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2016 (7) TMI 438 - SUPREME COURT

2016 (7) TMI 438 - SUPREME COURT - TMI - Winding up proceedings - Jurisdiction of Company Court in the High Court at Madras - sale of property conducted by Recovery Officer - Held that:- For recovery of a debt due to a bank or a financial institution, the concerned bank or financial institution, can legitimately initiate proceedings, by filing a winding up petition before the jurisdictional Company Court, or alternatively, intervene in a pending winding up petition. Since there is no bar restrai .....

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cked the jurisdictional authority. Since we have concluded that the Company Court which passed the order dated 10.3.2000 did not lack jurisdiction, we hereby hold, that in the facts of this case, the above order dated 10.3.2000 was neither invalid nor void. - The submission canvassed at the hands of learned counsel for the appellants, that the impugned sale dated 11.8.2005, and its confirmation on 12.9.2005, should not be interfered with on the ground of equity, as the appellant had made th .....

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fore the Recovery Officer by asserting, that the reserve price of ₹ 10 crores fixed for the property being put to auction, was too low. The fact, that in the process of sale of the properties of Deve Sugars Ltd. only two bids were received, has not been disputed. It is also not disputed, that whilst one of the bidders was the appellant Anita International, the other bidder was Synergy Steel Ltd. a sister company of the appellant. In sum and substance therefore, there was only one bidde .....

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utter violation of the order dated 10.3.2000, and therefore, the concerned parties were justified in approaching the High Court at Madras and submission on behalf of the appellants, that the sale conducted by the Recovery Officer and the order of confirmation thereof passed by the Recovery Officer ought to have been assailed only in proceedings under Section 30 of the RDB Act rejected. - Binding of HC order - Held that:- in the application filed by the State Bank of Mysore, the prayer made .....

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before the Tribunal. It is not possible for us to accept, that the aforesaid order passed by the High Court was an order in personam. We are of the view, that the above order had a clear and binding effect on the proceedings permitted to be initiated before the DRT, Bangalore, and further, that it was equally binding on the Recovery Officer. - And accordingly, in our view, the same would also be binding on those claiming through sale proceedings conducted by the Recovery Officer. In the abov .....

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MR. RAHUL PRATAP JUDGMENT JAGDISH SINGH KHEHAR, J. 1. Leave granted in Special Leave Petition (C) Nos. 7490-7491 of 2014. 2. Two company petitions, i.e., Company Petition Nos. 170 of 1995 and 35 of 1997 were filed by Videocon International Ltd. and Tapti Machines Pvt. Ltd., for winding up of Deve Sugars Ltd. before the High Court of Judicature at Madras. Deve Sugars Ltd. was running a sugar factory in the State of Karnataka. Deve Sugars Ltd. was ordered to be wound up on 16.4.1999. An Official L .....

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ts Recovery Tribunal, Bangalore, (hereinafter referred to as, the DRT, Bangalore) for the recovery of ₹ 22,31,78,558.55. During the course of the instant proceedings, the DRT, Bangalore issued a recovery certificate in the sum of ₹ 8.40 crores. It would be relevant to mention, that the State Bank of Mysore also filed Company Application Nos.1251-1253 of 1999, in the pending Company Petition No.170 of 1995, before the High Court at Madras, seeking leave to proceed with the recovery pr .....

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led by them against the respondent Company in the Debt Recovery Tribunal at Bangalore. Company Applications coming on this day before this Court for hearing in the presence of Mr. R. Varichandran advocate for the applicant, herein and the official liquidator, High Court, Madras, the respondent, appearing in person, and upon reading the Judges Summons and affidavit and report of the Official Liquidator filed herein, the Court made the following orders:- Leave is granted subject to the condition t .....

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gs before the DRT, Bangalore. 5. On 1.8.2001, the workers union of Deve Sugars Ltd. was granted the responsibility to overlook security arrangements of the establishment of Deve Sugars Ltd.. 6. Immediately after the DRT, Bangalore, issued the recovery certificate, the State Bank of Mysore moved DCP No.1912 in Original Application No.440 of 1997, seeking the disposal of the assets of the company in liquidation, at the hands of the Recovery Officer of the DRT, Bangalore (hereinafter referred to as .....

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urt at Madras. While declining to entertain Company Application No.1300 of 2003, the Registry of the High Court at Madras, relied upon a judgment rendered by this Court in Civil Appeal No. 2536 of 2000 (reported as Allahabad Bank v. Canara Bank (2000) 4 SCC 406). While not entertaining Company Application No.1300 of 2003, the Registry of the High Court recorded the following endorsement: ORDER As per order in Civil Appeal no.2536/00 as reported in 2000 (3) SCC 205. Leave is not necessary. 7. Con .....

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ion of sale in Form-13, by following the procedure prescribed under the RDB Act. The auction of the properties of Deve Sugars Ltd., in the first instance, was fixed for 1.10.2014. 8. At the instant juncture, the workers union (Tungabadra Sugar Works Mazdoor Sangh), of Deve Sugars Ltd., approached the High Court of Karnataka, by filing Writ Petition No.37991 of 2004. Through the above writ petition, the workers union assailed the recovery proceedings initiated by the State Bank of Mysore, before .....

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High Court of Karnataka, while issuing notice, directed that the sale made by the Recovery Officer would be subject to the final outcome of the writ petition. It would also be relevant to reiterate, that the Official Liquidator was authorized by the High Court at Madras, to take over possession of the properties of the company under liquidation. The Official Liquidator had accordingly taken over possession of the said properties on 28.9.1999. While permitting the State Bank of Mysore to pursue .....

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t. It would be relevant to mention, that the objections raised by the workers union and the Official Liquidator, were overruled by the Recovery Officer. 9. It is also pertinent to mention, that the auction scheduled by the Recovery Officer for 1.10.2004, could not be conducted. Accordingly, a fresh proclamation was issued, for the auction of the properties of Deve Sugars Ltd., fixing 11.8.2005 as the date for holding the auction. The rival parties were also permitted to bring their buyers, if th .....

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under the RDB Act. The Recovery Officer ordered the confirmation of the sale of the auctioned property, after the expiry of statutory period, expressed in Rules 60, 61, and 62 of the Second Schedule of the Income Tax Act (as is applicable to proceedings, before Debts Recovery Tribunals), on 12.9.2005. 10. On 20.9.2005, the Recovery Officer appointed a Receiver, to take possession of the property, sold at the auction. The Court Commissioner allegedly took over possession of some of the properties .....

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y a learned single Judge, wherein the auction purchaser - Anita International, raised a preliminary objection. It was submitted, that the petitioners before the High Court had an efficacious alternative remedy, under the RDB Act. It was accordingly prayed, that the petitioners be relegated to their alternative remedy. Company Application No.854 of 2006 was filed before the Company Court in the High Court at Madras, wherein a challenge was raised to the sale of the assets of Deve Sugars Ltd., at .....

