Source: https://ajeshkumarshankar.blogspot.com/2017/06/ajesh-kumar-shankar-two.html
Timestamp: 2019-04-19 18:13:18+00:00

Document:
Appellants: Sharath Rukmangada and Ors.
Respondent: Cauvery Papers Limited and Ors.
For Appellant/Petitioner/Plaintiff: Ajesh Kumar, Adv. for Ashwin C., Adv. For Respondents/Defendant: K.S. Mahadevan, Adv.
These applications are filed by the applicants under Rule 6 read with Rule 9 of the Company (Court) Rules, 1959.
C.A. No. 54/2016 is filed by the applicants praying the Court to set-aside the judgment dated 22.12.2003 passed by the Debts Recovery Tribunal in O.A.872/1999, which is produced at Annexure-C, and also to set-aside the orders dated 27.05.2015 and 24.06.2015 passed by respondent No. 2 in DCP No. 3096 of O.A. No. 872/1999 produced at Annexure-F, as they are non-est, illegal and arbitrary.
C.A.55/2016 is filed by the applicants to stay the execution/recovery proceedings in DCP No. 3096 of O.A. No. 872/1999 pending before the respondent No. 2.
Looking to averments made in both these applications, the said averments are one and the same, therefore, both these applications are taken together to dispose of them by this common order.
The facts in brief as pleaded by the applicants are that, M/s. Cauvery Papers Limited (In Liqn.,) i.e., respondent No. 1 herein had borrowed a term loan of Rs. 305 Lakhs from IDBI, IFCI and ICICI on 8.09.1982 and further loans of Rs. 28.80 Lakhs and Rs.34 Lakhs on 27.03.1985 and O9.11.1987 respectively, for its project at Satyagala Village, Mysore District, for manufacture of M.G. Kraft and colored poster papers. The respondent-company (In Liqn.,) was declared as a Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985, by the Board for Industrial and Financial Reconstruction (hereinafter referred to as ‘BIFR’ for short) on 26.10.1988 and the document in this regard is produced at Annexure-A.
This Court vide its order dated 2.1.2003 was pleased to accept the highest bid of Rs.2,01,67,667/- for the Land, Building, Plant and Machinery, and the highest bid of Rs.7,25,000/- for the comprising stocks of the respondent-company (In Liqn.,) Hence, this Court granted permission to Official Liquidator representing the respondent-company (In Liqn.,) for Sale of the assets of the respondent-company (In Liqn.,) and it is manifestly clear that the sale is made after winding-up of the respondent-company (In Liqn.,). There is no basis and justification by respondent No. 2 at Annexure-F order sheet in D.C.P. No. 3096 as to recommencement/continuance of recover proceedings on 24.02.2014 after having kept the same in abeyance from 10.12.2007.Section 537 of the Companies Act 1956, provides for the avoidances of certain attachments, executions, etc., in winding-up by Tribunal.In lieu of the above mentioned provisions of the SICA, 1985, and the Companies Act,1956, and in lieu of the pendency of the instant liquidation proceedings against the respondent company no authority could have initiated/proceeded with any kind of action/distress/execution proceedings against the respondent company and/or its directors for recovery of their respective dues. Therefore, the original application proceedings in O.A. No. 872/1999 could not have been presented by the IDBI, IFCI and ICICI Banks before the DRT, as the date of presentation of this petition is much prior to the initiation of the DRT proceedings. This certificate holder banks namely IDBI, IFCI and ICICI, had approached the DRT Bangalore on 5.7.1999 seeking to recover its dues from the respondent-company (In Liqn.,) in O.A.872/1999. In the pleadings in O.A. No. 872/1999 before the DRT, the aforementioned banks have specifically pleaded as regards the pendency of liquidation proceedings before this Court, but no leave of this Court is sought for by the aforesaid banks to proceed with O.A.872/1999 before the DRT in the said proceedings. In pursuance of the winding-up order by this Court, the Official Liquidator attached to this Court appeared before the DRT in O.A. No. 872/1999 on 18.12.2000 wherein in his written statement the Official