TMI Blog2009 (3) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... e other Parties. JUDGMENT S. Rajeswaran, J. The facts are as under : 2. C. A. No. 1811 of 2005 was filed by a third party seeking for a direction directing the official liquidator to remove the security guards and hand over possession of the subject property. In the affidavit filed in support of the above application, it is stated by the third party that M/s. Deve Sugars Ltd. (in liquidation) was ordered to be wound up in C. P. No. 170 of 1995 and C. P. No. 35 of 1997 by an order dated September 16, 1999. The first respondent-official liquidator was appointed as the liquidator of the said company. The official liquidator took possession of the assets of the company situated at Harige Village, Shimoga District, Karnataka on April 28, 1999, in the presence of the Deputy Commissioner, Shimoga and Chief Manager of the State Bank of Mysore, a secured creditor of the company. 3. The State Bank of Mysore extended financial assistance to the company and secured their outstanding dues. The bank filed O. A. No. 440 of 1997 before the Debts Recovery Tribunal, Bangalore for recovery of a sum of Rs. 22,31,78,558.55. The said O. A., was decreed by the Debts Recovery Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in support of the above application, it is stated by the President of the Sangha that the State Bank of Mysore approached this court for permission and this court in C. A. No. 1251 of 1999 permitted the bank on March 10, 2000, in O. A. No. 440 of 1997 and O. A. No. 1300 of 1997 by imposing a condition that the leave granted is subject to the condition that the 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. The members of the Sangha were appointed as security men by the official liquidator to protect the assets of the company with effect from August 1, 2001, on a monthly salary basis. In the mean time, the Debts Recovery Tribunal, Bangalore passed a decree in 2001 and ordered for sale by auction of the assets of the company on October 1, 2004. The workers' union objected to the sale and filed a writ petition before the High Court, Karnataka, seeking stay of the sale by auction proceedings as their salary and provident fund dues to the extent of Rs. 15 crores were due from the company. The High Court, Karnataka, by order dated September 27, 2004, passed an int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Recovery Tribunal and the writ petition filed by the Mazdoor Sangha. It is their contention that in spite of the conditional order passed by this court and the interim order passed by the High Court, Karnataka, the Recovery Officer of the Debts Recovery Tribunal, Bangalore in collusion with the State Bank of Mysore issued an official notice for sale of the properties on July 24, 2005, fixing the date of auction as August 11, 2005. They contented that the properties were sold for a meagre value of Rs. 10.25 crores. According to the impleaded second respondent, the value of the property based on Government valuation was Rs. 57 crores. They also filed a writ petition in W. P. No. 26564 of 2005 before the High Court, Karnataka, challenging the impugned sale proceedings and the same is pending. They are also taking steps for the revival of the company and an application was also filed to this effect before this court. It is their further contention that proper and necessary procedure was not followed by the Recovery Officer while selling the property in auction sale which is in the custody of the official liquidator. Therefore, the sale conducted by the Recovery Officer has no legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, Bangalore without the participation and the presence of the official liquidator is vitiated. The official liquidator also received copies of the letters addressed to the CBI by the ex-shareholders/directors/promoters of the company in liquidation wherein certain allegations against the recovery officer has been made. Therefore, the official liquidator submitted that a fresh sale is to be conducted by the Debts Recovery Tribunal with the official liquidator and the sale proceeds should be deposited with this court. 11. The official liquidator also has taken out an application in C. A. No. 854 of 2006 to set aside the sale confirmed by the Debts Recovery Tribunal, to direct the third respondent Central Warehousing Corporation to remit the arrears of rent to the official liquidator and also to permit the official liquidator to sell the assets of the company in liquidation afresh. 12. C. A. No. 854 of 2006 was resisted by the first respondent-bank by filing a counter affidavit wherein they raised the question of maintainability of the application itself. According to the bank, all the legal formalities were duly complied with and the sale was confirmed in favour of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit filed in support of the above three applications, it is stated by the applicant that he preferred a claim for revival of the company and also for restructuring and arrangement of the creditors. In this connection, he filed an application in C. A. No. 1960 of 2006 for convening a meeting of the unsecured and trade creditors and the same was conducted as per the directions of this court. A report was also filed by the chairman before this court. 