IMPORTANT POINTS
Order passed by Company Court is binding on Recovery Officer.
Lender Bank or Financial Institution are entitled to initiate recovery proceedings by filing application for winding up of debtor company, and the jurisdictional Company Court competent to determine claim of such Bank or Financial institution.
Sale conducted in violation of norms and ignoring objections by interested parties cannot be sustained on grounds of equity.

Headnote:(a) Companies Act, 1956 – Section 529 and 529-A r/w section 17, Recovery of Debts Due to Banks and Financial Institutions Act, 1993 – Order passed by Company Court – Binding on Recovery Officer – Instantly, auction sale conducted by Recovery Officer without involving Official Liquidator – Violative of orders of Company Court – Impermissible – Acceptance of bid of Anita International by Recovery Officer and confirmation of the sale in its favour – Impermissible – Deserve to be set aside. (Para 42)
       (2008) 7 SCC 738; (2013) 4 SCC 381 – Relied upon
       (b) Companies Act, 1956 – Section 446 – Lender Bank or Financial Institution – Entitled to initiate recovery proceedings by filing application for winding up of debtor company – Jurisdictional Company Court competent to determine claim of such Bank or Financial institution – Instantly, order passed by Company Court in the High Court at Madras – Neither invalid nor void. (Para 44)
       (2015) 5 SCC 574; 1955 (1) SCR 117; (2013) 10 SCC 136 – Distinguished
       (c) Administration of justice – Judicial propriety – Not open to anybody, parties to a lis or any third party, to determine at their own, validity of an order passed by a Court – Such party must have the order set aside by a Court of competent jurisdiction – Till the order is set aside, it would have the force of law, and any act/action carried out in violation thereof, would be liable to be set aside and also may entail punishment for disobedience. (Para 45)
       (2011) 3 SCC 363; (2013) 4 SCC 381; (2013) 14 SCC 689 – Relied upon
       (d) Recovery of Debts Due to Banks and Financial Institutions Act, 1993 – Sale conducted in violation of norms and ignoring objections by interested parties – Cannot be sustained on grounds of equity. (Para 47)
       (e) Administration of justice – Judicial propriety – Company court giving directions – Sale conducted in violation thereof – Aggrieved parties approaching Company Court for enforcing its directions – No infirmity. (Para 48)
       (2000) 4 SCC 406; (2005) 5 SCC 75; (2005) 8 SCC 190; (2003) 10 SCC 482; (1996) 4 SCC 165; (2001) 6 SCC 534; AIR 1971 SC 2337– Distinguished
       (f) Administration of justice – Judicial propriety – An order in rem is binding on all – Instantly, order of the Company Court to involve Official Liquidator and not to take any coercive steps against the debtor – Order in rem, not in pesonam – Binding on appellant. (Para 49)
       Facts of the case:
       Two company petitions, i.e., Company Petition Nos. 170 of 1995 and 35 of 1997 were filed by Videocon International Ltd. and Tapti Machines Pvt. Ltd., for winding up of Deve Sugars Ltd. before the High Court of Judicature at Madras. Deve Sugars Ltd. was running a sugar factory in the State of Karnataka. Deve Sugars Ltd. was ordered to be wound up on 16.4.1999. An Official Liquidator was accordingly directed to take possession of the properties of the company Deve Sugars Ltd.. The Official Liquidator took possession of the assets of the company on 28.9.1999.
       The State Bank of Mysore had also extended some loans to Deve Sugars Ltd. When Deve Sugars Ltd. defaulted in the repayment of the loans, the State Bank of Mysore filed Original Application before the Debts Recovery Tribunal, Bangalore for the recovery of Rs.22,31,78,558.55. During the course of the instant proceedings, the DRT, Bangalore issued a recovery certificate in the sum of Rs.8.40 crores. The State Bank of Mysore also filed Company Applications in the pending Company Petition No.170 of 1995, before the High Court at Madras, seeking leave to proceed with the recovery proceedings before the DRT, Bangalore, under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
       The Company Court while granting leave to the State Bank of Mysore granted leave subject to the condition that the Official Liquidator, was impleaded before the DRT, Bangalore, and further, that no coercive steps would be taken against the assets of the company – Deve Sugars Ltd., during or after the conclusion of proceedings before the DRT, Bangalore.
       Immediately after the DRT Bangalore issued the recovery certificate, the State Bank of Mysore moved DCP No.1912 in Original Application No.440 of 1997, seeking the disposal of the assets of the company in liquidation, at the hands of the Recovery Officer of the DRT, Bangalore. Simultaneously, the State Bank of Mysore filed Company Application No.1300 of 2003, with a prayer that it be permitted to seek execution of the recovery certificate dated 15.5.2002.
       The State Bank of Mysore approached the Recovery Officer, for the disposal of the assets of Deve Sugars Ltd., in continuation of the recovery certificate issued by the DRT dated 15.5.2002. The Recovery Officer issued a proclamation of sale. The auction of the properties of Deve Sugars Ltd., in the first instance, was fixed for 1.10.2014.
       The workers’ union of Deve Sugars Ltd. approached the High Court of Karnataka, by filing Writ Petition No.37991 of 2004 assailing the recovery proceedings initiated by the State Bank of Mysore, before the Recovery Officer. A learned single Judge of the High Court of Karnataka, while issuing notice, directed that the sale made by the Recovery Officer would be subject to the final outcome of the writ petition. The objections raised by the workers’ union and the Official Liquidator, were overruled by the Recovery Officer.
       The auction scheduled by the Recovery Officer for 1.10.2004, could not be conducted. The auction was actually conducted on 11.8.2005. The bid of Anita International of Rs.10.25 crores was accepted. The bidder deposited the bid amount, within the stipulated period. No challenge was raised against the auction. The Recovery Officer ordered the confirmation of the sale of the auctioned property on 12.9.2005.
       On 20.9.2005, the Recovery Officer appointed a Receiver, to take possession of the property, sold at the auction. The Court Commissioner allegedly took over possession of some of the properties, and handed over the same to the auction purchaser – Anita International.
       Anita International, filed Company Application No.1811 of 2005 before the High Court at Madras for removal of the security agency. Videocon International Ltd. and Tapti Machines Pvt. Ltd. filed Writ Petition No.26564 of 2005 before the High Court of Karnataka. The writ petitions were disposed of by the High Court of Karnataka whereby the petitioners were allowed to avail of their alternative remedy before the DRT, Bangalore. The writ appeals were dismissed. Liberty was, however, reserved with appellants, by permitting them to approach the DRT, Bangalore, by filing appeals.
       Finding of the Court:
       There is no merit in these appeals.
       Result: Appeals dismissed.

