Case: M/S. Nagindas K. &amp; Bros. &amp; Others Vs. The Official Liquidator, High Court &amp; Others

the company in liquidation was closed without any business activity. No income has been fetched from the properties which were in the hands of the Liquidator and the Central Bank, as a secured creditor had been paying the security charges and incurring expenses for several years;(iii) In view of the overriding provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 the D.R.T. has exclusive jurisdiction in respect of the subject matter of the recovery proceedings. It was not open to the Company Court to dispose of the immovable property of the company in liquidation;(iv) The D.R.T. had already passed an order permitting Central Bank to settle its claim in terms of the proposed settlement and the order had not been stayed by the D.R.A.T. It was not open to the Company court to sit in appeal against the order passed by the DRT and the validity of that order could not be questioned in the proceedings before the Company court;(v) The rights of the Appellant, if any, was to challenge the order passed by the D.R.T. and the Appellant had already taken recourse to that remedy;(vi) The reliefs claimed by Central Bank in proceedings before the Company court were only consequential to the orders passed by the D.R.T., which have not been stayed or set aside;(vii) Central Bank in whose favour the leasehold rights of the company in liquidation were mortgaged and which was required to spend substantial amounts towards security charges and towards other expenses was entitled to execute the decree and recover its dues by appropriating the sale proceeds. No order restraining the decree holder from selling the property and appropriating the sale proceeds towards its dues in satisfaction of the decree could be passed by the Company Court;(viii) The Appellant had not made a bona fide proposal. The Appellant proposed to deposit an amount of Rs.1.75 Crores in 2012 subject to the condition that the bank shall give up all its claims not only in respect of the leasehold properties, but also in respect of free hold properties, though the claim of the bank was in excess of Rs.25 Crorers. The Appellant had not taken any steps to clear the liabilities of the company in liquidation and the offer made before the Company court was not bonafide.On these grounds, the company application came to be dismissed.10. Learned Senior Counsel appearing on behalf of the Appellant submits that the Official Liquidator could not have given his consent to the proposed settlement by which Central Bank accepted an amount of Rs.1.40 Crores towards satisfaction of its mortgage debt, without any enquiry into the valuation of the leasehold rights. The Official Liquidator, it was urged, was duty bound to realize the best price and cannot agree to a slump sale. The Appellant has executed a personal guarantee and is therefore interested in ensuing that the best possible price for the sale of the assets of the company in liquidation is realised.11. Central Bank holds a decree in its favour which was passed as far back as on 30 November 1996. The leasehold rights of the company in liquidation constitute the mortgage security of the bank. In the order of the Company Court dated 16 December 2004, the learned Company Judge had made it clear that the properties which formed the subject of the security in favour of the bank would have to be sold and disposed of by the recovery officer in the proceedings before the D.R.T. and hence, it was not open to the Liquidator to seek sanction for the sale of the secured assets. The Liquidator was directed to hold the properties subject to the orders that may be passed by the D.R.T. This order was consistent with the scheme of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and having due regard to the judgment of the Supreme Court in Allahabad Bank vs. Canara Bank AIR (2000 (SC) 1535 ). The Central Banks application has been allowed by the D.R.T. The Appellant has sought to question the correctness of the order passed by the D.R.T before the D.R.A.T. The Appeal was dismissed for non-removal of objections and an application for restoration is now pending.12. The Company application, which the Liquidator moved before the Company Judge and which resulted in the passing of the order dated 12 February 2013 was merely consequential to the order passed by the D.R.T. The learned Company Judge was in our view right in coming to the conclusion that it would lie outside the jurisdiction of the Company court to sit in appeal over the order passed by the D.R.T., particularly having regard to the position that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 provides for a self contained remedy for challenging orders passed by the Debt Recovery Tribunal. In that appeal, it is open to the Appellant to question the order of the Tribunal on all counts as may be available in law, including the grounds which were sought to be raised in regard to valuation. The appeal was dismissed as the Appellant failed to remain present on more than six occasions. But, we do not make any observations in regard to the application for restoration and which will be disposed of on merits. The learned Company Judge was, in our view, justified in coming to the conclusion that the remedy of the Appellant must lie before the DRAT where the Appellant has invoked its remedy. The Appellant had no bona fide offer to make before the Company Judge, even assuming that such an offer could have been made before the Company Court. Central Bank has dues exceeding Rs.25 Crores and it was called upon by the Appellant to settle the entirety of its claim and to release even its free hold properties against the amount of Rs.1.75 Crores which was unacceptable.13. For all these reasons, we find no error in the order of the learned Single Judge.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]12. The Company application, which the Liquidator moved before the Company Judge and which resulted in the passing of the order dated 12 February 2013 was merely consequential to the order passed by the D.R.T. The learned Company Judge was in our view right in coming to the conclusion that it would lie outside the jurisdiction of the Company court to sit in appeal over the order passed by the D.R.T., particularly having regard to the position that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 provides for a self contained remedy for challenging orders passed by the Debt Recovery Tribunal. In that appeal, it is open to the Appellant to question the order of the Tribunal on all counts as may be available in law, including the grounds which were sought to be raised in regard to valuation. The appeal was dismissed as the Appellant failed to remain present on more than six occasions. But, we do not make any observations in regard to the application for restoration and which will be disposed of on merits. The learned Company Judge was, in our view, justified in coming to the conclusion that the remedy of the Appellant must lie before the DRAT where the Appellant has invoked its remedy. The Appellant had no bona fide offer to make before the Company Judge, even assuming that such an offer could have been made before the Company Court. Central Bank has dues exceeding Rs.25 Crores and it was called upon by the Appellant to settle the entirety of its claim and to release even its free hold properties against the amount of Rs.1.75 Crores which was unacceptable.13. For all these reasons, we find no error in the order of the learned Single Judge.