Supreme Court of India
ANITA INTERNATIONALversusTUNGABADRA SUGAR WORKS MAZDOOR SANGH - AND OTHERS
- Citation
- 2016 INSC 489
- Decided
- 4 July 2016
- Disposal
- Dismissed
- Bench
- S KHEHAR
Holding
The Company Court’s order was valid, within jurisdiction, and binding on the Recovery Officer; consequently, the sale and its confirmation were ultra vires and must be set aside.
Summary
Deve Sugars Ltd. was ordered to be wound up and its assets were taken over by an Official Liquidator. The State Bank of Mysore sought to recover a debt under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and obtained leave from the Company Court (High Court, Madras) on 10 March 2000, subject to the condition that the Official Liquidator be impleaded and no coercive steps be taken against the company's assets during or after the DRT proceedings. The Recovery Officer of the Debt Recovery Tribunal sold the assets on 11 August 2005 to Anita International and confirmed the sale on 12 September 2005, despite objections from the workers' union and the Official Liquidator. The High Court set aside the sale, holding that the Company Court's order was binding on the Recovery Officer and that the sale violated the imposed condition. On appeal, the Supreme Court affirmed that the Company Court had jurisdiction, its order was valid and binding, and therefore the sale and its confirmation were ultra vires and must be set aside.
Issues considered
- The order dated 10 March 2000 passed by the Company Court was within its jurisdiction and binding on the Recovery Officer under the ROB Act.
- Whether the condition imposed by the Company Court (no coercive steps and impleading the Official Liquidator) could be violated by the Recovery Officer.
- Whether the sale of the company's assets by the Recovery Officer, in contravention of the Company Court's order, was valid.
- Whether a party may treat a court order as void and ignore it without a declaration of invalidity by a competent court.
- The appropriate statutory remedy for aggrieved parties – appeal under Section 30 of the ROB Act or other recourse.
Legislation cited
- Code of Civil Procedures. Order XXI Rule 58, s. Rule 90, s. Rule 92
- Companies Act, 1956s. 446, s. 529, s. 529-A
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993s. 17, s. 18, s. 19, s. 30, s. 34
Subjects
Recovery of debtsROB ActCompany winding upOfficial LiquidatorSale of assetsJurisdictionVoid orderAuctionRecovery OfficerSection 30Section 446Section 529-AWorkmen's dues
Judgment
[2016] 6 S.C.R. 635
ANITA INTERNATIONAL A
v.
TUNGABADRA SUGAR WORKS MAZDOOR
SANGH - AND OTHERS
(Civil Appeal Nos. 6042-6048 of201 I) B
JULY04, 2016
[JAGDISH SINGH KHEHAR AND ADARSH KUMAR
GOEL, JJ.)
Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 - Recovery proceedings under - Propriety of - Company
c
ordered to be wound up by Company Court - Possession of the
assets thereof taken by Official Liquidator - Lender-Bank sought
permission of the Company Court by filing application in the pending
company petition, to pursue the recovery proceedings against the
Company under the 1993 Act - Company court by order dated D
10.3.2000 granted the permission 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 Debt Recovery
Tribunal - Recovery certificate was issued by the Tribunal -
Recovery Officer thereupon proceeded with the sale of the properties
of the Company - Objections thereto raised by the Workers ' Union E
of the Company and by the Official Liquidator were overruled by
the Recovery Officer - Jn Writ Petitions challenging recovery
proceedings, the High Court asked the writ petitioners to approach
the Debt Recovery Tribunal - Recovery Officer sold the property in
auction - Company applications were filed challenging the auction F
sale of the property by Recovery Officer - Ex Director of the
Company also filed company application seeking setting aside of
the auction sale - The applications were dismissed by the Company
Court - The appeal against the order of the company Judge was
allowed setting aside the auction sale and confirmation thereof -
On appeal, held: The order dated 10.3.2000 passed by the Company G
Court, was having jurisdiction to pass the same and hence was
binding on the Recovery Officer - The condition imposed by the
Company Court could not have been violated by the Recovery Officer
- Thus the sale made by the Recovery Officer was in violation of
H
635
636 SUPREME COURT REPORTS [2016] 6 S.C.R.
A the order dated 10.3.2000 - The order is equally binding on the
auction-purchaser.
Judgment/Order - An order/judgment, until set aside by a
competent court, would have the force of law - It is not open to the
parties to the lis or third parties to disobey the order/judgment
B
considering it, on their own, as void or non-est.
Dismissing the appeals, the Court
HELD: 1. The condition imposed by the Company Court
could not be violated by the Recovery Officer. The sale made by
the Recovery Officer in violation of the orders passed by the
Company Court, was without the authority of law. Therefore, it is
c not correct to say that the order dated 10.3.2000 being wholly
void and non est could not have any bearing on the proceedings
conducted by the Recovery Officer, including the sale of the
properties of the Company under liquidation and also, the
confirmation thereof by the Recovery Officer. The acceptance of
D the bid of appellant-auction purchaser by the Recovery Officer and
the confirmation of the sale in its favour were clearly impermissible,
and therefore, deserve to be set aside. [Paras 39, 42) [696-D; 697-
F-G; 698-B)
M V. Janardhan Reddy v. Vijaya Bank 2008 (7) SCR
520 : (2008) 7 SCC 738; Official Liquidator, Uttar
E Pradesh and Uttarakhand v. Allahabad Bank 2013 (4)
SCR 207 : (2013) 4 SCC 381 - relied on.
2. 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
F Company Court, or alternatively, intervene in a pending winding up
petition. Since there is no bar restraining a bank or a financial
institution from approaching a Company Court, by filing a winding
up petition, it is not possible to conclude, that the jurisdictional
Company Court, is not possessed with the determinative
authority/competence to entertain a claim raised by such bank or
G
financial institution. It cannot be said that the order passed by the
Company Court in the High Court at Madras dated 10.3.2000, lacked
the jurisdictional authority. Since the Company Court which passed
the order dated 10.3.2000 did not lack jurisdiction in the facts of this
case, the order dated 10.3.2000 was neither invalid nor void. [Para
H 44) (699-A-C]
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 637
MAZDOOR SANGH
Kiran Singh v. Chaman Paswan 1955 (1) SCR 117; A
Sadashiv Prasad Singh v. Harendar Singh 2014 (1) SCR
249 : (2015) 5 SCC 574; Jagmittar Sain Bhagat v.
Director, Health Services, Haryana 2013 (8) SCR 77 :
(2013) 10 sec 136 - held inapplicable.
3. It is not' 'open, either to parties to a /is or to any third B
parties, to determine at their own, that an order passed by a Court
is valid or void. A party to the /is or a third party, who considers
an order passed by a Court as void or non est, must approach a
Court of competent jurisdiction, to have the said order set aside,
on such grounds as may be available in law. However, till an
order passed by a competent Court is set aside, the same would c
have the force of law, and any act/action carried out in violation
thereof, would be liable to be set aside. To conclude otherwise,
may have disastrous consequences. Every cantankerous and
quarrelsome litigant would be entitled to canvass, that in his
wisdom, the judicial order detrimental to his interests, was void, D
voidable, or patently erroneous. And based on such plea, to avoid
or disregard or even disobey the same. This course can· never
be permitted. (Para 45) [699-D-H]
Krishnadevi Malchand Kamathia v. Bombay
Environmental Action Group 2011 (3) SCR 291 : (2011) .E
3 SCC 363; Official Liquidator, Uttar Pradesh and
Uttarakhand v. Allahabad Bank 2013 (4) SCR 207 :
(2013) 4 SCC 381; Jehal Tanti v. Nageshwar Singh
I ·' (2013) 14 sec 689 _; relied On
4. It is not correct to say that the impugned sale dated F
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. The Official Liquidator, as well as, the workers' union
had raised objections before the Recovery Officer at the very.initial G
stage. Even a former Director of the Company raised a challenge
to the proceedings before the Recovery Officer by asserting, that
the reserve price of Rs.IO crores fixed for the property being
put to auction, was too low. The fact, that in the process of sale .of
H
638 SUPREME COURT REPORTS [2016] 6 S.C.R.
A the properties of the Company only two bids were received, has
not been disputed. It is also not disputed, that whilst one of the
bidders was the appellant, the other bidder was a sister company
of the appellant. In sum and substa.nce therefore, there was only
one bidder. For the above reasons, in additi<_Jn to those recorded
by the High Court, it is not possible for the Court to accept the
B
claim of the appellant on the ground of equity. [Para 471 (700-D-
G)
5. It is also not correct to say that the sale conducted by
the Rec9very Officer on 11.8.2005, and the order of confirmation
thereof passed by the Recovery Officer on 12.9.2005, ou~ht to
c have been assailed only in proceedings under Section 30 of the
Recovery of Debts Due to Banks and Financial Institutions Act,
1993. There was sufficient justification for the parties to have
approached the Company Court in the High Court at Madras, for
the reason that they were seeking the enforcement of the order
D dated 10.3.2000, passed by the Company Court itself. The sale
made by the Recovery Ofiicer and its confirmation were in utter
violation of the order dated 10.3.2000, and therefore, the
concerned parties were justified in approaching the High Court
at Madras. [Para 48] [701-A-D)
E 6. It also cannot be said that the order dated 10.3.2000
passed by the Company Court, while disposing of Company
Application Nos. 1251-1253 of 1999, filed by the Bank, was not
binding on the appellant as that order was an order in persomm1.
