Page 1

Reportable IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6042-6048 OF 2011

Anita International …. Appellant versus

Tungabadra Sugar Works Mazdoor Sangh – and others …. Respondents

with CIVIL APPEAL NOS. 5501-5502  OF 2016

(Arising out of SLP(C) Nos. 7490-7491 of 2014)

Tungabadra Sugar Works Mazdoor Sangh …. Appellant

versus Official Liquidator and others …. Respondents

J U D G M E N T

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.

Page 2

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)

2

Page 3

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  entertain  Company

Application No.1300 of  2003,  the Registry  of  the High Court at  Madras,

relied upon a judgment rendered by this Court in Civil Appeal No. 2536 of

3

Page 4

2000 (reported as Allahabad Bank v. Canara Bank1).  While not entertaining

Company  Application  No.1300  of  2003,  the  Registry  of  the  High  Court

recorded the following endorsement:

“ORDER As per order in Civil  Appeal no.2536/00 as reported in 2000 (3) SCC 205.  Leave is not necessary.”

7. Consequent upon the return of Company Application No.1300 of

2003, it came to be assumed by the State Bank of Mysore, that leave of the

High Court, was not required for the sale of the assets of Deve Sugars Ltd..

Accordingly, 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.   On  the  above

prayer  of  the  State  Bank  of  Mysore,  the  Recovery  Officer  issued  a

proclamation  of  sale  in  Form-13,  by  following  the  procedure  prescribed

under the RDB Act.  The auction of the properties of Deve Sugars Ltd., in

the first instance, was fixed for 1.10.2014.

8. At  the  instant  juncture,  the  workers’  union  (Tungabadra  Sugar

Works Mazdoor Sangh), of Deve Sugars Ltd., approached the High Court of

Karnataka, by filing Writ Petition No.37991 of 2004.  Through the above

writ petition, the workers’ union assailed the recovery proceedings initiated

by the State Bank of  Mysore,  before the Recovery Officer.   The workers’

union also sought an interim direction from the High Court of Karnataka, to

restrain  the  continuation  of  the  sale  proceedings,  at  the  hands  of  the

1 (2000) 4 SCC 406

4

Page 5

Recovery Officer,  because their  salary and provident fund dues, were still

payable by Deve Sugars Ltd..  The aforesaid prayer was made by asserting,

that the workers’ union had a preferential claim, as against the claim of the

State  Bank  of  Mysore,  under  the  provisions  of  the  Companies  Act.   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.  It would also be relevant to reiterate, that

the Official Liquidator was authorized by the High Court at Madras, to take

over possession of the properties of the company under liquidation.  The

Official  Liquidator had  accordingly  taken  over  possession  of  the  said

properties  on  28.9.1999.  While  permitting  the  State  Bank  of  Mysore  to

pursue the recovery proceedings against Deve Sugars Ltd. before the DRT,

the  High  Court  at  Madras,  had  directed  that  the  Official  Liquidator be

impleaded as a respondent before the DRT. The Official Liquidator, had also

raised  objections  to  the  purported  sale  by  the  Recovery  Officer (in

continuation of the recovery certificate dated 15.5.2002, issued by the DRT).

The Official Liquidator sought deferment of the sale proceedings at the hands

of the Recovery Officer, under Section 529A of the Companies Act.  It would

be relevant to mention, that the objections raised by the workers’ union and

the Official Liquidator, were overruled by the Recovery Officer.

9. It is also pertinent to mention, that the auction scheduled by the

Recovery  Officer  for  1.10.2004,  could  not  be  conducted.   Accordingly,  a

fresh proclamation was issued, for the auction of  the properties of  Deve

5

Page 6

Sugars Ltd., fixing 11.8.2005 as the date for holding the auction.  The rival

parties  were  also  permitted  to  bring  their  buyers,  if  there  was  anyone

interested.  The reserve price was fixed at Rs.10 crores.  The auction was

actually  conducted  on  11.8.2005.   The  highest  bid  was  made  by  Anita

International,  the  appellant  before  this  Court.   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 conducted on 11.8.2005, within the postulated period of 30 days,

as is permissible in terms of the Rules framed under the RDB Act.  The

Recovery  Officer ordered  the  confirmation  of  the  sale  of  the  auctioned

property, after the expiry of statutory period, expressed in Rules 60, 61, and

62  of  the  Second  Schedule  of  the  Income  Tax  Act  (as  is  applicable  to

proceedings, before Debts Recovery Tribunals), on 12.9.2005.

10. 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.  At the instant

juncture,  the  appellant  –  Anita  International,  filed  Company  Application

No.1811 of 2005 before the High Court at Madras for removal of the security

agency.   At  the  said  juncture,  Videocon  International  Ltd.  and  Tapti

Machines Pvt.  Ltd.  filed Writ  Petition  No.26564 of  2005 before the High

Court of Karnataka.  The above writ petition, and Writ Petition No.37991 of

2004 (filed by the workers’ union) were heard by a learned single Judge,

6

Page 7

wherein the auction purchaser – Anita International, raised a preliminary

objection.  It was submitted, that the petitioners before the High Court had

an efficacious alternative remedy, under the RDB Act. It was accordingly

prayed,  that  the  petitioners  be  relegated  to  their  alternative  remedy.

Company Application No.854 of 2006 was filed before the Company Court in

the High Court at Madras, wherein a challenge was raised to the sale of the

assets of Deve Sugars Ltd., at the hands of the Recovery Officer.  It would be

relevant to mention, that the above two writ petitions were disposed of by

the High Court of Karnataka, by a common order dated 27.10.2006.  The

petitioners before the Karnataka High Court were allowed to avail of their

alternative remedy before the DRT, Bangalore.  The above common order

dated 27.10.2006 was challenged, by filing Writ Appeal Nos.2050 and 2051

of 2006.  Both the above writ appeals were dismissed on 23.2.2007.  Liberty

was, however, reserved with appellants, by permitting them to approach the

DRT, Bangalore, by filing appeals.  As a matter of abundant caution, the

appellate  Court  ordered,  that  the  DRT,  Bangalore,  would  deal  with  the

controversy, uninfluenced by the orders passed by the High Court.

11. In compliance with, and in continuation of the outcome before the

High Court of Karnataka, the workers’ union preferred AOR No.15 of 2006

and Videocon International Ltd. preferred AOR No.1 of 2007.  In the above

appeals, a challenge was raised to the order dated 12.9.2005 passed by the

Recovery Officer,  whereby  the  sale  of  the  properties  of  Deve  Sugars  Ltd.

conducted on 11.8.2005, in favour of  Anita International was confirmed.

7

Page 8

Simultaneously,  one N.  Ponnusamy, an ex-Director  of  Deve Sugars Ltd.,

filed  Company  Application Nos.2740-2742  of  2007  before  the  Company

Court in the High Court at Madras, and sought the setting aside of  the

auction  sale  dated  11.8.2005,  as  well  as,  the  confirmation  order  dated

12.9.2005, after the payment of the consideration amount.  The challenge

raised by N. Ponnusamy was primarily on the ground that the reserve price

of  Rs.10 crore was too low.   N.  Ponnusamy, also sought transfer  of  the

recovery  proceedings,  from  the  DRT,  Bangalore,  to  the  High  Court  at

Madras.  While entertaining the proceedings initiated by N. Ponnusamy, the

High Court by its order dated 24.10.2007, passed an ex parte interim order

of  stay.   Anita  International  and  State  Bank  of  Mysore,  filed  detailed

objections, to the applications filed by the Official Liquidator, as well as, by

the  aforementioned  N.  Ponnusamy.   All  the  applications  filed  in  C.A.

No.1811  of  2005  were  taken  up  for  consideration,  collectively.   By  a

common order dated 3.3.2009, the application filed by the Official Liquidator

was dismissed, by holding that the Official Liquidator was a party before the

Karnataka High Court  (in  the  proceedings which  were  disposed of  by  a

common order dated 27.10.2006), and in consonance with the above order,

the Official Liquidator was obliged to file an appeal, to challenge the auction

sale  (dated  11.8.2005),  as  well  as,  the  order  of  confirmation  (dated

12.9.2005)  passed  by  the  Recovery  Officer.   Likewise,  the  proceedings

initiated by N. Ponnusamy, also did not yield any result.  His claim was also

rejected on the ground, that he too could have availed of the remedy of filing

8

Page 9

an appeal, to assail the orders passed by the  Recovery Officer.  The other

applications, which came up for hearing jointly were likewise dismissed, as

the said applicants, had already availed of the appellate remedy, before the

DRT,  Bangalore.   As  against  the  above,  the  application  filed  by  Anita

International for possession of the property purchased by way of auction at

the hands of the Recovery Officer, was allowed.

12. Dissatisfied  with  the  order  passed  by  the  Company  Court,  the

applicants raised a challenge to the order dated 3.3.2009 (passed in C.A.

Nos.1811 of  2005,  854  of  2006  and  2740-2742 of  2007  –  in  Company

Petition No.170 of 1995) by filing O.S.A. Nos. 59-63, 76, 77 and 82 of 2009.

The impugned order in the present appeals dated 17.9.2009, was passed by

a Division Bench of the Company Court in the High Court at Madras.  In

arriving at its conclusions, the High Court took into consideration inter alia

the following factors:

Firstly,  the  Official  Liquidator had  raised  objections  before  the  Recovery

Officer, in respect of the sale of the properties of Deve Sugars Ltd..  There

was nothing to indicate, that the said objections were ever considered by the

Recovery Officer.  Conversely, the High Court also arrived at the conclusion,

that the Official Liquidator who was the custodian of the properties of Deve

Sugars Ltd. (consequent upon the Official Liquidator having taken possession

of the assets of the company on 28.9.1999), had failed to effectively protect

the property of the company.

9

Page 10

Secondly, no material had been placed before the High Court to indicate,

that  the  valuation  report  (dated  24.3.2002)  and  the  inventory  (dated

25.11.2004) were prepared after giving notice to the Official Liquidator, who

was undoubtedly in exclusive custody of the properties (which were subject

matter of auction).

Thirdly,  even  after  the  workers’  union  had  raised  objections  before  the

Recovery Officer, no material was placed before the High Court, that there

was proper application of mind at the hands of the Recovery Officer, leading

to  the  inference,  that  the  objections  were  rejected  in  a  casual  and

lackadaisical manner.

Fourthly, the inspection of the properties of the company under winding up,

by the intending purchasers (for the auction sale scheduled on 11.8.2005)

was permitted only on the day preceding the date of auction (namely, on

10.8.2005), leading to the inference, that the entire process of auction was a

mere formality.

Fifthly,  on  the  advertised  date  fixed  for  the  auction  (on  11.8.2005)  the

Recovery Officer received only two bids.  Despite the above, he closed the bid

on 11.8.2005 itself.  Insofar as the above two bids are concerned, it was felt,

that there was for all intents and purposes only a singular bid.  One of the

bidders was Anita International – the appellant herein, and the other bid

was  by  Synergy  Steel  Ltd.  –  a  sister  company  of  the  appellant  –  Anita

International.  In sum and substance therefore, the  Recovery Officer closed

the bid, after receiving a singular bid.

10

Page 11

Sixthly,  after  holding  the  auction  on  11.8.2005,  the  Recovery  Officer

confirmed the sale in favour of Anita International on 12.9.2005.  This could

not have been done, in view of the order dated 10.3.2000 passed by the

High Court at Madras, wherein it was directed, that no coercive steps would

be taken against the assets of the company under liquidation, during or

after the conclusion of the proceedings before the DRT, Bangalore.  And as

such, the State Bank of Mysore could not have proceeded with, the sale of

the assets of Deve Sugars Ltd.

13. While dealing with the proposition of law declared by this Court in

the  Allahabad  Bank  case1,  wherein  this  Court  had  unambiguously

concluded,  that  the  provisions of  the  RDB Act  required,  Debts  Recovery

Tribunals alone, to decide applications for recovery of debts due to banks

and financial institutions.  And wherein, it was also held, that the aforesaid

responsibility  included,  the  adjudication  of  the  liability  of  the  debtor  to

banks and financial institutions, as well as, the execution of the recovery

certificate by the  Recovery Officer.  In spite of the above, it was submitted,

that the High Court by relying on the judgment in M.V. Janardhan Reddy v.

Vijaya  Bank2,  and  after  taking  note  of  the  fact,  that  the  State  Bank of

Mysore had applied to the Company Court of the High Court at Madras, for

liberty  to  recover  its  dues  from  Deve  Sugars  Ltd.,  by  filing  Company

Application Nos.1251-1253 of 1999 (in pending Company Petition No.170 of

1995), and having obtained an order from the High Court dated 10.3.2000,

2 (2008) 7 SCC 738

11

Page 12

was bound by the same.  The High Court also concluded, that the above

order  dated  10.3.2000  was  binding,  on  the  Recovery Officer of  the  DRT,

Bangalore.  The High Court also expressed the view, that the order dated

10.3.2000 had unambiguously  directed, that no coercive steps would be

taken against the assets of the company under winding up.  Accordingly,

the  High  Court  held,  that  the  State  Bank  of  Mysore  could  not  take

advantage of  the sale  of  the assets of  the company,  or  the confirmation

thereof  at  the hands of  the Recovery Officer,  as the same were  in clear

violation, of the order (dated 10.3.2000) of the Company Court in the High

Court  at  Madras.   Relying  on  the  decision  of  this  Court  in  the  M.V.

Janardhan  Reddy  case2,  the  High  Court  while  referring  to  the  findings

recorded in paragraph 28 of the above judgment concluded, that since the

assets of the company under winding up were under the physical charge of

the  Official Liquidator, the  Official Liquidator ought to have been associated

with the auction proceedings, conducted by the Recovery Officer.  Since the

facts  and  circumstances  of  the  present  case  reveal,  that  the  Official

Liquidator was not allowed to be associated with the auction proceedings,

and even the valuation of the assets, was taken without the knowledge of

the  Official  Liquidator,  and further,  the  objections  raised by  the  Official

Liquidator were rejected without due consideration, the Company Court in

the High Court at Madras concluded, that the sale of the properties of Deve

Sugars Ltd. by the Recovery Officer on 11.8.2005, was liable to be set aside.

So also, the confirmation of the sale, by the Recovery Officer on 12.9.2015.

12

Page 13

14. Having  concluded  as  above,  the  High  Court  vide  the  impugned

order dated 17.9.2009, directed as under:

“Hence the following judgment is made: (i) The auction sale in question is set aside; (ii) The auction purchaser is  entitled  to  refund of  the monies paid by him towards the auction sale which is now set aside; (iii) In  the  interest  of  all  the  creditors  and  also  the  workers’ union, a fresh sale is ordered to be made by the Recovery Officer after following the procedural formalities and after preparation of a fresh  valuation  done  by  the  panel  of  valuers  appointed  by  the Company Court with the association of the Official Liquidator and on  acceptance  of  the  same  by  the  Company  Court  in  order  to ensure a proper price is fetched for the assets of the company in liquidation.”

