TMI Blog1997 (8) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... winding up of the company has been ordered on November 3, 1995, hence, by this petition the bank is seeking leave to continue recovery proceedings before the Tribunal. The question that calls for decision in this petition is as to whether the pending recovery proceeding against the company before the Debt Recovery Tribunal, relating to realisation of the debts should be allowed to continue/proceed or it should be transferred to this court which is seized of the winding up proceeding. The principal contentions raised by Shri O.P. Garg, in support of the petition are that the applicant-bank is a secured creditor and it had initiated the suit/proceedings for recovery of the debts prior to filing of the winding up petition against the company, hence, its interest as secured creditor has to be protected. That the bank has lent a huge amount to the company and it is the main secured creditor. The bank has already incurred a lot of expenditure in the conduct of the suit/recovery proceedings by engaging lawyers, etc, and as such it shall not be in the interest of justice to transfer recovery proceedings which are now pending before the Debt Recovery Tribunal. I have given my careful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver all suits and legal proceedings whoever may be the plaintiff. Section 529 provides for the application of insolvency rules in the winding up of insolvent companies. It also provides that the security of every secured creditor shall be deemed to be subject to "pari passu" charge in favour of the workmen to the extent of the workmen's portion therein. Section 529A states overriding preferential payments. It provides that workmen's dues and debts due to secured creditors to the extent such debts rank under clause ( c ) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts. A combined reading of the aforesaid provisions leads to the following results as stated by the Supreme Court in Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies [1996] 86 Comp Cas 255, 259 : "( 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 jurisdiction to transfer such a suit or proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up order being made and the official liquidator being appointed, he is to take into his custody the company as required by section 446. It also took note of section 457 conferring power on the official liquidator to sell the properties of the company and to realise the assets. The Committee felt that at the stage when the winding up order is made, the company may as well have subsisting claims to realise these claims and the liquidator will have to file a suit. In order to avoid this eventuality and to keep all incidental proceedings in winding up before the court, its jurisdiction was required to be enlarged to entertain petitions, amongst others, for recovering the claims of the company. Thus, suitable amendment was brought by substituting sub-section (2) in its present form. In Sudarsan Chits ( I. ) Ltd. v. G. Sukumaran Pillai [1985] 58 Comp Cas 633; [1984] 4 SCC 657, the Supreme Court tracing the historical background of section 446(2) in its present form observed that it confers special jurisdiction on the court winding up the company which otherwise it may not have enjoyed. It was, then, observed therein as under (page 637) : "To give effect to these recommenda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest of a secured creditor and the fact of incurring a lot of expenditure by him in filing the suit/recovery proceedings for realisation of the debt against the company would be required to be taken note of while exercising discretion. The company court would also take care of the interest of other secured creditors while deciding the question as to whether leave should be granted or not. In Central Bank of India v. Elmot Engineering Co. [1994] 81 Comp Cas 13 (SC) leave under section 446 of the Act was refused by the Bombay High Court on the ground that in defending by the liquidator at a far off place there would be a wasteful expenditure and ordered transfer of the suit to the High Court at Bombay. The Supreme Court held that the order of transfer of the suit to the High Court of Bombay cannot be supported as the transfer would result in greater expenditure to the appellant-bank which certainly is avoidable than the wasteful expenditure to the official liquidator. In Industrial Credit and Investment Corporation of India Ltd, v. Srinivas Agencies [1996] 86 Comp Cas 255 (SC) we find guidelines from the Supreme Court in a case where recovery proceedings initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this power we have no doubt that the company court would also bear in mind the rationale behind the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, to which reference has been made above. We made the same observation 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, the 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" . Applying the aforesaid guidelines and taking into consideration the relevant facts and circumstances of the case, in particular that the applicant-ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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