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rved with appellants, by permitting them to approach the DRT, Bangalore, by filing appeals. As a matter of abundant caution, the appellate Court ordered, that the DRT, Bangalore, would deal with the controversy, uninfluenced by the orders passed by the High Court. 11. In compliance with, and in continuation of the outcome before the High Court of Karnataka, the workers union preferred AOR No.15 of 2006 and Videocon International Ltd. preferred AOR No.1 of 2007. In the above appeals, a challenge .....

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ayment of the consideration amount. The challenge raised by N. Ponnusamy was primarily on the ground that the reserve price of ₹ 10 crore was too low. N. Ponnusamy, also sought transfer of the recovery proceedings, from the DRT, Bangalore, to the High Court at Madras. While entertaining the proceedings initiated by N. Ponnusamy, the High Court by its order dated 24.10.2007, passed an ex parte interim order of stay. Anita International and State Bank of Mysore, filed detailed objections, to .....

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the Official Liquidator was obliged to file an appeal, to challenge the auction sale (dated 11.8.2005), as well as, the order of confirmation (dated 12.9.2005) passed by the Recovery Officer. Likewise, the proceedings initiated by N. Ponnusamy, also did not yield any result. His claim was also rejected on the ground, that he too could have availed of the remedy of filing an appeal, to assail the orders passed by the Recovery Officer. The other applications, which came up for hearing jointly were .....

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tition No.170 of 1995) by filing O.S.A. Nos. 59-63, 76, 77 and 82 of 2009. The impugned order in the present appeals dated 17.9.2009, was passed by a Division Bench of the Company Court in the High Court at Madras. In arriving at its conclusions, the High Court took into consideration inter alia the following factors: Firstly, the Official Liquidator had raised objections before the Recovery Officer, in respect of the sale of the properties of Deve Sugars Ltd.. There was nothing to indicate, tha .....

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002) and the inventory (dated 25.11.2004) were prepared after giving notice to the Official Liquidator, who was undoubtedly in exclusive custody of the properties (which were subject matter of auction). Thirdly, even after the workers union had raised objections before the Recovery Officer, no material was placed before the High Court, that there was proper application of mind at the hands of the Recovery Officer, leading to the inference, that the objections were rejected in a casual and lackad .....

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elf. Insofar as the above two bids are concerned, it was felt, that there was for all intents and purposes only a singular bid. One of the bidders was Anita International - the appellant herein, and the other bid was by Synergy Steel Ltd. - a sister company of the appellant - Anita International. In sum and substance therefore, the Recovery Officer closed the bid, after receiving a singular bid. Sixthly, after holding the auction on 11.8.2005, the Recovery Officer confirmed the sale in favour of .....

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y this Court in the Allahabad Bank case, wherein this Court had unambiguously concluded, that the provisions of the RDB Act required, Debts Recovery Tribunals alone, to decide applications for recovery of debts due to banks and financial institutions. And wherein, it was also held, that the aforesaid responsibility included, the adjudication of the liability of the debtor to banks and financial institutions, as well as, the execution of the recovery certificate by the Recovery Officer. In spite .....

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ame. The High Court also concluded, that the above order dated 10.3.2000 was binding, on the Recovery Officer of the DRT, Bangalore. The High Court also expressed the view, that the order dated 10.3.2000 had unambiguously directed, that no coercive steps would be taken against the assets of the company under winding up. Accordingly, the High Court held, that the State Bank of Mysore could not take advantage of the sale of the assets of the company, or the confirmation thereof at the hands of the .....

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oceedings, conducted by the Recovery Officer. Since the facts and circumstances of the present case reveal, that the Official Liquidator was not allowed to be associated with the auction proceedings, and even the valuation of the assets, was taken without the knowledge of the Official Liquidator, and further, the objections raised by the Official Liquidator were rejected without due consideration, the Company Court in the High Court at Madras concluded, that the sale of the properties of Deve Su .....

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creditors and also the workers union, a fresh sale is ordered to be made by the Recovery Officer after following the procedural formalities and after preparation of a fresh valuation done by the panel of valuers appointed by the Company Court with the association of the Official Liquidator and on acceptance of the same by the Company Court in order to ensure a proper price is fetched for the assets of the company in liquidation. 15. While assailing the impugned order passed by the High Court da .....

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t the above judgment was rendered on 10.4.2000. And in the above view of the matter, the declared position of law was clear and explicit well before the controversy in hand was determined by the High Court at Madras. From the cited judgment, learned counsel for the appellant placed reliance on the following observations: 21. 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 .....

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9(22). Under Section 18, the jurisdiction of any other court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the Tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Articles 226 or 227 of the Constitution.) This is the effect of Sections 17 and 18 of the Act. 22. We hold that the provisions of .....

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and is covered by Sections 25 to 30. It is not the intendment of the Act that while the basic liability of the 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 realisation of the amount. The certificate granted under Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. No dual jurisdictions at different stages are conte .....

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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. .....

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necessary under Section 446. In that case, a Tribunal was constituted under the Life Insurance Corporation Act, 1956. Question was whether under Section 446 of the Companies Act, 1956, the said proceedings could be stayed and later be transferred to the Company Court and adjudicated in that Court. It was held that the said proceedings could not be transferred. Section 15 of the Life Insurance Corporation Act, 1956 - which we may say, roughly corresponds to Section 17 of the RDB Act - enabled Li .....

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62. The respondents before the Tribunal contended that the claim could not have been filed in the Tribunal without the leave of the Company Court under Section 446(1). This Court rejected the said contention and held that though the purpose of Section 446 was to enable the Company Court to transfer proceedings to itself and to dispose of the suit or proceedings so transferred, unless the Company Court had jurisdiction to decide the questions which were raised before the LIC Tribunal, there was n .....

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s (like Allahabad Bank) under Section 529-A read with proviso (c) to Section 529(1) can arise before the Tribunal only if Canara Bank has stood outside winding-up and realised amounts and if it shows that out of the amounts privately realised by it, some portion has been rateably taken away by the liquidator under clauses (a) and (b) of the proviso to Section 529(1). It is only then that it can claim that it is to be reimbursed at the same level as a secured creditor with priority over the reali .....

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m any Tribunal, and the other conditions of Section 73 not having been satisfied, no dividend can be claimed out of monies realised at the instance of Allahabad Bank, even if Allahabad Bank is an unsecured creditor. xxx xxx xxx 76. The next question is whether the amounts realised under the RDB Act at the instance of the appellant can be straight away released in its favour. Now, even if Section 19(19) read with Section 529-A of the Companies Act does not help the respondent Canara Bank, the sai .....