15. While  assailing  the  impugned  order  passed  by  the  High  Court

dated 17.9.2009, it was the vehement contention of learned counsel for the

appellant, that the Company Court in the High Court at Madras, had no

jurisdiction in respect of the proceedings which fell  within the legitimate

domain of the RDB Act.  To canvass the above proposition, learned counsel

placed reliance on a number of judgments of this Court.  The submissions

advanced in this behalf, are being narrated hereunder:

(i) Reliance was first placed on the Allahabad Bank case1.  It was pointed

out, that the above judgment was rendered on 10.4.2000.  And in the above

view of the matter, the declared position of law was clear and explicit well

before  the  controversy  in  hand  was  determined  by  the  High  Court  at

Madras.  From the cited judgment, learned counsel for the appellant placed

reliance on the following observations:

“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

13

Page 14

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 or 227 of the Constitution.) This is the effect of Sections 17 and 18 of the Act. 22. We hold that the provisions of Sections 17 and 18 of the RDB Act  are  exclusive  so  far  as  the  question  of    adjudication   of  the liability of the defendant to the appellant Bank is concerned.

(ii)  Execution of certificate by Recovery Officer: is his jurisdiction exclusive 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.  …..

xxx xxx xxx 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

14

Page 15

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.

xxx xxx xxx Question of leave and control by the Company Court: 30. Learned Attorney General has, in this connection, relied upon Damji Valji Shah   v.   LIC of India (1965) 3 SCR 665   to contend that for initiating and continuing proceedings under the RDB Act, no leave of  the Company Court is  necessary under Section 446. In that  case,  a  Tribunal  was  constituted  under  the  Life  Insurance Corporation Act, 1956. Question was whether under Section 446 of the Companies Act,  1956,  the said proceedings could be stayed and later be transferred to the Company Court and adjudicated in that  Court.  It  was held  that  the  said  proceedings could  not  be transferred. Section 15 of the Life Insurance Corporation Act, 1956 — which we may say, roughly corresponds to  Section 17 of  the RDB Act — enabled Life Insurance Corporation of India to file a case before a Special Tribunal and recover various amounts from the erstwhile life insurance companies in certain respects. Section 41  of  the  LIC  Act  conferred  exclusive  jurisdiction  on  the  said Tribunal  just  like  Section  18  of  the  RDB Act,  1993.  There  the Company was ordered to be wound up by an order of the Company Court passed under Section 446(1)  on 9-1-1959. The claim was filed  by  LIC  against  the  Company  and  its  Directors  before  the Tribunal in 1962. The respondents before the Tribunal contended that the claim could not have been filed in the Tribunal without the leave  of  the  Company  Court  under  Section  446(1).  This  Court rejected the said contention and held that though the purpose of Section  446  was  to  enable  the  Company  Court  to  transfer proceedings to itself and to dispose of the suit or proceedings so transferred, unless the Company Court had jurisdiction to decide the questions which were raised before the LIC Tribunal, there was no purpose of requiring leave of the Company Court or permitting transfer. …..

xxx xxx xxx 31. It may also be noticed that in the LIC Act of 1956, there was no provision like Section 34 of the RDB Act giving overriding effect to the provisions of the LIC Act. Still this Court upheld the exclusive jurisdiction of the LIC Tribunal …..

xxx xxx xxx 71. But the point here is that the occasion for such a claim by a secured creditor (here Canara Bank) against realisations by other

15

Page 16

creditors  (like  Allahabad  Bank)  under  Section  529-A  read  with proviso (  c  ) to Section 529(1) can arise before the Tribunal only if Canara Bank has stood outside winding-up and realised amounts and if  it  shows that out of the amounts privately realised by it, some portion has been rateably taken away by the liquidator under clauses (  a  ) and (  b  ) of the proviso to Section 529(1). It is only then that it can claim that it is to be reimbursed at the same level as a secured  creditor  with  priority  over  the  realisations  of  other creditors lying in the Tribunal. None of these conditions is satisfied by Canara Bank. Thus, Canara Bank does not belong to the class of secured creditors covered by Section 529-A(1)(b).

xxx xxx xxx 73. If none of the conditions required for applying Section 19(19) and Section 529-A is, therefore, satisfied, then the claim of Canara Bank before the Tribunal can only be on the basis of principles underlying Section 73 CPC. There being no decree in its  favour from any court or from any Tribunal, and the other conditions of Section 73 not having been satisfied, no dividend can be claimed out of monies realised at the instance of Allahabad Bank, even if Allahabad Bank is an unsecured creditor.

xxx xxx xxx 76. The next question is whether the amounts realised under the RDB Act  at  the  instance of  the  appellant  can be  straight  away released in its favour. Now, even if Section 19(19) read with Section 529-A of the Companies Act does not help the respondent Canara Bank, the said provisions can still have an impact on the appellant Allahabad Bank which has no doubt a decree in its favour passed by the Tribunal.  Its  dues are unsecured.  The “workmen’s dues” have  priority  over  all  other  creditors,  secured  and  unsecured because of Section 529-A(1)(  a  ). There is no material before us to hold that the workmen’s dues of the defendant Company have all been paid. In view of the general principles laid down in    National Textile  Workers’  Union   v.    P.R. Ramakrishnan (1983) 1 SCC 228 there is an obligation resting on this Court to see that no secured or unsecured creditors including banks or financial  institutions, are paid before the workmen’s dues are paid. We are, therefore, unable to release any amounts in favour of  the appellant Bank straight away.”

(emphasis supplied)

Based on the above decision, it was the contention of learned counsel for

the appellant, that the Company Court in the High Court at Madras, had

neither  the  jurisdiction  to  grant  liberty  to  the  State  Bank  of  Mysore  to

16

Page 17

recover its dues from Deve Sugars Ltd. by initiating proceedings under the

RDB Act, nor the jurisdiction to interfere with the recovery proceedings by

directing that no coercive steps would be taken against Deve Sugars Ltd.,

during or after the conclusion of the proceedings before the DRT, Bangalore.

Stated simply,  learned counsel  for  the appellant was emphatic,  that  the

order passed by the Company Court in the High Court at Madras (dated

10.3.2000), was jurisdictionally and legally impermissible, and as such, was

liable to be ignored.

(ii) Reliance was also placed on Andhra Bank v. Official Liquidator3.

The instant judgment was relied upon to support the conclusions drawn by

learned  counsel,  while  placing  reliance  on  the  Allahabad  Bank  case1.

Learned  counsel  invited  our  attention  to  the  position  expressed  in

paragraph 19 of the cited judgment, which is extracted hereunder:

“19. As  regards  Point  (6),  however,  this  Court  at  para  76  of  the judgment held:  “The next question is whether the amounts realised under the RDB Act at the instance of the appellant can be straight away released in its favour.  Now,  even  if  Section  19(19)  read  with  Section  529-A  of  the Companies Act does not help the respondent Canara Bank, the said provisions can still  have an impact on the appellant Allahabad Bank which has no doubt a decree in its favour passed by the Tribunal. Its dues are unsecured. The ‘workmen’s dues’ have priority over all other creditors, secured and unsecured because of Section 529-A(1)(a). There is  no  material  before  us  to  hold  that  the  workmen’s  dues  of  the defendant Company have all been paid. In view of the general principles laid  down in    National  Textile  Workers’  Union   v.    P.R.  Ramakrishnan (1983) 1 SCC 228     there is an obligation resting on this Court to see that no secured or unsecured creditors including banks or financial institutions,  are  paid  before  the  workmen’s  dues  are  paid.  We  are, therefore,  unable  to  release  any amounts  in favour  of  the  appellant Bank straight away.””                                              (emphasis supplied)

3  (2005) 5 SCC 75

17

Page 18

(iii) In  chronological  order,  learned  counsel  next  relied  upon  the

judgment in Rajasthan State Financial Corporation v. Official Liquidator4,

and drew the Court’s attention to the following:

“15. In A.P. State Financial Corpn. v. Official Liquidator (2000) 7 SCC 291 this Court held that the Company Judge, while permitting the financial  corporation  to  stay  outside  the  liquidation  proceedings, rightly imposed conditions to ensure that the Corporation would: (i) discharge  its  liability  due  to  workers  under  Section  529-A  of  the Companies Act, (ii) inform the Official Liquidator in advance about the proposed sale of properties of the indebted companies, and (iii) would obtain the Court’s permission before finalising the tenders. This Court specifically overruled the view taken by the High Court that it was not necessary  for  the  financial  corporations  to  seek  permission  of  the Company Court to stay outside the winding-up proceedings. It  was held  that  Sections  529(1)  and  529-A  of  the  Companies  Act  had overriding effect and the 1985 amendment being later in point of time, the non obstante clause therein would prevail over the non obstante clause contained in Section 46-B of the SFC Act. 16. In International Coach Builders Ltd. v. Karnataka State Financial Corpn (2003) 10 SCC 482 this Court considered the correctness of the views expressed by the Karnataka High Court and the Gujarat High Court.  This  Court  held  that  a  right  is  available  to  a  financial corporation under Section 29 of the SFC Act against a debtor, if  a company, only so long as there is no order of winding up. When the debtor is a company in winding up, the rights of financial corporations are  affected  by  the  provisions  in  Sections  529  and  529-A  of  the Companies Act. It was also held that the proviso to Section 529 of the Companies Act creates a “pari passu” charge in favour of the workmen to  the  extent  of  their  dues  and  makes  the  Liquidator  the representative of the workmen to enforce such a charge. The decision of the Bombay High Court in  Maharashtra State Financial Corpn. v. Official Liquidator was approved. The reference to a larger Bench was occasioned by the fact that the decision in   Allahabad Bank   v.   Canara Bank   was not adverted to in this decision. This decision recognises that, whether a creditor is standing outside the winding up or not, the distribution of the proceeds has to be in terms of Section 529 of the Companies Act read with Section 529-A of that Act in a case where the debtor is a company-in-liquidation. As far as we can see, there is no conflict on the question of the applicability of Section 529-A read with Section 529 of the Companies Act to cases where the debtor is a

4   (2005) 8 SCC 190

18

Page 19

company and is in liquidation. The conflict, if any, is in the view that the Debts Recovery Tribunal could sell the properties of the company in  terms  of  the  Recovery  of  Debts  Act.  This  view  was  taken  in Allahabad Bank   v.   Canara Bank   in view of the Recovery of Debts Act being a subsequent legislation and being a special law which would prevail over the general law, the Companies Act. This argument is not available as far as the SFC Act is concerned, since Section 529-A was introduced by Act 35 of  1985 and the overriding provision therein would  prevail  over  the  SFC Act  of  1951 as amended in  1956 and notwithstanding Section 46-B of the SFC Act. As regards distribution of assets, there is no conflict.  It seems to us that whether the assets are realised by a secured creditor even if it be by proceeding under the SFC Act or under the Recovery of Debts Act, the distribution of the assets  could  only  be  in  terms of  Section 529-A of  the Act  and by recognising  the  right  of  the  Liquidator  to  calculate  the  workmen’s dues and collect it for distribution among them pari passu with the secured  creditors.  The  Official  Liquidator  representing  a  ranked secured creditor  working  under  the  control  of  the  Company  Court cannot, therefore, be kept out of the process. 17. Thus, on the authorities what emerges is that once a winding-up proceeding has commenced and the Liquidator is put in charge of the assets  of  the  company  being  wound  up,  the  distribution  of  the proceeds of the sale of the assets held at the instance of the financial institutions coming under the Recovery of Debts Act or of financial corporations  coming  under  the  SFC  Act,  can  only  be  with  the association of the Official Liquidator and under the supervision of the Company Court. The right of a financial institution or of the Recovery Tribunal or that of a financial corporation or the court which has been approached under Section 31 of the SFC Act to sell the assets may not be taken away, but the same stands restricted by the requirement of the Official Liquidator being associated with it, giving the Company Court the right to ensure that the distribution of the assets in terms of Section 529-A of the Companies Act takes place. In the case on hand, admittedly,  the  appellants  have  not  set  in  motion  any  proceeding under the SFC Act.  What we have is only a liquidation proceeding pending  and  the  secured  creditors,  the  financial  corporations approaching the Company Court for permission to stand outside the winding up and to sell the properties of the company-in-liquidation. The  Company  Court  has  rightly  directed  that  the  sale  be  held  in association with the Official Liquidator representing the workmen and that the proceeds will be held by the Official Liquidator until they are distributed in terms of Section 529-A of the Companies Act under its supervision. The directions thus, made, clearly are consistent with the provisions of the relevant Acts and the views expressed by this Court in the decisions referred to above. In this situation, we find no reason to interfere with the decision of the High Court. We clarify that there is

19

Page 20

no inconsistency between the decisions in   Allahabad Bank   v.   Canara Bank   and in    International  Coach Builders  Ltd.   v.    Karnataka State Financial Corpn.   in respect of the applicability of Sections 529 and 529-A of the Companies Act in the matter of distribution among the creditors. The right to sell under the SFC Act or under the Recovery of Debts Act by a creditor coming within those Acts and standing outside the winding up, is different from the distribution of the proceeds of the sale of the security. The distribution in a case where the debtor is a company in the process of being wound up, can only be in terms of Section 529-A read with Section 529 of the Companies Act. After all, the Liquidator represents the entire body of creditors and also holds a right on behalf of the workers to have a distribution pari passu with the  secured  creditors  and  the  duty  for  further  distribution  of  the proceeds on the basis of the preferences contained in Section 530 of the Companies Act under the directions of  the Company Court.  In other words, the distribution of the sale proceeds under the direction of  the  Company  Court  is  his  responsibility.  To  ensure  the  proper working out of the scheme of distribution, it is necessary to associate the Official Liquidator with the process of sale so that he can ensure, in the light of the directions of the Company Court, that a proper price is fetched for the assets of the company-in-liquidation. It was in that context  that  the rights  of  the Official  Liquidator  were discussed in International Coach Builders Ltd. The Debts Recovery Tribunal and the District Court entertaining an application under Section 31 of the SFC Act should issue notice to the Liquidator and hear him before ordering a sale, as the representative of the creditors in general. 18. In the light of the discussion as above, we think it proper to sum up the legal position thus: (  i  ) A Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act,  1993 would be entitled to order  the  sale  and  to  sell  the  properties  of  the  debtor,  even  if     a company-in-liquidation,  through its  Recovery  Officer  but  only  after notice to the Official  Liquidator or the Liquidator appointed by the Company Court and after hearing him. (  ii  ) A District Court entertaining an application under Section 31 of the  SFC Act  will  have  the  power  to  order  sale  of  the  assets  of  a borrower company-in-liquidation, but only after notice to the Official Liquidator  or  the Liquidator  appointed by the Company Court  and after hearing him. (iii)  If a financial corporation acting under Section 29 of the SFC Act seeks  to  sell  or  otherwise  transfer  the  assets  of  a  debtor company-in-liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the Company Court and acting in terms of the directions issued by that court as regards associating the Official Liquidator with the sale, the fixing of the upset

20

Page 21

price or the reserve price, confirmation of the sale, holding of the sale proceeds and the distribution thereof among the creditors in terms of Section 529-A and Section 529 of the Companies Act. (  iv  ) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the creditor concerned is to approach the Company Court for  appropriate  directions regarding  the  realisation  of  its  securities consistent  with  the  relevant  provisions  of  the  Companies  Act regarding distribution of the assets of the company-in-liquidation.”

