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Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2511 OF 2013
(Arising out of S.L.P. (C) No. 35627 of 2011)
The Official Liquidator, U.P. and
Uttarakhand ... Appellant
Versus
Allahabad Bank and others
...Respondents
J U D G M E N T
Dipak Misra, J.
Leave granted.
2. The spinal issue that has spiralled to this Court is
whether the Company Judge under the Companies
Act, 1956 (for short “the 1956 Act”) has jurisdiction
at the instance of the Official Liquidator to set aside
the auction or sale held by the Recovery Officer
under the Recovery of Debts due to Banks and
Financial Institutions Act, 1993 (for brevity “the RDB
Page 2
Act”) or whether the Official Liquidator is required to
follow the route as engrafted under the RDB Act by
filing an appeal assailing the auction and the
resultant confirmation of sale.
3. 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 Pipes Limited, which was
decreed by the Debt 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 the DRT at
Allahabad. Be it noted, Company Petition No. 113 of
1997 was filed before the learned Company Judge in
2Page 3
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 immoveable
properties of the wound-up company by order dated
29.8.2002. The moveable properties of the company
were attached as per order dated 23.12.2003. At this
juncture, the 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, Debt 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
3Page 4
RDB Act. It is worth stating here that no condition
was imposed.
4. After auction and confirmation of sale by the 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.
5. As the facts get further unfolded, after associating
the Official Liquidator, the auction was held and the
Recovery Officer proceeded with the confirmation of
sale. At that stage, the Official Liquidator filed his
4Page 5
objections pertaining to fixation of the reserve price,
the non-inclusion of certain assets and the manner in
which the auction was conducted. The Recovery
Officer, after hearing the Bank and the Official
Liquidator, confirmed the sale and a date was fixed
for handing over the possession to the auctionpurchaser, but the same could not be done as the
Official Liquidator chose not to remain present.
Thereafter, the auction-purchaser filed an application
before the learned Company Judge for issue of a
direction to the Official Liquidator to hand over the
possession of the properties in respect of which the
sale had been confirmed by the Recovery Officer of
DRT. Similar prayer was also made by the Allahabad
Bank by filing another application. As is evincible
from the factual narration, the Official Liquidator filed
his report and the Company Court, on consideration
of both the applications and the report of the Official
Liquidator, by order dated 24.10.2009, set aside the
auction and confirmation of sale dated 27.2.2009 on
the foundation that the auction had not been
5Page 6
properly held and directed the properties mortgaged
with the Allahabad Bank to be auctioned after proper
identification of the properties and obtaining of a fair
valuation report from a Government approved valuer.
6. Being dissatisfied with the aforesaid order, the
Allahabad Bank preferred Special Appeal No. 1815 of
2009 before the Division Bench. Apart from raising
various contentions justifying the sale, a stand was
put forth that the Company Court had no jurisdiction
to set aside the sale held by the Recovery Officer
under the RDB Act. The said submission of the Bank
was resisted principally on the ground that it is the
duty of the Official Liquidator and the Company Court
to watch the best interest of the company and in
exercise of such power of supervision, if there is any
irregularity in conducting the auction for obtaining
adequate price, the same is liable to be lancinated by
the Company Court. The Division Bench referred to
the earlier orders passed by the Company Court, the
provisions of the RDB Act, grant of permission by the
Company Court to the Allahabad Bank to remain
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outside the winding up proceeding to realize the debt
of the appellant by associating itself in the recovery
proceeding in accordance with the RDB Act, the
direction issued to the Official Liquidator to give
access to the Recovery Officer to proceed with the
recovery of legal and valid dues of the Bank and the
non-imposition of any condition that the sale required
prior approval of the learned Company Judge and,
heavily relying on the decisions rendered in
Allahabad Bank v. Canara Bank and another1
and Rajasthan State Financial Corpn. and
another v. Official Liquidator and another2
and
distinguishing the decision in M. V. Janardhan
Reddy v. Vijaya Bank and others3
, came to hold
that when an auction is conducted and there is
confirmation of sale by the Recovery officer of the
tribunal under the RDB Act, it is open to the Official
Liquidator to file an appeal and raise his grievances
before the Tribunal in accordance with the provisions
of the RDB Act and the Company Court has no
1
(2000) 4 SCC 406
2
(2005) 8 SCC 190
3
(2008) 7 SCC 738
7Page 8
jurisdiction to set aside the sale. Being of this view,
the Division Bench declined to express any opinion
on the merits of the case and opined that it is open to
the Official Liquidator to take up all the grounds
available to him in appeal. As a consequence of the
aforesaid conclusion, the order passed by the
Company Judge nullifying the confirmation of sale
and directing fresh auction was set aside. The
defensibility of the said order is called in question by
the Official Liquidator before this Court.
