds and 1609 sq.ft. of land comprised in S.No.546(part), Mogappair Village by the Tamil Nadu Housing Board. They have mortgage the property with TIIC (Tamil Nadu Industrial Investment Corporation) and availed of loan. Subsequently, the loan was taken over by State Bank of India, Ambattur Industrial Estate Branch(2nd respondent in O.S.A.No.389 of 2013 and 1st respondent in O.S.A.Nos.390 and 391 of 2013). On 23.2.2005, the Viswanathans have entered into a sale agreement with Raju and Kamala (present appellants) to sell the said property for Rs.56,00,000/-. Rs.18,00,000/- has been paid as advance. On 22.1.2007, by another agreement, the sale consideration has been hiked to Rs.80,00,000/-. Advance paid is Rs.30,00,000/-. The balance Rs.50,00,000/- is to be paid by the said purchasers.
(iii) On 10.9.2007, in C.P.No.23 of 2003, the Company Court passed orders winding up Kaushik Switch Gears (P) Ltd., (Ist respondent in O.S.A.No.389 of 2013 and 2nd respondent in O.S.A.Nos.390 & 391 of 2013) and appointed the Official Liquidator as provisional liquidator.
(iv) State Bank of India, Ambattur Industrial Estate Branch filed O.A.Nos.98, 96 & 94 of 2003 in Debt Recovery Tribunal (DRT)-I, Chennai as against said Viswanathan and Banumathi, the Directors of Kaushik Switch Gears (P) Ltd.,(in winding up) to recover its dues. Subsequently, the O.As. were transferred to D.R.T-III, Chennai. They were re-numbered as O.A.Nos.297, 269 and 277 of 2007.
(v) The third party agreement holders, namely, Raju and his wife(the present appellants) have filed C.A.No.215 of 2008 in C.P.No.23 of 2003 for directing the Official Liquidator to execute the sale deed in their favour in pursuance of the sale agreements dated 23.2.2005 and 22.1.2007. In C.A.No.216 of 2008, they have sought for injunction to protect their possession of the said property. On 20.12.2010, the Company Court taking note of the fact that already the State Bank of India has taken steps to sell the property by initiating proceedings before D.R.T-III, Chennai and the Official Liquidator also has no objection for this, dismissed C.A.Nos.215 & 216 of 2008, however observing that the applicants necessarily have to go before D.R.T.-III, Chennai and file appropriate applications.
(vi) In 2008, in O.A.Nos.297, 269 and 277 of 2007, D.R.T.-III, Chennai issued Recovery Certificates D.R.C.Nos.40/2008, 53/2008 and 63/2008 respectively as against the directors of M/s.Kaushik Switch Gears (P) Ltd. to recover the bank dues. In D.R.C.No.53 of 2008, the Tribunal directed sale of the properties including the 3 grounds of property situate in Mogappair, which was agreed to be sold to the appellants by the said directors.
(vii) On 11.2.2011, the Recovery Officer, D.R.T-III, Chennai directed attachment of the said property. The appellants herein have filed I.A.No.427 of 2011 in Appeal SR No.3197/2011 in R.P.No.57 of 2008 in D.R.C.No.53 of 2008 in O.A.No.269 of 2007 before D.R.T-III, Chennai to condone the delay of 160 days caused in filing appeal as against the dismissal of their I.A.No.460 of 2010 filed to challenge the said order dated 11.2.2011 of the Recovery Officer. However, on 19.7.2007, it was dismissed. As against that, the appellants have preferred R.A.No.113 of 2012 before the D.R.T-III, Chennai. It is pending. On 4.12.2012, in D.R.C.No.53 of 2008, the Recovery Officer issued Auction Sale notice for the sale of the Mogappair property on 30.1.2013.