(emphasis supplied)

Relying  on  the  above  judgment,  learned  counsel  for  the  appellant

emphatically pointed out, that the sale of the properties of a company in

liquidation,  should  not  be  confused  with  the  distribution  of  the  sale

proceeds  of  the  company  in  liquidation  amongst  its creditors.   It  was

submitted, that there could be no interference with the right of the Recovery

Officer, to sell the assets of the company in liquidation, under the provisions

of the RDB Act.  But, that had nothing to do with the distribution of the

proceeds of the sale.  The distribution of the sale proceeds ought to be in

consonance with the provisions of the Companies Act, wherein the debtor

was a company in liquidation.

(iv) Learned  counsel  then  placed  reliance  on  the  M.V.  Janardhan

Reddy case2.  He invited the Court’s attention to the following:

“18. So far  as the order passed by the learned Company Judge is concerned, it specifically and unequivocally stated that permission of the court  should be obtained before sale  is  confirmed or  finalised. That order was passed as early as on 13-8-1999. In an order dated 25-3-2005 also it was expressly mentioned that the sale was subject to confirmation of the court. It was an express condition imposed by the Company Court  and as  such it  was not  open to  the Recovery Officer  to  confirm the  sale  and  such  order,  which  was  having  no authority of law, was rightly set aside by the Company Judge and no grievance could be made.

21

Page 22

xxx xxx xxx 22. Our  attention  has  been  invited  by  the  learned  counsel  to  the relevant orders passed by the Company Court from time to time. So far as the order dated 13-8-1999 is concerned, permission to sell the property was granted on certain terms and conditions. They read as under:

(A) The Official Liquidator shall be allowed to have inspection of the properties  and  assets  of  the  company  in  liquidation  and  to  take inventory as and when required.

(B)  Certified  copy  of  the  judgment  and  decree  passed  by  the Subordinate Judge, Bhongir in OS No. 57 of 1989 dated 24-7-1993 shall be made available to the Official Liquidator without delay.

(C)  The certified copy of  the order that would be passed by the Debts Recovery Tribunal,  Bangalore shall  be made available  to  the Official Liquidator without avoidable delay.

(D) The petitioner Bank shall file the valuer’s report in the court before the properties covered under the mortgage deed are put to sale.

(E) Permission of this Court shall be obtained before the sale of the properties movable or immovable, is confirmed or finalised.

(F) The petitioner Bank shall undertake to deposit and shall deposit the  workmen’s  dues  with  the  Official  Liquidator  as  and  when quantified  by  him  as  per  the  provisions  of  Section  529-A  of  the Companies Act.

(G) Whatever surplus remains after the sale and realisation of the dues  of  the  secured  creditors  and  the  workmen,  as  per  law,  the balance  sale  proceeds  shall  be  made  available  to  the  Official Liquidator for being dealt with in accordance with the provisions of the Companies Act and the Rules.

xxx xxx xxx 23. An order  dated 28-3-2005 in  Company Application  No.  187 of 2005 was equally clear. It reads as under: “This  is  an  application  filed  by  the  nationalised  bank  seeking permission of this court to receive the valuation report and also to permit the Bank to effect sale of the properties of the Company under liquidation  through  the  Recovery  Officer  of  the  Debts  Recovery Tribunal,  in  terms  of  the  conditions  of  auction-sale  notice  dated 2-2-2005. It  is  also stated that  though sale  notice  was ordered,  no sale  was conducted as no permission was obtained from this court. The Official Liquidator also filed a report reporting that there is no objection as to the proposed auction and also the valuation report  as filed by the applicant Company. Under the above circumstances, the applicant Company is permitted to  go  ahead with  the  proposed sale  of  the  assets  of  the  Company

22

Page 23

under liquidation through public auction. But, however, the said sale, if any effected, shall be subject to the confirmation of this court. The applicant is accordingly granted permission to effect the sale,   but the sale shall be required to be confirmed by this court. The application is accordingly disposed of.” The above orders leave no room of doubt that the Bank was permitted to  go  ahead with  the  proposed sale  of  the  assets  of  the  Company under  liquidation  by  way  of  auction  but  such sale  was subject  to confirmation  by  the  Company Court.  It  is,  therefore,  clear  that  all parties were aware about the condition as to confirmation of sale by the Company Court. It was, therefore, not open to the Recovery Officer to confirm sale. The order passed and action taken by the Recovery Officer  was  in  clear  violation  of  and inconsistent  with  the  specific condition imposed by the Company Court. In our considered opinion, therefore, the appellant cannot take any advantage of confirmation of sale by the Recovery Officer who did not possess the power to confirm sale.

xxx xxx xxx 27. It  is true that when the Company Judge set aside the sale on 17-3-2006, the order was reversed by the Division Bench of the High Court  since  it  was  in  breach  of  natural  justice.  That  does  not, however, mean that the Company Court could not pass fresh order after affording opportunity of hearing to the parties. 28. In our opinion, the Company Court was right in passing fresh order after hearing the parties. If the Recovery Officer could not have confirmed  the  sale,  obviously  all  actions  taken  in  pursuance  of confirmation of sale, such as, issuance of sale certificate, registration of documents, etc. would be of no consequence. Since the Company was in liquidation and Official Liquidator was in charge of the assets of the Company, he ought to have been associated with the auction proceedings, which was not done. This is also clear from the report submitted  by  the  Official  Liquidator  and on  that  ground also,  the auction-sale was liable to be set aside.”

(emphasis supplied)

Based on the conclusions drawn in the above judgment, it was submitted,

that there can be no doubt, that in a matter where the Company Court had

passed an order restraining the Recovery Officer confirming the sale, the

sale  made by the  Recovery Officer in execution of  the recovery certificate

could only have been confirmed with the permission of the Court.   Here

23

Page 24

again, learned counsel has drawn a fine distinction.  It was asserted, that

even in the above judgment, this Court had not disputed nor disturbed the

exclusive  jurisdiction  of  the  Recovery  Officer  in  executing  a  recovery

certificate.

(v) Last of all learned counsel placed reliance on Official Liquidator,

Uttar Pradesh and Uttarakhand v. Allahabad Bank5, and drew our attention

to the following conclusions recorded therein:

“23. From the aforesaid verdict,  it is vivid that the larger Bench in Rajasthan State Financial Corpn. case approved the law laid down in Allahabad Bank. In fact,  it  is  noticeable that the larger Bench has observed that in Allahabad Bank case, a view has been taken that the RDB Act being a subsequent legislation and being a special law would prevail over the general law, the 1956 Act, but the said argument is not available as far as the SFC Act is concerned.

xxx xxx xxx 24. From the aforesaid authorities, it clearly emerges that the sale has to be conducted by DRT with the association of the Official Liquidator. We may hasten to clarify that as the present controversy only relates to the sale, we are not going to say anything  with  regard  to  the distribution.   However,  it  is noticeable that under Section 19(19) of the RDB Act, the legislature has clearly stated that distribution has to be  done  in  accordance  with  Section  529-A  of  the  1956  Act.  The purpose of stating so is that it is a complete code in itself  and the Tribunal has the exclusive jurisdiction for the purpose of sale of the properties  for  realisation  of  the  dues  of  the  banks  and  financial institutions.

xxx xxx xxx 31. The  aforesaid  analysis  makes  it  luculent  that  DRT has  exclusive jurisdiction to sell the properties in a proceeding instituted by the banks or financial institutions, but at the time of auction and sale, it is required to  associate  the  Official  Liquidator.  The  said  principle  has  also  been reiterated in Pravin Gada v. Central Bank of India (2013) 2 SCC 101. 32. Once the Official Liquidator is associated, needless to say, he has a role to see that there is no irregularity in conducting the auction and appropriate price is obtained by holding an auction in a fair, transparent and non-arbitrary manner in consonance with the Rules framed under the RDB Act.

5 (2013) 4 SCC 381

24

Page 25

xxx xxx xxx 34. We have referred to the said passage from  Delhi  High Court  Bar Assn. case, for the purpose of highlighting that an appeal lies to DRT challenging the action of the Recovery Officer. In the case at hand, the Official  Liquidator  was  not  satisfied  with  the  manner  in  which  the auction  was  conducted  and  he  thought  it  apposite  to  report  to  the learned  Company  Judge  who  set  aside  the  auction.  Needless  to emphasise,  the Official  Liquidator  has a role  under the 1956 Act.  He protects the interests of the workmen and the creditors and, hence, his association at the time of auction and sale has been thought appropriate by this Court. To put it differently, he has been conferred locus to put forth his stand in the said matters. Therefore, anyone who is aggrieved by any act done by the Recovery Officer can prefer an appeal. Such a statutory  mode  is  provided  under  the  RDB  Act,  which  is  a  special enactment. DRT has the powers under the RDB Act to make an enquiry as it deems fit and confirm, modify or set aside the order made by the Recovery Officer  in  exercise  of  powers  under Sections 25 to  28 (both inclusive)  of  the  RDB Act.  Thus,  the  auction,  sale  and challenge  are completely codified under the RDB Act, regard being had to the special nature of the legislation.”

(emphasis supplied)

16. In addition to the aforesaid submissions, Mr. S.  Ganesh, Senior

Advocate  also  assisted  us  in  the  matter.   He  supported  the  above

contentions, but sought a little intervention by requiring us to also examine

the scope of the controversy under consideration, by placing reliance on the

judgment  of  this  Court  in  Sadashiv  Prasad  Singh  v.  Harendar  Singh6.

Learned  counsel  invited  our  attention  to the  scope  of  interference  with

reference  to  a  public  auction,  wherein  third  party  rights  have  emerged,

especially when the third parties are independent of the disputants,  and

also, with reference to seeking recourse to a statutory remedy available to a

party against the impugned order.  The conclusions recorded by this Court

6 (2015) 5 SCC 574

25

Page 26

in the Sadashiv Prasad Singh case6, as were pointedly brought to our notice,

are being extracted hereunder:

“23. At the time of hearing, we were thinking of remanding the matter to the Recovery Officer to investigate into the objection of Harender Singh under Rule 11 of the Second Schedule to the Income Tax Act, 1961. But considering the delay such a remand may cause, we have ourselves examined the objections of Harender Singh and rejected the objections for a variety of reasons: 23.1. Firstly, the contention raised at the hands of the respondents before the High Court, that the facts narrated by Harender Singh [the appellant in Special Leave Petition (C) No. 26550 of 2010] were a total sham, as he was actually the brother of one of the judgment-debtors, namely, Jagmohan Singh. And that Harender Singh had created an unbelievable story with the connivance and help of his brother, so as to save the property in question. The claim of Harender Singh in his objection  petition  was  based  on  an  unregistered  agreement  to  sell dated 10-1-1991. Not only that such an agreement to sell would not vest any legal right in his favour, it is apparent that it may not have been  difficult  for  him to  have  had the  aforesaid  agreement  to  sell notarised in connivance with his brother, for the purpose sought to be achieved. 23.2. Secondly, it is apparent from the factual position depicted in the foregoing  paragraphs that  Harender  Singh,  despite  his  having  filed objections  before  the  Recovery  Officer,  had  abandoned  the  contest raised by him by not appearing (and by not being represented) before the Recovery Officer after 26-10-2005, whereas, the Recovery Officer had passed the order of sale of the property by way of public auction more than two years thereafter, only on 5-5-2008. Having abandoned his claim before the Recovery Officer, it was not open to him to have reagitated the same by filing a writ petition before the High Court. 23.3. Thirdly, a remedy of appeal was available to Harender Singh in respect of the order of the Recovery Officer assailed by him before the High Court under Section 30, which is being extracted herein to assail the order dated 5-5-2008:

“30.  Appeal  against  the  order  of  Recovery  Officer.—(1) Notwithstanding  anything  contained  in  Section  29,  any  person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal. (2) On receipt of an appeal under sub-section (1), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such inquiry as it deems fit, confirm, modify or set aside

26

Page 27

the order made by the Recovery Officer in exercise of his powers under Sections 25 to 28 (both inclusive).”

The  High  Court  ought  not  to  have  interfered  with  in  the  matter agitated by Harender Singh in exercise of its writ jurisdiction. In fact, the learned Single Judge rightfully dismissed the writ petition filed by Harender Singh. 23.4. Fourthly,  Harender  Singh  could  not  be  allowed  to  raise  a challenge  to the public auction held on 28-8-2008 because he had not raised any objection to the attachment of the property in question or the proclamations and notices issued in newspapers in connection with the auction thereof. 23.5. All  these facts cumulatively  lead to the conclusion that after 26-10-2005, Harender Singh had lost all interest in the property in question and had therefore,  remained a silent  spectator  to  various orders which came to be passed from time to time. He had, therefore, no equitable right in his favour to assail the auction-purchase made by Sadashiv Prasad Sinha on 28-8-2008. 23.6. Finally,  the  public  auction  under  reference  was  held  on 28-8-2008.  Thereafter  the  same  was  confirmed  on  22-9-2008. Possession of the property was handed over to the auction-purchaser Sadashiv Prasad Sinha on 11-3-2009. The auction-purchaser initiated mutation proceedings in respect of the property in question. Harender Singh did not raise any objections in the said mutation proceedings. The  said  mutation  proceedings  were  also  finalised  in  favour  of Sadashiv Prasad Sinha. Harender Singh approached the High Court through CWJC No. 16485 of 2009 only on 27-11-2009. We are of the view that the challenged raised by Harender Singh ought to have been rejected  on  the  grounds  of  delay  and  laches,  especially  because third-party rights had emerged in the meantime. More so, because the auction-purchaser  was  a  bona  fide  purchaser  for  consideration, having  purchased the property  in  furtherance of  a  duly  publicised public auction, interference by the High Court even on the ground of equity was clearly uncalled for. 24. For the reasons recorded hereinabove, we are of the view that the impugned order dated 17-5-2010 passed by the High Court allowing Letters Patent Appeal No. 844 of 2010 deserves to be set aside. The same is  accordingly  set  aside.  The right  of  the  appellant  Sadashiv Prasad Sinha in Plot No. 2722, Exhibition Road, PS Gandhi Maidan, Patna, measuring 1289 sq ft is hereby confirmed. In the above view of the  matter,  while  the  appeal  preferred  by  Sadashiv  Prasad  Sinha stands allowed, the one filed by Harender Singh is hereby dismissed.”

(emphasis supplied)

27

Page 28

Based  on  the  conclusions  recorded  in  the  above  judgment,  it  was

contended,  that  the  DRT,  Bangalore,  issued  the  recovery  certificate  on

15.5.2002, thereupon the auction sale was conducted on 11.8.2005, and

there having been no objection to the same, the auction sale was confirmed

by the Recovery Officer on 12.9.2005.  It was submitted, that after a lapse of

more  than  a  decade  after  all  payments  were  made  (and  the  sale  was

confirmed), there was no equitable justification to interfere with the same.  