16. According to the applicant, the State Bank of Mysore advanced certain amounts to M/s. Tungabadra Sugars Works Ltd., and an application in O. A. No. 440 of 1997 came to be filed before the Debts Recovery Tribunal, Bangalore for recovery of a sum of Rs. 22,31,78,558.55. In the recovery proceedings in D. C. P. No. 1912 dated August 10, 2001, the land measuring an extent of 126 acres and 14 guntas was brought for sale and the property was sold to the third respondent (applicant in C. A. No. 1811 of 2005). According to him, as per the conditional order passed by this court on March 10, 2000, in C. A. Nos. 1251 to 1253 of 1999, the sale ought not to have been conducted by the Debts Recovery Tribunal. He accused that the third responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debts Recovery Tribunal and two appeals in A. O. R. No 15 of 2006 and A. O. R. No. 1 of 2007 were filed before the Debts Recovery Tribunal, challenging the order of confirmation of sale. The Debts Recovery Tribunal already heard the appeals and reserved the matters for orders. The order was about to be passed on October 24, 2007. On the same day a memo was filed informing about the stay granted in the above applications. Hence, the order was not pronounced by the presiding officer. 20. Heard Thiru T. K. Seshadri, learned senior counsel for the applicant in C. A. No. 1811 of 2005 (third respondent in C. A. Nos. 2740 to 2742 of 2007), Thiru P. S. Raman, learned senior counsel for the applicant in C. A. Nos. 2740 to 2742 of 2007, Thiru M. Jeyakumar, the assistant official liquidator for the official liquidator, learned counsel for the second respondent in C. A. No. 1811 of 2005, learned counsel for the third respondent in C. A. No. 1811 of 2005 (the fourth respondent in C. A. No. 854 of 2006), learned counsel for the third respondent in C. A. No. 854 of 2006 and learned counsel for the State Bank of Mysore (the first respondent in C. A. No. 854 of 2006 and the second respondent i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under section 29 of the SFC Act is available against a debtor, of a company, only so long as there is no order of winding up ; (2)The SFCs cannot unilaterally act to realise the mortgaged properties without the consent of the official liquidator representing workmen for the pari passu charge in their favour under the proviso to section 529 of the Companies Act, 1956 ; (3)If the official liquidator does not consent, the SFCs have to move the company court for appropriate directions to the official liquidator who is the pari passu charge holder on behalf of the work men. In any event, the official liquidator cannot act without seeking directions from the company court and under its supervision." 24. In [1996] 86 Comp. Cas. 255 ; [1996] 4 SCC 165 ( Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies ) , the hon'ble Supreme Court while dealing with sections 446, 529(1) and (2), 529A and 537 of the Companies Act, 1956, observed as under (page 259) : "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the secured creditor who had approached the civil court is one amongst many similar creditors, it may be that the company court feels that to take care of the interest of other secured creditors, either the relief of leave does not deserve to be granted or that the proceeding is required to be transferred to it for disposal. It may be pointed out that sections 529 and 529A of the Act do contain provisions in so far as the priority of secured creditors' claims is concerned. Of course, the company court would not transfer the proceeding to it merely because of its convenience ignoring the difficulties which may have to be faced by the secured creditor, who may be at a place far away from the seat of the company court. The need to protect the company from unnecessary litigation and cost have, however, to be borne in mind by the company court. 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 straight 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove the court under section 518 of the Act and pray that sale of the property belonging to the company conducted without leave be held to be void. It is not necessary in this case to further comment upon, what are the powers of a liquidator, in voluntary winding up under the supervision of the court, relating to sale of property belonging to the company." 27. In [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406 ( Allahabad Bank v. Canara Bank ) , the hon'ble Supreme Court held as under (page 76) : "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 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 'recover 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 sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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. 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 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. Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany court has no jurisdiction to entertain and adjudicate upon any matter which the Tribunal is empowered to decide or determine under that Act. It is not disputed that the Tribunal has jurisdiction under the Act to entertain and decide matters raised in the petition filed by the Corporation under section 15 of the Life Insurance Corporation Act. It must follow that the consequential provisions of sub-section ( 1 ) of section 446 of the Companies Act will not operate on the proceedings which may be pending before the Tribunal or which may be sought to be commenced before it (emphasis 1 supplied) Just as the company court was held incompetent to stay or transfer and decide the claims made before the Life Insurance Corporation Tribunal because the company court could not decide the claims before the Life Insurance Corporation Tribunal, the said court cannot, in our view, decide the claims of banks and financial institutions. On the same parity of reasoning