7. We have heard Mr. Ravindra Kumar, learned counsel
for the appellant, Mr. Debal Banerji, learned senior
counsel for the respondent-Allahabad Bank, and Mr.
Vivek Chaudhary, learned counsel for the respondent
No. 2.
8. At the very inception, it is condign to state that there
is no dispute over the facts as narrated hereinabove,
for the only cavil relates to the issue of jurisdiction. It
is to be noted that the irregularity in the conduct of
the auction or the manner in which the sale had been
confirmed has not been addressed to by the Division
8Page 9
Bench as it has restricted its delineation to the
jurisdictional spectrum. Therefore, we shall only
restrict our address as to which is the appropriate
forum for the Official Liquidator to agitate the
grievance.
9. It is apt to note that the RDB Act has been enacted in
the backdrop that the banks and financial institutions
had been experiencing considerable difficulties in
recovering loans and enforcement of securities
charged with them and the procedure for recovery of
debts due to the banks and financial institutions
which were being followed had resulted in a
significant portion of the funds being blocked. The
Statement of Objects and Reasons of the RDB Act
clearly emphasise the considerable difficulties faced
by the banks and financial institutions in recovering
loans and enforcement of securities charged with
them. Emphasis has been laid on blocking of funds in
unproductive assets, the value of which deteriorates
with the passage of time. Reference has been made
to the “Tiwari Committee Report” which had
9Page 10
suggested for setting up of special tribunals for
recovery of dues of the banks and financial
institutions by following a summary procedure.
10. The purpose of the RDB Act, as is evincible, is to
provide for establishment of tribunals and Appellate
Tribunals for expeditious adjudication and recovery
of debts due to banks and financial institutions and
for matters connected therewith or incidental
thereto. Section 17 of the RDB Act deals with
jurisdiction, powers and authority of the tribunals. It
confers jurisdiction on the tribunal to entertain and
decide applications from the banks and financial
institutions for recovery of debts due to such banks
and financial institutions. It also states about the
powers of the Appellate Tribunal. Section 18 creates
a bar of jurisdiction stating that 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) relating to
the matters specified in Section 17. Section 19
1Page 11
provides how an application of the tribunal is to be
presented. The said provision deals,
comprehensively, with all the aspects. Section
19(18) confers immense powers on the tribunal to
pass appropriate orders to do certain acts, namely,
appoint a Receiver of any property, remove any
person from the possession, confer upon Receiver all
such powers and appoint a Commissioner, etc. Subsection (19) of the said Section provides that 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. Section 20 provides
an appeal to the Appellate Tribunal; Section 21
provides for deposit of the amount of debt due on
filing appeal; and Section 22 deals with the
procedure and powers of the Tribunal and the
Appellate Tribunal. Chapter V of the RDB Act deals
1Page 12
with recovery of debts determined by the tribunal.
Section 25 provides for the modes of recovery of
debts; Section 26 stipulates about the validity of
certificate and amendment thereof; Section 27 deals
with the power of stay of proceeding under certificate
and amendment or withdrawal thereof; and Section
28 deals with the other methods of recovery. It is
worthy to note that Section 29 states that the
provisions of the Second and Third Schedule of the
Income-Tax Act, 1961 and the Income-Tax
(Certificate Proceedings) Rules, 1962, as in force
from time to time shall, as far as possible, be
applicable with necessary modifications as if the said
provisions and the rules referred to the amount of
debt due under the RDB Act instead of the IncomeTax Act. The defendant has been equated with an
assessee. Section 30 provides that any person
aggrieved by an order of the Recovery Officer made
under the RDB 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. It confers powers
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on the tribunal to make such inquiry as it deems fit
and confirm, modify or set aside the order made by
the Recovery Officer in exercise of its powers under
Sections 25 to 28 (both inclusive).
11. Section 34 lays down that the RDB Act would have
overriding effect. Section 34, being pertinent, is set
out hereinbelow: -
“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).”
We have referred to the Objects and Reasons and
the relevant provisions of the RDB Act to highlight that it
1Page 14
is a comprehensive Code dealing with all the facets
pertaining to adjudication, appeal and realization of the
dues payable to the banks and financial institutions.