17. Insofar  as  the  submission  pertaining  to  the  availability  of  a

statutory  remedy against the impugned order is concerned, learned senior

counsel referred to the directions issued by the High Court of Karnataka,

while disposing of Writ Petition No.26564 of 2005 (GM-DRT) preferred by

Videocon International Ltd. and Tapti Machines Pvt. Ltd. and Writ Petition

No.37991  of  2004  (GM-DRT)  preferred  by  Tungbhadra  Sugar  Works

Mazdoor Sangh – the workers’ union (referred to in the narration of facts

hereinabove), and drew our attention to the observations of the High Court

in its order dated 27.10.2006, which are being extracted hereunder:

“20. In the circumstances, I am of the view that there is an alternate and efficacious remedy by way of an appeal under the Debts Recovery Act R/w Procedure for recovery of tax.  The petitioner shall avail the alternate  remedy  within  a  period  of  six  weeks  from  today.   It  is needless  to  say that  the matter  shall  not  be precipitated until  the appeal filed by the petitioners is disposed of.  All the contentions are left upon.”

(emphasis supplied)

Based on the above, it was contended, that it was not open to the appellants

to raise a challenge with reference to a third party sale, especially when the

same was in the nature of a public auction conducted by a Recovery Officer,

28

Page 29

while  giving  effect  to  an  order  passed  by  the  Debts  Recovery  Tribunal,

strictly within the jurisdiction of the provisions of the RDB Act.  And also,

the determination of this Court not to interfere lightly with the rights which

came to be vested in such auction purchasers.  Insofar as the appellate

remedy  of  the  contesting  parties  is  concerned,  reliance  was  placed  on

Section 30 of the RDB Act, which is extracted hereunder:

“30.  Appeal  against  the  order  of  Recovery  Officer.—  (1) Notwithstanding  anything  contained  in  section  29,  any  person aggrieved by an order of  the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal.   (2)  On receipt of an appeal under sub-section (1), the Tribunal may, after  giving an opportunity  to the appellant to  be heard,  and after making such inquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under Sections 25 to 28 (both inclusive).”

Based  on  the  above  provision,  it  was  the  submission  of  learned  senior

counsel, that the wrong, if any, caused to the contesting respondents could

have been set right only under Section 18 of the RDB Act.

18. Mr. C.A. Sundaram, Senior Advocate, endeavoured to repudiate the

submissions advanced at the hands of learned counsel for the appellants,

by advancing three contentions.  Firstly, an order passed by a Court with

jurisdiction  having  attained finality,  was  binding  between  the  concerned

parties,  and was liable to be complied with under all circumstances.  In

reference to the instant submission, the assertion of learned counsel was,

that the order dated 10.3.2000 passed by the High Court at Madras had

been passed by a Court having jurisdiction.  The said order had attained

finality.  And accordingly, there was no justification at the hands of any

29

Page 30

other party concerned, to wriggle out of the same.  Secondly, even if  an

order is passed by a Court which has no jurisdiction with reference to a

controversy, and as such, could be termed as a void order, the order of the

Court would continue to remain enforceable in law, till the same is set aside

and/or vacated by a subsequent order.  Insofar as the instant aspect of the

matter  is  concerned,  it  was  submitted,  that  the  order  dated  10.3.2000

having attained finality and having not been varied or vacated, was binding

between the parties, and as such, its compliance was mandatory.  Thirdly,

any sale made within the teeth of an injunction, was liable to be set aside.

An injunction order, according to learned senior counsel, as in the instant

case (the order dated 10.3.2000), which mandated that no coercive steps

would be taken against the assets of Deve Sugars Ltd.  “… during or after

the conclusion of the proceedings before the Tribunal …”, namely the DRT,

Bangalore, was binding.  The auction sale conducted on 11.8.2005, and its

subsequent confirmation on 12.9.2015, according to learned senior counsel,

were  not  only  beyond  the  jurisdiction  of  the  Recovery  Officer,  but  also

beyond the jurisdiction of the Debts Recovery Tribunal.  In the instant view

of the matter, it was contended, that the impugned order dated 27.9.2009,

passed by the High Court at Madras, ought not to be interfered with.

19. While substantiating the first contention noticed in the foregoing

paragraph, it was asserted, that for recovery of a debt due to a bank, it can

file a winding up petition before a Company Court under the Companies

Act, or alternatively, it can file a recovery petition before the jurisdictional

30

Page 31

Debts Recovery Tribunal, under the provisions of the RDB Act.  Accordingly,

it was pointed out, that a recovery suit could be withdrawn to a Company

Court, and the recovery of the debt sought by the bank, could be agitated

before the Company Court.   It was however pointed out, that the inverse

was not permissible, inasmuch as, a winding up petition filed before the

Company Court under the Companies Act,  could not be withdrawn to a

Debts  Recovery  Tribunal,  under  the  provisions  of  the  RDB Act.   It  was

therefore the contention of learned counsel for the respondents, that since

the State Bank of Mysore could seek recourse to the DRT, as well as the

Company  Court,  as  may  be  considered  suitable  or  appropriate,  the

proceedings  filed  by  the  State  Bank  of  Mysore,  namely,  Company

Application Nos. 1250-1253 of 1999 in pending Company Petition No.170 of

1995 (and Company Petition No.35 of 1997) had been filed by the State

Bank of Mysore, before a Court having jurisdiction.  And therefore, a Court

having  jurisdiction  in  the  matter,  at  the  instance  of  the  State  Bank  of

Mysore,  had  passed  the  order  dated  10.3.2000.   By  the  order  dated

10.3.2000, the Company Court in the High Court at Madras, allowed the

prayer made by the State Bank of Mysore, to continue to proceed with the

recovery proceedings initiated by it before the DRT, Bangalore.  But while

granting  the  above  leave  imposed  two  conditions,  firstly,  the  Official

Liquidator would be impleaded before the DRT, and secondly, no coercive

steps would be taken against the assets of the Company (-Deve Sugars Ltd.)

during or after the proceedings before the DRT. The said order was neither

31

Page 32

varied nor vacated.  The same, according to learned counsel, was binding

between the parties.  And therefore, it was contended, that the same could

not have been ignored or overlooked.  It was submitted, that even if  the

above  order  dated  10.3.2000,  was  without  jurisdiction  and/or  void,  the

same would be equally binding, till it was varied or set aside by a Court

having competent jurisdiction.  Based on the factual position noticed above,

it  was asserted, that the sale of the properties of Deve Sugars Ltd.,  was

clearly in the teeth of the injunction order passed by the Company Court on

10.3.2000, and as such, was liable to be set aside.

20. In order to repudiate the submissions advanced at the hands of

learned counsel for the appellant, based on the judgment rendered by this

Court in the Allahabad Bank case1, reliance was placed on Industrial Credit

and Investment  Corporation  of  India  Ltd.  v.  Srinivas  Agencies7,  and the

Court’s  attention  was drawn to  the  factual  and legal  position  expressed

therein:

“1. The extent of right of secured creditors to realise their debts from the  assets  of  a  company  which  is  under  winding  up  or  has  been wound up,  by  approaching  fora  other  than  the  company  court,  is required to be spelt out in these appeals.  We have also been called upon to decide as to when a pending suit or proceeding relating to realization of the debts by such a creditor should be transferred to itself by a company court seized with the winding-up proceeding.

xxx xxx xxx 4. A  combined  reading  of  the  aforesaid  provisions  leads  to  the following results:

(i)  A winding-up court has jurisdiction, inter alia, to entertain or dispose of any suit or proceeding by or against the company, even if such  suit  or  proceeding  had  been  instituted  before  an  order  for winding  up had been made.  This  apart,  the  winding-up court  has

7 (1996) 4 SCC 165

32

Page 33

jurisdiction to transfer such a suit or proceeding to itself and dispose of the same. These follow from sub-sections (2) and (3) of Section 446.

(ii)  When  a  winding-up  order  has  been  made  or  the  official liquidator  has been appointed  as  provisional  liquidator,  no suit  or other legal proceeding, even if pending at the date of the winding-up order,  can  proceed  against  the  company,  except  by  leave  of  the company court vide sub-section (1) of Section 446.

(  iii  ) Any sale held, even without the leave of the winding-up court pursuant to order of a civil court on it being approached by a secured creditor to realise its debt will not ipso facto be void, in view of the holding in   Ranganathan case   that Section 537, dealing with voidness of sale, operates when the sale is pursuant to attachment of company court. This, however, would be the position where a company has not been wound up, but is in the process of being wound up. 5. None of the parties has assailed the aforesaid propositions of law as well.  The  real  bone  of  contention  is  as  to  when  (i)  leave  of  the winding-up court should be granted to a secured creditor to proceed with the suit after an order of winding up has been made; and (ii) when  should  a  winding-up  court  transfer  to  itself  any  suit  or proceeding by or  against the company during the pendency of  the winding-up proceeding. 6. The aforesaid questions arise because a secured creditor who has initiated a suit or proceeding in a civil court is interested in realisation of his debt only, whereas the company court looks after the interest of all the creditors; so too, the workmen’s dues, which rank pari passu with debts due to secured creditors. This is brought home not only by Section 529-A, which was inserted by the Companies (Amendment) Act, 1985, but also by the proviso to sub-section (1) of Section 529 inserted  by  the  same Amendment  Act.  The  winding-up  court  does these acts through a liquidator, who has been given wide powers by Section 457 of the Act. As against this, a receiver appointed by a civil court on being approached by secured creditor would basically look after the interest of that creditor, whose interest may in many cases be in  conflict  with  that  of  the  liquidator,  as  was  acknowledged in Karamelli & Barnett Ltd., In re. We feel no difficulty in stating that in case  of  such  conflict,  the  interest  of  liquidator  has  to  receive precedence over that of  the receiver  inasmuch as the former looks after the interest of a large segment of creditors along with that of workmen, whereas the latter confines his concern to the interest of the  secured  creditor  on  whose  approach  the  receiver  has  been appointed.  This  view  cannot  also  be,  and  has  indeed  not  been, contested by the learned counsel appearing for the appellants.

xxx xxx xxx 9. Shri Salve’s entire submission had been that a working principle may  be  got  evolved  which  would,  on  the  one  hand,  protect  the

33

Page 34

substantive right of a secured creditor, specially in view of large sums of money being advanced of late of such creditors and, on the other hand, not jeopardise the interest of other secured creditors. According to  the  learned  counsel,  these  twin  objects  can  be  achieved  if  the company  court  were  to  grant  leave  wherever  required  as  a  rule, subject to reasonable conditions. This would preserve the integrity of the substantive right of the secured creditor. The terms to be imposed should  facilitate,  rather  than  obstruct,  the  realisation  of  security. Further,  wherever  a  receiver  has  been  appointed  prior  to  the commencement  of  the  winding-up  proceedings,  he  should  be permitted to continue in general run of cases. As to the suits to be filed  after  the  winding-up  proceeding  has  commenced,  the  learned counsel urged that such a permission should normally be granted by the  winding-up  court.  On  this  being  done,  when  the  question  of appointment of receiver would arise, the civil court would do so if a case for same were to be made out after hearing the liquidator, who would be a defendant in the suit. As regards transfer of the pending suit by the company court, the submission was that convenience may not  be  the  guiding  factor;  the  preservation  of  integrity  of  the substantive right of the creditor should be the main consideration. 10. To buttress  his  submission,  Shri  Salve  has referred  us  to  the Recovery of Debts due to Banks and Financial Institutions Act, 1993, which  was  recently  enacted  because  of  the  considerable  difficulty being  experienced by financial  institutions  in  recovering  loans and enforcement securities charged with them. Earlier, recovery procedure used  to  block  a  significant  portion  of  their  funds  in  unproductive assets, the value of which deteriorates with the passage of time. An urgent need was, therefore, felt for successful implementation of the financial sector reforms, to work out a suitable mechanism through which dues to these institutions could be realised without delay. To achieve this purpose, the aforesaid Act visualises establishment of the Debts Recovery Tribunal(s) by the Central Government, with its own procedure which is speedy in nature. Section 18 of this Act has barred jurisdiction of other courts, except the writ power of the higher courts, in relation to the matters specified in Section 17 — the same being recovery of debts due to such institutions.

xxx xxx xxx 13. We are, therefore, of the view that the approach to be adopted in this regard by the company court does not deserve to be put in a strait-jacket formula. The discretion to be exercised in this regard has to  depend  on  the  facts  and  circumstances  of  each  case.  While exercising this power we have no doubt that the company court would also bear in mind the rationale behind the enactment of Recovery of Debts  Due  to  the  Banks  and  Financial  Institutions  Act,  1993,  to which reference has been made above. We make the same observation

34

Page 35

regarding the terms which a company court  should like to impose while  granting  leave.  It  need  not  be  stated  that  the  terms  to  be imposed have to be reasonable,  which would,  of  course,  vary from case to case. According to us, such an approach, would maintain the integrity of that secured creditor who had approached the civil court or  desires  to  do  so,  and  would  take  care  of  the  interest  of  other secured creditors as well which the company court is duty-bound to do. The company court shall also apprise itself about the fact whether dues of workmen are outstanding; if so, extent of the same. It would be seen whether after the assets of the company are allowed to be used to satisfy the debt of the secured creditor, it would be possible to satisfy the workmen’s dues pari passu.”

(emphasis supplied)

21. On  the  jurisdictional  aspect,  learned  senior  counsel  for  the

respondents placed reliance on clauses (1)  and (2)  of Section 446 of the

Companies Act, 1956.  The same are reproduced below:

“446. Suits stayed on winding up order. – (1) When a winding up order has  been  made  or  the  Official  Liquidator  has  been  appointed  as provisional  liquidator,  no  suit  or  other  legal  proceeding  shall  be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the (Tribunal) and subject to such terms as the (Tribunal) may impose. (2) (Tribunal) shall, notwithstanding anything, contained in any other law  for  the  time  being  in  force,  have  jurisdiction  to  entertain,  or dispose of –  (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c)  any application made under section 391 by or in respect of the company;  (d)  any  question  of  priorities  or  any  other  question  whatsoever, whether of law or fact, which may relate to or rise in course of the winding up of the company, whether such suit or proceeding has been instituted or is instituted or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960 …..”

35

Page 36

22. With reference to the judgment rendered in the Allahabad Bank

case1, it was asserted, that this Court had merely concluded, that it was not

necessary for a bank or a financial institution to seek leave of Company

Court before initiating proceedings against a debtor under the provisions of

the RDB Act.  It was therefore pointed out, that there was no dissimilarity of

the conclusions drawn by this Court in the Allahabad Bank case1 and the

Srinivas Agencies case7.

23. In  addition  to  the  above,  learned  senior  counsel  for  the

respondents, placed reliance on Krishnadevi Malchand Kamathia v. Bombay

Environmental  Action  Group8, and  placed  reliance  on  the  following

conclusions drawn therein:

“16. It is a settled legal proposition that even if an order is void, it requires  to  be  so  declared  by  a  competent  forum  and  it  is  not permissible for any person to ignore the same merely because in his opinion the order is  void.  In  State of  Kerala v.  M.K.  Kunhikannan Nambiar  Manjeri  Manikoth  Naduvil,  Tayabbhai  M.  Bagasarwalla v. Hind Rubber Industries (P)  Ltd.,  M. Meenakshi v.  Metadin Agarwal and Sneh Gupta v. Devi Sarup, this Court held that whether an order is valid or void, cannot be determined by the parties. For setting aside such an order, even if void, the party has to approach the appropriate forum. 17. In    State of Punjab   v.    Gurdev Singh   this Court held that a party aggrieved by the invalidity of an order has to approach the court for relief  of  declaration  that  the  order  against  him is  inoperative  and therefore, not binding upon him. While deciding the said case, this Court placed reliance upon the judgment in Smith v. East Elloe RDC, wherein Lord Radcliffe observed: (AC pp. 769-70) “… An order, even if not made in good faith, is still an act capable of legal consequences. It bears no brand of invalidity [on] its forehead. Unless the necessary proceedings are taken at law to establish the cause of invalidity and to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of orders.”