as in Damji Valji Shah's case [1965] 35 Comp. Cas. 755 (SC), there is no need for the appellant to seek leave of the company court to proceed with its claim before the Debt Recovery Tribunal or in respect of the executi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. [1993] 78 Comp. Cas. 803 ; [1993] 2 SCC 144, where there was inconsistency between two special laws, the State Financial Corporations Act, 1951, and the Sick Industrial Companies (Special Provisions) Act, 1985. The latter contained section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi J. that both special statutes contained non obstante clauses but that the '1985 Act being a subsequent enactment, the non obstante clause therein would ordinarily prevail over the non obstante clause in section 46B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 statute is a special one'. Therefore, in view of section 34 of the RDB Act, the said Act override ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tachment, distress or execution within the meaning of section 232( i ) of the Indian Companies Act, 1913, or proceeding with or commencing a suit or other legal proceeding against the company within the meaning of section 171 of the same Act, the leave of the court is necessary and if no such leave is obtained, the remedy cannot be availed by the secured creditor. 29. In [2001] 106 Comp. Cas. 388 ( Pennar Paterson Ltd. v. State Bank of Hyderabad ) , a Division Bench of the Andhra Pradesh High Court observed as under (page 352) : "It is now a well-settled principle of law that provisions of two statutes, when they appear to be in conflict with each other, must be read harmoniously and efforts should be made to give effect to the provisions of both the statutes . . . It is further a well-settled principle of law that when an order is passed by one court, the doctrine of amity or comity of reasons demands that no order contrary thereto or inconsistent therewith should be passed . . Although we do not intend to lay down a law to the effect that the Tribunal does not have plenary jurisdiction, as the said question does not arise for our consideration or assuming that the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deciding such claims or to proceed with execution proceedings the Recovery Officer or the Debt Recovery Tribunal does not need the leave of the company court. Noting the fact that there is no provision for transfer of the case from the Tribunal to the company court and also that when there are two special laws, the provision in the later special Act has to prevail, and in view of the provision in section 34 of the RDB Act, it was held that the provision in the RDB Act would override the corresponding provisions in the Companies Act to the extent there is inconsistency between the two Acts. In respect of monies realised 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 529A of the Companies Act and in no other manner. In view of this position, the apex court also held in categoric terms that the provisions of the RDB Act on the above aspects being inconsistent with the provisions of the Companies Act, do prevail over the provisions of the Companies Act during the pendency of the winding up petition against the debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent, the secured creditor who has stood outside the winding up and who has lost a part of the monies otherwise covered by security can come before the Tribunal to reimburse himself from out of other monies available in the Tribunal claiming priority over all creditors by virtue of section 529A(1) ( b ) of the Act. At the same time, his position would not improve from what it was originally and his priority would not extend to his entire unrealised sums which might be in excess of his security. The question whether the amount realised by a bank through the Tribunal can be straightaway released in its favour was also considered in the aforesaid decision. It was found that even if section 19(19) read with section 529A of the Companies Act does not help a secured creditor who has not approached the Tribunal or court for realisation of its money, those provisions can still have an impact in the matter. The workmen's dues have priority over all other creditors, secured or unsecured in view of section 529A(1)( a ). The said priority will have to be protected. No secured or unsecured creditor including banks or financial institutions will have a right to be paid before the workmen's du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After accepting the stand of the applicant, namely, that the jurisdiction of the matter is not vest with the Debts Recovery Tribunal, Bombay learned judge has granted leave as prayed for. The learned judge has further observed that it is always open to the applicant therein (ICICI Ltd.) to approach the Debts Recovery Tribunal, Bombay for necessary orders including the permission to sell the schedule mentioned properties through the Receiver appointed by the Debts Recovery Tribunal . . . In the light of what is stated above, I am of the view that the decision of the Supreme Court in the case of Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 ; [2000] 2 Comp. LJ 170 , the sale proceedings with regard to the assets of the company in liquidation will have to be continued only by the Debts Recovery Tribunal and not by the official liquidator and the applicant official liquidator will be consulted by the Recovery Officer while finalising the secured assets and distribution of the sale proceeds. I also accept the claim that the second respondent ICICF s case under section 529 