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re is an obligation resting on this Court to see that no secured or unsecured creditors including banks or financial institutions, are paid before the workmen s dues are paid. We are, therefore, unable to release any amounts in favour of the appellant Bank straight away. (emphasis supplied) Based on the above decision, it was the contention of learned counsel for the appellant, that the Company Court in the High Court at Madras, had neither the jurisdiction to grant liberty to the State Bank of .....

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permissible, and as such, was liable to be ignored. (ii) Reliance was also placed on Andhra Bank v. Official Liquidator (2005) 5 SCC 75. The instant judgment was relied upon to support the conclusions drawn by learned counsel, while placing reliance on the Allahabad Bank case. Learned counsel invited our attention to the position expressed in paragraph 19 of the cited judgment, which is extracted hereunder: 19. As regards Point (6), however, this Court at para 76 of the judgment held: The next q .....

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ecause of Section 529-A(1)(a). There is no material before us to hold that the workmen s dues of the defendant Company have all been paid. In view of the general principles laid down in National Textile Workers Union v. P.R. Ramakrishnan (1983) 1 SCC 228 there is an obligation resting on this Court to see that no secured or unsecured creditors including banks or financial institutions, are paid before the workmen s dues are paid. We are, therefore, unable to release any amounts in favour of the .....

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t the Corporation would: (i) discharge its liability due to workers under Section 529-A of the Companies Act, (ii) inform the Official Liquidator in advance about the proposed sale of properties of the indebted companies, and (iii) would obtain the Court s permission before finalising the tenders. This Court specifically overruled the view taken by the High Court that it was not necessary for the financial corporations to seek permission of the Company Court to stay outside the winding-up procee .....

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ht is available to a financial corporation under Section 29 of the SFC Act against a debtor, if a company, only so long as there is no order of winding up. When the debtor is a company in winding up, the rights of financial corporations are affected by the provisions in Sections 529 and 529-A of the Companies Act. It was also held that the proviso to Section 529 of the Companies Act creates a pari passu charge in favour of the workmen to the extent of their dues and makes the Liquidator the repr .....

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ith Section 529-A of that Act in a case where the debtor is a company-in-liquidation. As far as we can see, there is no conflict on the question of the applicability of Section 529-A read with Section 529 of the Companies Act to cases where the debtor is a company and is in liquidation. The conflict, if any, is in the view that the Debts Recovery Tribunal could sell the properties of the company in terms of the Recovery of Debts Act. This view was taken in Allahabad Bank v. Canara Bank in view o .....

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ets are realised by a secured creditor even if it be by proceeding under the SFC Act or under the Recovery of Debts Act, the distribution of the assets could only be in terms of Section 529-A of the Act and by recognising the right of the Liquidator to calculate the workmen s dues and collect it for distribution among them pari passu with the secured creditors. The Official Liquidator representing a ranked secured creditor working under the control of the Company Court cannot, therefore, be kept .....

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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 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. In the case on hand, admittedly, the .....

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tor until they are distributed in terms of Section 529-A of the Companies Act under its supervision. The directions thus, made, clearly are consistent with the provisions of the relevant Acts and the views expressed by this Court in the decisions referred to above. In this situation, we find no reason to interfere with the decision of the High Court. We clarify that there is no inconsistency between the decisions in Allahabad Bank v. Canara Bank and in International Coach Builders Ltd. v. Karnat .....

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ection 529-A read with Section 529 of the Companies Act. After all, the Liquidator represents the entire body of creditors and also holds a right on behalf of the workers to have a distribution pari passu with the secured creditors and the duty for further distribution of the proceeds on the basis of the preferences contained in Section 530 of the Companies Act under the directions of the Company Court. In other words, the distribution of the sale proceeds under the direction of the Company Cour .....

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g an application under Section 31 of the SFC Act should issue notice to the Liquidator and hear him before ordering a sale, as the representative of the creditors in general. 18. In the light of the discussion as above, we think it proper to sum up the legal position thus: (i) A Debts 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, .....

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the SFC 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 the distribution thereof among the creditors in terms of Secti .....

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t, learned counsel for the appellant emphatically pointed out, that the sale of the properties of a company in liquidation, should not be confused with the distribution of the sale proceeds of the company in liquidation amongst its creditors. It was submitted, that there could be no interference with the right of the Recovery Officer, to sell the assets of the company in liquidation, under the provisions of the RDB Act. But, that had nothing to do with the distribution of the proceeds of the sal .....

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s passed as early as on 13-8-1999. In an order dated 25-3-2005 also it was expressly mentioned that the sale was subject to confirmation of the court. It was an express condition imposed by the Company Court and as such it was not open to the Recovery Officer to confirm the sale and such order, which was having no authority of law, was rightly set aside by the Company Judge and no grievance could be made. xxx xxx xxx 22. Our attention has been invited by the learned counsel to the relevant order .....

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available to the Official Liquidator without delay. (C) The certified copy of the order that would be passed by the Debts Recovery Tribunal, Bangalore shall be made available to the Official Liquidator without avoidable delay. (D) The petitioner Bank shall file the valuer s report in the court before the properties covered under the mortgage deed are put to sale. (E) Permission of this Court shall be obtained before the sale of the properties movable or immovable, is confirmed or finalised. (F) .....

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xx xxx xxx 23. An order dated 28-3-2005 in Company Application No. 187 of 2005 was equally clear. It reads as under: This is an application filed by the nationalised bank seeking permission of this court to receive the valuation report and also to permit the Bank to effect sale of the properties of the Company under liquidation through the Recovery Officer of the Debts Recovery Tribunal, in terms of the conditions of auction-sale notice dated 2-2-2005. It is also stated that though sale notice w .....

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irmation of this court. The applicant is accordingly granted permission to effect the sale, but the sale shall be required to be confirmed by this court. The application is accordingly disposed of. The above orders leave no room of doubt that 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. It is, therefore, clear that all parties were aware about the conditio .....

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Judge set aside the sale on 17-3-2006, the order was reversed by the Division Bench of the High Court since it was in breach of natural justice. That does not, however, mean that the Company Court could not pass fresh order after affording opportunity of hearing to the parties. 28. In our opinion, the Company Court was right in passing fresh order after hearing the parties. If the Recovery Officer could not have confirmed the sale, obviously all actions taken in pursuance of confirmation of sal .....

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ment, it was submitted, that there can be no doubt, that in a matter where the Company Court had passed an order restraining the Recovery Officer confirming the sale, the sale made by the Recovery Officer in execution of the recovery certificate could only have been confirmed with the permission of the Court. Here again, learned counsel has drawn a fine distinction. It was asserted, that even in the above judgment, this Court had not disputed nor disturbed the exclusive jurisdiction of the Recov .....

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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. xxx xxx xxx 24. From the aforesaid authorities, it clearly emerges that the sale has to be conducted by 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 reg .....

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T 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 principle has also been reiterated in Pravin Gada v. Central Bank of India (2013) 2 SCC 101. 32. 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 .....