Liquidator maintained that, respondent-company (In Liqn.,) was ordered to be wound- up by this Court in COP 67/1997 on 09.03.2000 and that Official Liquidator had taken possession of the respondent-company (In Liqn.,) on 20.04.2000 and all the property, etc., of the respondent-company (In Liqn.,) hence, vested with this Court under Section 456 of Companies Act, 1956, that the Official Liquidator is taking steps for the sale of respondent-company (In Liqn.,) properties. The Official Liquidator also informed the DRT that under the provisions of Section 446(1) of the Companies Act, 1956, when a winding-up order was passed the leave of this Court was absolutely necessary and condition precedent to continue the application (Recovery) proceedings before the DRT against the respondent-company (In Liqn.,) and also informed that in the event of aforementioned banks viz., IDBI, IFCI, ICICI obtained a decree from the DRT against the respondent-company (In Liqn.,) the same shall not be executed without the leave of this Court. An amendment to the claim petition that the Official Liquidator representing the company was carried out in terms of the order of DRT dated25.09.2000. The written statement filed by the Official Liquidator before the DRT is annexure-B. The DRT instead of suspending the proceedings as contemplated under Sections 22 of SICA and Sections 441, 446, 537 of Companies Act 1956, in O.A.NO.872/1999, continued with the judicial proceedings and passed a judgment dated 22.12.2003 thereby allowing the claims of the claimant banks viz., IDBI, IFCI, ICICI. The claims of the respective banks was decreed as per the recovery certificate wherein the claim of Bank No. 1 (IDBI) was decreed at Rs. 5,08,27,177/-, the claim of Bank No. 2 (IFCI) was decreed at Rs. 2,46,23,546/- and the claim of Bank No. 3 (ICICI) was decreed at Rs. 2,07,79,225/- and interest at the rate of 14% p.a. from5.7.1999 to 22.12.2003 for each of the aforesaid banks. The copy of the judgment inO.A.N0.872/1999 dated 22.12.2003, is produced at Annexure-C. The defendant No. 2 in O.A. No. 872/1999 before the respondent No. 5-DRT i.e., Sri N.B. Rukmangada, who was the director of the respondent-company (In Liqn.,). arrived at an amicable one time settlement with regard to the decreetal amount of Bank No. 1 i.e., IDBI and by way of a compromise memo dated 3.4.2006 settled the dues of IDBI in full and final settlement. In lieu of the aforesaid compromise memo dated 3.4.2006, the IDBI bank acknowledged receipt of an amount of Rs. 5.00 Lakhs towards discharge of certificate amount due to it as full and final settlement. It was consented by the IDBI Bank that no amount shall be recoverable any further from the defendants in O.A.872/1999 by the said bank in lieu of the aforesaid compromise. In lieu of the aforesaid compromise the DRT was pleased to issue an amended recovery certificate declaring the amount to be recovered by Bank No. 2 i.e., IFCI, the respondent No. 4 herein and bank No. 3 i.e., ICICI. The copy of the compromise memo is as per Annexure-D and the copy of the amended recovery certificate is as per Annexure-E. The bank No. 3 i.e., (ICICI) assigned its right to recover the decreetal amount under the amended recovery certificate from the respondent-company (In Liqn.,) to Standard Chartered Bank Ltd. during 2006 and thereafter the said Bank has in-turn assigned its right to recover the decreetal amount to International Assets Reconstruction Company Private Limited i.e., respondent No. 3 herein during 2013. The amended recovery certificate is sent to the recovery officer of the DRT for recovery proceedings (execution of judgment and decree of DRT in O.A.872/1999) and that the same is numbered as DCP 3096 before the recovery officer (N) who is respondent No. 2 herein. The respondent No. 3 IARC has impleaded itself in DCP No. 3096 before respondent No. 2 of the DRT, and said respondent No. 2 IARC is now seeking to recover the decreetal amount in place of Bank No. 3 (ICICI). The copy of the order sheet in DCP No. 3096 of O.A.872/1999 before respondent No. 2 is at Annexure-F.
