TMI Blog2001 (7) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... 99 on account of money lent and advanced by the petitioner and not repaid by the Company. The petitioner claimed interest on and from 16th August. 1999 at the agreed rate. The petitioner granted loan to the Company from lime to time for the purpose of meeting the cost of the project of the Company for manufacture of glass shell at the Ulberia Industrial Growth Centre. District Howrah. West Bengal. On or about 12th May. 1990 the petitioner along with Industrial Development Bank of India (IDBI) and the Industrial finance Corporation of India Limited (IFCI) entered into a participation loan agreement for granting the Company a rupee loan of ₹ 164 lakhs(first loan) being the petitioner's share out of the rupee loans aggregating to ₹ 408 lakhs sanctioned by the petitioner in participation with IDBI and IFCI. The terms and conditions were mentioned in the loan agreement dated 12th December, 1990 as amended from time to time. In pursuance of the terms of the participation agreement the petitioner disbursed the entire loan of ₹ 164 lakhs to the Company. The Company appropriated the same to its benefit. Another loan of sum of ₹ 57 lakhs (second loan) was also gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioner be dismissed on the basis that secured creditors are not entitled to recover its debt other than before the Tribunal that is Debt Recovery Tribunal created under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the Act of 1993) and heavy reliance was placed by the applicant on the recent decision of the apex Court in the case of Allahabad Bank v. Canara Bank reported in : [2000]2SCR1102 and the decision of this Court in the Case of Durgapur Steel Plant v. Kisan Jaiswal reported in . 3. The learned single Judge after considering this application held that the winding up petition under the Companies Act is not an application under Recovery of Debts due to Banks and Financial Institution Act, 1993, and therefore the learned single Judge dismissed the application. However, the learned single Judge allowed time to file affidavit in opposition in the winding up petition and the petition for appointment of provisional liquidator. Liberty was also granted to file a reply thereto within two weeks thereafter. Aggrieved against this order passed by the learned single Judge dated 7 the August, 2000 the present appeal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied in whole or in part; or (c) If it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Court shall taken into account the contingent and prospective liabilities of the company. (2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm. 6. In this connection reference may also be made to the Recovery of Debts Due to Banks and Financial Institution Act of 1993. This Act was introduced by the Parliament with a view to expedite the adjudication of recovery of debts due to Banks and Financial Institutions and matters connected therewith or incidental thereto. The statement of objects and reasons of the Act reads as under : Statement of Objects and Reasons--Banks and Financial Institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Rural Bank; 9. The expression debt has been defined in section 2(g) of the Act of 1993 which reads as under: 'debt' means any liability (Inclusive of interest) which is alleged as due from any person by a Bank or a financial institution or by a consortium of Banks or Financial Institutions during the course of any business activity undertaken by the Bank or the Financial Institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or whether payable under a decree or order of any Civil Court or otherwise and subsisting on, and legally recoverable on, the date of the application; 10. In the present case we are concerned with Bank only therefore we need not to refer to the other definitions like Banking Company or financial institute . Under section 3 provides for establishment of Tribunal section 4 deals with composition of Tribunal. Section 5 provides for the qualifications for appointment as Presiding Officer. Section 6 provides for terms of office. Section 7 provides for staff of Tribunal. Section 8 provides for establishment of an Appellate Tribunal. Chapter Ml of the Act of 1993 deals wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with this Act. 15. Now in light of both the statutes i.e. under section 433 and 434 of the Companies Act, 1956 and sections 17, 18 and 34 of the Act of 1993 the question before us is whether the Company Court under the Companies Act, 1956 still has jurisdiction to entertain a petition filed by Banks for winding up of Companies. It is true that a special enactment has been made by the Parliament and a forum has been provided to the Banks and Financial Institutions for adjudication of their debts expeditiously. Therefore normally the Bank and Financial Institutions shall have to seek remedy from the Debt Recovery Tribunals by virtue of section 34 of the 1993 Act which gives overriding effect to this Act as against any other remedy available under the Civil Courts. Therefore, what we have to see is the relief which the Banks and Financial Institutions want to seek under the provisions of sections 433 and 434 of the Companies Act, 1956 can co-exist with the Act of 1993 or not. 16. Section 34 of the Act of 1993 only talks about inconsistency of the laws, that means that if any other law which is inconsistent with this Act then in that case this Act will have the overriding ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Club reported in 1966(2) Company Law Journal 213. It was held: The Court will not allow the winding up proceedings to be explanted as a normal alternative to the ordinary mode of debt realisation. The Company Court will forbear from deciding a dispute which can be more conveniently investigated in a regular action. That should be so, even if the dispute is not in respect of the whole debt, If the grounds on which the liability was disputed are bona fide and substantial. 