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ide 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 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 Ac .....

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sisted us in the matter. He supported the above contentions, but sought a little intervention by requiring us to also examine the scope of the controversy under consideration, by placing reliance on the judgment of this Court in Sadashiv Prasad Singh v. Harendar Singh (2015) 5 SCC 574. Learned counsel invited our attention to the scope of interference with reference to a public auction, wherein third party rights have emerged, especially when the third parties are independent of the disputants, .....

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such a remand may cause, we have ourselves examined the objections of Harender Singh and rejected the objections for a variety of reasons: 23.1. Firstly, the contention raised at the hands of the respondents before the High Court, that the facts narrated by Harender Singh [the appellant in Special Leave Petition (C) No. 26550 of 2010] were a total sham, as he was actually the brother of one of the judgment-debtors, namely, Jagmohan Singh. And that Harender Singh had created an unbelievable story .....

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rent from the factual position depicted in the foregoing paragraphs that Harender Singh, despite his having filed objections before the Recovery Officer, had abandoned the contest raised by him by not appearing (and by not being represented) before the Recovery Officer after 26-10-2005, whereas, the Recovery Officer had passed the order of sale of the property by way of public auction more than two years thereafter, only on 5-5-2008. Having abandoned his claim before the Recovery Officer, it was .....

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der this 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. (2) On receipt of an appeal under sub-section (1), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such inquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under Sections 25 to 28 (both inclusive). The High Court ought not to have interfered with in the ma .....

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to the conclusion that after 26-10-2005, Harender Singh had lost all interest in the property in question and had therefore, remained a silent spectator to various orders which came to be passed from time to time. He had, therefore, no equitable right in his favour to assail the auction-purchase made by Sadashiv Prasad Sinha on 28-8-2008. 23.6. Finally, the public auction under reference was held on 28-8-2008. Thereafter the same was confirmed on 22-9-2008. Possession of the property was handed .....

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ejected on the grounds of delay and laches, especially because third-party rights had emerged in the meantime. More so, because the auction-purchaser was a bona fide purchaser for consideration, having purchased the property in furtherance of a duly publicised public auction, interference by the High Court even on the ground of equity was clearly uncalled for. 24. For the reasons recorded hereinabove, we are of the view that the impugned order dated 17-5-2010 passed by the High Court allowing Le .....

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t the DRT, Bangalore, issued the recovery certificate on 15.5.2002, thereupon the auction sale was conducted on 11.8.2005, and there having been no objection to the same, the auction sale was confirmed by the Recovery Officer on 12.9.2005. It was submitted, that after a lapse of more than a decade after all payments were made (and the sale was confirmed), there was no equitable justification to interfere with the same. 17. Insofar as the submission pertaining to the availability of a statutory r .....

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order dated 27.10.2006, which are being extracted hereunder: 20. In the circumstances, I am of the view that there is an alternate and efficacious remedy by way of an appeal under the Debts Recovery Act R/w Procedure for recovery of tax. The petitioner shall avail the alternate remedy within a period of six weeks from today. It is needless to say that the matter shall not be precipitated until the appeal filed by the petitioners is disposed of. All the contentions are left upon. (emphasis suppli .....

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chasers. Insofar as the appellate remedy of the contesting parties is concerned, reliance was placed on Section 30 of the RDB Act, which is extracted hereunder: 30. Appeal against the order of Recovery Officer.- (1) Notwithstanding anything contained in section 29, any person aggrieved by an order of the Recovery Officer made under this 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. (2) On receipt of an appeal under sub- .....

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enior Advocate, endeavoured to repudiate the submissions advanced at the hands of learned counsel for the appellants, by advancing three contentions. Firstly, an order passed by a Court with jurisdiction having attained finality, was binding between the concerned parties, and was liable to be complied with under all circumstances. In reference to the instant submission, the assertion of learned counsel was, that the order dated 10.3.2000 passed by the High Court at Madras had been passed by a Co .....

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matter is concerned, it was submitted, that the order dated 10.3.2000 having attained finality and having not been varied or vacated, was binding between the parties, and as such, its compliance was mandatory. Thirdly, any sale made within the teeth of an injunction, was liable to be set aside. An injunction order, according to learned senior counsel, as in the instant case (the order dated 10.3.2000), which mandated that no coercive steps would be taken against the assets of Deve Sugars Ltd. & .....

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at Madras, ought not to be interfered with. 19. While substantiating the first contention noticed in the foregoing paragraph, it was asserted, that for recovery of a debt due to a bank, it can file a winding up petition before a Company Court under the Companies Act, or alternatively, it can file a recovery petition before the jurisdictional Debts Recovery Tribunal, under the provisions of the RDB Act. Accordingly, it was pointed out, that a recovery suit could be withdrawn to a Company Court, a .....

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y Court, as may be considered suitable or appropriate, the proceedings filed by the State Bank of Mysore, namely, Company Application Nos. 1250-1253 of 1999 in pending Company Petition No.170 of 1995 (and Company Petition No.35 of 1997) had been filed by the State Bank of Mysore, before a Court having jurisdiction. And therefore, a Court having jurisdiction in the matter, at the instance of the State Bank of Mysore, had passed the order dated 10.3.2000. By the order dated 10.3.2000, the Company .....

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cated. The same, according to learned counsel, was binding between the parties. And therefore, it was contended, that the same could not have been ignored or overlooked. It was submitted, that even if the above order dated 10.3.2000, was without jurisdiction and/or void, the same would be equally binding, till it was varied or set aside by a Court having competent jurisdiction. Based on the factual position noticed above, it was asserted, that the sale of the properties of Deve Sugars Ltd., was .....

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sed therein: 1. The extent of right of secured creditors to realise their debts from the assets of a company which is under winding up or has been wound up, by approaching fora other than the company court, is required to be spelt out in these appeals. We have also been called upon to decide as to when a pending suit or proceeding relating to realization of the debts by such a creditor should be transferred to itself by a company court seized with the winding-up proceeding. xxx xxx xxx 4. A comb .....

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ng-up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding, even if pending at the date of the winding-up order, can proceed against the company, except by leave of the company court vide sub-section (1) of Section 446. (iii) Any sale held, even without the leave of the winding-up court pursuant to order of a civil court on it being approached by a secured creditor to realise its debt will not ipso facto be void, in view o .....

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r of winding up has been made; and (ii) when should a winding-up court transfer to itself any suit or proceeding by or against the company during the pendency of the winding-up proceeding. 6. The aforesaid questions arise because a secured creditor who has initiated a suit or proceeding in a civil court is interested in realisation of his debt only, whereas the company court looks after the interest of all the creditors; so too, the workmen s dues, which rank pari passu with debts due to secured .....