Annexure-K. It is further pleaded that upon a perusal of the copy of the sale deed annexed along with the said application at Annexure-K indicates that the said property was purchased on 2.3.2005. The said property was not in existence when the loan was advanced by the aforementioned banks (i.e., IDBI, IFCI and ICICI). Thus, the said property was never and could not have been a part of the hypothecation/mortgage/loan transaction with the aforesaid banks. Thus the said property could not have been offered as a collateral/personal guarantee or otherwise to respondent No. 3 and respondent No. 4 herein. The said property was not a subject matter of the proceedings before the DRT in OA.872/1999 and hence, the question of said property now being sought for attachment or being proceeded against is bad in law and an abuse of process of law. Hence, the question of respondent No. 2 proceeding for granting injunction as sought for in the interlocutory application filed by the respondent No. 3 Bank is ultra vires of the judgment and decree passed by DRT in O.A.872/1999. The joint deed of guarantee dated 9.11.1987 executed by Sri N.B. Rukmangada and Sri K.S. Manohar in favour of the three banks viz., IDBI, IFCI and ICICI guarantees liability on the part of Sri N.B. Rukmangada for the total amount of Rs. 15 Lakhs only, i.e., Rs. 7,50,000/- in favour of respondent No. 3 and Rs.7,50,000/- in favour of respondent No. 4 herein. The copy of joint deed of guarantee dated 09.11.1987 is at annexure-L. There is no pious obligation for the applicants herein to repay the outstanding dues of respondent No. 3 and respondent No. 4 as the said loan was not contracted for their benefit or for the benefit of the family. The personal guarantee of Sri N.B. Rukmangada was a limited liability with regard to respondent No. 3 and respondent No. 4. The judgment and decree passed by the DRT Bengaluru in O.A.872/1999 is violative of Sections 438 and 441(2) and 446 and 537 of the Companies Act, 1956. The judgment and decree passed by the DRT, Bengaluru in O.A. No. 872/1999 is non-est in the eye of law and is liable to be set-aside/struck down in lieu of liquidation proceedings pending before this Court and the winding up order passed by this Court and subsequent winding up the respondent company. Therefore, the judgment and decree passed by the DRT in O.A.NO.872/1999 and the orders dated 27.05.2015 and 24.06.2015 passed by the respondent No. 2-Recovery Officer (N.) DRT, Bengaluru, are in clear violation of Section 22 of SICA, 1985. Hence, filed the above applications praying the Court to pass the orders as prayed for.
Heard the arguments of the learned counsel appearing for the applicants in respect of both the applications and also the learned counsel for Official Liquidator-respondent No. 1, so also the arguments of learned counsel appearing for respondent No. 3.
In support of his argument learned counsel for the applicants has relied upon the following decisions.
MANU/SC/1143/1996 in the case of Industrial Credit & InvestmentCorporation of India Ltd. v. Srinivas Agencies and Ors.
MANU/SC/1033/2005 : AIR 2006 SC 755 in the case of RajasthanFinancial Corpn. and Anr. v. Official Liquidator and Anr.
CA No. 190/2008 in COP No. 167/1999 in the case of Official Liquidator of M/s. Kritika Rubber Industries Pvt. Ltd., v. Canara Bank & Anr.
MANU/SC/0961/2014 in the case of KSL & Industries Ltd. v. ArihantThreads Ltd.
MANU/SC/0262/2000 : AIR 2000 SC 1535 in the case of Allahabad Bank v. Canara Bank and another.
MANU/SC/0541/2010 : AIR 2010 SC 3413 in the case of United Bank ofIndia v. Satyawati Tondon & Ors.
“1) On 8.09.1982 money of Rs. 304 Lakhs borrowed by Respondent- company from 3 banks i.e., IFCI IDBI and ICICI, (assigned to IARC respondent No. 4).
2) 27.03.1985 respondent-company takes further loan of Rs. 28.8 lakhs.
4) 9.11.1987 respondent-company takes further loan of Rs. 34 Lakhs.
BIFR as per the document Annexure-A.
8) 13.5.1997 company petition No. 167/1997 numbered by the High Court against the respondent company.
13. It is also the contention of the applicants that in the objection statement of the Official Liquidator produced at Annexure-B, the Debts Recovery Tribunal is notified about the pendency of winding up proceedings before this Cou So these factual aspects with the relevant dates are not in dispute even according to respondent No. 3. Therefore, the question is whether the judgment and decree passed by the DRT in O.A.872/1999 is liable to be set-aside and also whether this Court can stay the execution proceedings in CA No. 55/2006 in DCP NO.3096 of O.A.872/1999 pending before respondent No. 2.
“(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956, or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority.
Suits stayed on winding up orde–(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose.
(b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of Section 529 pari passu with such dues, shall be paid in priority to all other debts.
(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, through its Recovery Officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him.
(ii) A District Court entertaining an application under Section 31 of the SFC Act will have the power to order sale of the assets of a borrower company-in-liquidation, but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him.
(iii) If a financial corporation acting under Section 29 of 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 Section 529-A and Section 529 of the Companies Act.
(iv) In a case where proceedings under the Recovery of Debts Due To Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the concerned creditor is to approach the Company Court for appropriate directions regarding the realization of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-in-liquidation.
I have also perused the decision of the Hon’ble Supreme Court rendered in Civil Appeal No. 5225 of 2008 decided on 27.10.2014 in the case of KSL & Industries Ltd. v. Arihant Threads Ltd., Their Lordships have laid down the proposition in the said decision that the provisions of SICA, in particular, Section 22 shall prevail over the provision for the recovery of debts in the RDDB Act. It is further observed that in these circumstances as already directed by the two Judge Bench of this Court, the judgment and order dated 23.02.2006 of the High Court of Delhi is set-aside.