12. Presently, we shall advert to the analysis made in
Allahabad Bank’s case. In the said case, this
Court was concerned with the issue relating to the
impact of the provisions of the RDB Act on the
provisions of the 1956 Act. Allahabad Bank had
come to this Court against an order passed by the
learned Company Judge under Sections 442 and 537
of the 1956 Act whereby the Company Court, in
winding up petition, had stayed the sale proceedings
taken out by the Allahabad Bank before the Recovery
Officer under the RDB Act. The stand of the
Allahabad Bank was that the tribunal under the RDB
Act could itself deal with the question of
appropriation of sale proceeds in respect of the sale
of the company’s properties held at the instance of
the Bank and the priorities. After stating the facts,
the Court posed the questions that required to be
adverted to: -
1Page 15
“Questions have been raised by the
respondent as to whether the Tribunal can
entertain proceedings for recovery,
execution proceedings, and also for
distribution of monies realized by sales of
properties of a company against which
winding-up proceedings are pending,
whether leave is necessary and as to
which court is to distribute the sale
proceeds and according to what priorities
among various creditors.”
13. The two-Judge Bench, after referring to the dictionary
provisions, especially the “debt” as defined in Section
2(g), Sections 17, 18 and 19(22) and Section 31 of
the RDB Act, came to 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 Allahabad Bank was concerned.
Dealing with the facet of the execution of the
certificate by the Recovery Officer, the Division
Bench referred to Section 34 of the RDB Act and
opined thus: -
“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
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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
realization of the amount. The certificate
granted under Section 19(22) has, in our
opinion, to be executed only by the
Recovery Officer. No dual jurisdiction at
different stages are contemplated.”
[Emphasis supplied]
14. While dealing with the issue whether the RDB Act
overrides the provisions of Sections 442, 446 and
537 of the 1956 Act, after analyzing the said
provisions and delving into the concept of leave and
control by the Company Court, the learned Judges
relied on the pronouncement in Damji Valji Shah v.
LIC of India4
and came to hold that there is no need
for the appellant bank to seek leave of the Company
Court to proceed with the claim before the DRT or in
respect of the execution proceedings before the
Recovery Officer. It was also categorically held that
the said litigation cannot be transferred to the
Company Court. In the ultimate eventuate, the
bench ruled that in view of Section 34 of the RDB Act,
4
AIR 1966 SC 135
1Page 17
the tribunal has exclusive jurisdiction and, hence, the
Company Court cannot use its powers under Section
442 of the 1956 Act against the tribunal/Recovery
Officer and, therefore, Sections 442, 446 and 537 of
the 1956 Act could not be applied against the
tribunal. Be it noted, emphasis was laid on speedy
and summary remedy for recovery of the amount
which was due to the banks and financial institutions
and the concept of special procedure as
recommended by the Tiwari Committee Report of
1981 was stressed upon. It was concluded that the
special provisions made under the RDB Act have to
be applied. The Court addressed itself to the special
and general law and ruled that in view of Section 34
of the RDB Act, it overrides the Companies Act to the
extent there is any thing inconsistent between the
Acts. In the ultimate analysis, the learned Judges
stated thus: -
“For the aforesaid reasons, we hold that
the at the stage of adjudication under
Section 17 and execution of the certificate
under Section 25 etc. the provisions of the
RDB Act, 1993 confer exclusive jurisdiction
on the Tribunal and the Recovery Officer in
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respect of debts payable to banks and
financial institutions and there can be no
interference by the Company Court under
Section 442 read with Section 537 or under
Section 446 of the Companies Act, 1956.
In respect of the monies realized under the
RDB Act, the question of priorities among
the banks and financial institutions and
other creditors can be decided only by the
Tribunal under the RDB Act and in
accordance with Section 19(19) read with
Section 529-A of the Companies Act and in
no other manner. The provisions of the
RDB Act, 1993 are to the above extent
inconsistent with the provisions of the
Companies Act, 1956 and the latter Act
has to yield to the provisions of the former.
This position holds good during the
pendency of the winding-up petition
against the debtor Company and also after
a winding-up order is passed. No leave of
the Company Court is necessary for
initiating or continuing the proceedings
under the RDB Act, 1993.”
[Emphasis added]
15. While dealing with the claim of the workmen, the
Bench proceeded to state that the “workmen’s dues”
have priority over all other creditors, secured and
unsecured, because of Section 529-A(1)(a) of the
1956 Act. Be it noted, this has been so stated in
paragraph 76 of the decision in Allahabad Bank’s
case. The correctness of this statement was
doubted and the matter was referred to the larger
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Bench. A three-Judge Bench in Andhra Bank v.
