2011 Supreme(Bom) 585

2011 (4) ALLMR 770
In the High Court of Bombay at Nagpur
R.K. DESHPANDE
IDBI Ltd. & Others
Versus
Official Liquidator, High Court of Bombay & Others
Company Application No.110 of 2009 In Company Appeal No. of 2009 With Company Appeal No.5 of 2009 In Company Petition No.7 of 2001 With Company Appeal No.9 of 2009 With Company Appeal Stamp No.18418 of 2009 With Company Application No.84 of 2008 With Company Application No.377 of 2010 With Company Application No.146 of 2008 With Company Application No.153 of 2008 With Company Application No.530 of 2011 With Company Application No.154 of 2008 With Company Application No.533 of 2011
Decided On: 07-06-2011

Headnote:Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Sections 17, 18 and 19-Companies Act, 1956, Sections 442, 446 and 537-Applicability of-Jurisdiction of Tribunal (DRT)-Exclusive-Company Court cannot exercise its powers under Section 442 of Act against Tribunal or Recovery Officer-Provisions of Sections 442, 446 and 537 of Act, 1956 not attracted to Tribunal (DRT).-Jurisdiction of the Debts Recovery Tribunal is exclusive and the Company Court cannot use its powers under Section 442 against the Tribunal or Recovery Officer and the provisions of Sections 442, 446 and 537 of the said Act cannot be applied against the Debts Recovery Tribunal.

       Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Sections 17, 18 and 19-Companies Act, 1956, Sections 442, 446 and 537-Interpretation of statute-Provisions of RDB Act prevails over provisions of Companies Act to extent of inconsistency between same-Provisions of Companies Act to yield to provisions of RDB Act-In matter of adjudication under Section 17 and execution under Section 25 of RDB Act, Company Court cannot interfere under Sections 442, 446, 537 of Act, 1956.-The provisions of the RDB Act shall prevail over the provisions of the said Act to the extent of inconsistency between the same and the provisions of the said Act have to yield to the provisions of the RDB Act. It has been held that in the matter of adjudication under Section 17 and execution under Section 25, etc., of the RDB Act, there can be no interference by the Company Court under Sections 442, 446 and 537 of the Companies Act.

       Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Sections 17, 18, 19 and 28(2)-Companies Act, 1956, Sections 442, 446 and 537-Jurisdiction of Company Court-Company Court, can exercise its jurisdiction under Section 446(2) only at instance of Recovery Officer acting under Section 28(2) of RDB Act-Any decision by Company Court on application of a secured creditor to disburse amount as per certificate obtained under Section 19(22) of RDB Act would be without jurisdiction.-The exercise of jurisdiction by the Company Court under Section 446(2) can only be at the instance of the Recovery Officer acting under Section 28(4) of the RDB Act. In view of this, any decision by the Company Court on the application of a secured creditor under Section 446 of the said Act, to disburse amount to the secured creditors as per the certificate under Section 19(22) of the RDB Act, would be without jurisdiction.

       Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Sections 17 and 19-Liability and Recovery-Adjudication of liability and execution of certificate by Recovery Officer-Jurisdiction of Tribunal (DRT)-Tribunal DRT has exclusive jurisdiction under Sections 17 and 18 of Act in respect of adjudication of liability and execution of certificate by Recovery Officer-Civil Court or Company Court cannot go into said question, except on provided in Act, 1993.-The jurisdiction of the Debts Recovery Tribunal under Sections 17 and 18 of the RDB Act is exclusive so far as the question of adjudication of liability and execution of the certificate by the Recovery Officer is concerned. It has further been held that no other Court or authority much less the civil Court or the Company Court can go into the said question relating to the liability and recovery, except as provided in the Act.

       Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 19(22)-Companies Act, 1956, Sections 529, 529-A, 530-Company (Court) Rules, 1959, Rules 154, 156, 159 and 163-Winding up of a Company-Winding up proceedings-Proof of debts-Acceptance or rejecting of-Secured credits obtained a certificate under Section 19(22) of Act, 1993 for recovery of their dues from company under liquidation-Held-Secured creditors not entitled to enforce their full claim under certificate in proceeding under Rule 163 before Official Liquidator-Claims not permissible under Rules, cannot be granted by Official Liquidator, while accepting or rejecting proof of debts under Rule 163.-The question is whether the secured creditors having obtained the certificates under Section 19(22) of the RDB Act, are entitled to enforce their full claim under the certificates in the proceedings lodged under Rule 163 of the said Rules before the Official Liquidator, irrespective of the date of order of winding-up of the Company. Rule 163 of the said Rules deals with acceptance or rejection of proof of debts in winding-up proceedings by the Official Liquidator. The Official Liquidator may have partially accepted the claim on the basis of the certificate issued by the Debts Recovery Tribunal under Section 19(22) of the RDB Act. However, it does not mean that the jurisdiction of the Official Liquidator under Rule 163 of the said Rules can be invoked by the secured creditors to enforce their full claims on the basis of the certificate under Section 19(22) of the RDB Act. Sections 25, 26 and 29 of the RDB Act provide various modes for execution of such certificates. Neither the Official Liquidator is empowered under the said provisions of the RDB Act, to enforce such certificate nor Rule 163 of the said Rules is prescribed as one of the modes for execution of such certificates under Sections 25, 28 and 29 of the RDB Act. Though, the Official Liquidator is bound by the judgment and order dated 31.8.2005 passed by the Debts Recovery Tribunal and the certificate under Section 19(22) of the RDB Act, he would be answerable in respect of it, in the proceedings for execution of such certificate, if initiated by the secured creditors under the provisions of the RDB Act. But when it comes to the acceptance or rejection of the proof of debts under Rule 163 of the said Rules, the Official Liquidator will have to act strictly in accordance with the provisions of the said Act and the Rules and he can neither act in deviation of it, nor can grant the claims, which are not permissible under the said Rules. The first charge holders/secured creditors are, therefore, not entitled to enforce their full claim under the certificate, in the proceedings lodged under Rule 163 of the said Rules before the Official Liquidator.

       Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Sections 19(22) 25 and 28-Claims of secured creditors-Relinquishment or surrender of-Question, whether first charge holders have relinquished their claims over assets and properties of company in liquidation-A mixed question of fact and law-Required to be pleaded and proved.-The question whether the first charge holders have relinquished their claims over the assets and properties of the Company under liquidation, is a mixed question of law and fact, which is required to be pleaded and proved.

       Companies Act, 1956 - Section 446-Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section 17-Jurisdiction of Company Court-Matter completely determined by Tribunal (DRT)-Tribunal passed judgment and order under Section 17 of RDB Act by concluding all issues-Company Court lacks jurisdiction under Section 446 of Act, 1956 to reopen said issues.-The Company Court cannot use its powers under Section 446 of the said Act against the Tribunal/Recovery Officer and Sections 442, 446 and 537 cannot be applied against the Tribunal. In view of this, the matter is completely determined by the Debts Recovery Tribunal and the Court has no jurisdiction under Section 446 to re-open the issues concluded by the judgment and order passed by the Debts Recovery Tribunal under Section 17 of the RDB Act.

       Companies Act, 1956 - Section 446-Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 17 and 19(22)-Jurisdiction of Company Court-Charges of secured creditor-Certificate under Section 19(22) of RDB Act issued to secured creditor-Company Court has no jurisdiction under Section 446 of Act, 1956 to go into question as to whether charges registered or not-Company Court also lacks jurisdiction to go into question whether debts of secured creditors should be treated as secured only to extent of amounts specified in certificate.-Under Section 446, no power is conferred upon the Company Court to declare a decree of the competent Court to be void and the application of the Official Liquidator for the purpose was held to be not maintainable. In view of this, it has to be held that the Company Court has no jurisdiction under Section 446 of the said Act to go into the question as to whether the charges of the secured creditors are registered or not, and whether the debts of the secured creditors should be treated as secured only to the extent of the amounts specified in the certificate.