In the application filed by the Bank, the prayer made was, thaf
the Bank be permitted leave to proceed with recovery
F proceedings before the DRT. By the order dated 10.3.2000, the
Company Court in the High Court at Madras, while granting
leave, imposed two conditions. Firstly, the Official Liquidator would
have to be impleaded by the bank in the recovery proceedings
before the DRT. And secondly, no coercive steps would be taken
G against the assets of the company during or after the conclusion
of the proceedings before the Tribu1.ial. It cannot be said that the
aforesaid order passed by the High Court was an order in
personam. The above order had a clear and binding effect on the
proceedings permitted to be initiated before the DRT, and further,
that it was equally binding on the Recovery Officer. And
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 639
MAZDOOR SANGH
accordingly, the same would also be binding on those claiming A
through sale proceedings conducted by the Recovery Officer.
Thus, the order dated 10.3.2000 was also binding on the appellant
before this Court. [Para 49) [701-D-H; 702-A-B)
Allahabad Bank v. Canara Bank 2000 (2) SCR 1102 :
(2000) 4 SCC 406; Andhra Bank v. Official Liquidator B
2005 (2) SCR 776 : (2005) 5 SCC 75; Rajasthan State
Financial Corporation v. Official Liquidator 2005(3)
Suppl. SCR 1073: (2005) 8 SCC 190; Industrial Credit
and Investment Corporation of India Ltd. v. Srinivas
Agencies 1996 (2) SCR 960 : (1996) 4 SCC 165;
Dhurandhar Prasad Singh v. Jai Prakash University
c
2001 (3) SCR 1129: (2001) 6 SCC 534; J Radhy Shyam
v. Shyam Behari Singh AIR 1971 SC 2337 : 1971 (1)
SCR 783; Navalkha and Sons v. Sri Ramanya Das 1970
(3) SCR 1 : (1969) 3 SCC 537 - 1·eferred to.
Case Law Reference D
2000 (2) SCR 1102 referred to Para6
2008 (7) SCR520 relied on Para 13
2005 (2) SCR 776 referred to Para 15
2005 (3) Suppl. SCR 1073 referred to Para 15 E
2013 (4) SCR 207 relied on Paras 15, 45
2014 (1) SCR 249 held inapplicable Para 16
1996 (2) SCR 960 referred to Para20
2011 (3) SCR 291 relied on Para23 F
(2013) 14 sec 689 relied on Para 25
1955 (1) SCR 117 held inapplicable Para 27
2001 (3) SCR 1129 referred to Para 27
2013 (8) SCR 77 held inapplicable Para 27
G
1971 (1 ) SCR 783 referred to Para 29
1970 (3) SCR 1 · referred to Para 29
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6042-
6048of2011.
H
t _..,
640 SUPREME COURT REPORTS [2016] 6 S.C.R.
A From the Judgment and Order dated 17.09.2009 of the High Court
of Judicature at Madras in OSA Nos. 59, 61,62,63,76,77 & 82 of2009
WITH
C. A. Nos. 5501-5502 of2016.
B P. Chidambaram, Salman Khurshid, S. Ganesh, V. Giri, Sr. Advs.,
AlokAggarwal, Apoorv Kurup, Vikas Mehta, Varun Tikmani, Roh it Rathi,
Gaurav Tanwar, Ms. Anushree Menon, Rajat Sehgal, Antony Julian,
Manav Vohra, Ms. Garima Prashad, Advs. for the Appellants.
Tushar Mehta, ASG, F. S. Nariman, C. A. Sundaram, Huzefa
c Ahmadi, Dr. Rajeev Dhawan, Sr. Advs.,Arunabh Chowdhury, Rahul
Pratap, Amar Dev Unniyal, Ms. Rohini Musa, Zafar Inayat, Abhishek
Gupta, Farrukh Rasheed, Amardev Uniyal, A. Raghunath, Sabheesh
Mohanan, Mahesh Agarwal, Shashank Manish, Abhinav Agrawal, E. C.
Agrawala, Mrs. Maneesha Dhir, Apoorve Karol, Vaibhav Tyagi, Gagan.
Gupta, Bhaskar Vali, R. N. Keshwani, Shivaji M. Jadhav, Gaurav Goel,
D M.s. Pallavi Langar, Advs, for the Respondents.
The Judgment of the Court was delivered by
JAGDISH SINGH KHEHAR, J. I. Leave granted in Special
Leave Petition (C) Nos. 7490-7491 of2014.
E 2. Two company petitions, i.e., Company Petition Nos. 170 of
I 995 and 35 of I 997 were filed by Videocon International Ltd. and Tapti
Machines Pvt. Ltd., for winding up ofDeve 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 I 6.4.1999. An Official Liquidator was accordingly directed
F
to take possession of the properties of the company- Deve Sugars Ltd ..
The Official Liquidator took possession of the assets of the company
situate at Harige (in District Shimoga, in the State of Karnataka), on
28.9.1999.
3. The State Bank of Mysore had also extended some loans to
G Deve Sugars Ltd.. When Deve Sugars Ltd. defaulted in the repayment
of the loans, the State Bank of Mysore filed Original ApplicationNos.
440 of I 997 and I 300 of I 997, before the Debts Recovery Tribunal,
Bangalore, (hereinafter referred to as, the ORT, Bangalore) for the
recovery of Rs.22,31,78,558.55. During the course of the instant
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 641
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
proceedings, the ORT, Bangalore issued a recovery certificate in the A
sum of Rs.8.40 crores. It would be relevant to mention, that the State
Bank of Mysore also filed Company Application Nos.1251-1253of1999,
in the pending Company Petition No.170of1995, before the High Court
at Madras, seeking leave to proceed with the recovery proceedings before
the ORT, Bangalore, under the Recovery of Debts Due to Banks and
B
Financial Institutions Act, 1993 (hereinafter referred to as, the ROB
Act).
4. The Company Court in the High Court at Madras, while granting
leave to the State Bank of Mysore, passed the following order on
10.3.2000 (while disposing of Company Application Nos. 1251-1253 of
1999):
c
"This company application praying this Court to grant leave to the
applicant Bank to proceed and prosecute further O.A. No.1300
of 1997 filed by them against the respondent Company in the
Debt Recovery Tribunal at Bangalore.
Company Applications coming on this day before this Court for D
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 Cou.rt made the following orders:-
E
Leave is granted subject to the condition that official liquidator is
impleaded and no coercive steps are taken against the assets.of
the company during or after the conclusion of the proceedings
before the Tribunal." (emphasis supplied)
A perusal of the above order reveals, that leave was granted,
F
subject to the condition that the Official Liquidator, was impleaded before
the ORT, Bangalore, and further, that no coercive steps would be taken
against the assets of the company - Deve Sugars Ltd., during or after
the conclusion of proceedings before the DRT, Bangalore.
5. On 1.8.2001, the workers' union of Deve Sugars Ltd. was
G
granted the responsibility to overlook security arrangements of the
establishment of Deve Sugars Ltd ..
6. Immediately after the ORT, 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
H
642 SUPREME COURT REPORTS [2016] 6 S.C.R.
A company in liquidation, at the hands of the Recovery Officer of the
ORT, Bangalore (hereinafter referred to as, the Recovery Officer).
Simultf!neously, the State Bank of Mysore being conscious of the order
passed by the High Court at Madras on 10.3.2000, filed Company
Application No.1300 of2003, with a prayer that it be permitted to seek
execution of the recovery certificate dated 15.5.2002 (for recovering
B
the amounts due to it, from out of the assets ofDeve Sugars Ltd.). It is
relevant to mention, that the aforesaid Company Application No.1300 of
2003 was not entertained by the Registry of the High Court at Madras.
While declining to entertain Company Application No.1300 of2003, the
Registry of the High Court at Madras, relied upon a judgment rendered
c by this Court in Civil Appeal No. 2536 of2000 (reported as Allahabad
Bank v. Canara Bank 1). While not entertaining Company Application
No.1300 of2003, the Registty of the High Court recorded the following
endorsement:
"ORDER
D As per order in Civil Appeal no.2536/00 as reported in 2000 (3)
SCC 205. Leave is not necessary."