JUDGMENT :

Jagdish Singh Khehar, J.

1. Leave granted in Special Leave Petition (C) Nos. 7490-7491 of 2014.

2. Two company petitions, i.e., Company Petition Nos. 170 of 1995 and 35 of 1997 were filed by Videocon International Ltd. and Tapti Machines Pvt. Ltd., for winding up of Deve Sugars Ltd. before the High Court of Judicature at Madras. Deve Sugars Ltd. was running a sugar factory in the State of Karnataka. Deve Sugars Ltd. was ordered to be wound up on 16.4.1999. An Official Liquidator was accordingly directed to take possession of the properties of the company Deve Sugars Ltd.. The Official Liquidator took possession of the assets of the company situate at Harige (in District Shimoga, in the State of Karnataka), on 28.9.1999.

3. The State Bank of Mysore had also extended some loans to Deve Sugars Ltd.. When Deve Sugars Ltd. defaulted in the repayment of the loans, the State Bank of Mysore filed Original Application Nos. 440 of 1997 and 1300 of 1997, before the Debts Recovery Tribunal, Bangalore, (hereinafter referred to as, the DRT, Bangalore) for the recovery of Rs.22,31,78,558.55. During the course of the instant proceedings, the DRT, Bangalore issued a recovery certificate in the sum of Rs.8.40 crores. It would be relevant to mention, that the State Bank of Mysore also filed Company Application Nos.1251-1253 of 1999, in the pending Company Petition No.170 of 1995, before the High Court at Madras, seeking leave to proceed with the recovery proceedings before the DRT, Bangalore, under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as, the RDB Act).

4. The Company Court in the High Court at Madras, while granting leave to the State Bank of Mysore, passed the following order on 10.3.2000 (while disposing of Company Application Nos. 1251-1253 of 1999):

“This company application praying this Court to grant leave to the applicant Bank to proceed and prosecute further O.A. No.1300 of 1997 filed by them against the respondent Company in the Debt Recovery Tribunal at Bangalore. Company Applications coming on this day before this Court for hearing in the presence of Mr. R. Varichandran advocate for the applicant, herein and the official liquidator, High Court, Madras, the respondent, appearing in person, and upon reading the Judges Summons and affidavit and report of the Official Liquidator filed herein, the Court made the following orders:-Leave is granted subject to the condition that official liquidator is impleaded and no coercive steps are taken against the assets of the company during or after the conclusion of the proceedings before the Tribunal.” (emphasis supplied)

A perusal of the above order reveals, that leave was granted, subject to the condition that the Official Liquidator, was impleaded before the DRT, Bangalore, and further, that no coercive steps would be taken against the assets of the company – Deve Sugars Ltd., during or after the conclusion of proceedings before the DRT, Bangalore.

5. On 1.8.2001, the workers’ union of Deve Sugars Ltd. was granted the responsibility to overlook security arrangements of the establishment of Deve Sugars Ltd..

6. Immediately after the DRT, Bangalore, issued the recovery certificate, the State Bank of Mysore moved DCP No.1912 in Original Application No.440 of 1997, seeking the disposal of the assets of the company in liquidation, at the hands of the Recovery Officer of the DRT, Bangalore (hereinafter referred to as, the Recovery Officer). Simultaneously, the State Bank of Mysore being conscious of the order passed by the High Court at Madras on 10.3.2000, filed Company Application No.1300 of 2003, with a prayer that it be permitted to seek execution of the recovery certificate dated 15.5.2002 (for recovering the amounts due to it, from out of the assets of Deve Sugars Ltd.). It is relevant to mention, that the aforesaid Company Application No.1300 of 2003 was not entertained by the Registry of the High Court at Madras. While declining to

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