of the Companies Act in order to stand out side the winding up to realise its security. Apart from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies. (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to ( a )debts provable ; ( b )the valuation of annuities and future and contingent liabilities ; and ( c )the respective rights of secured and unsecured creditors ; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent : Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security, ( a )the liquidator shall be entitled to represent the workmen and enforce such charge ; ( b )any amount realised by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of work men's dues ; and ( c )so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The illustration appended to clause ( c ) of sub-section (3) of section 529 is a clear pointer to the effect that the amount of debts due to the secured creditors should be taken into consideration for the purpose of ascertaining the workmen's portion of security. The language of section 529A is also clear and unequivocal, in terms whereof the workmen's due or the debts due to the 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 have priority over all other debts. Once the workmen's portion is worked out in terms of proviso ( c ) to sub-section (1) of section 529, indisputably the claim of the workmen as also the secured creditors will have to be paid in terms of section 529A. This court in Allahabad Bank [2000] 101 Comp. Cas. 64, 93 (SC) held : The learned Attorney General on the other hand submitted that the first part of clause ( c ) of the proviso to section 529(1) is to be read along with the words "or the amount of the workmen's portion in his security, whichever is less". In other words, the priority of the secured creditor is only to the extent that any part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ementioned extent does not lay down the correct law. The court also wrongly placed reliance on National Textile Workers' Union v. P. R. Ramakrishnan [1983] 53 Comp. Cas. 184; [1983] 1 SCC 228. The question which arose therein was only as regards the right of the workers be heard in the winding up proceeding. The said decision was, therefore, not applicable." 34. In [2005] 127 Comp. Cas. 156 ; [2005] 6 Comp. LJ 463 ( V.K. Seshasayee v. Official Liquidator ) , this court held as under (page 161) : "In this context, the provisions of section 19(19) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and section 529A of the Companies Act are referable. While considering both the provisions, the Supreme Court in Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406, has held that even the priorities among the various creditors can be decided only by the Debts Recovery Tribunal in accordance with the provisions of section 19(19) of the Recovery of Debts Due to Banks and Financial Institutions Act, read with section 529A of the Companies Act . . . The Supreme Court in a recent decision in Andhra Bank v. Official Liquidato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation v. Official Liquidator [2005] 128 Comp. Cas. 387; [2005] 8 SCC 190. In that event if the securitisation company acting under section 13 of the Securitisation 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 price or the reserve price, confirmation of the sale, holding of the sale proceeds and distribution thereof among the creditors in terms of sections 529A and 529 of the Companies Act." 36. In the unreported judgment dated August 10, 2007, made in W. A. (MD). Nos. 145 and 146 of 2007 since reported in ( K. Chidambara Manickam v. Shakeena [2009] 152 Comp. Cas. 196) a Division Bench of this court held as under (page 207) : "At the outset, it is to be stated that nothing survives in the notice dated November 14, 2005, to adjudicate, as on the date of filing of the writ petitions, the entire proceedings under section 13(4) of the Act have come to an end and become final, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of India MANU/SC/2834/2007, the Supreme Court after referring to section 17(2)( xii ) of the Registration Act, held that when a property is sold in public auction in pursuance of an order of the court and the bid is accepted and the court confirms the sale in favour of the purchaser, the sale becomes absolute and the title vests in the purchaser ... The ratio laid down by the Division Bench of this court in S. Arumugham v. C. K. Venugopal Chetty [1994] 1 LW 491 (Mad.) and the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, squarely applies to the case on hand and we, therefore, have no incertitude to hold that the sale which took place on December 19, 2005, has become final when it is confirmed in favour of the auction purchaser and the auction purchaser is vested with rights in relation to the property purchased in auction on issuance of the sale certificate and he has become the absolute owner of the property. Further, as held by the Division Bench of this court in S. Arumugham v. C. K. Venugopal Chetty and the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, the sale certificate issued in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is not open to the auction purchaser to assume possession of the property under the sale conducted by the Debts Recovery Tribunal. Considering the decision of the apex court on the nature of extent of exclusive jurisdiction of the Debts Recovery Tribunal as regards matters before them of the pendency of appeal filed by the company, I do not find any merit in the plea of the applicant for possession. As rightly contended by learned senior counsel placing