(viii) In the circumstances, the appellants have filed I.A.Nos.40 and 41 of 2012 in R.P.No.57 of 2008 in D.R.C.No.53 of 2008 in O.A.No.269 of 2007 to defer the sale scheduled on 30.1.2013. On 24.1.2013, the Recovery Officer referring to his order dated 11.2.2011 and the order of the Company Court in C.A.No.360 of 2008 granting permission to the Bank to sell the property dismissed I.A.Nos.40 and 41 of 2012. As against this, the appellants have filed Appeal Nos.1 and 2 of 2013 in R.P.No.57 of 2008 in O.A.No.269 of 2007 before D.R.T-III, Chennai. On 28.1.2013, the Tribunal granted interim stay on the appellants depositing Rs.50 lakhs. It was deposited.
(ix) The Official Liquidator filed C.A.No.160 of 2013 in C.P.No.23 of 2013 in the Company Court under Section 460(4) of Companies Act, 1956 seeking direction to transfer Appeal No.1 of 2013 in R.P.No.57 of 2008 in O.A.No.269 of 2007 from D.R.T-III, Chennai to the Company Court and under Section 531 of the Act for a declaration that the sale agreement, dated 23.2.2005 and 22.1.2007 in favour of the appellants is a fraudulent preference. The appellants have filed counter opposing the transfer.
(x) On 13.6.2013, in C.A.No.160 of 2013, the Company Court passed orders transferring Appeal Nos.1 & 2 of 2013 from D.R.T-III, Chennai to the Company Court observing as under:-
"8 There is no dispute about the fact that the third respondent is a secured creditor. There is also no dispute that they also obtained certificates of recovery. The borrower is not pursuing his remedies. But, the respondents 1 and 2 are in occupation of the property on the ground that they are agreement holders. Therefore, all these disputes can be dealt with conveniently before this Court and the Bank, which has been unable to bring the property to sale before the Debts Recovery Tribunal, will stand a better chance by having the appeals transferred to this court.
9 Hence, this application is allowed and the appeals in A.Nos.1 and 2 of 2013 pending on the file of the Presiding Officer, Debts Recovery Tribunal-3, Chennai shall stand transferred to this Court. Office is directed to send a copy of this order to the Debts Recovery Tribunal-3, Chennai for the transfer. List all the applications for hearing on 27.6.2013. The prayer made by the learned Official Liquidator for a direction to the respondents 1 and 2 to pay occupation charges is kept aside to be decided along with other applications."
(xi) In the Company Court, the appellants have filed Transfer C.A.Nos.1108 and 1109 of 2013 to set aside the orders passed by the Recovery Officer, D.R.T-III, Chennai, on 24.1.2013 in I.A.Nos.40 & 41 of 2013 in R.P.No.57 of 2008 in D.R.C.No.53 of 2008 in O.A.No.269 of 2007 on 24.1.2013 and sought for stay of the auction fixed on 30.1.2013.
(xii) On 5.11.2013, the Company Court took up C.A.No.160 of 2013 and the Transfer C.A.Nos.1108 and 1109 of 2013 and dismissed the Transfer Applications observing that the appellants, who are third party agreement holders have created hurdles after hurdles preventing the bank from realising its dues from the company in liquidation by selling the Mogappair property and the Company Court also permitted the Official Liquidator to proceed with the sale of the said property and permitted the agreement holders / appellant herein also to participate in the auction sale.
7. These O.S.As are as against the orders passed in C.A.No.160 of 2013 and Transfer C.A.Nos.1108 & 1109 of 2013.
8. According to Mr.P.H.Arvind Pandian, learned Senior counsel appearing for the appellants the appellants / third party agreement holders in pursuance of the agreements, dated 23.2.2005 and 22.01.2007 are entitled to get the sale deed executed in their favour with respect to the Mugappair property. As directed, they have also deposited Rs.50 lakhs. Thus, their right in the property cannot be scuttled. While dismissing C.A.Nos.215 and 216 of 2008, the Company Court gave them liberty to approach D.R.T-III, Chennai by filing appropriate application. Accordingly, they have filed petitions in D.R.T-III to safeguard their right in the said property involved in the proceedings initiated to by the Bank under RDB Act to recover its dues.
