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SUPREME COURT OF INDIA
R.F. NARIMAN, NAVIN SINHA, JJ.
SWARAJ INFRASTRUCTURE PVT. LTD. – APPELLANT
VERSUS
KOTAK MAHINDRA BANK LTD. – RESPONDENT
CIVIL APPEAL NO.___1291 of 2019 (ARISING OUT OF SLP (CIVIL) NO.6221 OF 2018)
CIVIL APPEAL NO._____1292________ of 2019 (ARISING OUT OF SLP (CIVIL) NO.6458 OF 2018) CIVIL APPEAL NO._____1294________ of 2019 (ARISING OUT OF SLP (CIVIL) NO.6571 OF 2018) CIVIL APPEAL NO._____1293________ of 2019 (ARISING OUT OF SLP (CIVIL) NO.6597 OF 2018)
Decided on : 29-01-2019
(2000) 4 SCC 406 – Referred
(b) Companies Act, 1956 – Section 433(e) and 434 – Winding up proceedings under – Not a means of seeking to enforce payment of a debt – Therefore bar contained in section 18 r/w section 34, Recovery of Debts Act, 1993 would not apply to winding up proceedings under Companies Act, 1956 – Proceedings under both Acts can proceed simultaneously – Debts Recovery Tribunal, would be entitled to order sale, and sell the properties of the debtor, even of a company in liquidation, but only after giving notice to the Official Liquidator. (Para 11, 13, 15)
(1965) 35 Comp Cas 456 (SC); (2010) 10 SCC 553; (1966) 3 SCR 948; (2005) 8 SCC 190; (2013) 4 SCC 381 – Relied upon
(2001) 3 Mah LJ 552 – Cited with approval
(c) Companies Act, 1956 – Section 439 and section 9(2), Provincial Insolvency Act, 1920 – In contrast to provision of section 9(2) of act 1920, section 439 of Act 1956, a secured creditor’s petition for winding up is maintainable without any requirement of it having to give up or relinquish its security – Held, a secured creditor is not required to forsake his security before filing a winding up application. (Para 17, 18)
(2013) 1 SCC 462 – Relied upon
ILR 1987 KAR 2673; (2013) 3 Mah LJ 811 – Cited with approval
(d) Companies Act, 1956 – Section 434(1) – Different clauses of section 434(1) viz. (a) to (e) are not mutually exclusive – If a creditor is not able to file petition under clause (b), he is not precluded from filing the same under other clauses – Instantly execution or other process in the form of a recovery certificate had not been issued by the Recovery Officer under Recovery of Debt Act, 1993 till the date of filing of the petition – Hence the petition could not be filed under clause (b) – Application filed under section 434(1) (e) r/w section 434(1)(a) held maintainable. (Para 19)
(e) Administration of justice – Company matters – Cases for recovery of dues to secured creditors like the present one have to be decided by balancing the interest of creditors with a debtor company against which a winding up petition is admitted – When secured creditors like the respondent are driven from pillar to post to recover their legitimately can attempt to avail of more than one remedy at the same time. (Para 20)
[1940] 1 All E.R. 425 – Referred
Facts of the case:
The respondent, Kotak Mahindra Bank Limited, advanced various loans to the companies in question. The outstanding amount against these companies as on date, together with interest, is stated to be in the region of INR 48 crores. The respondent approached the Debts Recovery Tribunal, Mumbai by filing three separate original applications to recover the debt owed to them. The Debts Recovery Tribunal delivered three separate judgments on 16.01.2015 allowing the applications filed by the respondent bank. Apparently, the said orders are final as no appeals have been preferred to the Debts Recovery Appellate Tribunal. Recovery certificates dated 12.08.2015 for the said amounts were then issued by the Recovery Officer. Various attempts were made to auction the properties that were security for the loans granted, but each of these attempts has yielded no results.