reliance on the decision reported in [2000] 2 LW 216 (U. Nilan v. Kannayyan ) , unless and until the appeal filed by the respondent-company is disposed of before the appellate forum, the question of treating the sale as absolute does not arise. As the apex court pointed out, the appeal is a continuation of the proceedings initiated in the lower court. The apex court referring to Order 21, rule 92 of the CPC held as follows : 'The entire legal position was reviewed by the court in Maganlal v. Jaiswal Industries Neemach [1989] 3 SCR 696 and it was held that the sale does not become absolute or irrevocable merely on passing an order confirming the sale under Order 21, rule 92 but it would attain finality on the disposa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiating or continuing the proceedings under the RDB Act, 1993. In the aforesaid decision this court also upheld the view of some of the High Courts that the Companies Act is a general statute, and hence the RDB Act which is a special Act, overrides the general statute. At any event, in view of section 34 of the RDB Act, the said Act will prevail to the extent of inconsistency over the Companies Act. Since in the aforesaid decision this court has held that even with regard to execution the jurisdiction under the RDB Act is exclusive, we cannot agree with the view taken by the High Court merely because the appellant had given his consent to the transfer of the execution petition to the Tribunal. It is well-settled in law that consent cannot confer jurisdiction . . . Learned counsel for the respondent-bank relied on section 446(1) of the Companies Act which states that when a winding up order is passed or the official liquidator is appointed as a 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 court and subject to such terms as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Act being a special and subsequent legislation will prevail over the provisions of the Companies Act. The judgment in Rajasthan Financial Corporation's case [2005] 128 Comp. Cas. 387 is not applicable as the question involved in the said case was arising between an earlier statute, i.e., the State Financial Corporations Act, 1951 and section 529A of the Companies Act. Since the said provision of the Companies Act is subsequent legislation, it was held that the latter statute will prevail over the earlier Act. However, the official liquidator has a right to determine the dues of the workmen as provided under section 529A of the Companies Act. Therefore, as and when the official liquidator determines the dues, if any, payable to the workmen, it shall have a right to seek apportionment of the sale proceeds of the assets of the company from respondent No. 1. Thus, it is held that the financial institution possesses right to sell the property in terms of the provisions of the Act, thus, the issuance of the sale certificate on February 9, 2005, after its confirmation by the Recovery Officer on January 12, 2005, cannot be said to be illegal or void." 40. In [2006] 134 Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in Damji Valji Shah v. Life Insurance Corporation of India [1965] 35 Comp. Cas. 755 ; AIR 1966 SC 135, the Supreme Court has held as follows (page 80) : Just as the company court was held in competent to stay or transfer and decide the claims made before the LIC Tribunal because the company court could not decide the claims before the LIC Tribunal, the said court cannot, in our view, decide the claims of banks and financial institutions. On the same parity of reasoning as in Damp Valji Shah's case [1965] 35 Comp. Cas. 755 ; AIR 1966 SC 135, there is no need for the appellant to seek leave of the company court to proceed with its claim before the Debts Recovery Tribunal or in respect of the execution proceedings before the Recovery Officer. Nor can they be transferred to the company court.' The Supreme Court further strengthened their view by pointing out as follows (page 80) : '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 observing as follows (page 763) : "the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffered Rs. 15.08 crores and paid 25 per cent. (Rs. 3.77 crores) of the amount on same date and the balance 75 per cent. (Rs. 11.31 crores) on September 13, 2004, within the time granted to him. Thereafter, spate of writ petitions as stated above were filed and interim orders of stay/injunction were granted on September 9, 2004, September 24, 2004, and December 2, 2004, by this court from confirming the sale in favour of the auction purchaser. Thereupon the auction purchaser withdrawn the amount except 10 per cent, of the bid amount with the permission of the bank on the promise that he would repay the entire amount within 7 days on the conclusion of these writ petitions. Hence, he cannot be faulted for the same." 41. From the above judgments, the following legal principles are settled by the Supreme Court and the High Courts : (1)A Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, is entitled to order the sale and to sell the properties of the debtor even of 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dator representing the workmen for the pan passu charge in their favour under the proviso to section 529 of the Companies Act, 1956. (13)If the official liquidator does not consent, then the financial corporations under the SFC Act have to move the company court for appropriate direction to the official liquidator who is the pari passu charge holder on behalf of the workmen. (14)The official liquidator cannot act in this regard without seeking directions from the company court