7. Consequent upon the return of Company Application No.1300
of2003, it came to be assumed by the State Bank of Mysore, that leave
of the High Court, was not required for the sale of the assets of Deve
E Sugars Ltd.. Accordingly, the State Bank of Mysore approached the
Recovery Officer, for the disposal of the assets ofOeve Sugars Ltd., in
continuation of the recovery certificate issued by the ORT dated
15.5.2002. On the above prayer of the State Bank of Mysore, the
Recovery Officer issued a proclamation of sale in Form-13, by following
F the procedure prescribed under the ROB Act. The auction of the
properties of Oeve 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 Oeve Sugars Ltd., approached the High
G Court of Karnataka, by filing Writ Petition No.3 7991 of2004. Through
the above writ petition, the workers' union assailed the recovery
proceedings initiated by the State Bank of Mysore, before the Recovery
Officer. The workers' union also sought an interim direction from the
High Court of Karnataka, to restrain the continuation· of the sale
H
• (2000) 4 sec 406
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 643
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
proceedings, at the hands of the Recovery Officer, because their salary A
and provident fund dues, were still payable by Deve Sugars Ltd .. The
aforesaid prayer was made by asserting, that the workers' union had a
preferential claim, as against the claim of the State Bank of Mysore,
under the provisions of the Companies Act. A learned single Judge of
the High Court ofKarnataka, while issuing notice, directed that the sale
B
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 the c
recovery proceedings against Deve Sugars Ltd. before the ORT, the
High Couti at Madras, had directed that the Official Liquidator be imp leaded
as a respondent before the ORT. The Official Liquidator, had also raised
objections to the purported sale by the Recovery Officer (in continuation
of the recovery certificate dated 15.5.2002, issued by the ORT). The
D
Official Liquidator sought deferment of the sale proceed in gs at the hands
of the Recovery Officer, under Section 529A of the Companies Act. 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 I. I 0.2004, could not be conducted. Accordingly, E
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 there was
anyone interested. The reserve price was fixed at Rs. IO crores. The
auction was actually conducted on 11.8.2005. The highest bid was made F
by Anita International, the appellant before this Court. The bid of Anita
International of Rs. I 0.25 crores was accepted. The bidder deposited
the bid amount, within the stipulated period. No challenge was raised
against the auction conducted on 11.8.2005, within the postulated period
of 30 days, as is permissible in terms of the Rules framed under the
ROB Act. The Recovery Officer ordered the confirmation of the sale of G
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.
;
·.• H
644 SUPREME COURT REPORTS [2016) 6 S.C.R.
A IO. 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,
and handed over the same to the auction purchaser-Anita International.
Atthe instant juncture, the appellant-Anita International, filed Company
Application No.1811 of2005 before the High Court at Madras for removal
B
of the security agency. At the said juncture, Videocon International Ltd.
and Tapti Machines Pvt. Ltd. filed Writ Petition No.26564 of2005 before
the High Court ofKarnataka. The above writ petition, and Writ Petition
No.37991 of2004 (filed by the workers' union) were heard by a learned
single Judge, wherein the auction purchaser-Anita International, raised
c a preliminary objection. It was submitted, that the petitioners before the
High Court had an efficacious alternative remedy, under the ROB 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
D
the hands of the Recovery Officer. It would be relevant to mention, that
the above two writ petitions were disposed of by tlie High Court of
Kamataka, by a common order dated 27.10.2006. The petitioners before
the Karnataka High Court were allowed to avail of their alternative
remedy before the ORT, Bangalore. The above common order dated
E 27.10.2006 was challenged, by filing Writ Appeal Nos.2050 and 2051 of
2006. Both the above writ appeals were dismissed on 23 .2.2007. Liberty
was, however, reserved with appellants, by permitting them to approach
the ORT, Bangalore, by fit ing appeals. As a matter of abundant caution,
the appellate Court ordered, that the ORT, Bangalore, would deal with
the controversy, uninfluenced by the orders passed by the High Court.
F
11. In compliance with, and in continuation of the outcome before
the High Court ofKarnataka, the workers' union preferred AOR No.15
of2006 and Videocon International Ltd. preferred AOR No.I of2007.
In the above appeals, a challenge was raised to the order dated 12.9.2005
passed by the Recovery Officer, whereby the sale of the properties of
G
Deve Sugars Ltd. conducted on 11.8.2005, in favour ofAnita International
was confirmed. Simultaneously, one N. Ponnusamy, an ex-Director of
· Deve Sugars Ltd., filed Company Application Nos.2740-2742 of2007
before the Company Court in the High Court at Madras, and sought the
setting aside of the auction sale dated 11.8.2005, as well as, the
H
ANITA INTERNATIONAL v. TUNGABAORA SUGAR WORKS 645
MAZOOOR SANGH [JAGDISH SINGH KHEHAR, J.]
confinnation order dated 12.9.2005, after the payment of the consideration A
amount. The challenge raised by N. Ponnusamy was primarily on the
ground that the reserve price of Rs. I0 crore was too low. N. Ponnusamy,
also sought transfer of the recovery proceedings, from the ORT,
Bangalore, to the High Court at Madras. While entertaining the
proceedings initiated by N. Ponnusamy, the High Court by its order dated
B
24.10.2007, passed an ex parte interim order of stay. Anita International
and State Bank of Mysore, filed detailed objections, to the applications
filed by the Official Liquidator, as well as, by the aforementioned N.
Ponnusamy. All the applications filed in C.A. No.18 I I of 2005 were
taken up for consideration, collectively. By a common order dated
3.3.2009, the application filed by the Official Liquidator was dismissed, c
by holding that the Official Liquidator was a party before the Karnataka
High Court (in the proceedings which were disposed of by a common
order dated 27. I0.2006), and in consonance with the above order, the
Official Liquidator was obi iged to file an appeal, to challenge the auction
sale (dated I 1.8.2005), as well as, the order of confirmation (dated
0
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 hearingjointly were likewise
dismissed, as the said applicants, had already availed of the appellate E
remedy, before the ORT, Bangalore. As against the above, the application
filed by Anita International for possession of the property purchased by
way of auction at the hands of the Recovery Officer, was allowed.
12. Dissatisfied with the order passed by the Company Court, the
applicants raised a challenge to the order dated 3.3 .2009 (passed in C.A. F
Nos.1811 of2005, 854 of2006 and 2740-2742 of2007 - in Company
Petition 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
G
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 ofOeve Sugars
Ltd .. There was nothing to indicate, that the said objections were ever
H
646 SUPREME COURT REPORTS (2016) 6 S.C.R.
A considered by the Recovery Officer. Conversely, the High Court also
arrived at the conclusion, that the Official Liquidator who was the custodian
of the properties of Deve Sugars Ltd. (consequent upon the Official
Liquidator having taken possession of the assets of the company on
28.9.1999), had failed to effectively protect the property of the company..
B Secondly, no material had been placed before the High Cou11 to
indicate, that the valuation report (dated 24.3 .2002) 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).
c Thirdly, even after the workers' union had raised objections before
the Re~overy 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 lackadaisical manner.
D Fourthly, the inspection of the properties of the company under
winding up, by the intending purchasers (for the auction sale scheduled
on 11.8.2005) was pennitted only on the day preceding the date of auction
(namely, on I 0.8.2005), leading to the inference, that the entire process
of auction was a mere fomrnlity.
E Fifthly, on the advertised date fixed for the auction (on 11.8.2005)
the Recovery Officer received only two bids. Despite the above, he
closed the bid on 11.8.2005 itself. 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
F
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 Anita International on 12.9.2005. This
could not have been done, in view of the order dated I 0.3.2000 passed
G
by the High Court at Madras, wherein it was directed, that no coercive
steps would be taken against the assets of the company under liquidation,
during or after the conclusion of the proceedings before the DRT,
Bangalore. And as such, the State Bank of Mysore could not have
proceeded with, the sale of the assets of Deve Sugars Ltd.
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 647
MAZDOOR SANGH [JAGDJSH SINGH KHEHAR, J.]