8 (2011) 3 SCC 363

36

Page 37

18. In    Sultan Sadik   v.    Sanjay Raj  Subba AIR 2004 SC 1377  ,  this Court took a similar view observing that once an order is declared non est by the court only then the judgment of nullity would operate   erga omnes   i.e. for and against everyone concerned. Such a declaration is permissible if the court comes to the conclusion that the author of the order lacks inherent jurisdiction/competence and therefore, it comes to  the  conclusion  that  the  order  suffers  from  patent  and  latent invalidity.” 19. Thus, from the above it emerges that even if the order/notification is void/voidable, the party aggrieved by the same cannot decide that the said order/notification is not binding upon it. It has to approach the  court  for  seeking  such  declaration.  The  order  may  be hypothetically a nullity and even if its invalidity is challenged before the court in a given circumstance, the court may refuse to quash the same on various grounds including the standing of the petitioner or on the ground of delay or on the doctrine of waiver or any other legal reason. The order may be void for one purpose or for one person, it may not be so for another purpose or another person.”

(emphasis supplied)

24. In addition to the above, reliance was placed on Order XXI Rule 58

of the Code of Civil Procedure, which is extracted below:

“58.  Adjudication  of  claims  to,  or  objections  to  attachment  of, property. - (1) Where any claims preferred to, or any objection is made to the attachment of, any property attached in execution of a decree on the ground that such property is not liable to such attachment, the Court  shall  proceed  to  adjudicate  upon  the  claim  or  objection  in accordance with the provisions herein contained:  Provided that no such claim or objection shall be entertained—  (a)  where,  before  the  claim  is  preferred  or  objection  is  made,  the property attached has already been sold; or  (b)  where  the  Court  considers  that  the  claim  or  objection  was designedly or unnecessarily delayed.  (2) All questions (including questions relating to right, title or interest in the property attached) arising between the parties to a proceeding or  their  representatives  under  this  rule  and  relevant  to  the adjudication  of  the  claim or  objection,  shall  be  determined by  the Court dealing with the claim or objection and not by a separate suit.  (3) Upon the determination of the questions referred to in sub-rule (2), the Court shall, in accordance with such determination,—  (a)  allow  the  claim  or  objection  and  release  the  property  from attachment either wholly or to such extent as it thinks fit; or  (b) disallow the claim or objection; or  

37

Page 38

(c) continue the attachment subject to any mortgage, charge of other interest in favour of any person; or  (d) pass such order as in the circumstances of the case it deems fit.  

(4) Where any claim or objection has been adjudicated upon under this rule, the order made thereon shall have the same force and be subject to the same conditions as to appeal or otherwise as if it were a decree.  (5) Where a claim or an objection is preferred and the Court, under the proviso to sub-rule (1), refuses to entertain it, the party against whom such order is made may institute a suit to establish the right which he claims to the property in dispute; but, subject to the result of such suit,  if  any, an order so refusing to entertain the claim or objection shall be conclusive.”  

Based  on  the  above  provision,  it  was  submitted,  that  a  declaration  of

illegality could only be prospective.  And therefore, what had to be decided

was,  whether  the  sale  proceedings  conducted  on  11.8.2005  and  the

confirmation thereof on 12.9.2005, were valid?  It was submitted, that even

if, for arguments sake, the order dated 10.3.2000 passed by the Company

Court of the High Court at Madras was now to be set aside, the same would

not validate the aforementioned illegality and unauthorized actions of the

Recovery Officer, for giving effect to the recovery certificate issued by the

DRT.  To support the aforementioned proposition, learned senior counsel

placed reliance on the Official Liquidator, Uttar Pradesh and Uttarakhand

case5, and drew the attention of this Court to the factual position recorded

in paragraphs 2 and 3 thereof, which are reproduced hereunder:

“2. Regard being had to the controversy involved which is in the realm of  pure question of  law,  it  is  not necessary to exposit  the facts in detail.  Hence,  the  necessitous  facts  are  adumbrated  herein.  The respondent,  Allahabad Bank, a secured creditor with whom certain properties were mortgaged, filed Original Application No. 153 of 1999 under  Section  9  of  the  RDB  Act  for  recovery  of  a  sum  of  Rs 39,93,47,701 with interest from the Company, namely, M/s Rajindra

38

Page 39

Pipes  Ltd.,  which  was  decreed  by  the  Debts  Recovery  Tribunal, Jabalpur  (DRT)  vide  its  order  dated  7-3-2000.  The  debt  recovery certificate being DRC No. 164 of 2000 was issued for recovery of the aforesaid  amount  which  was  subsequently  transferred  to  DRT  at Allahabad. Be it noted, Company Petition No. 113 of 1997 was filed before the learned Company Judge in the High Court of Judicature at Allahabad who, vide order dated 26-7-2000, had passed an order for winding up of the Company, as a consequence of which the Official Liquidator  had  taken  over  the  possession  of  the  assets  of  the Company on 24-7-2002. After receipt of the recovery certificate, the Recovery Officer attached the immovable properties of the wound-up company by order dated 29-8-2002. The movable properties  of  the company  were  attached  as  per  order  dated  23-12-2003.  At  this juncture,  Allahabad Bank filed  an application before  the  Company Court for impleading it  as a necessary party and protect  its  rights getting  it  out  of  the  winding-up  proceedings.  A  prayer  was  made before the Company Court to grant permission to proceed with the sale of the attached properties by the Recovery Officer, Debts Recovery Tribunal (DRT). The learned Company Judge, on 13-2-2004, granted permission for proceeding with the attachment and sale of the assets for recovery of the dues under the RDB Act. It is worth stating here that no condition was imposed. 3. After  auction  and  confirmation  of  sale  by  DRT,  the auction-purchaser filed  an application before the learned Company Judge  for  issuance of  a  direction  to  the  Official  Liquidator  to  give physical possession. The Company Court, by order dated 4-4-2007, set aside the sale certificate on the ground that the Official Liquidator was neither heard in the matter nor was he given an opportunity to represent before the Recovery Officer for the purposes of representing the workmen’s dues and a portion of the workmen’s liability  under Section 529-A of the 1956 Act. A direction was issued to the Recovery Officer to proceed to sell the assets only after associating the Official Liquidator and after giving him hearing to represent the claims of the workmen.”

The aforementioned controversy was adjudicated and disposed of by this

Court,  after  making a reference to the judgment in the Allahabad Bank

case1 by concluding as under:

“35. It  has been submitted by Mr Banerji,  learned Senior Counsel, that if the Company Court as well as DRT can exercise jurisdiction in respect of the same auction or sale after adjudication by DRT, there would be duality of exercise of jurisdiction which the RDB Act does

39

Page 40

not envisage. By way of an example, the learned Senior Counsel has submitted that there are some categories of persons who can go before DRT challenging the sale and if the Official Liquidator approaches the Company Court, then such a situation would only bring anarchy in the realm of  adjudication.  The aforesaid submission of  the learned Senior  Counsel  commends  acceptance  as  the  intendment  of  the legislature is that the dues of the banks and financial institutions are realised in promptitude. It is to be noted that when there is inflation in  the  economy,  the  value  of  the  mortgaged  property/assets depreciates with the efflux of time. If more time is consumed, it would be really difficult on the part of the banks and financial institutions to realise their dues. Therefore, this Court in    Allahabad Bank case   has opined  that  it  is  DRT which  would  have  the  exclusive  jurisdiction when a matter is agitated before DRT. The dictum in the said case has been approved by the three-Judge Bench in   Rajasthan State Financial Corpn.      It is not a situation where the Official Liquidator can have a choice either to approach DRT or the Company Court. The language of the  RDB Act,  being  clear,  provides  that  any  person  aggrieved  can prefer  an  appeal.  The  Official  Liquidator  whose  association  is mandatorily  required  can  indubitably  be  regarded  as  a  person aggrieved relating to the action taken by the Recovery Officer which would include the manner in which the auction is conducted or the sale is confirmed. Under these circumstances, the Official Liquidator cannot even take recourse to the doctrine of election. It is difficult to conceive that there are two remedies. It is well settled in law that if there is only one remedy, the doctrine of election does not apply and we are  disposed to  think that  the  Official  Liquidator  has only  one remedy  i.e.  to  challenge  the  order  passed  by  the  Recovery  Officer before DRT. Be it noted, an order passed under Section 30 of the RDB Act by DRT is appealable. Thus, we are inclined to conclude and hold that  the  Official  Liquidator  can only  take recourse  to  the  mode of appeal and further appeal under the RDB Act and not approach the Company Court to set aside the auction or confirmation of sale when a sale has been confirmed by the Recovery Officer under the RDB Act. 36. We will  be  failing  in  our  duty  if  we do not  take notice  of  the decision in   M.V. Janardhan Reddy   wherein the sale was set aside by the Company Judge. It may be stated here that the Company Court had imposed a condition that the permission of the Company Court shall  be  obtained  before  the  sale  of  the  properties,  immovable  or movable, is confirmed or finalised. On the aforesaid basis, this Court opined  that  when  the  bank  was  permitted  to  go  ahead  with  the proposed sale of the assets of the company under liquidation by way of auction but such sale was subject to confirmation by the Company Court  and  all  the  parties  were  aware  about  the  condition  as  to confirmation of sale by the Company Court, it was not open to the Recovery Officer to confirm the sale and, therefore, the sale was set

40

Page 41

aside by the Company Court, being in violation of the order. Thus, we find  that  the  facts  in  the  said  case  were  absolutely  different  and further this Court did not deal with the jurisdiction of the Company Court vis-à-vis DRT as the said issue really did not arise. Hence, it is not an authority for the proposition that the Official Liquidator can approach  the  Company  Court  to  set  aside  the  auction  or  sale conducted by the Recovery Officer of DRT. 37. In  view  of  the  aforesaid  analysis,  we  concur  with  the  view expressed by the Division Bench and hold that the Official Liquidator can prefer an appeal before DRT. As he was prosecuting the lis in all genuineness  before  the  Company  Court  and  defending  the  order before the Division Bench, we grant him four weeks’ time to file an appeal after following the due procedure. On such an appeal being preferred, DRT shall deal with the appeal in accordance with law. DRT is directed to decide the appeal within a period of two months after offering an opportunity of hearing to all concerned. Till the appeal is disposed of, the interim order passed by this Court shall remain in force. We hasten to clarify that we have not expressed anything on the merits of the case.”

(emphasis supplied)

25. Reliance was then placed on Order XXI Rule 54 of the Code of Civil

Procedure, which is extracted hereunder:

“54.  Attachment  of  immovable  property.- (1)  Where  the  property  is immovable, the attachment shall be made by an Order prohibiting the judgment debtor  from transferring or  charging the property  in any way, and all persons from taking any benefit from such transfer or charge. (1)A The Order shall also require the judgment debtor to attend court on a specified date to take notice of the date to be fixed for settling the terms of the proclamation of sale. (2)  The Order shall  be proclaimed at some place on or adjacent to such property by beat of drum or other customary mode, and a copy of the Order shall be affixed on a conspicuous part of the property and then upon a conspicuous part of the court house, and also, where the property is land paying revenue to the government, in the office of the Collector of the District in which the land is situate and, where the property  is  land  situate  in  village,  also  in  the  office  of  the  Gram Panchayat, if any, having jurisdiction over that village.”

To support the contention advanced at the hands of learned senior counsel

representing  the  respondents,  reliance  was  placed  on  Jehal  Tanti  v.

41

Page 42

Nageshwar  Singh9.   The  following  observations  recorded  therein,  are  of

relevance:

“10. The nature and effect of an alienation made in violation of an order of injunction was considered in  Tayabbhai M. Bagasarwalla v. Hind Rubber Industries (P) Ltd. and the following propositions were laid down:  “16.  According  to  this  section,  if  an  objection  is  raised  to  the jurisdiction of the court at the hearing of an application for grant of, or for vacating, interim relief, the court should determine that issue in the first  instance as a  preliminary issue before granting or  setting aside the relief already granted. An application raising objection to the jurisdiction to the court is directed to be heard with all expedition. Sub-rule (2), however, says that the command in sub-rule (1) does not preclude the court from granting such interim relief as it may consider necessary pending the decision on the question of jurisdiction. In our opinion,  the  provision  merely  states  the  obvious.  It  makes  explicit what is implicit in law. Just because an objection to the jurisdiction is raised,  the  court  does  not  become  helpless  forthwith—nor  does  it become incompetent to grant the interim relief. It can. At the same time, it should also decide the objection to jurisdiction at the earliest possible  moment.  This  is  the  general  principle  and  this  is  what Section  9-A  reiterates.  Take this  very  case.  The  plaintiff  asked  for temporary injunction. An ad interim injunction was granted. Then the defendants came forward objecting to the grant of injunction and also raising  an  objection  to  the  jurisdiction  of  the  court.  The  court overruled  the  objection  as  to  jurisdiction  and  made  the  interim injunction  absolute.  The  defendants  filed  an  appeal  against  the decision  on  the  question  of  jurisdiction.  While  that  appeal  was pending, several other interim orders were passed both by the civil court as well  as by the High Court.  Ultimately, no doubt, the High Court has found that the civil court had no jurisdiction to entertain the suit but all this took about six years. Can it be said that orders passed by the civil court and the High Court during this period of six years were all non est and that it is open to the defendants to flout them merrily, without fear of any consequence. Admittedly, this could not  be  done  until  the  High  Court’s  decision  on  the  question  of jurisdiction. The question is  whether the said decision of  the High Court  means  that  no  person  can  be  punished  for  flouting  or disobeying the interim/interlocutory orders while they were in force i.e. for violations and disobedience committed prior to the decision of the High Court on the question of jurisdiction. Holding that by virtue of the said decision of the High Court (on the question of jurisdiction),

9 (2013) 14 SCC 689

42

Page 43

no one can be punished thereafter for disobedience or violation of the interim orders committed prior to the said decision of the High Court, would indeed be subversive of  the rule  of  law and would seriously erode the dignity and the authority of the courts. We must repeat that this  is  not even a case where a  suit  was filed  in the wrong court knowingly or only with a view to snatch an interim order. As pointed out hereinabove, the suit was filed in the civil court bona fide. We are of the opinion that in such a case the defendants cannot escape the consequences  of  their  disobedience  and  violation  of  the  interim injunction committed by them prior to the High Court’s decision on the question of jurisdiction. 28.  The  correct  principle,  therefore,  is  the  one  recognised  and reiterated in Section 9-A – to wit, where an objection to jurisdiction of a  civil  court  is  raised to  entertain  a suit  and to  pass  any interim orders therein, the Court should decide the question of jurisdiction in the first instance but that does not mean that pending the decision on the  question  of  jurisdiction,  the  Court  has  no  jurisdiction  to  pass interim orders as may be called for in the facts and circumstances of the case.  A mere objection to jurisdiction does not instantly disable the court from passing any interim orders. It can yet pass appropriate orders.  At  the  same  time,  it  should  also  decide  the  question  of jurisdiction at the earliest possible time. The interim orders so passed are orders within jurisdiction when passed and effective till the court decides that it has no jurisdiction to entertain the suit. These interim orders undoubtedly come to an end with the decision that this Court had no jurisdiction.  It  is  open to the court  to  modify these orders while holding that it has no jurisdiction to try the suit…..””

