2000 (4) TMI 843 - SC - Indian Laws

Summary

Issues Involved:
1. Exclusive Jurisdiction of the Tribunal and Recovery Officer under the RDB Act.
2. Necessity of Leave of the Company Court under Sections 537 and 446 of the Companies Act.
3. Powers of the Company Court to Stay, Transfer, and Decide Questions of Liability and Priorities.
4. Applicability of Section 73 CPC and Sections 529, 529A, and 530 of the Companies Act to Proceedings before the Tribunal.
5. Distribution of Sale Proceeds and Priority among Creditors under Section 19(19) of the RDB Act.
6. Relief to be Granted on the Facts of the Case.

Detailed Analysis:

Point 1: Exclusive Jurisdiction of the Tribunal and Recovery Officer under the RDB Act

The RDB Act is designed to provide an expeditious mechanism for the adjudication and recovery of debts due to banks and financial institutions. Sections 17 and 18 of the RDB Act confer exclusive jurisdiction on the Tribunal for adjudicating debts and on the Recovery Officer for executing recovery certificates. The Tribunal's jurisdiction is exclusive for adjudicating the liability of the debtor, and the Recovery Officer's jurisdiction is exclusive for executing the recovery certificate. Section 34 of the RDB Act gives it overriding effect over other laws, reinforcing the exclusivity of the Tribunal and Recovery Officer's jurisdiction.

Point 2: Necessity of Leave of the Company Court under Sections 537 and 446 of the Companies Act

The RDB Act's provisions override the Companies Act, meaning that leave of the Company Court is not necessary for initiating or continuing proceedings under the RDB Act. This is supported by the Supreme Court's decision in Damji Valji Shah & Another vs. Life Insurance Corporation of India & Others, which held that special statutes with exclusive jurisdiction provisions override the general provisions of the Companies Act. Therefore, sections 442, 446, and 537 of the Companies Act cannot be applied against the Tribunal.

Point 3: Powers of the Company Court to Stay, Transfer, and Decide Questions of Liability and Priorities

The RDB Act's special purpose of expeditious recovery of debts due to banks and financial institutions takes precedence over the general purposes of the Companies Act. The Tribunal has exclusive jurisdiction to adjudicate, execute, and distribute sale proceeds, including deciding priorities among creditors. The Tribunal can distribute sale proceeds among secured creditors in accordance with section 529A of the Companies Act, as clarified by section 19(19) of the RDB Act introduced by Ordinance 1/2000.

Point 4: Applicability of Section 73 CPC and Sections 529, 529A, and 530 of the Companies Act to Proceedings before the Tribunal

The Tribunal has wide powers under section 22 of the RDB Act to decide questions of priorities, subject to principles of natural justice. The principles underlying section 73 CPC can be applied, but only if a creditor has obtained a decree or order of adjudication from the Tribunal and has complied with other conditions of section 73. In this case, Canara Bank has not obtained such a decree or complied with section 73's conditions, so it cannot claim a share in the sale proceeds realized by the Recovery Officer.

Point 5: Distribution of Sale Proceeds and Priority among Creditors under Section 19(19) of the RDB Act

Section 19(19) of the RDB Act mandates that sale proceeds be distributed among secured creditors in accordance with section 529A of the Companies Act. Secured creditors who stand outside the winding up and realize their security can claim priority for the "workmen's portion" of their security that is taken away by the liquidator for workmen's dues. Canara Bank does not fall into this category, as it has neither realized any amount outside winding up nor lost any part of its security towards workmen's dues. Therefore, Canara Bank cannot claim any amount lying in the Tribunal towards its security or priority over Allahabad Bank.

Point 6: Relief to be Granted on the Facts of the Case

The sale proceeds of shed No.15 and other properties are to be first used to pay workmen's dues, as they have priority over all other creditors. The remaining balance can then be released to Allahabad Bank, subject to compliance with the principles stated in the judgment. The Supreme Court directs its Registry to transfer the sale proceeds to the Debt Recovery Tribunal, Delhi, for further action. Canara Bank can move the Tribunal/Recovery Officer for the removal and inventory of any machinery or goods pledged to it that are lying in the sold sheds.

The impugned order of the High Court is set aside, and the appeal is allowed as stated above, with no order as to costs.