9. The learned Senior Counsel further contended that RDB Act is a Special Act dealing with matters pertaining to recovery of bank dues. C.A.No.160 of 2013 has been filed by the Official Liquidator in the Company Court under the provisions of Companies Act, 1956, which is a General Act. The Special Act will prevail over the General Act. Further, the RDB Act being latter in point of time, will prevail over the earlier Act, viz., Companies Act, 1956. In such circumstances, the order passed by the Company Court transferring Appeal Nos.1 and 2 of 2013 in R.P.No.57 of 2008 in O.A.No.269 of 2007 from D.R.T-III, Chennai to the Company Court is without jurisdiction. Consequently, all the other orders passed by the Company Court, namely, directing the Official Liquidator to sell the property should also go.
10. In support of his submissions, the learned Senior counsel cited ALLAHABAD BANK vs. CANARA BANK AND ANOTHER [2000(4) SCC 406], INTERNATIONAL COACH BUILDERS LTD. vs. KARNATAKA STATE FINANCIAL CORPN[2003(10) SCC 482] and K.AROKIYARAJ Vs. THE CHIEF JUDICIAL MAGISTRATE, SRIVILLIPUTHUR AND ANOTHER (MANU/TN/1796/ 2013)[Full Bench].
11. On the otherhand, Mr.S.R.Sundar, learned counsel appearing for the Official Liquidator submitted that after filing the winding up petition before the Company Court, the appellants have entered into sale agreements, dated 23.2.2005 and 21.1.2007 with the directors of the Company, which is a fraudulent preference. It is hit under section 531 of the Companies Act, 1956. The appellants have created many hurdles preventing the bank from recovering its dues from the company in liquidation. The appellants have also placed many bottlenecks on the various steps taken by the Official Liquidator to carry out the orders of the Company Court passed in C.P.No.23 of 2003. The only motive of the appellants is to drag on the proceedings. In such circumstances, direction has been sought for from the Company Court under section 460(4) of the Companies Act, 1956 to transfer Appeal Nos.1 and 2 of 2013 from D.R.T-III, Chennai to the Company Court so as to have a comprehensive disposal of all the matters in C.P.No.23 of 2013 and also a declaration that the sale agreement in favour of the appellants is a fraudulent preference under section 531 of the Companies Act. In such circumstances, the order of the Company Court transferring the matters from D.R.T.-III, Chennai to the Company Court is perfectly in order.
12. In support of his submissions, the learned counsel appearing for the Official Liquidator cited OFFICIAL LIQUIDATOR, U.P. AND UTTARAKHAND Vs. ALLAHABAD BANK AND OTHERS [2013(4) SCC 381], and IDBI BANK LTD., CHENNAI vs. THE ADMINISTRATOR, KOTHARI ORIENT FINANCE LTD & OTHERS, [2009(4) L.W.725].
13. Mr.M.L.Ganesh, learned counsel appearing for the State Bank of India submitted that the Bank is interested in realising its dues. Already the Company Court has granted permission to the Bank to sell the property and that has to be proceeded with before the Recovery Officer, D.R.T.-III, Chennai and the appellants cannot be permitted to prevent that.
14. We have given our anxious considerations to the submissions of the learned Senior Counsel appearing for the appellants and the learned counsels appearing for the respondents, carefully perused the materials on record, the impugned common order and the decisions cited.