13. While dealing with the proposition of law declared by this A
Court in the Allahabad Bank case 1, 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
B
banks and financial institutions, as well as, the execution of the recovery
certificate by the Recovery Officer. In spite of the above, it was submitted,
thatthe High Court by relying on the judgment in M.V. Janardhan Reddy
v. Vijaya Bank\ and after taking note of the fact, that the State Bank of
Mysore had applied to the Company Court of the High Court at Madras,
for liberty to recover its dues from Deve Sugars Ltd., by filing Company c
Application Nos.1251-1253of1999 (in pending Company Petition No.170
of 1995), and having obtained an order from the High Court dated
I0.3.2000, was bound by the same. The High Court also concluded,
that the above order dated 10.3.2000 was binding, on the Recovery Officer
of the ORT, Bangalore. The High Court also expressed the view, that
D
the order dated I 0.3 .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 Recovery Officer, as the same
were in clear violation, of the order (dated I 0.3.2000) of the Company E
Court in the High Court at Madras.· Relying on the decision of th is Court
in the M.V. Janardhan Reddy case 2, the High Court while referring to
the findings recorded in paragraph 28 of the above judgment concluded,
that since the assets of the company under winding up were under the
physical charge of the Official Liquidator, the Official Liquidator ought to
F
have been associated with the auction proceedings, 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 G
consideration, the Company Court in the High Court at Madras concluded,
that the sale of the properties of Deve Sugars Ltd. by the Recovery
Officer on 11.8.2005, was liable to be set aside. So also, the confirmation
of the sale, by the Recovery Officer on 12.9.2015,
'(2008) 1 sec 738 H
648 SUPREME COURT REPORTS [2016] 6 S.C.R.
A 14. Having concluded as above, the High Court vide the impugned
order dated 17.9.2009, directed as under:
"Hence the followingjudgment is made:
(i) The auction sale in question is set aside;
B (ii) The auction purchaser is entitled to refund of the monies paid
by him towards the auction sale which is now set aside;
· (iii) In the interest ofall the 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
c 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."
0 15. While assailing the impugned order passed by the High Court
dated 17.9.2009, it was the vehement contention of learned counsel for
the appellant, that the Company Court in the High Court at Madras, had
no jurisdiction in respect of the proceedings which fell within the legitimate
domain of the ROB Act. To canvass the above proposition, learned
counsel placed reliance on a number of judgments of this Court. The
E submissions advanced in this behalf, are being narrated hereunder:
(i) Reliance was first placed on the Allahabad Bank case 1 • It
was pointed out, that the above judgment was rendered on I0.4.2000.
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
F 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 ROB Act requires the Tribunal alone
to decide applications for recovery of debts due to banks or
G financial institutions. Once the Tribunal passes an order that the
debt is due, the Tribunal has to issue a certificate under Section
19(22) [formerly under Section 19(7)] to the Recovery Officer
for recovery of the debt specified in the certificate. The question
arises as to the meaning of the word "recovery" in Section 17 of
the Act. It appears to us that basically the Tribunal is to adjudicate
H
ANITA INTERNATIONAL v. TUNGABAORA SUGAR WORKS 649
MAZOOOR SANGH [JAGDISH SINGH KHEHAR, J.]
the liability of the defendant and then it has to issue a certificate A
under Section 19(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
B
Supreme Court or ofa 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 Sections 17 and 18 of the ROB
Act are exclusive so far as the question of adjudication of the
liability of the defendant to the appellant Bank is concerned.
c
(ii) Execution of certificate by Recovery Officer: is his jurisdiction
exclusive
23. Even in regard to "execution". the jurisdiction of the Recovery
Officer is exclusive. Now a procedure has been laid down in the 0
Act for recovery of the debt as per the certificate issued by the
Tribunal and this procedure is contained in Chapter V of the Act
and is covered by Sections 2? 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 E
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 contemplated. Fmther, Section 34 of the
Act gives overriding effect to the provisions of the ROB Act. F
xxx xxx xxx
The provisions of Section 34( !) clearly state that the ROB Act
overrides other laws to the extent of "inconsistency". In our
opinion, the prescription of an exclusive Tribunal both for G
adjudication and execution is a procedure clearly inconsistent with
realisation of these debts in any other manner.
24. There is one more reason as to why it must be held that the
jurisdiction of the Recovery Officer is exclusive. The Tiwari
H
650 SUPREME COURT REPORTS [2016] 6 S.C.R.
A 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
B
be taken up only by the Special Tribunal under the Act. In our
opinion, in view of the special procedure for recovery prescribed
in Chapter V of the Act, and Section 34, execution of the certificate
is also within the exclusive jurisdiction of the Recovery Officer.
xxx xxx xxx
c
Question of leave and control by the Company Court:
30. Learned Attorney General has, in this connection, relied upon
Damji Valji Shah v. LIC of India (1965) 3 SCR 665 to contend
that for initiating and continuing proceedings under the ROB Act,
D no leave of the Company Court is 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, t~e 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
E transferred. Section 15 of the Life Insurance Corporation Act,
1956 - which we may say, roughly corresponds to Section 17 of
the ROB Act- enabled Life Insurance Corporation of India to
file a case before a Special Tribunal and recover various amounts
from the erstwhile life insurance companies in certain respects.
F Section 41 of the UC Act conferred exclusive jurisdiction on the
said Tribunal just like Section 18 of the ROB Act, 1993. There the
Company was ordered to be wound up by an order of the Company
C_ourt passed under Section 446( I) on 9-1-1959. The claim was
filed by LIC against the Company and its Directors before the
Tribunal in 1962. The respondents before the Tribunal contended
G 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
H transferred, unless the Company Court had jurisdiction to decide
ANITA INTERNATIONAL v. TUNGABAORA SUGAR WORKS 651
MAZOOOR SANGH [JAGDISH SINGH KHEHAR, J.]
the ~stions which were raised before the UC Tribunal. there A
was no purpose of requiring leave of the Company Court or
permitting transfer..... .
xxx xxx xxx
31. It may a1so be noticed 'that in the UC Act of 1956, there was
no provision like Section 34 of the ROB Act giving overriding B
effect to the provisions of the LIC Act. Still this Court upheld the
exclusive jurisdiction of the LIC Tribunal .....
xxx xxx xxx
71. But the point here is that the occasion for such a claim by a C
secured creditor (here Canara Bank) against realisations by other
creditors (like Allahabad Bank) under Section 529-A read with
proviso (c) to Section 529( I) can arise before the Tribunal only if
Canara Bank has stood outside winding-up and realised amounts
and i.f it shows that out of the amounts privately realised by i.h
g>me.n01:tion has been rateably taken away by the liquidator under 0
clauses (a) and (h) of the proviso to Section 529( I). 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 realisations of other creditors
lying in the Tribunal. None of these conditions is satisfied by Canara
Bank. Thus, Canara Bank does not belong to the class of secured E
creditors covered by Section 529-A( I )(b).
xxx xxx xxx
73. If none of the conditions required forapplying Section 19( 19)
and Section 529-A is; therefore, satisfied, then the claim of Canara
Bank before the Tribunal can only be on the basis of principles F
underlying Section 73 CPC. There being no decree in its favour
from any court or from 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.
G
xxx xxx xxx
76. The next question is whether the amounts realised under the
ROB Act at the instance of the appellant can be straight away
released in its favour. Now, even if Section 19( 19) read with
H
652 SUPREME COURT REPORTS [2016] 6 S.C.R.
A Section 529-A of the Companies Act does not help the respondent
Canara Bank, the said provisions can still have an impact on the
appellant Allahabad Bank which has no doubt a decree in its favour
passed by the Tribunal. Its dues are unsecured. The "workmen's
dues" have prioritv over all other creditors. secured and unsecured
because of Section 529-A( !)(a). There is no material before us
B
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) I SCC 228
there is an obligation resting on this Court to see that no secured
or unsecured creditors including banks or financial institutions,
c 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
0 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
Mysore to recover its dues from Oeve Sugars Ltd. by initiating
proceedings under the ROB Act, nor the jurisdiction to interfere with the
recovery proceedings by directing that no coercive steps would be taken
E against Oeve Sugars Ltd., during or after the conclusion of the
proceedings before the ORT, Bangalore. Stated simply, learned counsel
for the appellant was emphatic, that the order passed by the Company
Court in the High Court at Madras (dated I 0.3.2000), was jurisdictionally
and legally impermissible, and as such, was liable to be ignored.