But in the case on hand, the applicants who have filed the present application are not at all the workmen of the company-in-liquidation. They are the legal representatives of one Sri N.B. Rukmangada, who was the director of the company-in-liquidation, who furnished guarantee to the financial institution when the company borrowed the loan from the said financial institution. After the demise of the said Sri N.B. Rukmangada, the guarantor, the present applicants claiming to be his legal representatives have filed the present application. The official liquidator had also appeared before the recovery officer in the case on hand, and he had also filed his statement while arguing on these applications. The official liquidator also made submission that in the above referred reported decisions, the interest of the workmen was involved but here in the case on hand, it is not so, because the applicants claiming to be the legal representatives of the said Sri. N.B. Rukmangada have no concern with the company in liquidation. So this goes to show that notice has been already given by the DRT to the official liquidator and he has been heard in the matter. Even according to the decision relied upon by the learned counsel for the applicants the relevant paragraphs are referred above. There is no bar for the DRT to proceed with the sale of the property. But before conducting such sale of the property, the official liquidator has to be heard in the matter. As I have already observed above, official liquidator has already appeared before the DRT and he has been heard.
Apart from the said legal position, when the judgment and decree has been passed by the DRT, neither the present applicants nor the said Sri. N.B. Rukmangada had challenged the judgment and decree passed by the DRT by preferring an appeal to the appellate tribunal.
“17: Jurisdiction, powers and authority of tribunals – (1) A Tribunal shall exercise, on and from the appointed day, 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.
(2) An appellate tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a tribunal under this Act.
: Appeal to the Appellate Tribunal – (1) Save as provided in sub section (2), any person aggrieved by an order made, or deemed to have been made, by a Tribunal under this Act, may prefer an appeal to an Appellate Tribunal have jurisdiction in the matter.
Tribunal with the consent of the parties.
(4) On receipt of an appeal under Sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
“While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part-III or for any other purpose are very wide and there is no express limitation on exercise of that power, but at the same time, we cannot be oblivious of the rules of self- imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc., and the particular legislation contains a detailed mechanism for redressal of his grievance. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases, relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad MANU/SC/0399/1968 : AIR 1969 SC 556; Whirlpool Corporation Registrar of Trade marks, Mumbai MANU/SC/0664/1998 : (1998)8 SCC 1 and Harbanslal Sahnia and Anr v. Indian Oil Corporation Ltd. and others MANU/SC/1199/2002 : (2003) 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order.
In our opinion, the order which was passed by the Tribunal directing sale of mortgaged property was appealable under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short “the Act”). The High Court ought not to have exercised its jurisdiction under Article 227 in view of the provision for alternative remedy contained in the Act. We do not propose to go into the correctness of the decision of the High Court and whether the order passed by the Tribunal was correct or not has to be decided before an appropriate forum.
23. It is no doubt true the said company applications are filed under the provisions of the Companies Act and not under the writ jurisdiction of this Court. But even then, the observations made by their Lordships in the above said decision at the relevant paragraphs 18, 22 and 27 referred above are equally made applicable in the case on hand also as the applicants has not availed the statutory remedies available to them under Recovery of Debts Due to Banks and Financial Institutions Act, 1 There are no reasons forthcoming in the applications also as to why they have not availed such statutory remedy before the filing the present applications. As I have already observed above that official Liquidator was notified about the proceedings he appeared in the matter before the DRT and the applications herein are also not from the Workmen/Employees of the Company in Liquidation and there is no allegation from the Official Liquidator that the recovery officer is conducting the sale of the property without his consultation and without hearing him.
24. Therefore, looking to the facts and circumstances of the case on hand, and the facts and circumstances in the reported decisions relied upon by the learned counsel for the applicants, which are referred above they will not come to the aid and assistance of the applicants case in getting the orders to set-aside the judgment dated 22.12.2003 passed by the Debt Recovery Tribunal in O.A.NO.872/1999 produced as per Annexure-C and to set-aside the orders dated 27.05.2015 and 24.06.2015 passed by respondent No. 2 in D.C.P. No. 3096 of O.A. No. 872/1999 produced as per Annexure-F and also to stay the execution/recovery proceedings in D.C.P. No. 3096 OF O.A.NO.872/1999 pending before respondent No. 2. There is no merit in the applications and accordingly, CA. Nos. 54/2016 and 55/2016 in C.O.P. No. 67/1997 are hereby dismissed.
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