In the meanwhile, the respondent issued statutory notices under Sections 433 and 434 of the Companies Act, 1956. As no payments were forthcoming, a company petition was filed before the Bombay High Court. By an order dated 26.07.2017, the said petition was admitted. The Division Bench dismissed the appeals in question.
Finding of the Court:
Winding up proceedings under Act 1956 is not a means of seeking to enforce payment of a debt.
Proceedings under Companies Act, 1956 and Recovery of Debts Act, 1993 can proceed simultaneously.
A secured creditor is not required to forsake his security before filing a winding up application.
Different clauses of section 434(1) viz. (a) to (e) of Companies Act 1956 are not mutually exclusive.
When secured creditors like the respondent are driven from pillar to post to recover their legitimately can attempt to avail of more than one remedy at the same time.
JUDGMENT :
R.F. Nariman, J.
1. Leave granted.
2. The present case involves the right of a secured creditor to file a winding up petition after such secured creditor has obtained a decree from the Debts Recovery Tribunal [“DRT”] and a recovery certificate based thereon.
3. Several appeals were taken up together for hearing by the Division Bench of the Bombay High Court. The brief facts necessary to decide the present appeals are as follows:
The respondent, Kotak Mahindra Bank Limited, advanced various loans to the companies in question. The outstanding amount against these companies as on date, together with interest, is stated to be in the region of INR 48 crores. The respondent approached the Debts Recovery Tribunal, Mumbai by filing three separate original applications to recover the debt owed to them. The Debts Recovery Tribunal delivered three separate judgments on 16.01.2015 allowing the applications filed by the respondent bank. Apparently, the said orders are final as no appeals have been preferred to the Debts Recovery Appellate Tribunal [“DRAT”], Mumbai. Recovery certificates dated 12.08.2015 for the said amounts were then issued by the Recovery Officer under Section 19(19) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 [“Recovery of Debts Act”]. We have been informed that various attempts were made to auction the properties that were security for the loans granted, but each of these attempts has yielded no results.
In the meanwhile, the respondent issued statutory notices dated 15.04.2015 under Sections 433 and 434 of the Companies Act, 1956. As no payments were forthcoming, a company petition was filed before the Bombay High Court on 03.07.2015. By an order dated 26.07.2017, the said petition was admitted as the companies in question were said to be commercially insolvent. In the appeals that were filed to the Division Bench of the Bombay High Court, the main point argued was that once a secured creditor has obtained an order from the DRT, and a recovery certificate has been issued thereupon, such secured creditor cannot file a winding up petition as the Recovery of Debts Act is a special Act which vests exclusive jurisdiction in the DRT. Also, a secured creditor can file a winding up petition only on giving up its security, which has not been done in the present case. These contentions did not find favour with the Division Bench who then dismissed the appeals in question.
4. Shri K. Parameshwar, learned advocate, appearing on behalf of the appellants, has urged a number of points before us. He first argued that this Court has held that the Recovery of Debts Act is a special statute qua the general statute of the Companies Act, 1956, and that this Court has further held that exclusive jurisdiction is vested in the DRT under the Recovery of Debts Act to the exclusion of the Company Court. As this is so, once the DRT has been approached, the necessary corollary is that a winding up petition to realize the same debt would be expressly barred on a conjoint reading of Sections 17 and 18 of the Recovery of Debts Act. He further argued that in any case, the secured creditor is put to an election where it must either relinquish its security and stand in line in the winding up proceeding or realize its security outside the winding up proceeding. On the facts of the present case, it has filed a successful action to realize its security outside the winding up proceeding, as a result of which, the winding up proceeding filed by it, without giving up the mortgaged security, would not be maintainable. It was further argued that, in any event, Section 434(1)(b) of the Companies Act, 1956 would be attracted, and not Section 434(1)(a), and that since the security has not yet been realized, the winding up petition dressed up under Section 434(1)(a), but really under Section 434(1)(b), would not be maintainable. Also, reliance on certain High Court judgments by the impugned judgment is completely misplaced for the
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