F (ii) Reliance was also placed on Andhra Bank v. Official
Liquidator3 • The instant judgment was relied upon to support the
conclusions drawn by learned counsel, while placing reliance on the
Allahabad Bank case 1• Learned counsel invited our attention to the
position expressed in paragraph 19 of the cited judgment, which is
extracted hereunder:
G
"19. As regards Point (6), however, this Court at para 76 of the
judgment held:
"The next question is whether the amounts realised under the
ROB Act at the instance of the appellant can be straight away
H '(2005) s sec 75
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 653
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
released in its favour. Now, even if Section 19( 19) read with A
Section 529-A of the Companies Act does not help the respondent
Canara Bank, the said provisions can still have an impact on the
appellant Allahabad Bank which has no doubt a decree in its favour
passed by the Tribunal. Its dues are unsecured. The 'workmen's
dues' have priority over all other creditors, secured and unsecured
B
· because of Section 529-A( I )(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) I SCC 228
there is an obligation resting on this Court to see that no secured
or unsecured creditors including banks or financial institutions, c
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)
(iii) In chronological order, learned counsel next relied upon the
judgment in Rajasthan State Financial Corporation v. Official Liquidator, D
and drew the Court's attention to the following:
"15. In A.P. State Financial Corpn. v. Official Liquidator (2000) 7
SCC 291 this Court held that the Company Judge, while permitting
the financial corporation to stay outside the liquidation proceedings,
rightly imposed conditions to ensure that the Corporation would: E
(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 Comt specifically overruled the view taken by the
High Court that it was not necessary for the financial corporations F
to seek permission of the Company Court to stay outside the
winding-up proceedings. It was held that Sections 529( I) and 529-
A of the Companies Act had overriding effect and the 1985
amendment being later in point of time, the non obstante clause
therein would prevail over the non obstante clause contained in G
Section 46-B of the SFC Act.
16. In International Coach Builders Ltd. v. Karnataka State
Financial Corpn (2003) I 0 SCC 482 this Court considered the
correctness of the views expressed by the Karnataka High Court
' (2005J s sec 190 H
654 SUPREME COURT REPORTS [2016) 6 S.C.R.
A and the Gujarat High Court. This Court held that a right 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 corP.orations are affected by the provisions in Sections
529 and 529-A of the Companies Act. It was also held that the
B
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 representative of the workmen to enforce
such a charge. The decision of the Bombay High Court in
Maharashtra State Financial Corpn. v. Official Liquidator was
c approved. The reference to a larger Bench was occasioned by
the fact that the decision in Allahabad Bank v. Canara Bank was
not adverted to in this decision. This decision recognises that,
whether a creditor is standing outside the winding up or not, the
distribution of the proceeds has to be in terms of Section 529 of
the Companies Act read with Section 529-A of that Act in a ·case
D
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
E 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 of the Recovery of Debts Act being a subsequent
legislation and being a special law which would prevail over the
general law. the Companies Act. This argument is not available
as far as the SFC Act is concerned, since Section 529-A was
F
introduced by Act 35of1985 and the overriding provision therein
would prevail over the SFC Act of 1951 as amended in 1956 and
notwithstanding Section 46-B of the SFC Act. As regards
distribution of assets, there is no conflict. It seems to us that
whether the assets are realised by a secured creditor even if it be
G by proceeding under the SFC Act or under the Recovery of Debts
Act. the distribution of the assets could only be in tenns 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
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 655
MAZDOOR SANGH (JAGDISH SINGH KHEHAR, J.]
of the Company Court cannot, therefore, be kept out of the A
process.
17. Thus, on the authorities what emerges is that once a winding-
!!P proceeding has commenced and the Liquidator is put in charge
of the assets of the company being wound up, the distribution of
the proceeds of the sale of the assets held at the instance of the
B
financial institutions coming under the Recovery of Debts Act or
of financial corporations coming under the SFC Act. can only be
with the association of the Official Liquidator and under the
supervision of the Company 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 3 I of the c
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 ofSection 529-
A of the Companies Act takes place. In the case on hand,
D
admittedly, the appellants have not set in motion any proceeding
under the SFC Act. What we have is only a liquidation proceeding
pending and the secured creditors, the financial corporations
approaching the Company Court for permission to stand outside
the winding up and to sell the properties of the company-in-
liquidation. The Company Court has rightly directed that the sale E
be held in association with the Official Liquidator representing
the workmen and that the proceeds will be held by the Official
Liquidator 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
F
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. Karnataka State Financial
Corpn. in respect of the applicability of Sections 529 and 529-A G
of the Companies Act in the matter of distribution among the
creditors. The right to sell under the SFC Act orunder the Recovery
of Debts Act by a creditor coming within those Acts and standing
outside the winding up, is different from the distribution of the
proceeds of the sale of the securitv. The distribution in a case
H
656 SUPREME COURT REPORTS [2016] 6 S.C.R.
A where the debtor is a company in the process of being wound up.
can only be in terms of Section 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
B
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
Court is his responsibility. To ensure the proper working out of the
scheme of distribution, it is necessary to associate the Official
c Liquidator with the process of sale so that he can ensure, in the
light of the directions of the Company Court. that a proper price is
fetched for the assets of the company-in-liquidation. It was in
that context that the rights of the Official Liquidator were discussed
in Intemational Coach Builders Ltd. The Debts Recovery Tribunal
and the District Court entertaining an application under Section
D
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:
E (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 ifa
s;ompany-in-liquidation, through its Recovery Officer but only after
notice to the Official Liquidatoror the Liquidator appointed by the
Company Court and after hearing him.
F
(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.
G (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
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 657
· MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
ofthe upset price or the reserve price, confirmation of the sale, A
holding of the'sale proceeds and the distribution thereof among
the creditors in terniS'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, I 993 or the SFC Act
B
are not set in motion, the creditor concerned is to approach the
Company Court for appropriate directions regarding the realisation
of its securities consistent with the relevant provisions of the
Companies Act regarding distribution of the assets of the company-
in-liquidation."
(emphasis supplied) c
Relyfng on the above judgment, 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 D
Recovery Officer, to sell the assets of the company in liquidation, under
the provisions of the ROB Act. But, that had nothing to do with the
distribution of the proceeds of the sale. The distribution of the sale
proceeds ought to be in consonance with the provisions of the Companies
Act, wherein the debtor was a company in liquidation.
E
(iv) Learned counsel then placed reliance on the M.V. Janardhan
Reddy case~. He invited the Court's attention to the following:
"18. So far as the order passed by the learned Company Judge is
concerned, it specifically and unequivocally stated that permission
of the court should be obtained before sale is confirmed or finalised.
F
That order was 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 oflaw, was rightly set aside by the G
Company Judge and no grievance could be made.
xxx xxx xxx
22. Our attention has been invited by the learned counsel to the
relevant orders passed by the Company Court from time to time.
So far as the order dated 13-8-1999 is concerned, permission to
H
658 SUPREME COURT REPORTS [2016] 6 S.C.R.
A sell the property was granted on certain terms and conditions.
They read as under:
(A) The Official Liquidator shall be allowed to have inspection of
the properties and assets of the company in liquidation and to take
inventory as and when required.
(B) Certified copy of the judgment and decree passed by the
B
Subordinate Judge, Bhongir in OS No. 57 of 1989 dated 24-7-
1993 shall be made 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
c the Official Liquidator without avoidable delay.
(D) The petitioner Bank shall file the valuer's report in the cout1
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.
D
(F) The petitioner Bank shall undertake to deposit and shall deposit
the workmen's dues with the Official Liquidator as and when
quantified by him as per the provisions of Section 529-A of the
Companies Act.
(G) Whatever surplus remains after the sale and realisation of the
E dues of the secured creditors and the workmen, as per law, the
balance sale proceeds shall be made available to the Official
Liquidator for being dealt with in accordance with the provisions
of the Companies Act and the Rules.
xxx xxx xxx
23. An order dated 28-3-2005 in Company Application No. 187 of
F 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
G Recovery Tribunal, in terms of the conditions of auction-sale notice
dated 2-2-2005. ·
It is also stated that though sale notice was ordered, no sale was
conducted as no permission was obtained from this court. The
Official Liquidator also filed a report reporting that there is no
objection as to the proposed auction and also the valuation report
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 659
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
as filed by the applicant Company. A
Under the above circumstances, the applicant Company is
permitted to go ahead with the proposed sale of the assets of the
Company under liquidation through public auction. But, however,
the said sale, if any effected, shall be subject to the confirmation
of this court. The applicant is accordingly granted permission to
B
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 duubt 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 c
subject to confirmation by the Company Court. It is, therefore,
. clear that all parties were aware about the condition as to
confirmation of sale by the Company Court. It was, therefore, not
open to the Recovery Officer to confirm sale. The order passed
and action taken by the Recovery Officer was in clear violation
D
of and inconsistent with the sgecific condition imgosed by the
Company Court. In our considered opinion, therefore, the appell!.rn!
cannot take any advantage of confirmation of sale by the Recovery
Officer who did not gossess the power to confirm sale.
xxx xxx xxx
27. It is true that when the Company Judge set aside the sale on E
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
F
order after hearing the parties. If the Recovery Officer could not
have confirmed the sale, obviously all actions taken in pursuance
of confirmation of sale, such as, issuance of sale certificate,
registration of documents, etc. would be of no consequence. Since
the Company was in liquidation and Official Liquidator was in
charge of the assets of the Company, he ought to have been G
associated with the auction proceedings, which was not done.