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y in many cases be in conflict with that of the liquidator, as was acknowledged in Karamelli & Barnett Ltd., In re. We feel no difficulty in stating that in case of such conflict, the interest of liquidator has to receive precedence over that of the receiver inasmuch as the former looks after the interest of a large segment of creditors along with that of workmen, whereas the latter confines his concern to the interest of the secured creditor on whose approach the receiver has been appointed .....

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twin objects can be achieved if the company court were to grant leave wherever required as a rule, subject to reasonable conditions. This would preserve the integrity of the substantive right of the secured creditor. The terms to be imposed should facilitate, rather than obstruct, the realisation of security. Further, wherever a receiver has been appointed prior to the commencement of the winding-up proceedings, he should be permitted to continue in general run of cases. As to the suits to be fi .....

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eservation of integrity of the substantive right of the creditor should be the main consideration. 10. To buttress his submission, Shri Salve has referred us to the Recovery of Debts due to Banks and Financial Institutions Act, 1993, which was recently enacted because of the considerable difficulty being experienced by financial institutions in recovering loans and enforcement securities charged with them. Earlier, recovery procedure used to block a significant portion of their funds in unproduc .....

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on of other courts, except the writ power of the higher courts, in relation to the matters specified in Section 17 - the same being recovery of debts due to such institutions. xxx xxx xxx 13. 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 strait-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 .....

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at 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, 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 .....

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h, against the company, except by leave of the (Tribunal) and subject to such terms as the (Tribunal) may impose. (2) (Tribunal) shall, notwithstanding anything, contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of - (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under section 391 by or in respect of the compa .....

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udgment rendered in the Allahabad Bank case, it was asserted, that this Court had merely concluded, that it was not necessary for a bank or a financial institution to seek leave of Company Court before initiating proceedings against a debtor under the provisions of the RDB Act. It was therefore pointed out, that there was no dissimilarity of the conclusions drawn by this Court in the Allahabad Bank case and the Srinivas Agencies case7. 23. In addition to the above, learned senior counsel for the .....

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asarwalla v. Hind Rubber Industries (P) Ltd., M. Meenakshi v. Metadin Agarwal and Sneh Gupta v. Devi Sarup, this Court held that whether an order is valid or void, cannot be determined by the parties. For setting aside such an order, even if void, the party has to approach the appropriate forum. 17. In State of Punjab v. Gurdev Singh this Court held that a party aggrieved by the invalidity of an order has to approach the court for relief of declaration that the order against him is inoperative a .....

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s ostensible purpose as the most impeccable of orders. 18. In Sultan Sadik v. Sanjay Raj Subba AIR 2004 SC 1377, this Court took a similar view observing that once an order is declared non est by the court only then the judgment of nullity would operate erga omnes i.e. for and against everyone concerned. Such a declaration is permissible if the court comes to the conclusion that the author of the order lacks inherent jurisdiction/competence and therefore, it comes to the conclusion that the orde .....

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ng of the petitioner or on the ground of delay or on the doctrine of waiver or any other legal reason. The order may be void for one purpose or for one person, it may not be so for another purpose or another person. (emphasis supplied) 24. In addition to the above, reliance was placed on Order XXI Rule 58 of the Code of Civil Procedure, which is extracted below: 58. Adjudication of claims to, or objections to attachment of, property. - (1) Where any claims preferred to, or any objection is made .....

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or unnecessarily delayed. (2) All questions (including questions relating to right, title or interest in the property attached) arising between the parties to a proceeding or their representatives under this rule and relevant to the adjudication of the claim or objection, shall be determined by the Court dealing with the claim or objection and not by a separate suit. (3) Upon the determination of the questions referred to in sub-rule (2), the Court shall, in accordance with such determination,- .....

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itions as to appeal or otherwise as if it were a decree. (5) Where a claim or an objection is preferred and the Court, under the proviso to sub-rule (1), refuses to entertain it, the party against whom such order is made may institute a suit to establish the right which he claims to the property in dispute; but, subject to the result of such suit, if any, an order so refusing to entertain the claim or objection shall be conclusive. Based on the above provision, it was submitted, that a declarati .....

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ficate issued by the DRT. To support the aforementioned proposition, learned senior counsel placed reliance on the Official Liquidator, Uttar Pradesh and Uttarakhand case5, and drew the attention of this Court to the factual position recorded in paragraphs 2 and 3 thereof, which are reproduced hereunder: 2. 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 her .....

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equently transferred to DRT at Allahabad. Be it noted, Company Petition No. 113 of 1997 was filed before the learned Company Judge in 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 immovable properties of the wound-up com .....

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n 13-2-2004, granted permission for proceeding with the attachment and sale of the assets for recovery of the dues under the RDB Act. It is worth stating here that no condition was imposed. 3. After auction and confirmation of sale by 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 Of .....

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posed of by this Court, after making a reference to the judgment in the Allahabad Bank case by concluding as under: 35. It has been submitted by Mr Banerji, learned Senior Counsel, that if the Company Court as well as DRT can exercise jurisdiction in respect of the same auction or sale after adjudication by 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 p .....

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tes 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 realise their dues. Therefore, this Court in Allahabad Bank case has opined that it is DRT which would have the exclusive jurisdiction when a matter is agitated before DRT. The dictum in the said case has been approved by the three-Judge Bench in Rajasthan State Financial Corpn. It is not a situation where the Official Liquidator can have a choice either to a .....

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t 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 DRT. Be it noted, an order passed under Section 30 of the RDB Act by DRT is appealable. Thus, we are inclined to conclude and hold that the Official Liquidator can only take recourse to the mode of ap .....

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the properties, immovable or movable, is confirmed or finalised. 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 asid .....

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ur with the view expressed by the Division Bench and hold that the Official Liquidator can prefer an appeal before 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, DRT shall deal with the appeal in accordance with law. DRT is directed to decide the appeal within a period of two months after offering a .....

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r from transferring or charging the property in any way, and all persons from taking any benefit from such transfer or charge. (1)A The Order shall also require the judgment debtor to attend court on a specified date to take notice of the date to be fixed for settling the terms of the proclamation of sale. (2) The Order shall be proclaimed at some place on or adjacent to such property by beat of drum or other customary mode, and a copy of the Order shall be affixed on a conspicuous part of the p .....

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Singh (2013) 14 SCC 689. The following observations recorded therein, are of relevance: 10. The nature and effect of an alienation made in violation of an order of injunction was considered in Tayabbhai M. Bagasarwalla v. Hind Rubber Industries (P) Ltd. and the following propositions were laid down: 16. According to this section, if an objection is raised to the jurisdiction of the court at the hearing of an application for grant of, or for vacating, interim relief, the court should determine t .....

