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Andhra Pradesh High Court
Judges : N.V.RAMANA
Syndicate Bank, Hyderabad - Appellant
Versus
A.P. Steels Limited, Hyderabad - Respondent
Decided On : 10-08-02
Civil Matter - Civil Law – Writ Petition - Companies Act, Companies Act,1956 - Section 456 - 442 and 537 - Income Tax Act, 1961 - Income- tax (Certificate Proceedings) Rules, 1962, -Sick Industrial companies (Special Provisions) Act, 1985 - Section 20 (2) - Learned Counsel for Official liquidator submitted that as per Section 456 of Companies Act, all properties of company in liquidation absolutely vest in Company Court, and it is for company Court to pass appropriate orders for disposal of properties of company in liquidation having regard to interests of company as well as secured and unsecured creditors of company - He urged that property of company in liquidation does not vest in Official liquidator and he is only custodian of company - Since object of winding up proceedings is to put secured creditors on par with and pay them pari passu, any attachment or sale of properties of company in liquidation by another authority would be ineffective, as under law, all properties of company in liquidation would absolutely vest in company Court free from all attachments - It is only Company Court which can give all directions, and no secured creditor is entitled to seek removal of properties vested in Company Court by reason of exercise of jurisdiction by any other forum or authority - Point for consideration point that arises for consideration is whether a Bank or a Financial institution, which obtained a Certificate of Recovery from Debts Recovery tribunal against a company in winding up can seek an order to remove properties custodia legis in Company court to Recovery Officer attached to Debts Recovery Tribunal - Contention was that in view of section 18 of the DRT Act, all matters relating to recovery of debt are taken out from purview of Companies Court, including Sections 442, 537 and 446, and therefore, no leave is necessary to proceed with original application and the recovery Case in view of overriding effect given to DRT Act by Section 34 thereof - Alternately, it was also submitted that Section 447 of Companies Act, cannot be invoked as there was no winding up order nor an order appointing provisional liquidator - For Canara Bank it was urged that merely because Allahabad Bank obtained a decree from Debts Recovery tribunal, it cannot be allowed to appropriate entire sale proceeds recovered by it as Canara Bank has claimed under section 446 of Companies Act - Hon ble Supreme Court framed six points for consideration - It was held that adjudication of liability and recovery of debt amount by execution of Certificate of recovery are within exclusive jurisdiction of Debts Recovery Tribunal and recovery Officer - On question whether leave of Company Court is required for initiation of various proceedings by banks and financial institutions before debts Recovery Tribunal, before winding up order is passed, it was answered in negative - Even in regard to cases after winding up order has been passed, it was held that Company Court cannot stay execution proceedings before recovery Officer or transfer execution proceedings to itself - Held, Court may now consider two decisions relied upon by learned Counsel for applicant - Court have gone through decisions very carefully and am of considered opinion that they do not in any manner assist applicant, and on other hand, there are observations, which run counter to submissions made by learned Counsel for applicant Court our opinion, must be done having regard to provisions laid down therein - Court must also take into consideration fact that tribunal is subject to supervisory jurisdiction of this Court - Jurisdiction of Tribunal for adjudication and right of execution jurisdiction of Company Court has been determined in allahabad Bank s case (supra) but not mode of recovery thereof - When a liquidator or a provisional liquidator as case may be is directed to take into his custody or under his control property, effects and actionable claims, company is or appears to be entitled to by reason of provisions contained in Section 456 of Companies Act, there cannot be any doubt whatsoever that leave of Court must be obtained - By reason of aforesaid provision a legal fiction is created - Application filed by Syndicate bank at stage when matter is posted for confirmation of sale by this court is not maintainable as per provisions of DRT Act, Companies Act, second and Third Schedules to Income- tax Act, which are made applicable by reason of Section 29 of DRT Act - Appeal dismissed.
( 1 ) THIS application, filed by one of the respondents in R. C. C. No. 2 of 1995 i. e. Syndicate Bank, under Rule 9 of the company (Court) Rules, 1959 (for short the Rules ) raises an important question as to the right of a secured creditor to seek transfer or assets to the Debts Recovery tribunal (DRT), By this application, the applicant seeks a direction to the Official liquidator to transfer all the assets, moveable and immoveable properties and liquid cash of A. P. Steels Limited-1st respondent company to the Recovery Officer of the drt as per R. P. No. 90 of 2002, on the file of the DRT. The applicant also seeks stay of all further proceedings in C. A. No. 354 of 2002 in RCC No. 2 of 1995. Facts in brief
( 2 ) IT is the case of the applicant that they filed OA No. 925 of 1999 before the drt, Hyderabad, for recovery of rs. 2,91,27,334/-, that in the said application all the other respondents, except 9th respondent herein are parties, that one of the respondents, namely Andhra Bank has put up a claim for Rs. 1,05,71,000/- against the applicant, that the DRT vide orders dated 1-3-2002 allowed the claim of the applicant and rejected the claim of the 2nd respondent and issued a Certificate of recovery in favour of the applicant vide rp No. 90 of 2002, for recovery of a sum of Rs. 8,49,07,865/ -. As per Section 34 (1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short the DRT Act ) and the order passed by the DRT dated 1-3-2002, the applicant is entitled to seek transfer of all the assets of the Company in liquidation to the DRT and the 1st respondent.
( 3 ) THE 5th and 7th respondents, namely IDBI and ICICI have opposed the application. In their counter-affidavit, IDBI stated that the application filed by Syndicate bank is belated and is not maintainable, that when the assets of the Company in liquidation are sold by the Official Liquidator and the sale is awaiting confirmation by the Court, the remedy of the applicant is to pursue their claim by filing appropriate application before the Official Liquidator as per section 529a of the Companies Act, 1956, (for short the Companies Act ) and that the application for transfer of all the properties of the company in liquidation to the DRT is not maintainable. The 7th respondent, ICICI also filed counter- affidavit with similar averments. Another financial institution, namely IFCI has taken similar stand in their counter-affidavit. Apart from the counter-affidavits filed by the financial Institutions, other secured creditors filed counter-affidavits and opposed the applications. It is their contention that the applicant has only second charge over the properties, and therefore, it has no right to claim any amount from the assets of the company. Summary of submissions
( 4 ) THE learned Counsel for the applicant submits that in view of the overriding effect given to DRT Act by reason of Section 34 thereof, the Company court has no power to sell the assets/ properties of the company in liquidation. Reliance is placed on the judgement of the supreme Court in Allahabad Bank v. Canara Bank, (2000) 101 Comp. Cas. 634 (SC) = AIR 2000 SC 1535, and on the judgement of the Division Bencn of this court in Pennar Patterson v. State Bank of India, 2001 (3) ALT 673 (DB ). The learned Counsel further urged that the DRT act was enacted to provide for speedy and summary remedy for recovery of huge amounts of debts due to the banks and financial institutions. Delay in recovering the debt due to the winding up proceedings should be avoided. The debt due to the bank and the company in liquidation has to be realized from the assets and properties of the company and ail the remedies are to be worked out only under the DRT Act. Any recourse to the provisions of the companies Act, which is a general Act, would defeat the purpose of the DRT Act, and therefore, all questions in relation to adjudication of the claims by the bank, execution of orders, etc. ,
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