This is also clear from the report submitted by the Official
Liquidator and on that ground also, the auction-sale was liable to
be set aside."
(emphasis supplied)
H
660 SUPREME COURT REPORTS [2016] 6 S.C.R.
A Based on the conclusions drawn in the above judgment, 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 th~
Cou1i. Here again, learned counsel has drawn a fine distinction. It was
8
asserted, that even in the above judgment, this Court had not disputed
nor disturbed the exclusive jurisdiction of the Recovery Officer fo
executing a recovery certificate.
(v) Last ofall learned counsel placed reliance on Official Liquidator,
Uttar Pradesh and Uttarakhand v. Allahabad Bank;, and drew our
c attention to the following conclusions recorded therein:
"23. From the aforesaid verdict, it is vivid that the larger Bench in
Rajasthan State Financial Corpn. case approved the law laid down
in Allahabad Bank. In fact, it is noticeable that the larger Bench
has observed that in Allahabad Bank case, a view has been taken
that the ROB Act being a subsequent legislation and being a special
0
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 ORT with the association of the Official
E Liquidator. We may hasten to clarify that as the present
controversy only relates to the sale. we are not going to say
anything with regard to the distribution. However, it is
noticeable that under Section 19( 19) of the ROB Act. the legislature
has clearly stated that distribution has to be done in accordance
with Section 529-A of the 1956 Act. The purpose of stating so is
F
that it is a complete code in itself and the Tribunal has the exclusive
jurisdiction for the purpose of sale of the properties for realisation
. of the dues of the banks and financial institutions.
xxx xxx xxx
31. The aforesaid analysis makes it luculent that ORT has
G 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
oflndia (2013) 2 sec 101.
H '(2013) 4 sec 381
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 661
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
32. Once the Official Liquidator is associated, needless to say, he A
has a role to see that there is no irregularity in conducting the
auction and appropriate price is obtained by holding an auction in
a fair, transparent and non-arbitrary manner in consonance with
the Rules framed under the ROB Act.
xxx xxx xxx
B
34. We have referred to the said passage from Delhi High Court
Bar Assn. case, for the purpose of highlighting that an appeal lies
to ORT challenging the action of the Recovery Officer. In the
case at hand, the Official Liquidator was not satisfied with the
manner in which the auction was conducted and he thought it
apposite to report to the learned Company Judge who set aside c
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
D
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 ROB Act, which is a special
enactment. ORT has the powers under the ROB Act to make an
enquiry as it deems fit and confirm, modify or set aside the order
made by the Recovery Officer in exercise of powers under E
Sections 25 to 28 (both inclusive) of the ROB Act. Thus, the
auction, sale and challenge are completely codified under the ROB
Act, regard being had to the special nature of the legislation."
(emphasis supplied)
16. In addition to the aforesaid submissions, Mr. S. Ganesh, Senior F
Advocate also assisted 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 6 •
Learned counsel invited our attention to the scope of interference with
reference to a public auction, wherein third party rights have emerged, G
especially when the third parties are independent of the disputants, and
also, with reference to seeking recourse to a statutory remedy available
to a party against the impugned order. The conclusions recorded by this
Court in the Sadashiv Prasad Singh case6 , as were pointedly broughno
'(2015) s sec 574 H
662 SUPREME COURT REPORTS [2016] 6 S.C.R.
A our notice, are being extracted hereunder:
"23. At the time of hearing, we were thinking of remanding the
matter to the Recovery Officer to investigate into the objection of
Harender Singh under Rule 11 of the Second Schedule to the
Income Tax Act, 1961. But considering the delay such a remand
may cause, we have ourselves examined the objections of
B
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 20 IO]
were a total sham, as he was actually the brother of one of the
c judgment-debtors, namely, Jagmohan Singh. And that Harender
Singh had created an unbelievable story with the connivance and
help of his brother, so as to save the property in question. The
claim of Harender Singh in his objection petition was based on an
unregistered agreement to sell dated 10-1-1991. Not only that
such an agreement to sell would not vest any legal right in his
D
favour, it is apparent that it may not have been difficult for him to
have had the aforesaid agreement to sell notarised in connivance
with his brother, for the purpose sought to be achieved.
23.2. Secondly, it is apparent from the factual position depicted in
the foregoing paragraphs that Harender Singh, despite his having
E 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
F
the Recovery Officer, it was not open to him to have reagitated
the same by filing a writ petition before the High Court.
23.3. Thirdly, a remedy of appeal was available to Harender Singh
in respect of the order of the Recovery Officer assailed by him
before the High Court under Section 30, which is being extracted
G herein to assail the order dated 5-5-2008:
"30. Appeal against the order of Recovery Officer,-( I)
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.
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 663
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
(2) On receipt ofan appeal under sub-section (1 ), the Tribunal A
may, after giving an opportunity to the appellant to be heard,
and after making such inquiry as it deems fit, confirnr, modify
or set aside the order made by the Recovery Officer in exercise
of his powers under Sections 2? to 28 (both inclusive)."
The High Court ought not to have interfered with in the matter B
agitated by Harender Singh in exercise of its writ jurisdiction. In
fact, the learned Single Judge rightfully dismissed the writ petition
filed by Harender Singh.
23.4. Fourthly, Harender Singh could not be allowed to raise a
challenge to the public auction held on 28-8-2008 because he had
not raised any objection to the attachment of the property in c
question or the proclamations and notices issued in newspapers in
connection with the auction thereof.
23.5. All these facts cumulatively lead 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 D
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 over to the auction- E
purchaser Sadashiv Prasad Sinha on 11-3-2009. The auction-
purchaser initiated mutation proceedings in respect of the property
in question. Harender Singh did not raise any objections in the
said mutation proceedings. The said mutation proceedings were
also finalised in favourofSadashiv Prasad Sinha. Harender Singh F
approached the High Court through CW JC No. 16485 of 2009
only on 27-11-2009. We are of the view that the challenged raised
by Harender Singh ought to have been rejected on the grounds of
delay and Iaches, 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 G
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
thatthe impugned order dated 17-5-2010 passed by the High Court H
664 SUPREME COURT REPORTS [2016] 6 S.C.R.
A allowing Letters Patent Appeal No. 844 of 20 I 0 deserves to be
set aside. The same is accordingly set aside. The right of the
appellant Sadashiv Prasad Sinha in Plot No. 2722, Exhibition Road,
PS Gandhi Maidan, Patna, measuring 1289 sq ft is hereby
confirmed. In the above view of the matter, while the appeal
preferred by Sadashiv Prasad Sinha stands allowed, the one filed
B
by Harender Singh is hereby dismissed."
(emphasis supplied)
Based on the conclusions recorded in the above judgment, it was
contended, that the DRT, Bangalore, issued the recovery certificate on
15 .5 .2002, thereupon the auction sale was conducted on 11.8.2005, and
c there having been no objection to the same, the auction sale . was
confi_rmed 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.
D 17. Insofar as the submission pertaining to the availability of a
statutory remedy against the impugned order is concerned, learned senior
counsel referred to the directions issued by the High Court ofKarnataka,
while disposing of Writ Petition No.26564 of2005 (GM-ORT) preferred
by Videocon Iiiternational Ltd. and Tapti Machines Pvt. Ltd. and Writ
Petition No.37991 of2004 (GM-ORT) preferred by Tungbhadra Sugar
E
Works Mazdoor Sangh-the workers' union (referred to in the narration
of facts hereinabove), and drew our attention to the observations of the
High Court in its order dated 27. I0.2006, which are being extracted
hereunder:
"20. In the circumstances, I am of the view that there is an alternate
F 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
G contentions are left upon."
(emphasis supplied)
Based on the above, it was contended, that it was not open to the
appellants to raise a challenge with reference to a third party sale,
especially when the same was in the nature of a public auction conducted
by a Recovery Officer, while giving effect to an order passed by the
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 665
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
Debts Recovery Tribunal, strictly within the jurisdiction of the provisions A
of the RDB Act. And also, the determination of this Court not to interfere
lightly with the rights which came to be vested in such auction purchasers.
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:
B
"30. Appeal against the order of Recovery Officer.- (I)
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-section (I), the Tribunal c
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)."
Based on the above provision, it was the submission of learned D
senior counsel, that the wrong, if any, caused to the contesting respondents
could have been set right only under Section 18 of the ROB Act.
18. Mr. C.A. Sundaram, Senior Advocate, endeavoured to
repudiate the submissions advanced at the hands of learned counsel for
the appellants, by advancing three contentions. Firstly, an order passed E
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 I 0.3 .2000 passed by the High
Court at Madras had been passed by a Court having jurisdiction. The
said order had attained finality. And accordingly, there was no justification F
at the hands of any other party concerned, to wriggle out of the same.