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xplicit what is implicit in law. Just because an objection to the jurisdiction is raised, the court does not become helpless forthwith-nor does it become incompetent to grant the interim relief. It can. At the same time, it should also decide the objection to jurisdiction at the earliest possible moment. This is the general principle and this is what Section 9-A reiterates. Take this very case. The plaintiff asked for temporary injunction. An ad interim injunction was granted. Then the defendant .....

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isdiction to entertain the suit but all this took about six years. Can it be said that orders passed by the civil court and the High Court during this period of six years were all non est and that it is open to the defendants to flout them merrily, without fear of any consequence. Admittedly, this could not be done until the High Court s decision on the question of jurisdiction. The question is whether the said decision of the High Court means that no person can be punished for flouting or disob .....

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ignity and the authority of the courts. We must repeat that this is not even a case where a suit was filed in the wrong court knowingly or only with a view to snatch an interim order. As pointed out hereinabove, the suit was filed in the civil court bona fide. We are of the opinion that in such a case the defendants cannot escape the consequences of their disobedience and violation of the interim injunction committed by them prior to the High Court s decision on the question of jurisdiction. 28. .....

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objection to jurisdiction does not instantly disable the court from passing any interim orders. It can yet pass appropriate orders. At the same time, it should also decide the question of jurisdiction at the earliest possible time. The interim orders so passed are orders within jurisdiction when passed and effective till the court decides that it has no jurisdiction to entertain the suit. These interim orders undoubtedly come to an end with the decision that this Court had no jurisdiction. It i .....

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e Company Court could be secure, only if the sale of the properties of the company under winding up was made by conforming to the crystalised practices in getting the best price. Referring to the conclusions drawn in the impugned order, it was submitted, that the auction sale conducted by the Recovery Officer was farcical, as it was, with the sole object of extending benefits to the appellant - Anita International. It was therefore asserted, that the Division Bench of the High Court was fully ju .....

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eme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17. Provided that any proceedings in relation to the recovery of debts due to any multi-State co-operative bank pending before the date of commencement of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) shall be continued and nothing contained in .....

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the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or (c) the cause of action, wholly or in part, arises: Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, .....

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e of such application: Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor. (1A) Every bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of section 2, may, at its option, opt to initiate proceedings under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) to recover debts, whether due before o .....

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(39 of 2002) to recover debts, it may do so with the permission of the Tribunal and every such application seeking permission from the Tribunal to withdraw the application made under sub-section (1A) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application: Provided that in case the Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the r .....

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cation under sub-section (1) or sub-section (2) shall be in such form and accompanied by such documents or other evidence and by such fee as may be prescribed: Provided that the fee may be prescribed having regard to the amount of debt to be recovered: Provided further that nothing contained in this sub-section relating to fee shall apply to cases transferred to the Tribunal under sub-section (1) of section 31. (3A) If any application filed before the Tribunal for recovery of any debt is settled .....

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within a period of thirty days from the date of service of summons, present a written statement of this defence: Provided that where the defendant fails to file the written statement within the said period of thirty days, the Presiding Officer may, in exceptional cases and in special circumstances to be recorded in writing, allow not more than two extensions to the defendant to file the written statement. (5A) After hearing of the application has commenced, it shall be continued from day-to-day .....

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certained sum of money legally recoverable by him from such applicant, the defendant may, at the first hearing of the application, but not afterwards unless permitted by the Tribunal, present a written statement containing the particulars of the debt sought to be set-off. (7) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Tribunal to pass a final order in respect both of the original claim and of the set-off. (8) A defendant in an application may .....

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laim under sub-section (8) shall have the same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same application, both on the original claim and on the counter-claim. (10) The applicant shall be at liberty to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Tribunal. (11) Where the defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not to be disposed of .....

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, or disposing of, any property and assets belonging to him without the prior permission of the Tribunal. (13)(A) Where, at any stage of the proceedings, the Tribunal is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him, - (i) is about to dispose of the whole or any part of his property; or (ii) is about to remove the whole or any part of his property from the .....

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certificate for the recovery of debt, or to appear and show cause why he should not furnish security. (B) Where the defendant fails to show cause why he should not furnish security, or fails to furnish the security required, within the time fixed by the Tribunal, the Tribunal may order the attachment of the whole or such portion of the properties claimed by the applicant as the properties secured in his favor or otherwise owned by the defendant as appears sufficient to satisfy any certificate fo .....

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the Tribunal under sub-sections (12), (13) and (18) or breach of any of the terms on which the order was made, the Tribunal may order the properties of the person guilty of such disobedience or breach to be attached and may also order such person to be detained in the civil prison for a term not exceeding three months, unless in the meantime the Tribunal directs his release. (18) Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order,- (a) appoint a receiver of a .....

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s and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and (e) appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof. (19) 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 distribu .....

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nds of justice. (20A) Where it is proved to the satisfaction of the Tribunal that the claim of the applicant has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties or where the defendant has repaid or agreed to repay the claim of the applicant, the Tribunal shall pass orders recording such agreement, compromise or satisfaction of the claim. (21) The Tribunal shall send a copy of every order passed by it to the applicant and the defendant. ( .....

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ituated: Provided that in a case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it. (24) The application made to the Tribunal under sub-section (1) or sub-section (2) shall be dealt with by it as expeditiously as possible and endeavor shall be made by it to dispose of the application finally within one hundred and eighty days from .....

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ing 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 Develo .....

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nies Act. In this behalf, learned senior counsel for the appellant, placed reliance on Kiran Singh v. Chaman Paswan 1955 (1) SCR 117, and pointed out to the following observations recorded therein: 6. The answer to these contentions must depend on what the position in law is when a court entertains a suit or an appeal over which it has no jurisdiction, and what the effect of Section 11 of the Suits Valuation Act is on that position. It is a fundamental principle well established that a decree pa .....

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under consideration fell to be determined only on the application of general principles governing the matter, there can be no doubt that the District Court of Monghyr was coram non judice, and that its judgment and decree would be nullities. The question is what is the effect of Section 11 of the Suits Valuation Act on this position. (emphasis supplied) Reliance was also placed on Dhurandhar Prasad Singh v. Jai Prakash University (2001) 6 SCC 534, and the Court s attention was drawn to the follo .....

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id to be invalid, or null and void. If it is intra vires it was, of course, valid. If it is flawed by an error perpetrated within the area of authority or jurisdiction, it was usually said to be voidable; that is, valid till set aside on appeal or in the past quashed by certiorari for error of law on the face of the record. 21. Clive Lewis in his work Judicial Remedies in Public Law at p. 131 has explained the expressions void and voidable as follows: A challenge to the validity of an act may be .....

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ference was made to Jagmittar Sain Bhagat v. Director, Health Services, Haryana (2013) 10 SCC 136. In order to canvass the proposition, that jurisdiction of courts/forums cannot be conferred by consent of parties, or acquiescence or waiver. Reliance in this behalf was placed on the following conclusions drawn by this Court: 9. Indisputably, it is a settled legal proposition that conferment of jurisdiction is a legislative function and it can neither be conferred with the consent of the parties n .....