(emphasis supplied)

26. It  was  the  emphatic  contention  of  learned  counsel  for  the

respondents, that the sole purpose for requiring the Official Liquidator to

participate in the proceedings before the DRT, was to keep the interest of

the creditors before the Company Court (where winding up proceedings had

been  initiated  by  other  creditors),  secure.   The  interest  of  the  creditors

before the Company Court could be secure, only if the sale of the properties

of  the  company  under  winding  up  was  made  by  conforming  to  the

crystalised practices in getting the best price.  Referring to the conclusions

43

Page 44

drawn  in  the  impugned  order,  it  was  submitted,  that  the  auction  sale

conducted by the Recovery Officer  was farcical,  as it  was,  with  the sole

object of extending benefits to the appellant – Anita International.  It was

therefore  asserted,  that  the  Division  Bench of  the  High Court  was fully

justified in setting aside the order passed by the learned Single Judge.

27. Mr. P. Chidambaram, learned senior counsel in rejoinder and in

response  to  the  three  contentions  advanced  at  the  hands  of  the

respondents, invited this Court’s attention to Sections 18, 19 and 34 of the

RDB Act.  The same are extracted hereunder:

“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 and 227 of the Constitution) in relation to the matters specified in section 17. Provided that any proceedings in relation to the recovery of debts due to  any  multi-State  co-operative  bank  pending  before  the  date  of commencement of the Enforcement of Security Interest and Recovery of  Debts  Laws  (Amendment)  Act,  2012  under  the  Multi-State Co-operative Societies Act, 2002 (39 of 2002) shall be continued and nothing contained in this  section shall,  after  such commencement, apply to such proceedings. 19.  Application to  the Tribunal.  –  (1)  Where a  bank or  a  financial institution has to recover any debt from any person, it may make an application  to  the  Tribunal  within  the  local  limits  of  whose jurisdiction- (a)  the defendant,  or each of  the defendants where there are more than  one,  at  the  time  of  making  the  application,  actually  and voluntarily  resides,  or  carries  on business,  or  personally  works for gain; or (b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or (c) the cause of action, wholly or in part, arises:

Provided  that  the  bank  or  financial  institution  may,  with  the permission of the Debts Recovery Tribunal, on an application made by it,  withdraw  the  application,  whether  made  before  or  after  the

44

Page 45

Enforcement  of  Security  Interest  and  Recovery  of  Debts  Laws (Amendment)  Act,  2004 for the purpose of taking action under the Securitisation  and  Reconstruction  of  Financial  Assets  and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act:  Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application:  Provided  also  that  in  case  the  Debts  Recovery  Tribunal  refuses  to grant  permission for  withdrawal  of  the  application filed  under  this sub-section,  it  shall  pass  such  orders  after  recording  the  reasons therefor. (1A) Every bank being, multi-State co-operative bank referred to in sub-clause (vi)  of clause (d)  of section 2, may, at its option, opt to initiate proceedings under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) to recover debts, whether due before or after the date of  commencement of  the Enforcement of  the Security  Interest and Recovery of Debts Laws (Amendment) Act, 2012 from any person instead of making an application under this Chapter. (1B) In case, a bank being, multi-State co-operative bank referred to in sub-clause (vi)  of clause (d) of section 2 has filed an application under this Chapter and subsequently opts to withdraw the application for  the  purpose  of  initiating  proceeding  under  the  Multi-State Co-operative Societies Act, 2002 (39 of 2002) to recover debts, it may do so with the permission of the Tribunal and every such application seeking  permission  from  the  Tribunal  to  withdraw  the  application made under sub-section (1A) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application: Provided that  in  case  the Tribunal  refuses to  grant  permission for withdrawal  of  the  application  filed  under  this  sub-section,  it  shall pass such orders after recording the reasons therefor. (2) Where a bank or a financial institution, which has to recover its debt from any person, has filed an application to the Tribunal under sub-section (1) and against the same person another bank or financial institution also has a claim to recover its debt, then, the later bank or financial  institution  may  join  the  applicant  bank  or  financial institution at any stage of the proceedings, before the final order is passed, by making an application to that Tribunal. (3) Every application under sub-section (1) or sub-section (2) shall be in such form and accompanied by such documents or other evidence and by such fee as may be prescribed: Provided that the fee may be prescribed having regard to the amount of debt to be recovered:

45

Page 46

Provided further that nothing contained in this sub-section relating to fee shall apply to cases transferred to the Tribunal under sub-section (1) of section 31. (3A) If  any application filed before the Tribunal for recovery of any debt is settled prior to the commencement of the hearing before that Tribunal or at any stage of the proceedings before the final order is passed, the applicant may be granted refund of the fees paid by him at such rates as may be prescribed. (4) On receipt of the application under sub-section (1) or sub-section (2),  the  Tribunal  shall  issue  summons  requiring  the  defendant  to show cause within thirty days of the service of summons as to why the relief prayed for should not be granted. (5) The defendant shall, within a period of thirty days from the date of service of summons, present a written statement of this defence:

Provided that where the defendant fails to file the written statement within the said period of  thirty days,  the Presiding Officer may, in exceptional  cases  and  in  special  circumstances  to  be  recorded  in writing, allow not more than two extensions to the defendant to file the written statement. (5A)  After  hearing  of  the  application  has  commenced,  it  shall  be continued from day-to-day until the hearing is concluded: Provided that the Tribunal may grant adjournments if sufficient cause is shown, but no such adjournment shall be granted more than three times to a party and where there are three or more parties, the total number of such adjournments shall not exceed six: Provided  further  that,  the  Presiding  Officer  may  grant  such adjournments  on  imposing  such  costs  as  may  be  considered necessary. (6)  Where  the  defendant  claims  to  set-off  against  the  applicant's demand any ascertained  sum of  money  legally  recoverable  by  him from such applicant, the defendant may, at the first hearing of the application,  but  not  afterwards  unless  permitted  by  the  Tribunal, present  a  written  statement  containing  the  particulars  of  the  debt sought to be set-off. (7) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Tribunal to pass a final order in respect both of the original claim and of the set-off. (8)  A  defendant  in  an  application  may,  in  addition  to  his  right  of pleading  a  set-off  under  sub-section  (6),  set  up,  by  way  of counter-claim against the claim of the applicant, any right or claim in respect of  a cause of  action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not.

46

Page 47

(9) A counter-claim under sub-section (8) shall have the same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same  application,  both  on  the  original  claim  and  on  the counter-claim. (10) The applicant shall  be at liberty to file  a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Tribunal. (11) Where the defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but in an independent action, the applicant may, at any time before issues are settled in relation to the counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, and the Tribunal may, on the hearing of such application, make such order as it thinks fit. (12)  The  Tribunal  may make  an interim order  (whether  by  way  of injunction or stay or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing of, any  property  and  assets  belonging  to  him  without  the  prior permission of the Tribunal. (13)(A)  Where,  at  any  stage  of  the  proceedings,  the  Tribunal  is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct  or  delay  or  frustrate  the  execution  of  any  order  for  the recovery of debt that may be passed against him, - (i) is about to dispose of the whole or any part of his property; or (ii) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or (iii) is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest,  the Tribunal may direct the defendant, within a time to be fixed by it, either to furnish security,  in such sum as may be specified in the order,  to  produce and place at  the disposal  of  the Tribunal,  when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the certificate for the recovery of debt,  or  to  appear  and  show  cause  why  he  should  not  furnish security. (B)  Where  the  defendant  fails  to  show  cause  why  he  should  not furnish security, or fails to furnish the security required, within the time fixed by the Tribunal, the Tribunal may order the attachment of the whole or such portion of the properties claimed by the applicant as  the  properties  secured  in  his  favor  or  otherwise  owned  by  the defendant  as  appears  sufficient  to  satisfy  any  certificate  for  the recovery of debt. (14) The applicant shall, unless the Tribunal otherwise directs, specify the property required to be attached and the estimated value thereof.

47

Page 48

(15)  The  Tribunal  may  also  in  the  order  direct  the  conditional attachment of the whole or any portion of the property specified under sub-section (14). (16) If  an order of attachment is made without complying with the provisions of sub-section (13), such attachment shall be void. (17) In the case of  disobedience of  an order made by the Tribunal under sub-sections (12), (13) and (18) or breach of any of the terms on which the order was made, the Tribunal may order the properties of the person guilty of such disobedience or breach to be attached and may also order such person to be detained in the civil prison for a term  not  exceeding  three  months,  unless  in  the  meantime  the Tribunal directs his release. (18) Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order,- (a) appoint a receiver of any property, whether before or after grant of certificate for recovery of debt; (b) remove any person from the possession or custody of the property; (c) commit the same to the possession, custody or management of the receiver; (d)  confer  upon  the  receiver  all  such  powers,  as  to  bringing  and defending suits in the courts or filing and defending application before the  Tribunal  and  for  the  realization,  management,  protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and (e)  appoint  a  Commissioner  for  preparation  of  an  inventory  of  the properties of the defendant or for the sale thereof. (19)  Where  a  certificate  of  recovery  is  issued  against  a  company registered under the Companies Act, 1956 (1 of 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. (20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realization or actual payment, on the application as it thinks fit to meet the ends of justice. (20A) Where it is proved to the satisfaction of the Tribunal that the claim of  the applicant has been adjusted wholly or in part  by any lawful agreement or compromise in writing and signed by the parties or where the defendant has repaid or agreed to repay the claim of the applicant, the Tribunal shall pass orders recording such agreement, compromise or satisfaction of the claim.

48

Page 49

(21) The Tribunal shall send a copy of every order passed by it to the applicant and the defendant. (22) The Presiding Officer shall issue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate. (23) Where the Tribunal, which has issued a certificate of recovery, is satisfied that the property is situated within the local limits  of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated: Provided that in a case where the Tribunal to which the certificate of recovery  is  sent  for  execution  finds  that  it  has  no  jurisdiction  to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it. (24) The application made to the Tribunal under sub-section (1)  or sub-section (2) shall be dealt with by it as expeditiously as possible and endeavor shall be made by it to dispose of the application finally within one hundred and eighty days from the date of receipt of the application.

(25) The Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice.

xxx xxx xxx 34.  Act  to  have  over-riding  effect.—(1)  Save  as  provided  under sub-section  (2),  the  provisions  of  this  Act  shall  have  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), the  Sick  Industrial  Companies  (Special  Provisions)  Act,  1985  (1  of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989).”

Based on the aforesaid provisions, it was asserted, that the provisions of the

RDB Act  envisaged  a  complete  ouster  of  the  Company  Court,  and  that

neither  the  Company  Court  nor  any  other  Court,  could  have  exercised

jurisdiction  vested  in  the  RDB Act.   It  was  submitted,  that  the  Official

49

Page 50

Liquidator  has  no  participatory  role  under  the  RDB  Act.   The  Official

Liquidator has jurisdictional control, over the assets of a company under

winding  up,  under  the  Companies  Act.   In  this  behalf,  learned  senior

counsel  for  the  appellant,  placed  reliance  on  Kiran  Singh  v.  Chaman

Paswan10, and pointed out to the following observations recorded therein:

“6. The  answer  to  these  contentions  must  depend  on  what  the position in law is when a court entertains a suit or an appeal over which it has no jurisdiction, and what the effect of Section 11 of the Suits Valuation Act is on that position.  It is a fundamental principle well established that a decree passed by a court without jurisdiction is a  nullity,  and  that  its  invalidity  could  be  set  up  whenever  and wherever it is sought to be enforced or relied upon, even at the stage of  execution  and  even  in  collateral  proceedings.  A  defect  of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect  of  the  subject-matter  of  the  action,  strikes  at  the  very authority of the court to pass any decree, and such a defect cannot be cured  even  by  consent  of  parties.  If  the  question  now  under consideration fell to be determined only on the application of general principles  governing  the  matter,  there  can  be  no  doubt  that  the District  Court  of  Monghyr  was  coram  non  judice, and  that  its judgment and decree would be nullities. The question is what is the effect of Section 11 of the Suits Valuation Act on this position.”

(emphasis supplied)

Reliance  was  also  placed  on  Dhurandhar  Prasad  Singh  v.  Jai  Prakash

University11,  and  the  Court’s  attention  was  drawn  to  the  following

observations:

“20. de Smith, Woolf and Jowell in their treatise  Judicial Review of Administrative  Action, 5th Edn.,  para 5-044, have summarised the concept of void and voidable as follows: “Behind the simple dichotomy of void and voidable acts (invalid and valid until declared to be invalid) lurk terminological and conceptual problems  of  excruciating  complexity.  The  problems arose  from the premise that if an act, order or decision is ultra vires in the sense of outside jurisdiction, it was said to be invalid, or null and void. If it is

10 1955 (1) SCR 117 11 (2001) 6 SCC 534

50

Page 51

intra  vires  it  was,  of  course,  valid.  If  it  is  flawed  by  an  error perpetrated within the area of authority or jurisdiction, it was usually said to be voidable; that is, valid till set aside on appeal or in the past quashed by certiorari for error of law on the face of the record.” 21. Clive Lewis in his work Judicial Remedies in Public Law at p. 131 has explained the expressions “void and voidable” as follows: “A challenge to the validity of an act may be by direct action or by way of collateral  or indirect  challenge.  A direct action is  one where the principal purpose of the action is to establish the invalidity. This will usually be by way of an application for judicial review or by use of any statutory mechanism for appeal or review. Collateral challenges arise when the invalidity is raised in the course of some other proceedings, the purpose of which is not to establish invalidity but where questions of validity become relevant.”