Secondly, even if an order is passed by a Court which has no jurisdiction
with reference to a controversy, and as such, could be termed as a void
order, the order of the Court would continue to remain enforceable in
law, till the same is set aside and/or vacated by a subsequent order. G
Insofar as the instant aspect of the matter is concerned, it was submitted,
that the order dated I 0.3.2000 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
ofan injunction, was liable to be set aside. An injunction order, according
H
666 SUPREME COURT REPORTS [2016] 6 S.C.R.
A 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. " ... during or after the conclusion of the
proceedings before the Tribunal ... ", namely the ORT, Bangalore, was
binding. The auction sale conducted on 11.8.2005, and its subsequent
confirmation on 12.9.2015, according to learned senior counsel, were
B
not only beyond the jurisdiction of the Recovery Officer, but also beyond
the jurisdiction of the Debts Recovery Tribunal. In the instant view of
the matter, it was contended, that the impugned order dated 27.9.2009,
passed by the High Court at Madras, ought not to be interfered with.
19. While substantiating the first contention noticed in the foregoing
c 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
D withdrawn to a Company Comt, and the recovery of the debt sought by
the bank, could be agitated before the Company Court. It was however
pointed out, that the inverse was not permissible, inasmuch as, a winding
up petition filed before the Company Court under the Companies Act,
could not be withdrawn to a Debts Recovery Tribunal, under the
provisions of the ROB Act. It was therefore the contention of learned
E
counsel for the respondents, that since the State Bank of Mysore cou Id
seek recourse to the ORT, as well as the Company Court, as may be
considered suitable or appropriate, the proceedings filed by the State
Bank of Mysore, namely, Company Application Nos. 1250-1253of1999
in pending Company Petition No.170 of 1995 (and Company Petition
F No.35 of 1997) had been filed by the State Bank of Mysore, before a
Court havingjurisdiction. And therefore, a Court havingjurisdiction in
the matter, at the instance of the State Bank of Mysore, had passed the
order dated 10.3.2000. By the order dated I0.3.2000, the Company
Court in the High Court at Madras, allowed the prayer made by the
State Bank of Mysore, to continue to proceed with the recovery
G proceedings initiated by it before the ORT, Bangalore. But while granting
the above leave imposed two conditions, firstly, the Official Liquidator
would be impleaded before the DRT, and secondly, no coercive steps
would be taken against the assets of the Company (-Deve Sugars Ltd.)
during or after the proceedings before the ORT. The said order was
H neither varied nor vacated. The same, according to learned counsel,
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 667
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
was binding between the parties. And therefore, it was contended, that A
the same could not have been ignored or overlooked. It was submitted,
that even if the above order dated I 0.3.2000, 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
8
Deve Sugars Ltd., was clearly in the teeth of the injunction order passed
by the Company Court on I 0.3.2000, and as such, was liable to be set
aside.
20. In order to repudiate the submissions advanced at the hands
of learned counsel for the appellant, based on the judgment rendered by
this Court in the Allahabad Bank case 1, reliance was placed on Industrial c
Credit and Investment Corporation oflndia Ltd. v. Srinivas Agencies7,
and the Court's attention was drawn to the factual and legal position
expressed therein:
"I. The extent of right of secured creditors to realise their debts
from the assets of a company which is under winding up or has D
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. E
xxx xxx xxx
4. A combined reading of the aforesaid provisions leads to the
following results:
(i)A winding-up court has jurisdiction, inter alia, to entertain or F
dispose ofany suit or proceeding by or against the company. even
if such suit or proceeding had been instituted before an order for
winding up had been made. This apart, the winding-up court has
jurisdiction to transfer such a suit or proceeding to itselfand dispose
of the same. These follow from sub-sections (2) and (3) of Section
G
446.
(ii) When a winding-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-
' (1996) 4 sec 165 H
668 SUPREME COURT REPORTS [2016] 6 S.C.R.
A up order, can proceed against the company, except by leave of
the company court vi de sub-section (I) 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
B view of the holding in Ranganathan case that Section 537, dealing
with voidness of sale, operates when the sale is pursuant to
attachment of company court. This, however, would be the position
where a company has not been wound up, but is in the process of
being wound up.
c 5. None of the parties has assailed the aforesaid propositions of
law as well. The real bone of contention is as to when (i) leave of
the winding-up court should be granted to a secured creditor to
proceed with the suit after an order.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
D 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
E rank pari passu with debts due to secured creditors. This is brought
home not only by Section 529-A, which was inserted by the
Companies (Amendment) Act, 1985, but also by the proviso to
sub-section (I) of Section 529 inserted by the same Amendment
Act. The winding-up court does these acts through a liquidator,
who has been given wide powers by Section 457 of the Act. As
F
against this, a receiver appointed by a civil court on being
approached by secured creditor would basically look after the
interest of that creditor, whose interest may 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
G that in case of such conflict, the interest ofliquidator 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. This view cannot also be, and has indeed not been,
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 669
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
contested by the learned counsel appearing for the appellants. A
xxx xxx xxx
9. Shri Salve's entire submission had been that a working principle
may be got evolved which would, on the one hand, protect the
substantive right of a secured creditor, specially in view of large
sums of money being advanced of late of such creditors and, on
B
the other hand, not jeopardise the interest of other secured
creditors. According to the learned counsel, these twin objects
can be achieved ifthe 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 c
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 filed after the winding-up proceeding
has commenced, the learned counsel urged that such a permission
D
should normally be granted by the winding-up court. On this being
done, when the question of appointment of receiver would arise,
the civil court would do so if a case for same were to be made out
after hearing the liquidator, who would be a defendant in the suit.
As regards transfer of the pending suit by the company court, the
submission was that convenience may not be the guiding factor; E
the preservation of integrity of the substantive right of the creditor
should be the main consideration.
I0. 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 F
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 unproductive assets, the value of which deteriorates with
the passage of time. An urgent need was, therefore, felt for
successful implementation of the financial sector reforms, to work G
out a suitable mechanism through which dues to these institutions
could be realised without delay. To achieve this purpose, the
aforesaid Act visualises establishment of the Debts Recovery
Tribunal(s) by the Central Government, with its own procedure
which is speedy in nature. Section 18 of this Act has barred H
670 SUPREME COURT REPORTS [2016] 6 S.C.R.
A jurisdiction 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
B in this regard by the company court does not deserve to be put in
a strait-focket fonnula. 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 the company court
would also bear in mind the rationale behind the enactment of
c Recovery of Debts Due to the Banks and Financial Institutions
Act, 1993, to which reference has been made above. We make
the same observation regarding the terms which a company court
should like to impose while granting leave. It need not be stated
that the terms to be imposed have to be reasonable, which would,
of course, vary from case to case. According to us, such an
D approach, would maintain the integrity of that secured creditor
who had approached the civil court or desires to do so, and wou Id
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
E
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 passu."
(emphasis supplied)
21. On the jurisdictional aspect, learned senior counsel for the
F respondents placed reliance on clauses (I) and (2) of Section 446 of the
Companies Act, 1956. The same are reproduced below:
"446.· Suits stayed on winding up order. -(I) 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
G 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.
(2) (Tribunal) shall, notwithstanding anything, contained in any
other law for the time being in force, have jurisdiction to entertain,
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 671
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
or dispose of- A
(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
company;
B
(d) any question of priorities or any other question whatsoever,
whether of law or fact, which may relate to or rise in course of
the winding up of the company,
whether such suit or proceeding has been instituted or is instituted
or such claim or question has arisen or arises or such application
has been made or is made before or after the order for the winding c
up of the company, or before orafter the commencement of the
Companies (Amendment) Act, 1960 ....."
22. With reference to the judgment rendered in the Allahabad
Bank case 1, 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 D
Company Court before initiating proceedings against a debtor under the
provisions of the ROB Act. It was therefore pointed out, that there was
no dissimilarity of the conclusions drawn by this Court in the Allahabad
Bank case 1 and the Srinivas Agencies case'.
23. In addition to the above, learned senior counsel for the E
• respondents, placed reliance on Krishnadevi Malchand Kamathia v.