and under its supervision. (15)The decision of the Andhra Pradesh High Court reported in [2001] 106 Comp. Cas. 388 ( Pennar Paterson Ltd. v. State Bank of Hydera bad ) , is not good law in view of the judgment of the hon'ble Supreme Court in [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406 ( Allahabad Bank v. Canara Bank ) . (16) The sale proceedings with regard to the assets of the company in liquidation will have to be continued only by the Debts Recovery Tribunal and not by the official liquidator. (17)The official liquidator is to be consulted by the Recovery Officer while finalising the secured assets and distribution of the sale proceeds. (18)In a case where the Recovery Certificate is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order of the company and the bid is accepted and the court confirms the sale in favour of the purchaser, the sale becomes absolute and the title vests with the purchaser. (27)The sale certificate issued does not require any registration in view of section 17(2)( xii ) of the Registration Act as the same has been granted pursuant to the sale held in public auction by the authorised officer under the SARFAESI Act. (28)The sale of a secured asset in public auction as per section 13(4) of the SARFAESI Act which ended in issuance of a sale certificate as per rule 9(7) of the Rules is a complete and absolute sale for the purpose of the SARFAESI Act. (29)All that the auction purchaser gets under the sale by the Debts Recovery Tribunal is only a symbolic delivery and the question of actual delivery has to be only from the company court which is the custodian of the property of the company in liquidation. (30)Unless and until there is a specific order by the company court to put the auction purchaser in possession, the question of the purchaser entering into the property and taking possession on the strength of the sale does not arise. (31)Unless and until the appeal filed is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, I am of the considered view that C. A. No. 854 of 2006 filed by the official liquidator before this court is not maintainable and accordingly, the same is dismissed. No costs. 44. C. A. Nos. 2740 to 2742 of 2007 have been filed by an ex-director of the company in liquidation praying to transfer the proceedings before the Debts Recovery Tribunal to the company court and also to set aside the sale made in favour of the third respondent in D. C. P. No. 1912, on August 10, 2001. This application is also not maintainable for the very same reasons given by me for dismissing the application filed by the official liquidator in C. A. No. 854 of 2006. 45. It was mainly contended by learned counsel appearing for the applicant in the above company applications that the leave granted by this court on March 10, 2000 in C. A. Nos. 1251 to 1253 of 1999 is a conditional leave subject to the condition that the 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. This order, according to learned senior counsel is neither cancelled nor modified and therefore, the sale mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le was confirmed by the Recovery Officer on September 12, 2005, itself. In spite of the fact that the auction has been confirmed on September 12, 2005, itself, he was not handed over the possession in spite of the steps taken by him. 49. This application was resisted by the workers' union who were impleaded in the application. The reasons given by the workers' union for opposing C. A. No. 1811 of 2005 is that challenging the sale they filed a writ petition. But, on October 27, 2006, the writ petition filed by the workers' union in W. P. No. 37991 of 2004 was heard along with another writ petition filed in W. P. No. 26564 of 2005 by the Karnataka High Court. The High Court found that M/s. Tapti Machineries P. Ltd., has taken over the assets and liabilities of M/s. Tungabadra Sugar Works Ltd. When Tapti Machineries P. Ltd., had defaulted in re-payment of its dues, recovery proceedings were initiated by the State Bank of Mysore before the Debts Recovery Tribunal by filing O. A. No. 440 of 1997 for recovery of Rs. 22.31 crores. The High Court adverted to the fact that the official liquidator was heard and he also filed his objections. The High Court was of the view that the objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gle judge held that unless and until the appeal filed by the company is disposed of before the appellate forum, the question of treating the sale as absolute does not arise. Therefore, it was submitted that until the appeals pending before the Debts Recovery Tribunal, Bangalore are disposed of, the auction purchaser is not entitled to get possession and at the most, he could be given the liberty to approach the company court again after the disposal of the appeals. 53. Against this, it was argued on behalf of the auction purchaser that the sale has already become final as the sale was already confirmed by the Recovery Officer and therefore, the auction purchaser is entitled to take possession of the property. The decision of the Division Bench of this court dated August 10, 2007, made in W. A. Nos. 145 and 146 of 2007 since reported in ( K. Chidambara Manickam v. Shakeena [2009] 152 Comp. Cas. 196), was very much relied on in this regard. 54. In the above judgment, the Division Bench held that the sale of the secured asset in public auction as per section 13(4) of the SARFAESI Act which ended in issuance of a sale certificate is a complete and absolute sale for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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