Thereupon,  reference  was  made  to  Jagmittar  Sain  Bhagat  v.  Director,

Health  Services,  Haryana12.   In  order  to  canvass  the  proposition,  that

jurisdiction of courts/forums cannot be conferred by consent of parties, or

acquiescence or waiver.  Reliance in this behalf was placed on the following

conclusions drawn by this Court:

“9. Indisputably,  it  is  a  settled  legal  proposition  that  conferment  of jurisdiction is a legislative function and it can neither be conferred with the consent of  the parties nor by a superior  court,  and if  the court passes a decree having no jurisdiction over the matter, it would amount to nullity as the matter goes to the root of the cause. Such an issue can be raised at any stage of the proceedings.  The finding of a court or tribunal becomes irrelevant and unenforceable/inexecutable once the forum is found to have no jurisdiction. Similarly, if  a court/tribunal inherently lacks jurisdiction, acquiescence of party equally should not be permitted to perpetrate and perpetuate defeating of the legislative animation. The court cannot derive jurisdiction apart from the statute. In such eventuality the doctrine of waiver also does not apply. (Vide United Commercial Bank Ltd. v. Workmen AIR 1951 SC 230; Nai Bahu v. Lala Ramnarayan AIR 1978 SC 22; Natraj Studios (P) Ltd. v. Navrang Studios (1981) 1 SCC 523; and  Kondiba Dagadu Kadam v.  Savitribai Sopan Gujar (1999) 3 SCC 722.) 10. In  Sushil Kumar Mehta v.  Gobind Ram Bohra (1990) 1 SCC 193, this  Court,  after  placing  reliance  on  a  large  number  of  its  earlier judgments  particularly  in  Premier  Automobiles  Ltd. v.  Kamlekar

12 (2013) 10 SCC 136

51

Page 52

Shantaram Wadke (1976) 1 SCC 496; Kiran Singh v. Chaman Paswan AIR 1954 SC 340; and  Chandrika Misir v.  Bhaiya Lal  AIR 1973 SC 2391 held, that a decree without jurisdiction is a nullity. It is a   coram non judice  ; when a special statute gives a right and also provides for a forum for adjudication of rights, remedy has to be sought only under the  provisions  of  that  Act  and  the  common  law  court  has  no jurisdiction;  where  an  Act  creates  an  obligation  and  enforces  the performance in specified manner, “performance cannot be forced in any other manner”. 11. The law does not  permit  any court/tribunal/authority/forum to usurp  jurisdiction  on  any  ground  whatsoever,  in  case,  such  an authority  does  not  have  jurisdiction  on  the  subject-matter.  For  the reason that it  is  not an objection as to the place of suing; “it  is an objection going to the nullity  of  the order on the ground of  want of jurisdiction”.  Thus,  for  assumption  of  jurisdiction  by  a  court  or  a tribunal, existence of jurisdictional fact is a condition precedent. But once such jurisdictional fact is found to exist, the court or tribunal has power  to  decide  on  the  adjudicatory  facts  or  facts  in  issue.  (Vide Setrucherla Ramabhadraraju v. Maharaja of Jeypore AIR 1919 PC 150; State of Gujarat v. Rajesh Kumar Chimanlal Barot AIR 1996 SC 2664; Harshad Chiman Lal Modi v. D.L.F. Universal Ltd. AIR 2005 SC 4446; and Carona Ltd. v. Parvathy Swaminathan & Sons AIR 2008 SC 187).”

(emphasis supplied)

28. Whilst  supplementing  the  above  contentions,  Mr.  S.  Ganesh,

learned senior  counsel  pointed out,  that  in  the present  controversy,  the

State  Bank of  Mysore  had preferred  an application before  the  Company

Court under Section 446(1) of the Companies Act.  It was asserted, that the

order passed by the High Court was an order in personam, and as such, the

aforesaid order dated 10.3.2000 could not be considered as binding on the

DRT, or for that matter, on the Recovery Officer of the DRT.  For the above

proposition,  learned senior  counsel  placed reliance on the Andhra Bank

case3,  and drew the attention of  this  Court  to  the following  conclusions

recorded therein:

“31. Section 446 of the Companies Act indisputably confers a wide power upon the Company Judge, but such a power can be exercised

52

Page 53

only upon consideration of the respective contentions of the parties raised in a suit or a proceeding or any claim made by or against the company. A question of determining the priorities would also fall for consideration if  the parties claiming the same are before the court. Section 446 of the Companies Act ipso facto confers no power upon the court to pass interlocutory orders. The question as to whether the courts have inherent power to pass such orders, in our opinion, does not arise for consideration in this proceeding. Assuming such a power exists, it was imperative that the same should have been exercised on consideration of the factors laid down by this Court in Morgan Stanley Mutual Fund v. Kartick Das (1994) 4 SCC 225. An unreasoned order does not subserve the doctrine of fair play. (See  Mangalore Ganesh Beedi Works v. CIT (2005) 2 SCC 329).

(emphasis supplied)

29. In  order  to  make  the  final  thrust,  learned  senior  counsel

representing the appellant submitted, that an auction sale of the nature,

which is subject matter of consideration in the present controversy, was not

liable to be set aside, merely on account of some trivial infirmities in the

procedure  adopted  for  the  sale  of  the  same.   It  was  the  submission  of

learned counsel, that only a material irregularity would persuade a Court to

interfere with such sale proceedings conducted in furtherance of statutory

power conferred upon such authority.   To support the above contention,

reliance  was  placed  by  learned  senior  counsel  firstly  on  the  following

observations in the decision rendered by this  Court  in Radhy Shyam v.

Shyam Behari Singh13.

“7. There can be no doubt that an application under O. XXI, Rule 90 to set aside an auction-sale concerns the rights of a person declared to be the purchaser. If the application is allowed, the sale is set aside and the purchaser is deprived of his right to have the sale confirmed by the Court under Rule 92. Such a right is a valuable right, in that, upon such confirmation the sale becomes absolute and the rights of ownership in the property so sold become vested in him. A decision in

13 AIR 1971 SC 2337

53

Page 54

such a proceeding, therefore, must be said to be one determining the right of the auction-purchaser to have the sale confirmed and made absolute and of the judgment-debtor conferred by Rule 90 to have it set aside and a resale ordered. In our view an order in a proceeding under  Order  XXI,  Rule  90,  is  a  ‘judgment’  inasmuch  as  such  a proceeding raises a controversy between the parties therein affecting their valuable rights and the order allowing the application certainly deprives the purchaser of  rights accrued to him as a result  of  the auction-sale. We, therefore, agree with the High Court that a letters patent appeal lay against the order of the learned single Judge. 8. Rule 90 of O. XXI of the Code, as amended by the Allahabad High Court, inter alia provides that no sale shall be set aside on the ground of irregularity or even fraud unless upon the facts proved the Court is satisfied that the applicant has sustained injury by reason of such irregularity or fraud. Mere proof of a material irregularity such as the one under Rule 69 and inadequacy of price realised in such a sale, in other  words  injury,  is,  therefore,  not  sufficient.  What  has  to  be established is that there was not only inadequacy of the price but that that inadequacy was caused by reason of the material irregularity or fraud.  A  connection  has  thus  to  be  established  between  the inadequacy of the price and the material irregularity.”

(emphasis supplied)

Additionally,  reliance was placed on Navalkha and Sons v.  Sri  Ramanya

Das14.  And the Court’s attention was drawn to the following observations:

“7. In the present case the Division Bench has come to the conclusion that  publicity  was  not  as  wide  as  originally  proposed  by  the Commissioners in their affidavit.  The publication was made in four dailies namely The Hindu, Indian Express, the Hindustan Times and The  Statesman.  There  was  no  publication  in  the  Times  of  India. Further out of the four newspapers in which publication was made only in two there were two insertions and in the remaining two there was only one insertion. This was contrary to what the Commissioners have promised in their affidavit dated July 8, 1964. No doubt, other efforts  were  made  for  giving  publicity  but  these  efforts  were  not sufficient  to  attract  more  than one offer.  When the  case  came for confirmation on December 24, 1964 there was an application by Babu Khan that the property was of much higher value and that fresh offers must be invited again with wider publicity. There is also the affidavit of the State Government dated August 29, 1963 in which the value of the property was shown as Rs.13,40,000/-. Besides, on that very day, one Gopaldas Darak had come before the Court with a higher offer

14 (1969) 3 SCC 537

54

Page 55

showing his bona fides and earnestness by depositing more than one lakh  of  rupees.  He  came  with  the  complaint  that  there  was  not sufficient publicity as to attract people from the north and that as soon as he came to know he gave his offer. In these circumstances the learned Single Judge was right in expressing his reluctance to confirm the offer of Navalkha & Sons. He therefore decided to have an open bid as between the appellant and Darak in the Court itself  on that very day. The complaint of Padam Chand Agarwal is that the second step taken by the Single Judge of holding an auction without giving wide publicity was not justified in law. Rule 273 of the Companies (Court) Rules provides that all sales shall be made by public auction or by inviting sealed tenders or in such manner as the Judge may direct. It appears that on April 17, 1964 at the instance of the Official Liquidator  and  at  the  instance  of  a  contributory  the  Court  had approved of the terms and conditions of sale which provide calling of sealed tenders. On December 24, 1964 the learned Judge realised the inefficacy  of  this  Course  and  decided  to  abandon  the  original procedure and put the properties to auction. But having made up his mind to resort to auction the learned Judge confined the auction to only two persons namely the previous tenderer and the fresh tenderer. The auction in question no doubt was conducted in a public place but it was not a public auction because it was not open to the general public but was confined to two named persons. Secondly it was not held after due publicity. It was held immediately after it was decided upon.  It  is,  therefore,  obvious that  the sale  in question was not  a public sale which implies sale after giving notice to the public wherein every member of the public is at liberty to participate. No doubt, the device resorted to considerably raised the previous bid yet it was not an adequate price having regard to the market value of the property to which reference has already been made. The denial of opportunity to purchase the property by persons who would have taken part in the auction bid but for want of notice is a serious matter. In our opinion the learned Judge having  decided on December  24,  1964 that  the property should be put to auction should have directed auction by public sale instead of confining it to two persons alone. Since there was want of publicity and there was lack of opportunity to the public to take part in the auction the acceptance of the highest bid by the learned Judge was not a sound exercise of discretion. It is contended on behalf of the appellant that confirmation was discretionary with the Court and the Division Bench ought not to have interfered with the discretion exercised by the Company Judge. It  is  true that the discretion  exercised  by  the  Judge  ought  not  to  be  interfered  with unless the Judge has gone wrong on principle. As already pointed out the learned Company Judge having decided to put the property  to auction went wrong in not holding the auction as a public auction after due publicity and this has resulted in prejudice to the Company

55

Page 56

and the creditors in that the auction did not fetch adequate price. The prejudice was inherent in the method adopted. The petition of Padam Chand Agarwal also suggests that want of publicity had resulted in prejudice. In these circumstances the Company Judge ought not to have  confirmed  the  bid  of  the  appellant  in  the  auction  held  on December 24, 1964. We are accordingly of opinion that the Division Bench was  right  in  holding  that  the  order  of  the  Company  Judge dated February 19, 1965 should be set aside and there should be fresh sale of the property either by calling sealed tenders or by auction in accordance with law. The tender will be called or the auction will take place with the minimum offer or with the starting bid of ten lakh rupees.”

(emphasis supplied)

30. Based on the legal position declared by this Court in the above

judgments,  it  was asserted, that the validity  of the auction sale held on

11.8.2005  and  the  confirmation  thereof  on  12.9.2005  was  natural  and

normal in the facts and circumstances of this case.  In order to restore the

aforestated validity, it was submitted, that the impugned order passed by

the High Court deserved to be set aside.

31. We  have  given  our  thoughtful  consideration  to  the  complicated

sequence  of  facts  projected  before  us,  as  also,  the  legal  submissions

advanced at the hands of learned counsel for the rival parties.  We shall

now  endeavour  to  record  our  conclusions,  with  reference  to  the  issues

canvassed.

32. In  our  considered  view,  the  controversy  projected  for  our

consideration falls in a narrow compass.  It is apposite, to crystalise the

dimensions of the dispute.  Deve Sugars Ltd. was ordered to be wound up

on 16.4.1999 (in Company Petition No.170 of 1995). The  Official Liquidator

took possession of  the assets of  Deve Sugars Ltd.  situated at Harige on

56

Page 57

28.9.1999.   The  State  Bank  of  Mysore  filed  Company  Application  Nos.

1251-1253 of 1999, in the then pending Company Petition No.170 of 1995.

Through the above applications, the State Bank of Mysore sought leave of

the Company Court in the High Court at Madras, to pursue the recovery

proceedings before the DRT, Bangalore.  On 10.3.2000, the Company Court

granted leave “…subject to the condition that… no coercive steps are taken

against the assets of  the company during or after  the conclusion of  the

proceedings before the Tribunal…”

33. After  the  DRT,  Bangalore  issued  the  recovery  certificate  dated

15.5.2002, the State Bank of Mysore filed Company Application No. 1300 of

2003, with a prayer that the bank be permitted to seek execution of the

recovery certificate.  It is not a matter of dispute, that the Company Court in

the High Court at Madras, neither heard nor passed any order on the above

application.  The admitted position is, that the Registry of the High Court, at

its  own,  returned  the  above  Company  Application  No.1300  of  2003,  by

recording an endorsement, that leave of the High Court was not necessary.

The Recovery Officer thereafter proceeded with the sale of the properties of

Deve Sugars Ltd.

34. Tungabadra Sugar Works Mazdoor Sangha, the workers’ union of

Deve Sugars Ltd., objected to the execution of the recovery certificate by the

Recovery Officer.  The Official Liquidator, who was ordered to be impleaded in

the recovery proceedings initiated by the State Bank of Mysore, vide order

dated  10.3.2000  (passed  by  the  Company  Court  in  the  High  Court  at

57

Page 58

Madras), also filed objections.  All the above objections were overruled by

the Recovery Officer.

35. The workers’ union, then assailed the recovery proceedings, before

the  High  Court  of  Karnataka,  by  filing  Writ  Petition  No.37991  of  2004.

Videocon International  Ltd.  and Tapti  Machines Pvt.  Ltd.  also  filed  Writ

Petition No.26564 of  2005,  before the High Court  of  Karnataka.   In the

above writ petitions, the petitioners assailed the sale proceedings before the

Recovery Officer.  Based on a preliminary objection raised by the appellant

–Anita International, the High Court of Karnataka relegated the petitioners

to their remedy under the RDB Act, by a common order dated 27.10.2006.

The above order was challenged through Writ Appeal Nos. 2050 and 2051 of

2006 before the High Court of Karnataka.  The writ appeals were dismissed

on 23.2.2007.

36. The workers’  union thereafter preferred AOR No.15 of  2006 and

Videocon International Ltd. filed AOR No.1 of 2007.   In both the above

matters, a challenge was raised to the order passed by the Recovery Officer

dated 12.9.2005, whereby the sale of properties of Deve Sugars Ltd. to Anita

International, was confirmed.

37. It would be relevant to mention, that as against the reserve price of

Rs.10  crores,  Anita  International  –  the  appellant  herein,  made  a  bid  of

Rs.10.25  crores.   The  same  was  accepted  by  the  Recovery  Officer on

11.8.2005, and confirmed on 12.9.2005.  One N. Ponnusamy filed Company

Application Nos. 2740-2742 of 2007, before the Company Court in the High

58

Page 59

Court  at  Madras,  wherein  he  assailed  the  sale  and  confirmation  orders

dated 11.8.2005 and 12.9.2005.  In the above applications, it was inter alia

asserted, that the reserve price of Rs.10 crores was too low.  The above

company  applications  were  dismissed  on  3.3.2009.   A  challenge  raised

against the same, was also dismissed by the High Court at Madras.

38. The  applications  filed  by  the  Official  Liquidator and  others  were

considered collectively (with Company Application Nos. 2740-2742 of 2007)

and  were  rejected  by  a  common order  dated  3.3.2009,  whereby  all  the

applicants were relegated to their remedy of appeal under the RDB Act.  A

challenge raised to the above order dated 3.3.2009, by way of an intra-court

appeal, was allowed by the High Court, on 17.9.2009.  It is this order, which

is subject matter of challenge before this Court.  Stated concisely, the High

Court expressed the view, that the proceedings before the  Recovery Officer,

including the sale of the properties of Deve Sugars Ltd. on 11.8.2005 and

the confirmation thereof on 12.9.2005, had been conducted in disregard of

the  order  of  the  Company  Court  in  the  High  Court  at  Madras,  dated

10.3.2000 (in Company Application Nos. 1251-1253 of 1999).  The sale and

confirmation  of  the  properties  of  Deve  Sugars  Ltd.  in  favour  of  Anita

International were accordingly set aside.