       Companies Act, 1956 - Sections 446, 529-A and 529(1)(c)-Company (Court) Rules, 1959, Rules 154, 156 and 179-Company Court-Jurisdiction of-Certificate of recovery under Section 19(22) of RDB Act obtained by secured creditors-Their claims can be entertained and decided by Company Court under Section 446(2) of Act-Only to extent they consistent with provisions of Section 529-A and 529(1)(c) of Act and Rules 154, 156 and 179 of Rules-Company Court has no jurisdiction under Section 446(2) of Act to act in execution of such certificate.-The Company Court, in exercise of its jurisdiction under sub-section (2) of Section 446 of the Act, can entertain and decide the claims of the secured creditors, who have obtained the certificate of recovery under Section 19(22) of the RDB Act only to the extent they are consistent with the provisions of Section 529-A and 529(1)(c) of the said Act and Rules 154, 156 and 179 of the said Rules. The reason is that such creditors stand in the shoes of the secured creditors entitled to enforce their securities consistent with the provisions of the said Act regarding distribution of the assets of Company under liquidation. This is how the secured creditors were before the Official Liquidator under Rule 163 of the said Rules. The Official Liquidator was, therefore, right and reasonable in accepting the claim consistent with the provisions of the said Act and the said Rules. Simply because such certificate is binding upon the Company under liquidation and the Official Liquidator, that does not extent the jurisdiction of the Company Court to grant the entire claim covered by such certificate.

       Companies Act, 1956 - Sections 529 and 529-A-Company (Court) Rules, 1959, Rules 154, 156 and 179-Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section 19(22)-Jurisdiction of Company Court-Scope of-Jurisdiction available to several creditors only to a limited extent of dealing with provisions of Section 529 and 529-A of Act and Rules 154, 156 and 179 of Rules-Claims of secured creditors before Company Court-Consistent with provisions of Companies Act and Rules-Company Court has jurisdiction to grant such claims.-The jurisdiction of the Company Court is available to the secured creditors only to a limited extent of dealing with the provisions of Sections 529 and 529-A of the said Act and Rules 154, 156 and 179 of the said Rules, and where the secured creditors approach the Company Court, their claims consistent with the provisions of the said Act and the said Rules can be granted by the Company Court.

       Companies Act, 1956 - Sections 529, 529-A and 530-Company (Court) Rules, 1959, Rules 154, 159 and 163-Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section 19(22)-Winding up proceedings-Company under liquidation-Proof of debts-Acceptance or rejection of-Jurisdiction of liquidator-Held-Official liquidator competent to accept or reject proof of debts either wholly in part-Official Liquidator not empowered to execute recovery certificate obtained by secured creditor under Section 19(22) of Act, 1993-Acceptance of claim of secured creditor by Official Liquidator under Rule 163, not binding upon secured creditor.-When the Official Liquidator acts under Rule 163 of the said Rules, either to accept or to reject the proof of debts, he is not exercising any power of execution of certificate under Sections 25 to 30 of the RDB Act. Hence, it will not have the effect of altering or modifying such certificate. The certificate issued under Section 19(22) of the RDB Act remains as it is. On the contrary, the claim in the certificate is accepted to the extent it is in conformity with Rules 154, 156 and 179 of the said Rules. The Official Liquidator is neither competent to travel beyond the scope of the said Rules, nor is conferred with, the powers under Sections 25 to 30 of the RDB Act, to execute the said certificate. In view of this, there is no question of any adjudication by the Official Liquidator when he restricts the claims of the secured creditors in conformity with the provisions of the said Rules. What is the most important aspect of it, is that the acceptance of the claim of the secured creditor by the Official Liquidator under Rule 163 of the said Rules, is not binding upon the secured creditor and it is open for him either to accept it or refuse to accept it. Even if he accepts it or refused to accept it, his right to get the certificate under Section 19(22) of the RDB Act executed under Sections 25 to 30 of the RDB Act is in no manner taken away, altered or modified for recovery of the full amount of such certificate.

       Companies Act, 1956 - Section 529-A(1)-Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 17, 18 and 19- Winding up of a Company-Winding up proceedings-Priority-Scope of-Secured creditors opted to stand outside winding up proceedings-Can approach Company Court in certain circumstances-Can claim priority over all other creditors for release of amounts out of other monies lying in Company Court-Priority is limited and restricted only to extent specified in Section 529-A(1) of Act.-The secured creditors, who have opted to stand outside the winding up proceedings, can in certain circumstances come before the Company Court and claim priority over all other creditors for release of the amounts out of other monies lying in the Company Court. However, this limited priority is restricted only to the extent specified in clause (b) of Section 529-A (1) of the said Act. It has further been held that the secured creditor, who has stood outside the winding-up proceedings, and who has lost a part of the monies otherwise covered by the security, can come before the Tribunal to reimburse himself out of the other monies available in the Tribunal, claiming priority over all creditors by virtue of Section 529-A(1)(b) of the said Act.