19. Our attention was also invited to the decision of the apex Court in the case of .Amalgamated Commercial Traders (P) Ltd, v. A.C.K. Krishnaswami Anr. reported in 1965 (35) Comp Cas 456 wherein it was held by the apex Court that winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bonafide disputed by the company: 'Their Lordships observed: it is well-settled that a winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat context their Lordships observed: The claim in a petition for winding up is not for money. The petition filed under the Companies Act would be to the effect, in a matter like this, that the company has become commercially insolvent and, therefore, should be wound up. 23. Therefore, it was contended by the learned counsel for the respondent that the power exercised by the Court under sections 433 and 434 of the Companies Act, 1956 for winding up of the company is not merely for recovery of debts, it is more than i.e. it is not in public interest to allow such company to operate in the commercial world as it might lead to cheating the public at large. There, it is submitted by the learned counsel for the respondent that there is an element of public interest involved in the winding up petition and secondly the other creditors of the company of which winding up is being sought can also join in the said winding up proceeding which is not possible in a case where a suit is filed by the Bank or Financial Institution, or Banking company for recovery of debts before a Tribunal constituted under the Act of 1993. Therefore, the purpose of filing a petition for winding up is more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1956 rather provisions of both the statutes can operate harmoniously. In this connection the learned counsel for the appellant has invited our attention to a recent decision of the apex Court in the case of Allahabad Bank v. Canara Bank (supra). In this case their Lordships have discussed the provisions of the Act of 1993 and that of the Companies Act. Their Lordships after discussing the provisions of sections 17, 18, 19, 25, 2(g), 31 and 34 held that as far as recovery of debts are concerned no Civil Court can operate by virtue of the provisions of section 34 of the Act of 1993. The issue involved in that case was that after having obtained a money decree against an indebted company from the Debt Recovery Tribunal under the provisions of section 19 of the Act of 1993 whether the creditor was required to make an application under section 446 of the Companies Act, 1956 in order to proceed with the execution. The company in that case had gone into liquidation on the basis of a petition filed by the creditor. In that context it was held by the apex Court that once a creditor had its claim adjudicated before the Debt Recovery Tribunal then there was no need for the creditor to seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the provisions of the Act of 1993. Once it is held that the petition is not only for the recovery of debts but they are more than that as mentioned above then in that case it cannot be said that the jurisdiction of the Company Court is ousted by virtue' of section 34 read with sections 17 and 18 of the Act of 1993. Had it been a case where the petition was filed for recovery of debts only then perhaps the arguments raised by the learned counsel for the appellant would derived support from the decisions given in the case of Allahabad Bank v. Canara Bank (supra), but it has been the consistent view of the apex Court that the petitions filed under sections 433 and 434 of the Companies Act are not petitions for mere recovery of debts then in that case the provisions contained in the Act of 1993 cannot prevent the Banks or Financial Institutions in approaching the Company Court for an order of winding up. If the petition under sections 433 and 434 of the Companies Act had been meant for recovery of debt only then, of course, the provisions contained in the Act of 1993 will prevent the Banks and Financial Institutions from filing petitions under sections 433 and 434 of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Act can con-exist without doing any harm to the provisions of the Act of 1993. Therefore, the decisions heavily relied upon by the learned counsel for the appellant namely Allahabad Bank v. Canara Bank (supra) cannot be interpreted to mean, as laid down by their Lordships of the apex Court, that the petitions filed under sections 433 and 434 of the Companies Act cannot be entertained by virtue of section 34 of the Act of 1993. 30. It may be not out of place to refer to the prayer of the petitioner in the petition filed by the petitioner for winding up of the company under sections 433 and 434 of the Companies Act, 1956 which reads as under: (a) The company namely Maxlux Class Private Limited be wound up by this Hon'ble Court under the provisions of the Companies Act. 1956; (b) The Official Liquidator attached to this Hon'ble Court be directed to take possession of the assets and properties of the company forthwith; (c) Cost of and incidental to this application and the claim of the petitioner to come out of the assets of the company: (d) Such further order or orders and/or direction or directions as to this Hon'ble Court may deem fit and prope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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