15. Already we have given the factual matrix involved in this case. Let us not duplicate it.
16. However, to facilitate discussions on the legal issues involved, in short, we shall notice that the Company is being wound up under the orders of the Company Court in C.P.No.23 of 2003. The appellants are third party agreement holders with respect to three grounds of property situate in Mugappair belonging to the Directors of the company in winding up. A creditor of the Company viz., State Bank of India, Ambattur Industrial Estate Branch, in O.A.No.269 of 2007 initiated recovery proceedings before D.R.T.-III, Chennai and attached the property to realise its dues. The said third party agreement holders have filed application before D.R.T-III, Chennai seeking relief with respect to the said property. They suffered certain adverse orders before the Recovery Officer, D.R.T.-III, Chennai. As against that, they have filed Appeal Nos.1 and 2 of 2013 before D.R.T.-III, Chennai. On the application of the Official Liquidator in C.A.No.160 of 2013, the said Appeal Nos.1 and 2 of 2013 were transferred to the Company Court. C.A.Nos.1108 and 1109 of 2013 filed by the said third party agreement holders to set aside the orders of the Recovery Officer passed in I.A.Nos.40 and 41 of 2013 in R.P.No.57 of 2008 in D.R.C. No.53 of 2008 in O.A.No.269 of 2007 have been dismissed by the Company Court by its common[impugned] order dated 5.11.2013.
17. On the arguments advanced by both sides, question arises, whether the Company Court on the petition filed under the provisions of the Companies Act, 1956 can transfer the proceedings under RDB Act from D.R.T.-III, Chennai to the Company Court, whether the Company Court has such jurisdiction, in other words, it is, Companies Act, 1956 vs. RDB Act, 1993?
18. Exactly such a tangle was posed before the Hon'ble Apex Court in ALLAHABAD BANK vs. CANARA BANK AND ANOTHER [2000(4) SCC 406].
19. In the said case, Allahabad Bank obtained money decree against its debtor, namely, M/s.M.S.Shoes (East) Co. Ltd. from the Debts Recovery Tribunal, Delhi under the RDB Act. A claim of Canara Bank as secured creditor as against the said company was also pending before the said Tribunal. Winding up petition was filed before the Delhi High Court to wound up the said company under section 442 and 537 of the Companies Act. Allahabad Bank initiated sale proceedings before the Recovery Officer under RDB Act to recover its dues. It was contended by Canara Bank that leave of the Company Court under section 446(1) of the Companies Act have to be obtained by the Allahabad Bank to sell the property and the Company Court can stay the sale proceedings under Sections 442 and 537 of the Companies Act. The Company Court stayed the sale of assets by the Recovery Officer, D.R.T., Delhi. Against that, Allahabad Bank appealed to the Hon'ble Apex Court.
20. The Hon'ble Apex Court noticed Section 17, 18 and 34 of the RDB Act. They runs as under:
"Section 17: Jurisdiction, powers and authority of Tribunals -
(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.
(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.
Section 18: Bar of Jurisdiction-
On and from the appointed day, 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, 227 of the Constitution) in relation to the matters specified in Section 17.
Section 34(1): Act to have over-riding effect-
(1) Save as otherwise provided in Sub-section (2), the provisions of this Act shall 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) and the Sick Industrial Companies (Special Provisions ) Act, 1985(1 of 1986)."
21. In ALLAHABAD BANK case [2000(4) SCC 406], the Hon'ble Apex Court observed as under:
21. In our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to Banks or Financial Institutions. Once the Tribunal passes an order that the debt is due, the Tribunal has to issue a certificate under Section 19(22) (formerly under Section 19(7)) to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the word 'recovery' in Section 17 of the Act. It appears to us that basically the Tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate under Section 19(22). Under Section 18, the jurisdiction of any other court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the Tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Articles 226, 227 of the Constitution). This is the effect of Sections 17 and 18 of the Act.
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 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 realisation of the amount. The certificate granted under Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. No dual jurisdictions at different stages are contemplated. Further, Section 34 of the Act gives overriding effect to the provisions of the RDB Act. That Section reads as follows:
Section 34(1): Act to have over-riding effect-
(1) Save as otherwise provided in Sub-section (2), the provisions of this Act shall 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) and the Sick Industrial Companies (Special Provisions ) Act, 1985(1 of 1986).
