Case: Viral Filaments Limited, Mumbai Vs. Indusind Bank Limited, Mumbai

3.The facts are that the respondent is a Bank which had lent large sums of money of Rs. 5,17,46,623.96 to the Appellant Company. It issued a statutory notice for repayment of the aforesaid amount on 8th March, 2000. Since the Company did not pay or secure the large amount due and payable, a Petition for winding up of the Company was presented under section 433(e) of the Companies Act, 1956. After the petition was accepted and notice was issued to the Company, the Company appeared and opposed the petition by an affidavit in reply. The only point urged in the affidavit in reply dated 8th October, 2000 is that it was not commercially insolvent, that it engaged a large number of workers and that winding up of the Company would cause hardship to the workers and their families. It was further urged that the respondent had already moved Application No. 1249 of 2000 seeking recovery of certain debts before the Debt Recovery Tribunal (hereinafter referred to as "DRT") constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as "RDB Act"). Based on this circumstance, it was urged in opposition to the petition for winding up that the Company Court had no jurisdiction to entertain the winding up petition. Hence, it was prayed that the Company Petition be dismissed summarily. The argument did not find favour with the learned Company Judge who admitted the petition. Hence, this appeal.

Court's reasoning:
5.Section 18 of the RDB Act provides that, on and from the appointed day, jurisdiction of Courts and other authorities in relation to matters specified in section 17 is barred. Section 17 provides that on and from the appointed day, a Tribunal constituted under the RDB Act shall exercise the jurisdiction, powers and authority "to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions." Thus, it is obvious that the exclusion of the jurisdiction of all other Courts and authorities is only to the extent the jurisdiction is specifically vested in the DRT. That jurisdiction under section 17 is only the jurisdiction to entertain and decide applications from banks and financial institutions for recovery of debts due toargument of Mr. Shah that what could be done by the Company Court can equally be done by the DRT under the RDB Act is erroneous. There is no provision in the RDB Act empowering the Tribunal to wind up a Company which owes the debt to the applicant financial institution. The jurisdiction of the Tribunal under the RDB Act is only to adjudicate the liability of the respondent before it, ascertain the "debt" due to the bank/ financial institution and issue a certificate for recovery thereof. Once such a certificate of recovery is issued to the Recovery Officer, the Recovery Officer is empowered to execute the same in the manner prescribed under the RDB Act. We find that the jurisdiction to wind up the Company is wholly unavailable to the DRT. Hence, what could be done by the Company Court under section 433(e) could obviously not be done byto Point (1), the Supreme Court held (paragraph 23) that it is not the intendment of the RDB 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. Placing reliance on the provisions of section 34(1) of the RDB Act, Supreme Court held that the RDB Act overrides other laws to the extent of "inconsistency" and that the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner. It was held that the adjudication of the liability and the recovery of amount by execution of the certificate are, respectively, within the exclusive jurisdiction of the DRT and the Recovery Officer and no other Court or authority, much less the Civil Court or the Company Court, can go into the said question relating to the liability and the recovery except as provided in the Act. 11.Dealing with Point 2, the Supreme Court holds in Allahabad Banks case (supra) that as the Company Court had no jurisdiction to decide questions which were exclusively left to the jurisdiction of the DRT and would have no "jurisdiction to transfer the application pending before the DRT to itself for trial, no purpose would be served by insisting on leave being asked from the Company Court before the application could be proceeded with before the DRT. For this reason, the Supreme Court was inclined to hold that there was no need for the Appellant Bank to seek leave of the Company Court to proceed with its claim before DRT or in respect of the execution proceedings before the Recovery Officer. It was also held that such proceedings could not be transferred to the Company Court.16.Dealing with the argument based on sections 529 and529A of the Companies Act, 1956,in the light of the provisions of the RDB Act, the Supreme Court held that it will be necessary for the DRT to decide questions of priority bearing in mind the principles underlying section 73 of the Code of Civil Procedure inasmuch as section 22 of the RDB Act gives sufficiently wide power to the Tribunal/ Appellate Tribunal to decide such questions of priorities, subject only to the principles of natural justice. In fact, as the Supreme Court pointed out, the powers under section 22 of the RDB Act are much wider than those of Civil Courts and the only restriction on its powers is that principles of natural justice are to be followed.we have already observed the admission of petition for winding up under section 433(e) need not be preceded by an adjudicated liability of the Company. It proceeds upon the inability of the Company to pay its debts. Section 434(1)(a) prescribes a statutory presumption of such inability on the part of the Company if the conditions prescribed therein areanxiously scanning the affidavit in reply, we find neither any pleading, nor any material particulars which could have satisfied the learned Company Judge on this issue. Thus, the learned Company Judge had nothing but the statutory presumption to fall upon, which he rightly followed up with an order of admission of the petition. Hence, we are unable to say that the learned Company Judge in any way erred in admitting the petition for winding up. 20.For all the aforesaid reasons, we agree with the order made by the learned Single Judge admitting the petition for winding up. We see no reason to interfere with it. In fact, much of the discussion with regard to adjustment of the priorities is really uncalled for in the facts of the present case, for the petition has just been admitted. As to how and in what manner the question of priorities has to be dealt with in a situation of conflict between RDB Act and the provisions of sections 529 and529A of the Companies Act, 1956,we need express no opinion; nor do we do so. The Appeal is dismissed as without substance. However, there will be no order as to costs.