39. The principal debate raised before this Court, revolves around the

cause and effect  of  the  order  dated 10.3.2000,  passed by  the  Company

Court in the High Court at Madras.  According to learned counsel for the

appellants, the above order dated 10.3.2000 being wholly void and non est

59

Page 60

could not have any bearing on the proceedings conducted by the  Recovery

Officer,  including  the  sale  of  the  properties  of  Deve  Sugars  Ltd.  on

11.8.2005,  and  also,  the  confirmation  thereof  by  the  Recovery Officer on

12.9.2005.  According to the respondents, who support the impugned order dated

17.9.2009, the order dated 10.3.2000 was valid, and had a binding effect.  And

because, the proceedings conducted by the Recovery Officer were in total disregard

of the order dated 10.3.2000, it was submitted, that the impugned order was well

founded.

40. In order to support their claim, it was submitted on behalf of the

appellants, that jurisdiction in matters of recovery agitated by banks and

financial institutions under the RDB Act, has been repeatedly expounded by

this Court.  The concerned Debts Recovery Tribunals, before whom recovery

proceedings are initiated, have exclusive jurisdiction in the matter.  It was

also  pointed  out,  that  this  Court  has  clearly  declared,  that  even  the

jurisdiction  of  Recovery  Officers,  in  matters  of  execution  of  recovery

certificates, was likewise exclusive.  It was the pointed contention of learned

counsel  for  the  appellants,  that  in matters  wherein banks and financial

institutions  approach  a  Debts  Recovery  Tribunal,  which  on  due

consideration issues a recovery certificate, the same can be executed only

through a Recovery Officer.  It was submitted, that a Company Court has no

jurisdiction,  in  the  matter.  Learned  counsel  for  the  appellants,

substantiated the above assertion on the basis of the decisions rendered by

this Court in the Allahabad Bank1, the M.V. Janardhan Reddy2, the Andhra

60

Page 61

Bank3,  the  Rajasthan  State  Financial  Corporation4,  and  the  Official

Liquidator, Uttar Pradesh and Uttarakhand5 cases.   

41. According to learned counsel for the appellants, it was apparent,

that  the  action  of  a  Recovery Officer in  conducting  sale  proceedings  and

ordering  the  confirmation  thereof  for  executing  a  recovery  certificate  fell

squarely within his jurisdiction under the RDB Act.  And his jurisdiction

being exclusive, as declared by this Court could not be interfered with or set

aside.  It is in the above context, that it was also the pointed assertion of

learned counsel representing the appellant, that the order passed by the

Company Court in the High Court at Madras dated 10.3.2000 was without

jurisdiction.  Learned counsel representing the appellant however cautioned

this Court,  not to  confuse the power of  the  Recovery Officer in executing

recovery  certificates  (through  sale  of  the  debtor’s  properties),  with  the

apportionment of the sale proceeds.  It was urged, that the concern of the

appellant – Anita International, was limited to the sale of the properties of

Deve  Sugars  Ltd.,  which  it  had  purchased  on  11.8.2005,  which  was

confirmed by the Recovery Officer on 12.9.2005.  It was submitted, that the

appellant –Anita International has no concern with the distribution of the

sale proceeds, and as such, the issue of distribution of the sale proceeds

should not fall within the consideration of the present determination.

42. It  is  not  possible  for  us  to  accept  the contentions advanced on

behalf of the appellants.  In this behalf, it would be relevant to mention,

that in the M.V. Janardhan Reddy case2, the Company Court by an order

61

Page 62

dated 13.8.1999 required that its permission should be obtained before the

Recovery Officer finalized the sale.  Thereafter, the Company Court by an

order dated 25.3.2005, directed that sale by the Recovery Officer, was subject

to confirmation by the Company Court.  In the above sequence of facts, this

Court clearly held, that the condition imposed by the Company Court could

not be violated by the Recovery Officer.  It was concluded, that the sale made

by the  Recovery Officer in violation of the orders passed by the Company

Court, was without the authority of law, the same was accordingly set aside.

The  explanation  tendered  by  learned  senior  counsel  representing  the

appellants  was,  that  even  in  the  above  judgment,  this  Court  had  not

disturbed the exclusive jurisdiction of a  Recovery Officer, in executing the

recovery  certificate.   In  our  considered  view,  the  above  contention  is

immaterial to the issue under consideration.  The issue under consideration

is, whether or not, an order passed by the Company Court (in the present

case, the order dated 10.3.2000) was binding on the Recovery Officer? And,

whether the proceedings conducted by the  Recovery Officer, in violation of

the  above  order,  were  sustainable  in  law?   We  have  no  hesitation  in

concluding, that in the M.V. Janardhan Reddy case2, an order passed by the

Company Court was held to be binding on the  Recovery Officer.  Based on

exactly the same consideration, we are of the view, that the acceptance of

the bid of Anita International by the Recovery Officer on 11.8.2005, and the

confirmation  of  the  sale  in  its  favour  on  12.9.2005,  were  clearly

impermissible, and therefore, deserve to be set aside.

62

Page 63

43. In addition to the above, reference may be made to the judgment

rendered  by  this  Court  in  the  Official  Liquidator,  Uttar  Pradesh  and

Uttarakhand case5.  In paragraph 36 of the above judgment (extracted in

paragraph xxx 24 xxx hereinabove), this Court has taken due notice of the

proposition, with reference to a case where an order, had been passed by

the Company Court.   The proposition dealt with was in a situation where,

the Company Court had imposed a condition on the  Recovery Officer, that

permission of the Company Court would be obtained, before the  Recovery

Officer  conducted  the  sale  and  confirmation  of  the  movable  or  immovable

properties, of the debtor.  It was held, that the order passed by the Company

Court,  was binding on the Recovery Officer.   In  the above judgment it  was

concluded, that it was not open to the Recovery Officer to confirm the sale of the

properties at his own, and such a sale and confirmation of movable or immovable

properties made by the Recovery Officer, without the permission of the Company

Court, were liable to be set aside.  This Court while recording its above conclusion,

also expressed, that the above issue had nothing  to do with the proposition,

whether an Official Liquidator can approach a Company Court, to seek the setting

aside of the auction and the sale conduced by the Recovery Officer.  It would be

relevant to mention, that the judgments relied upon by learned counsel for the

appellants, were duly taken into consideration in the Official Liquidator, Uttar

Pradesh and Uttarakhand case5.  In view of the above, we are of the considered

view, that the pointed issue canvassed before us, at the hands of learned counsel

for the appellants, stands answered against the appellant in paragraph 36 of the

63

Page 64

above judgment.  We endorse, and are obliged to follow, the view expressed by this

Court, as noticed above.  Accordingly, we find no merit in the first contention

advanced at the hands of learned counsel for the appellants.

44. Despite our above conclusion, it is imperative for us to notice, that for

recovery of a debt due to a bank or a financial institution, the concerned bank or

financial institution, can legitimately initiate proceedings, by filing a winding up

petition before the jurisdictional Company Court, or alternatively, intervene in a

pending winding  up petition.  Since there is no bar restraining a bank or a

financial institution from approaching a Company Court,  by filing a winding up

petition, it is not possible to conclude, that the jurisdictional Company Court, is

not possessed with the determinative authority/competence to entertain a claim

raised by such bank or financial institution.  In view of the above, it is not possible

for us to accept, as was suggested on behalf of the appellants, that the order

passed by the Company Court in the High Court at Madras dated 10.3.2000,

lacked the jurisdictional authority.  Since we have concluded that the Company

Court which passed the order dated 10.3.2000 did not lack jurisdiction, we hereby

hold, that in the facts of this case, the above order dated 10.3.2000 was neither

invalid nor void.

45. We  are  also  of  the  considered  view,  as  held  by  the  Court  in  the

Krishnadevi Malchand Kamathia case8, that it is not open either to parties

to a  lis or  to any third parties, to determine at their own, that an order

passed by a Court is valid or void.  A party to the lis or a third party, who

considers an order passed by a Court as void or non est, must approach a

64

Page 65

Court of competent jurisdiction, to have the said order set aside, on such

grounds as may be available in law.  However, till  an order passed by a

competent Court is set aside, as was also held by this Court in the Official

Liquidator, Uttar Pradesh and Uttarakhand5 and the Jehal Tanti9 cases, the

same  would  have  the  force  of  law,  and  any  act/action  carried  out  in

violation thereof, would be liable to be set aside.  We endorse the opinion

expressed by this Court in the Jehal Tanti case9.   In the above case, an

earlier order of a Court was found to be without jurisdiction after six years.

In other words,  an order passed by a Court having no jurisdiction,  had

subsisted for six years.  This Court held, that the said order could not have

been violated while it subsisted.  And further, that the violation of the order,

before it is set aside, is liable to entail punishment, for its disobedience.  For

us to conclude otherwise, may have disastrous consequences.  In the above

situation, every cantankerous and quarrelsome litigant would be entitled to

canvass, that in his wisdom, the judicial order detrimental to his interests,

was void, voidable, or patently erroneous.  And based on such plea, to avoid

or disregard or even disobey the same.  This course can never be permitted.  

46. To be  fair  to  learned counsel  for  the  appellants,  it  needs to  be

noticed, that reliance was also placed on behalf of the appellants on the

Kiran Singh10, the Sadashiv Prasad Singh6, and the Jagmittar Sain Bhagat12

cases, to contend, that a decree passed by a Court without jurisdiction was

a nullity, and that, its invalidity could not be corrected, even by the consent

of  the  concerned  parties.   We  are  of  the  considered  view,  that  the

65

Page 66

proposition debated and concluded in the judgments relied upon by learned

counsel for the appellants (referred to above) are of no relevance, to the

conclusions  drawn  in  the  foregoing  paragraph.   In  our  determination

hereinabove, we have not held, that a void order can be legitimized.  What

we have concluded in the foregoing paragraph is, that while an order passed

by a Court subsists, the same is liable to be complied with, till  it  is set

aside.

47. The submission canvassed at the hands of learned counsel for the

appellants, that the impugned sale dated 11.8.2005, and its confirmation

on 12.9.2005, should not be interfered with on the ground of equity, as the

appellant had made the entire payment in 2005, and the  Recovery Officer

had  ordered  confirmation  of  the  sale,  as  no  objection  had  been  raised

against the same.  We find it difficult to persuade ourselves to accept the

above contention.  In this behalf, one cannot lose sight of the fact that the

Official Liquidator, as well as, the workers’ union had raised objections before

the Recovery Officer at the very initial stage.  Even a former Director of Deve

Sugars Ltd. – N. Ponnusamy raised a challenge to the proceedings before

the Recovery Officer by asserting, that the reserve price of Rs.10 crores fixed

for the property being put to auction, was too low.  The fact, that in the

process of sale of the properties of Deve Sugars Ltd. only two bids were

received, has not been disputed.  It is also not disputed, that whilst one of

the bidders was the appellant – Anita International, the other bidder was

Synergy  Steel  Ltd.  –  a  sister  company  of  the  appellant.   In  sum  and

66

Page 67

substance therefore, there was only one bidder.  For the above reasons, in

addition to those recorded by the High Court (noticed in paragraph xxx 12

xxx,  hereinabove),  it  is  not  possible  for  us  to  accept  the  claim  of  the

appellant on the ground of equity.  Reliance placed by learned counsel on

the judgments rendered by this Court, in support of the instant contention,

is also unacceptable, as the factual position in the judgments relied upon,

are inapplicable to the facts and circumstances of this case.  In view of the

above, we find no merit in the contention advanced.

48. It  was also submitted on behalf  of  the appellants,  that the sale

conducted  by  the  Recovery  Officer on  11.8.2005,  and  the  order  of

confirmation thereof passed by the  Recovery Officer on 12.9.2005, ought to

have been assailed only in proceedings under Section 30 of the RDB Act.  It

was submitted, that since an efficacious alternative remedy was available to

the parties, which had approached the Company Court in the High Court at

Madras, the interference at the hands of the High Court was neither just

nor  proper.   The  instant  submission  is  wholly  devoid  of  substance  and

deserves to  be rejected.   We are of  the considered view,  that  there was

sufficient  justification  for  the  parties  to  have  approached  the  Company

Court in the High Court at Madras, for the reason that they were seeking

the  enforcement  of  the  order  dated  10.3.2000,  passed  by  the  Company

Court itself.  The sale made by the  Recovery Officer on 11.8.2005, and its

confirmation  on  12.9.2005,  were  in  utter  violation  of  the  order  dated

10.3.2000,  and  therefore,  the  concerned  parties  were  justified  in

67

Page 68

approaching the High Court at Madras.  In the above view of the matter, we

find no merit in the instant contention as well.

49. Last of all, we may advert to the contention, that the order dated

10.3.2000 passed by the  Company Court  in  the  High Court  at  Madras,

while disposing of Company Application Nos. 1251-1253 of 1999, filed by

the State Bank of Mysore, was not binding on the appellant.  Insofar as the

instant  contention  is  concerned,  it  was  submitted,  that  the  said  order

passed by the High Court  was an order  in  personam,  and as  such,  the

aforesaid  order  could  not  be  considered  as  an  order  binding  on  the

appellant before this Court.  We find no merit in the instant contention, as

well.  In this behalf, it would be relevant to mention, that in the application

filed by the State Bank of Mysore, the prayer made was, that the State Bank

of Mysore be permitted, leave to proceed with recovery proceedings before

the DRT, Bangalore.  By the order dated 10.3.2000, the Company Court in

the High Court at Madras, while granting leave, imposed two conditions.

Firstly, the Official Liquidator would have to be impleaded by the bank in the

recovery proceedings before the DRT, Bangalore.  And secondly, no coercive

steps would be taken against the assets of the company during or after the

conclusion of the proceedings before the Tribunal.  It is not possible for us

to accept, that the aforesaid order passed by the High Court was an order in

personam.  We are of the view, that the above order had a clear and binding

effect  on  the  proceedings  permitted  to  be  initiated  before  the  DRT,

Bangalore, and further, that it was equally binding on the Recovery Officer.

68

Page 69

And accordingly,  in  our view,  the same would  also be binding on those

claiming through sale proceedings conducted by the Recovery Officer.  In

the above view of the matter, there can be no doubt, that the order dated

10.3.2000 was also binding on the appellant before this Court.   For the

above reasons, we find no merit even in the last contention advanced by

learned counsel for the appellants.

50. For all the reasons recorded hereinabove, we find no merit in the

instant appeals.  The same are accordingly dismissed.  While affirming the

impugned order passed by the High Court, we confirm the setting aside of

the  sale  made  by  the  Recovery  Officer  in  favour  of  the  appellant  –  Anita

International on 11.8.2005, and the confirmation thereof by the order of the

Recovery Officer dated 12.9.2005.

………………………………….J. (Jagdish Singh Khehar)

………………………………….J. (Adarsh Kumar Goel)

New Delhi; July 04, 2016.

69

Page 70

70