Official Liquidator and another5
opined that it
was only a stray observation as such a question did
not arise in the said case as Allahabad Bank was
undisputably an unsecured creditor and, accordingly,
the larger Bench opined that the finding of this Court
in Allahabad Bank’s case to the aforesaid extent
did not lay down the correct law. The said exposition
of law has further been reiterated in Jitendra Nath
Singh v. Official Liquidator and others6
. We
have referred to the aforesaid decisions only to
highlight that this part of the judgment in Allahabad
Bank’s case has been overruled.
16. In International Coach Builders Ltd. v.
Karnataka State Financial Corpn.7
, the question
arose whether there was any conflict between the
State Financial Corporation Act, 1951 and the
Companies Act, 1956 and, in that context, the
learned Judges relied on the decision in A.P. State
5
(2005) 5 SCC 75
6
(2013) 1 SCC 462
7
(2003) 10 SCC 482
1Page 20
Financial Corpn. v. Official Liquidator8
and came
to hold that there is no conflict between the
provisions of the SFC Act and the 1956 Act and even
the rights under Section 29 of the SFC Act are not
intended to operate in the situation of winding-up of
a company. It is further opined that even assuming
that there is a conflict, the amendments made in
Sections 529 and 529-A of the 1956 Act would
override and control the rights under Section 29 of
the SFC Act. The Division Bench proceeded to state
that though the 1956 Act may be general law, yet the
provisions introduced therein in 1985 were intended
to confer special rights on the workers and pro tanto
must be treated as special law made by the
Parliament and, hence, the said provisions would
override the provisions contained in Section 29 of the
SFC Act, 1951.
17. In Rajasthan State Financial Corporation and
another (supra), when the appeal came up for
hearing before the two learned Judges, a submission
8
(2000) 7 SCC 291
2Page 21
was put forth that there was a conflict between the
decisions in Allahabad Bank (supra) and
International Coach Builders Ltd. (supra) and,
taking note of the importance of the question of law
involved, the matter was referred to a larger Bench.
The three-Judge Bench analysed the ratio laid down
in Allahabad Bank’s case and International
Coach Builders Ltd. (supra) and, after referring to
various authorities, held 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 RDB 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
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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. Thereafter, the
bench summed up the legal position. The pertinent
part of the said summation is reproduced below: -
(i) A Debt 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, though its
Recovery officer but only after notice to
the Official Liquidator or the Liquidator
appointed by the Company Court and after
hearing him.
xxx xxx xxx
(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 realization of its securities consistent
with the relevant provisions of the
Companies Act regarding distribution of
the assets of the company-in-liquidation.”
18. From the aforesaid verdict, it is vivid that the larger
Bench approved the law laid down in Allahabad
2Page 23
Bank (supra). In fact, it is noticeable that the larger
Bench has observed that in Allahabad Bank’s 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.
19. From the aforesaid authorities, it clearly emerges
that the sale has to be conducted by the 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 realization of the dues of the banks and
financial institutions.
2Page 24
20. Mr. Revindra Kumar, learned counsel for the
appellant, would contend that he, being an Official
Liquidator, is liable to report to the Company Court
and, therefore, the Company Court has jurisdiction to
accept or reject the report and, hence it has
jurisdiction to set aside the sale held by the Recovery
Officer under the RDB Act. The learned counsel
would submit with emphasis that the role of a
Company Court cannot be marginalized as it has the
control over the assets of the company. Per contra,
Mr. Debal Banerji, learned senior counsel for the
Allahabad Bank, would submit that the jurisdiction of
the Company Court cannot be equated with the
jurisdiction exercised by the High Court under
Articles 226 and 227 of the Constitution of India.
21. To appreciate the aforesaid submission, we may
fruitfully refer to the dictum in Jyoti Bhushan
Gupta and others v. The Banaras Bank Ltd.9
,
wherein the learned Judges, while stating about the
jurisdiction of the Company Court, have opined that
9
AIR 1962 SC 403
2Page 25
the jurisdiction is ordinary; it does not depend on any
extraordinary action on the part of the High Court.