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rpetuate defeating of the legislative animation. The court cannot derive jurisdiction apart from the statute. In such eventuality the doctrine of waiver also does not apply. (Vide United Commercial Bank Ltd. v. Workmen AIR 1951 SC 230; Nai Bahu v. Lala Ramnarayan AIR 1978 SC 22; Natraj Studios (P) Ltd. v. Navrang Studios (1981) 1 SCC 523; and Kondiba Dagadu Kadam v. Savitribai Sopan Gujar (1999) 3 SCC 722.) 10. In Sushil Kumar Mehta v. Gobind Ram Bohra (1990) 1 SCC 193, this Court, after placing .....

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has no jurisdiction; where an Act creates an obligation and enforces the performance in specified manner, performance cannot be forced in any other manner . 11. The law does not permit any court/tribunal/authority/forum to usurp jurisdiction on any ground whatsoever, in case, such an authority does not have jurisdiction on the subject-matter. For the reason that it is not an objection as to the place of suing; it is an objection going to the nullity of the order on the ground of want of jurisdic .....

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thy Swaminathan & Sons AIR 2008 SC 187). (emphasis supplied) 28. Whilst supplementing the above contentions, Mr. S. Ganesh, learned senior counsel pointed out, that in the present controversy, the State Bank of Mysore had preferred an application before the Company Court under Section 446(1) of the Companies Act. It was asserted, that the order passed by the High Court was an order in personam, and as such, the aforesaid order dated 10.3.2000 could not be considered as binding on the DRT, or .....

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pany. A question of determining the priorities would also fall for consideration if the parties claiming the same are before the court. Section 446 of the Companies Act ipso facto confers no power upon the court to pass interlocutory orders. The question as to whether the courts have inherent power to pass such orders, in our opinion, does not arise for consideration in this proceeding. Assuming such a power exists, it was imperative that the same should have been exercised on consideration of t .....

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some trivial infirmities in the procedure adopted for the sale of the same. It was the submission of learned counsel, that only a material irregularity would persuade a Court to interfere with such sale proceedings conducted in furtherance of statutory power conferred upon such authority. To support the above contention, reliance was placed by learned senior counsel firstly on the following observations in the decision rendered by this Court in Radhy Shyam v. Shyam Behari Singh AIR 1971 SC 2337 .....

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oceeding, therefore, must be said to be one determining the right of the auction-purchaser to have the sale confirmed and made absolute and of the judgment-debtor conferred by Rule 90 to have it set aside and a resale ordered. In our view an order in a proceeding under Order XXI, Rule 90, is a judgment inasmuch as such a proceeding raises a controversy between the parties therein affecting their valuable rights and the order allowing the application certainly deprives the purchaser of rights acc .....

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larity such as the one under Rule 69 and inadequacy of price realised in such a sale, in other words injury, is, therefore, not sufficient. What has to be established is that there was not only inadequacy of the price but that that inadequacy was caused by reason of the material irregularity or fraud. A connection has thus to be established between the inadequacy of the price and the material irregularity. (emphasis supplied) Additionally, reliance was placed on Navalkha and Sons v. Sri Ramanya .....

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re two insertions and in the remaining two there was only one insertion. This was contrary to what the Commissioners have promised in their affidavit dated July 8, 1964. No doubt, other efforts were made for giving publicity but these efforts were not sufficient to attract more than one offer. When the case came for confirmation on December 24, 1964 there was an application by Babu Khan that the property was of much higher value and that fresh offers must be invited again with wider publicity. T .....

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e learned Single Judge was right in expressing his reluctance to confirm the offer of Navalkha & Sons. He therefore decided to have an open bid as between the appellant and Darak in the Court itself on that very day. The complaint of Padam Chand Agarwal is that the second step taken by the Single Judge of holding an auction without giving wide publicity was not justified in law. Rule 273 of the Companies (Court) Rules provides that all sales shall be made by public auction or by inviting sea .....

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ined the auction to only two persons namely the previous tenderer and the fresh tenderer. The auction in question no doubt was conducted in a public place but it was not a public auction because it was not open to the general public but was confined to two named persons. Secondly it was not held after due publicity. It was held immediately after it was decided upon. It is, therefore, obvious that the sale in question was not a public sale which implies sale after giving notice to the public wher .....

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be put to auction should have directed auction by public sale instead of confining it to two persons alone. Since there was want of publicity and there was lack of opportunity to the public to take part in the auction the acceptance of the highest bid by the learned Judge was not a sound exercise of discretion. It is contended on behalf of the appellant that confirmation was discretionary with the Court and the Division Bench ought not to have interfered with the discretion exercised by the Com .....

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Padam Chand Agarwal also suggests that want of publicity had resulted in prejudice. In these circumstances the Company Judge ought not to have confirmed the bid of the appellant in the auction held on December 24, 1964. We are accordingly of opinion that the Division Bench was right in holding that the order of the Company Judge dated February 19, 1965 should be set aside and there should be fresh sale of the property either by calling sealed tenders or by auction in accordance with law. The te .....

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he High Court deserved to be set aside. 31. We have given our thoughtful consideration to the complicated sequence of facts projected before us, as also, the legal submissions advanced at the hands of learned counsel for the rival parties. We shall now endeavour to record our conclusions, with reference to the issues canvassed. 32. In our considered view, the controversy projected for our consideration falls in a narrow compass. It is apposite, to crystalise the dimensions of the dispute. Deve S .....

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lore. On 10.3.2000, the Company Court granted leave …subject to the condition that… no coercive steps are taken against the assets of the company during or after the conclusion of the proceedings before the Tribunal… 33. After the DRT, Bangalore issued the recovery certificate dated 15.5.2002, the State Bank of Mysore filed Company Application No. 1300 of 2003, with a prayer that the bank be permitted to seek execution of the recovery certificate. It is not a matter of dispu .....

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objected to the execution of the recovery certificate by the Recovery Officer. The Official Liquidator, who was ordered to be impleaded in the recovery proceedings initiated by the State Bank of Mysore, vide order dated 10.3.2000 (passed by the Company Court in the High Court at Madras), also filed objections. All the above objections were overruled by the Recovery Officer. 35. The workers union, then assailed the recovery proceedings, before the High Court of Karnataka, by filing Writ Petition .....

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Writ Appeal Nos. 2050 and 2051 of 2006 before the High Court of Karnataka. The writ appeals were dismissed on 23.2.2007. 36. The workers union thereafter preferred AOR No.15 of 2006 and Videocon International Ltd. filed AOR No.1 of 2007. In both the above matters, a challenge was raised to the order passed by the Recovery Officer dated 12.9.2005, whereby the sale of properties of Deve Sugars Ltd. to Anita International, was confirmed. 37. It would be relevant to mention, that as against the res .....