The provisions of Section 34(1) clearly state that the RDB Act overrides other laws to the extent of 'inconsistency'. In our opinion, the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner.
24. There is one more reason as to why it must be held that the jurisdiction of the Recovery Officer is exclusive. The Tiwari Committee which recommended the Constitution of a Special Tribunal in 1981 for recovery of debts due to Banks and Financial Institutions stated in its Report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the adjudication of the liability but also in regard to the execution proceedings. It stated in Annexure XI of its Report that all "execution proceedings" must be taken up only by the Special Tribunal under the Act. In our opinion, in view of the special procedure for recovery prescribed in Chapter V of the Act, and Section 34, execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer.
25. Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other Court or authority much less the Civil Court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act. Point 1 is decided accordingly.
31. It may also be noticed that in the L.I.C. Act of 1956, there was no provision like Section 34 of the RDB Act giving overriding effect to the provisions of the L.I.C. Act. Still this Court upheld the exclusive jurisdiction of the LIC Tribunal observing as follows:
the provisions of the special Act i.e. the L.I.C. Act will override the provisions of the general Act, the Companies Act which is an Act relating to Companies in general. We are of the view that the appellant's case under the RDB Act - with an additional Section like Section 34 -is on a stronger footing for holding that leave of the Company Court is not necessary under Section 537 or under Section 446 for the same reasons. If the jurisdiction of the Tribunal is exclusive, the Company Court cannot also use its powers under Section 442 against the Tribunal/Recovery Officer. Thus, Sections 442, 446 and 537 cannot be applied against the Tribunal.
34. While it is true that the principle of purposive interpretation has been applied by the Supreme Court in favour of jurisdiction and powers of the Company Court in Sudarshan Chits (P) Ltd. case, and other cases the said principle, in our view, cannot be invoked in the present case against the Debt Recovery Tribunal in view of the superior purpose of the RDB Act and the special provisions contained therein. In our opinion, the very same principle mentioned above equally applies to the Tribunal/Recovery Officer under the RDB Act, 1993 because the purpose of the said Act is something more important than the purpose of Sections 442, 446 and 537 of the Companies Act, It was intended that there should be a speedy and summary remedy for recovery of thousands of crores which were due to the Banks and to Financial Institutions, so that the delays occurring in winding up proceedings could be avoided.
37. Even in regard to 'priorities' among creditors, the said Committee stated in Annexure I as follows:
"The Adjudication Officer will have such power to distribute the sale proceeds to the Banks and Financial Institutions being secured creditors, in accordance with inter-se agreement/arrangement between them and to the other persons entitled thereto in accordance with the priorities in the law."
The above recommendations as to working out 'priorities' have now been brought into the Act with greater clarity under Section 19(19) of Ordinance 1/ 2000. Priorities, so far as the amounts realised under the RDB Act are concerned, are to be worked out only by the Tribunal under the RDB Act. Section 19(19) of the RDB Act reads as follows:
19.(19) "Where a certificate of recovery is issued against a company registered under the Companies Act, 1956, the Tribunal may order the sale proceeds of such company to be distributed among its secured creditors in accordance with the provisions of Section 529A of the Companies Act, 1956 and to pay the surplus, if any, to the Company." (emphasis supplied) Section 19(19) is clearly inconsistent with Section 446 and other provisions of the Companies Act. Only Section 529A is attracted to proceedings before the Tribunal. Thus, on questions of adjudication, execution and working out priorities, the special provisions made in the RDB Act have to be applied.
Special law v. general law:
38. At the same time, some High Courts have rightly held that the Companies Act is a general Act and does not prevail under the RDB Act. They have relied upon Union of India v. India Fisheries (P) Ltd.
40. Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, Section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of India where there was inconsistency between two special laws, the Finance Corporation Act, 1951 and the Sick Industries Companies (Special Provisions) Act, 1985. The latter contained Section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi, J. that both special statutes contained non-obstinate clauses but that the "1985 Act being a subsequent enactment, the non-obstinate clause therein would ordinarily prevail over the non-obstinate clause in Section 46-B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 statute is a special one". Therefore, in view of Section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts."
22. Ultimately, the Honourable Apex Court held that RDB Act being a special enactment will prevail over the Companies Act, 1956.
23. This aspect of the law has not been disturbed by a Three-Judge Bench of the Honourable Apex Court in INTERNATIONAL COACH BUILDERS LTD. vs. KARNATAKA STATE FINANCIAL CORPN.[2003(10) SCC 482] and also in OFFICIAL LIQUIDATOR, UTTAR PRADESH AND UTTARAKHAND Vs. ALLAHABAD BANK AND OTHERS [2013(4) SCC 381].
24. Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act ("SARFAESI Act") runs as under:
"17. Right to appeal: (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken"
25. Very recently, in JAGADISH SINGH Vs. HEERALAL AND OTHERS [2014 (1) L.W. 108] the Hon'ble Apex Court referring to Section 17 of the SARFAESI Act held that any person, whether a borrower, guarantor or person affected by auction sale has to approach the Debts Recovery Tribunal and not a Civil Court. The said decision also brings out the exclusive jurisdiction of the Debts Recovery Tribunal to exercise jurisdiction over matters covered under section 17 of RDB Act.
26. In K.AROKIYARAJ Vs. C.J.M., SRIVILLIPUTHUR AND ANOTHER [2013(6) MLJ 641] : [2013(5) CTC 225] [MANU/TN/1796/ 2013] before a Full Bench of the Madurai Bench of this Court, when a question as to whether in the Districts to take possession of secured assets under SARFAESI Act, the Bank has to approach the District Magistrate(Collector) alone or either Collector or CJM(Chief Judicial Magistrate) and whether Code of Criminal Procedure,1973 will prevail over SARFAESI Act,2000 arose, the Full Bench noticing that the SARFAESI Act is a Special Act, and the Code of Criminal Procedure being a General Act, held that the Special Act will prevail over General Act.
27. Considering the exclusive jurisdiction of the Debts Recovery Tribunal constituted under the RDB Act, the order passed by the Company Court transferring Appeal Nos.1 and 2 of 2013 from D.R.T-III to itself under the provisions of the Companies Act,1956 is without jurisdiction is clear from the provisions of the RDB Act, 1993 and the General enactment, namely, Companies Act, 1956 and also the decisions seen supra. Thus, the consequential orders passed in the impugned order, dated 5.11.2013 permitting the Official Liquidator to take steps for selling the property is also without jurisdiction.
28. As we have decided the matter on legal issues, we need not go into the merit aspects of the case raised by both sides. Necessarily, they must be raised before D.R.T.-III, Chennai, which is having exclusive jurisdiction over the matter.
29. In view of the foregoings, the orders of the Company Court in C.A.No.160 2013 in C.P.No.23 of 2003 and in Transfer C.A.Nos.1108 and 1109 of 2013 permitting the Official Liquidator to proceed further with the sale of the property are set aside. Appeal Nos.1 and 2 of 2013 shall be sent back to D.R.T.-III, Chennai. The parties are given liberty to raise the various other contentions that they have raised in these appeals before D.R.T-III, Chennai. Accordingly, the O.S.As. are disposed of. The parties shall bear their own costs. Consequently, connected M.P.s are closed.
(N.P.V.J.) (P.D.S.J.) 28.01.2014 Index: Yes/No Internet:Yes/No rrg/vaan N.PAUL VASANTHAKUMAR, J.
and P.DEVADASS, J.
rrg/vaan Pre-Delivery Common Judgment in O.S.A.Nos.389 to 391 of 2013 and M.P.Nos. 1, 1, 1 and 2 of 2013 Dated: 28.01.2014