The jurisdiction is also original in character because
the petition for exercise of the jurisdiction is
entertainable by the High Court as a court of first
instance and not in exercise of its appellate
jurisdiction. As the High Court adjudicates upon the
liability of the debtor to pay the debts due by him to
the Company, the jurisdiction is, therefore, civil. It
has been further observed that normally a creditor
has to file a suit to enforce liability for payment of a
debt due to him from his debtor. The Legislature
has, by Section 187 of the 1956 Act, empowered the
High Court in a summary proceeding to determine
the liability and to pass an order for payment, but on
that account, the real character of the jurisdiction
exercised by the High Court is not altered. After
further analyzing, the four-Judge Bench proceeded to
state thus: -
“The jurisdiction to deal with the claims of
companies ordered to be wound up is
conferred by the Indian Companies Act and
to that extent the letters Patent are
2Page 26
modified. There is, however, no difference
in the character of the original civil
jurisdiction which is conferred upon the
High Court by Letters Patent and the
jurisdiction conferred by special Acts.
When in exercise of its authority conferred
by a special statute the High Court in an
application presented to it as a court of
first instance declares liability to pay a
debt, the jurisdiction exercised is original
and civil and if the exercise of that
jurisdiction does not depend upon any
preliminary step invoking exercise of
discretion of the High Court, the
jurisdiction is ordinary.”
22. The aforesaid enunciation makes it clear as crystal
that while exercising jurisdiction under the 1956 Act,
the High Court is exercising ordinary jurisdiction and
not any extraordinary or inherent jurisdiction and
that is why, the legislature has appropriately
postulated that the jurisdiction of the High Court
under Articles 226 and 227 of the Constitution would
not be affected.
23. The aforesaid analysis makes it luculent that the 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
2Page 27
principle has also been reiterated in Pravin Gada
and another v. Central Bank of India and
others10
.
24. 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.
25. At this juncture, we may refer with profit to what a
three-Judge Bench, while dealing with the
constitutional validity of the RDB Act, in Union of
India and another v. Delhi High Court Bar
Association and others11
, had the occasion to
observe:-
“By virtue of Section 29 of the Act, the
provisions of the Second and Third
Schedules to the Income Tax Act, 1961
and the Income Tax (Certificate
Proceedings) Rules, 1962, have become
applicable for the realization of the dues
by the Recovery Officer. Detailed
procedure for recovery is contained in
10 (2013) 2 SCC 101
11 (2002) 4 SCC 275
2Page 28
these Schedules to the Income Tax Act,
including provisions relating to arrest and
detention of the defaulter. It cannot,
therefore, be said that the Recovery
Officer would act in an arbitrary manner.
Furthermore, Section 30, after amendment
by the Amendment Act, 2000, gives a right
to any person aggrieved by an order of the
Recovery Officer, to prefer an appeal to
the Tribunal. Thus now an appellate forum
has been provided against any orders of
the Recovery Officer which may not be in
accordance with the law. There is,
therefore, sufficient safeguard which has
been provided in the event of the Recovery
Officer acting in an arbitrary or an
unreasonable manner.”
26. We have referred to the said passage for the purpose
of highlighting that an appeal lies to the 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
2Page 29
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. The 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.
27. It has been submitted by Mr. Banerji, learned senior
counsel, that if the Company Court as well as the
DRT can exercise jurisdiction in respect of the same
auction or sale after adjudication by the DRT, there
would be duality of exercise of jurisdiction which the
RDB Act does not envisage. By way of an example,
the learned senior counsel has submitted that there
are some categories of persons who can go before
2Page 30
the 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 realized 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
realize their dues. Therefore, this Court in
Allahabad Bank’s case has opined that it is the
DRT which would have the exclusive jurisdiction
when a matter is agitated before the DRT. The
dictum in the said case has been approved by the
three-Judge Bench in Rajasthan State Financial
Corporation and another (supra). It is not a
situation where the Official Liquidator can have a
choice either to approach the DRT or the Company
3Page 31
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 the DRT.
Be it noted, an order passed under Section 30 of the
RDB Act by the 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
3Page 32
or confirmation of sale when a sale has been
confirmed by the Recovery Officer under the RDB
Act.
28. We will be failing in our duty if we do not take notice
of the decision in M.V. Janardhan Reddy (supra)
wherein the sale was 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, immoveable or moveable, is
confirmed or finalized. 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 aside by the Company Court, being in
violation of the order. Thus, we find that the facts in
3Page 33
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 the DRT.
29. 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 the
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, the
DRT shall deal with the appeal in accordance with
law. The 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
3Page 34
have not expressed anything on the merits of the
case.
30. Consequently, the appeal is disposed of in the above
terms leaving the parties to bear their respective
costs.
……………….…………….J.
[H. L. Dattu]
………………………….….J.
[Dipak Misra]
New Delhi;
March 12, 2013.
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