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ores was too low. The above company applications were dismissed on 3.3.2009. A challenge raised against the same, was also dismissed by the High Court at Madras. 38. The applications filed by the Official Liquidator and others were considered collectively (with Company Application Nos. 2740-2742 of 2007) and were rejected by a common order dated 3.3.2009, whereby all the applicants were relegated to their remedy of appeal under the RDB Act. A challenge raised to the above order dated 3.3.2009, b .....

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n Nos. 1251-1253 of 1999). The sale and confirmation of the properties of Deve Sugars Ltd. in favour of Anita International were accordingly set aside. 39. The principal debate raised before this Court, revolves around the cause and effect of the order dated 10.3.2000, passed by the Company Court in the High Court at Madras. According to learned counsel for the appellants, the above order dated 10.3.2000 being wholly void and non est could not have any bearing on the proceedings conducted by the .....

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port their claim, it was submitted on behalf of the appellants, that jurisdiction in matters of recovery agitated by banks and financial institutions under the RDB Act, has been repeatedly expounded by this Court. The concerned Debts Recovery Tribunals, before whom recovery proceedings are initiated, have exclusive jurisdiction in the matter. It was also pointed out, that this Court has clearly declared, that even the jurisdiction of Recovery Officers, in matters of execution of recovery certifi .....

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Court in the Allahabad Bank, the M.V. Janardhan Reddy, the Andhra Bank3, the Rajasthan State Financial Corporation4, and the Official Liquidator, Uttar Pradesh and Uttarakhand5 cases. 41. According to learned counsel for the appellants, it was apparent, that the action of a Recovery Officer in conducting sale proceedings and ordering the confirmation thereof for executing a recovery certificate fell squarely within his jurisdiction under the RDB Act. And his jurisdiction being exclusive, as dec .....

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pportionment of the sale proceeds. It was urged, that the concern of the appellant - Anita International, was limited to the sale of the properties of Deve Sugars Ltd., which it had purchased on 11.8.2005, which was confirmed by the Recovery Officer on 12.9.2005. It was submitted, that the appellant -Anita International has no concern with the distribution of the sale proceeds, and as such, the issue of distribution of the sale proceeds should not fall within the consideration of the present det .....

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e sequence of facts, this Court clearly held, that the condition imposed by the Company Court could not be violated by the Recovery Officer. It was concluded, that the sale made by the Recovery Officer in violation of the orders passed by the Company Court, was without the authority of law, the same was accordingly set aside. The explanation tendered by learned senior counsel representing the appellants was, that even in the above judgment, this Court had not disturbed the exclusive jurisdiction .....

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M.V. Janardhan Reddy case, an order passed by the Company Court was held to be binding on the Recovery Officer. Based on exactly the same consideration, we are of the view, that the acceptance of the bid of Anita International by the Recovery Officer on 11.8.2005, and the confirmation of the sale in its favour on 12.9.2005, were clearly impermissible, and therefore, deserve to be set aside. 43. In addition to the above, reference may be made to the judgment rendered by this Court in the Official .....

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rmation of the movable or immovable properties, of the debtor. It was held, that the order passed by the Company Court, was binding on the Recovery Officer. In the above judgment it was concluded, that it was not open to the Recovery Officer to confirm the sale of the properties at his own, and such a sale and confirmation of movable or immovable properties made by the Recovery Officer, without the permission of the Company Court, were liable to be set aside. This Court while recording its above .....

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the pointed issue canvassed before us, at the hands of learned counsel for the appellants, stands answered against the appellant in paragraph 36 of the above judgment. We endorse, and are obliged to follow, the view expressed by this Court, as noticed above. Accordingly, we find no merit in the first contention advanced at the hands of learned counsel for the appellants. 44. Despite our above conclusion, it is imperative for us to notice, that for recovery of a debt due to a bank or a financial .....

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o entertain a claim raised by such bank or financial institution. In view of the above, it is not possible for us to accept, as was suggested on behalf of the appellants, that the order passed by the Company Court in the High Court at Madras dated 10.3.2000, lacked the jurisdictional authority. Since we have concluded that the Company Court which passed the order dated 10.3.2000 did not lack jurisdiction, we hereby hold, that in the facts of this case, the above order dated 10.3.2000 was neither .....

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wever, till an order passed by a competent Court is set aside, as was also held by this Court in the Official Liquidator, Uttar Pradesh and Uttarakhand5 and the Jehal Tanti9 cases, the same would have the force of law, and any act/action carried out in violation thereof, would be liable to be set aside. We endorse the opinion expressed by this Court in the Jehal Tanti case9. In the above case, an earlier order of a Court was found to be without jurisdiction after six years. In other words, an or .....

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his interests, was void, voidable, or patently erroneous. And based on such plea, to avoid or disregard or even disobey the same. This course can never be permitted. 46. To be fair to learned counsel for the appellants, it needs to be noticed, that reliance was also placed on behalf of the appellants on the Kiran Singh10, the Sadashiv Prasad Singh6, and the Jagmittar Sain Bhagat12 cases, to contend, that a decree passed by a Court without jurisdiction was a nullity, and that, its invalidity cou .....

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me is liable to be complied with, till it is set aside. 47. The submission canvassed at the hands of learned counsel for the appellants, that the impugned sale dated 11.8.2005, and its confirmation on 12.9.2005, should not be interfered with on the ground of equity, as the appellant had made the entire payment in 2005, and the Recovery Officer had ordered confirmation of the sale, as no objection had been raised against the same. We find it difficult to persuade ourselves to accept the above con .....

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Sugars Ltd. only two bids were received, has not been disputed. It is also not disputed, that whilst one of the bidders was the appellant - Anita International, the other bidder was Synergy Steel Ltd. - a sister company of the appellant. In sum and substance therefore, there was only one bidder. For the above reasons, in addition to those recorded by the High Court (noticed in paragraph xxx 12 xxx, hereinabove), it is not possible for us to accept the claim of the appellant on the ground of equi .....

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Officer on 12.9.2005, ought to have been assailed only in proceedings under Section 30 of the RDB Act. It was submitted, that since an efficacious alternative remedy was available to the parties, which had approached the Company Court in the High Court at Madras, the interference at the hands of the High Court was neither just nor proper. The instant submission is wholly devoid of substance and deserves to be rejected. We are of the considered view, that there was sufficient justification for t .....

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ention as well. 49. Last of all, we may advert to the contention, that the order dated 10.3.2000 passed by the Company Court in the High Court at Madras, while disposing of Company Application Nos. 1251-1253 of 1999, filed by the State Bank of Mysore, was not binding on the appellant. Insofar as the instant contention is concerned, it was submitted, that the said order passed by the High Court was an order in personam, and as such, the aforesaid order could not be considered as an order binding .....

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