2010 (5) TMI 387 - HC - Companies Law

Whether the jurisdiction of the Company Court stands ousted by the Recovery of Debts Due to Banks and Financial Institutions Act 1993 and the Company Court has no jurisdiction to entertain the company petition and the orders dated 16-1-2004 and 23-3-2006 are without jurisdiction and nullity? Held that - The petition for winding up is not a petition for recovery of money. The petitioner creditor invokes jurisdiction of the Company Court not for his benefit but for all the creditors shareholders and contributors. On the other hand DRT Act is a statute providing adjudicatory process and proceedings for the execution of the amount due. Thus two statutes occupy different field enacted to achieve different objectives. Thus the secured creditor cannot be said to be prohibited to continue with the winding up process. Therefore the argument raised by the petitioner that secured creditor cannot invoke more than one remedy i.e. DRT Act and Companies Act is without any merit. The argument that secured creditor cannot be permitted to continue with the winding up proceedings is not tenable in law nor such an argument can be permitted to be raised on behalf of the petitioner. The applications filed by the petitioner are without any merit

Summary

Issues Involved:
1. Application under Order 9 Rule 13 read with Section 151 of the Code of Civil Procedure, 1908, and Section 466 of the Companies Act, 1956.
2. Application under Section 151 of the Code of Civil Procedure, 1908 read with Section 5 of the Limitation Act for condonation of delay.
3. Jurisdiction of the Company Court vis-`a-vis the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
4. Merits of the petitioner's claim regarding mental and physical health as a reason for non-appearance.
5. Legitimacy of simultaneous proceedings under the Companies Act and DRT Act by secured creditors.

Detailed Analysis:

1. Application under Order 9 Rule 13 read with Section 151 of the Code of Civil Procedure, 1908, and Section 466 of the Companies Act, 1956:
The petitioner, ex-Managing Director of the company, filed an application for stay of operation of orders dated 16-1-2004 and 23-3-2006. The court noted that there was no averment indicating sufficient cause for the non-appearance of the company or its Managing Director in the winding-up petition. The application did not point out any sufficient cause for not causing appearance before the court. The court concluded that the said application cannot be treated as an application for setting aside the winding-up order dated 16-1-2004 or the order permitting the Official Liquidator to sell the property on 23-3-2006.

2. Application under Section 151 of the Code of Civil Procedure, 1908 read with Section 5 of the Limitation Act for condonation of delay:
The petitioner sought condonation of delay of 2 years 17 days in seeking review of the order dated 16-1-2004 and 71 days of delay in seeking review of the order dated 23-3-2006. The court found that the application lacked bona fide and was an attempt to circumvent the order passed by the court on 30-9-2008. The court noted that earlier applications filed by the petitioner's brothers for setting aside the winding-up order and the order permitting the sale of the property were dismissed, and the appeal against the said order was withdrawn. Thus, the court found no merit in the application for condonation of delay.

3. Jurisdiction of the Company Court vis-`a-vis the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:
The petitioner argued that the jurisdiction of the Company Court is ousted by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act), and the orders dated 16-1-2004 and 23-3-2006 are without jurisdiction and nullity. The court referred to various judgments, including Allahabad Bank v. Canara Bank and Transcore v. Union of India, to conclude that the DRT Act and the Companies Act occupy different fields and serve different objectives. The court held that the secured creditor is not prohibited from continuing with the winding-up process under the Companies Act while also pursuing remedies under the DRT Act.

4. Merits of the petitioner's claim regarding mental and physical health as a reason for non-appearance:
The petitioner contended that serious health and psychiatric problems prevented him from prosecuting the proceedings initiated by the unsecured creditor for winding up the company. The court found no merit in this argument, noting that the company was served and had put in appearance through an advocate based on a power of attorney signed by the petitioner. The court observed that there was no reference to the petitioner's mental and physical health in the application filed on 2-5-2006, and the excuse of lack of proper mental and physical health was raised only in 2009 after similar applications filed by the petitioner's brothers were dismissed.

5. Legitimacy of simultaneous proceedings under the Companies Act and DRT Act by secured creditors:
The petitioner argued that the secured creditors are estopped in law from prosecuting the petition for winding up before the Company Court while also continuing with the original application under Section 19 of the DRT Act. The court referred to various judgments and concluded that the winding-up petition is not a petition for recovery of money but for the benefit of all creditors, shareholders, and contributors. The court held that the secured creditor can invoke remedies under both the DRT Act and the Companies Act, as they are complementary and not inconsistent.

Conclusion:
The court dismissed the applications filed by the petitioner, finding them without merit and lacking bona fide. The court upheld the jurisdiction of the Company Court to entertain the winding-up petition and the legitimacy of simultaneous proceedings under the Companies Act and the DRT Act by the secured creditors.