Bombay Environmental Action Group 8, and placed reliance on the
following conclusions drawn therein:
"16. It is a settled legal proposition that even if an order is void, it
requires to be so declared by a competent forum and it is not
permissible for any person to ignore the same merely because in F
his opinion the order is void. In State ofKerala v. M.K. Kunhikannan
Nambiar Manjeri Manikoth Naduvil, Tayabbhai M. Bagasarwalla
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 G
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 invaliditv of an order has to approach the court
• <20.11) 3 sec 363 H
672 SUPREME COURT REPORTS [2016] 6 S.C.R.
A for relief of declaration that the order against him is inoperative
and therefore, not binding upon him. While Jeciding the said case,
this Court placed reliance upon the judgment in Smith v. East
Elloe RDC, wherein Lord Radcliffe observed: (AC pp. 769-70)
" ... An order, even if not made in good faith, is still an act capable
B of legal consequences. It bears no brand of invalidity [on) its
forehead. Unless the necessary proceedings are taken at law to
establish the cause of invalidity and to get it quashed or otherwise
upset, it will remain as effective for its ostensible purpose as the
most impeccable of orders."
c 18. In Sultan Sadik v. Sanjay Raj Subba AIR 2004 SC 1377, this
Court took a similar view observing that once a·n order is declared
non est by the court only then the judgment ofnu llity would operate
erga omnes i.e. for and against everyone concerned. Such a
declaration is permissible ifthe comt comes to the conclusion that
the author of the order lacks inherent jurisdiction/competence and
D therefore. it comes to the conclusion that the order suffers from
patent and latent invalidity."
19. Thus. from the above it emerges that even if the order/
notification is void/voidable, the party aggrieved by the same cannot
decide that the said order/notification is not binding upon it. It has
E to approach the court for seeking such declaration. Tbe order
may be hypothetically a nullity and even ifits invalidity is challenged
before the court in a given circumstance, the court may refuse to
quash the same on various grounds including the standing 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
F
or for one person. it may not be so for another purpose or another
12erson."
(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:
G
"58. Adjudication of claims to, or objections to attachment ot:
property. -(l) Where any claims preferred to, or any objection is
made to the attachment of, any property attached in execution of
a decree on the ground that such property is not Iiable to such
attachment, the Court shall proceed to adjudicate upon the claim
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 673
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
or objection in accordance with the provisions herein contained: A
Provided that no such claim or objection shall be entertained-
(a) where, before the claim is preferred or objection is made, the
property attached has already been sold; or
(b) where the Court considers that the claim or objection was
designedly or unnecessarily delayed.
B
(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. c
(3) Upon the determination of the questions referred to in sub-
rule (2), the Court shall, in accordance with such determination,-
(a) allow the claim or objection and release the property from
attachment either wholly or to such extent as it thinks fit; or
(b) disallow the claim or objection; or
D
(c) continue the attachment subject to any mortgage, charge of
other interest in favour of any person; or
(d) pass such order as in the circumstances of the case it deems
fit.
(4) Where any claim or objection has been adjudicated upon under
this rule, the order made thereon shall have the same force and · E
be subject to the same conditions 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 (I), refuses to entertain it, the party
against whom such order is made may institute a suit to establish
F
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 declaration
of illegality could only be prospective. And therefore, what had to be
decided was, whether the sale proceedings conducted on 11.8.2005 and G
the confirmation thereof on 12.9.2005, were valid? It was submitted,
that even if, for arguments sake, the order dated 10.3.2000 passed by
the Company Court of the High Court at Madras _was now to be set
aside, the same would not validate the aforementioned illegality and
unauthorized actions of the Recovery Officer, for giving effect to the
H
674 SUPREMfr COURT REPORTS [2016] 6 S.C.R.
A recovery certificate issued by the ORT. To support the aforementioned
_ proposition, learned senior counsel placed reliance on th~ 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:
B "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 herein.
The respondent, Allahabad Bank, a secured creditor with whom
certain properties were mortgaged, filed Original Application No.
153 of 1999 under Section 9 of the ROB Act for recovery of a
c sum of Rs 39,93,47,701 with interest from the Company, namely,
Mis Rajindra Pipes Ltd., which was decreed by the Debts
Recovery Tribunal, Jabalpur (ORT) vide its order dated 7-3-2000.
The debt recovery certificate being DRC No. 164 of 2000 was
issued for recovery of the aforesaid amount which was
D subsequently transferred to ORT 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 ofwhich the Official Liquidator
had taken over the possession of the assets of the Company on
E 24-7-2002. After receipt of the recovery certificate, the Recovery
Officer attached the immovable properties of the wound-up
company by order dated 29-8-2002. The movable properties of
the company were attached as per order dated 23-12-2003. At
this juncture, Allahabad Bank filed an application before the
F Company Court for imp leading it as a necessary party and protect
its rights getting it out of the winding-up proceedings. A prayer
was made before the Company Court to grant permission to
proceed with the sale of the attached properties by the Recovery
Officer, Debts Recovery Tribunal (ORT). The learned Company
Judge, on 13-2-2004, granted permission for proceeding with the
G attachment and sale of the assets for recovery of the dues under
the ROB Act. It is worth stating here that no condition was
imposed.
3. After auction and confirmation of sale by ORT, the auction-
purchaser filed an application before the learned Company Judge
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 675
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
for issuance ofa,direction to the Official Liquidator to give physical . A
possession. The Company Court, by order.dated 4-4-2007, set
aside the sale certificate on the ground that the Official Liquidator
was neither heard in the matter nor was he given an opportunity
to represent before the Recovery Officer for the purposes of
representing the workmen's dues and a portion of the workmen's
B
liability under Section 529-A of the 1956 Act. A dire~tion was
issued to the Recovery Officer to proceed to sell the assets only
after associating the Official Liquidator and after giving him hearing
to represent the claims of the workmen."
The aforementioned controversy was adjudicated and disposed
of by this Court, after making a reference to the judgment in the Allahabad
c
Bank case I by concluding as under:
"35. It has been submitted by Mr Bane1ji, learned Senior Counsel,
that ifthe Company Court as well as DRT can exercise jurisdiction
in respect of the same auction or sale after adjudication by ORT,
there would be duality of exercise ofjurisdiction which the RDB D
Act does not envisage. By way of an example, the learned Senior
Counsel has submitted that there are some categories of persons
who can go before DRT challenging the sale and if the Official
Liquidator approaches the Company Court, then such a situation
would only bring anarchy in the realm of adjudication. The· E
aforesaid submission of the learned Senior Counsel commends
acceptance as the intendment of the legislature is that the dues of
the banks and financial institutions are realised in promptitude. It
is to be noted that when there is inflation in the economy. the
value of the mortgaged property/assets depreciates with the effiux
of time. If more time is consumed, it would be really difficult on F
the part of the banks and financial institutions to realise their dues.
Therefore, this Court in Allahabad Bank case has opined that it is
DRTwhich would have the exclusive jurisdiction when a matter
is agitated before DRT. The dictum in the said cast has been
approved by the three-Judge Bench in Rajasthan State Financial G
Corpn.-It is not a situation where the Official Liquidator can have
a choice either to approach DRT or the Company Court. The
language of the RDB Act. being clear. provides that any person
aggrieved can prefer an appeal. The Official Liquidator whose
association is mandatorily required can indubitably be regarded
H
676 SUPREME COURT REPORTS [2016] 6 S.C.R.
A as a person aggrieved relating to the action taken by the Recovery
Officer which would include the manner in which the auction is
conducted or the sale is confirmed. Under these circumstances,
the Official Liquidator cannot even take recourse to the doctrine
of election. It is difficult to conceive that there are two remedies.
It is well settled in law that if there is only one remedy, the doctrine
B 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
c Official Liquidator can only take recourse to the mode of appeal
and further appeal under the RDB Act and not approach the
Company Court to set aside the auction or confirmation of sale
when a sale has been confirmed by the Recovery Officer under
the RDB Act.
D 36. We will be failing in our duty if we do not take notice of the
decision in M.V. Janardhan Reddy wherein the sale was set aside
by the Company Judge. It may be stated here that the Company
Court had imposed a condition that the permission of the Company
Court shall be obtained before the sale of the properties, immovable
or movable, is confirmed or finalised. On the aforesaid basis, this
E 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
F not open to the Recovery Officer to confirm the sale and, therefore,
the sale was set aside by the Company Court, being in violation of
the order. Thus, we find that the facts in the said case were
absolutely different and further this Court did not deal with the
jurisdiction of the Company Court vis-a-vis DRTas the said issue
really did not arise. Hence, it is not an authority for the proposition
G that the Official Liquidator can approach the Company Court to
set aside the auction or sale conducted by the Recovery Officer
ofDRT.
37. In view of the aforesaid analysis. we concur with the view
expressed by the Division Bench and hold that the Official
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 677
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
Liquidator can prefer an appeal before DRT. As he was prosecuting A
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
8
a period of two months after offering an opportunity of hearing to
all concerned. Till the appeal is disposed of, the interim order passed
by this Court shall remain in force. We hasten to clarify that we
have not expressed anything on the merits of the case."
(emphasis supplied)
25. Reliance was then placed on Order XXI Rule 54 of the Code c
of Civil Procedure, which is extracted hereunder:
"54. Attachment of immovable property.- {I) Where the property
is immovable, the attachment shall be made by an Order prohibiting
the judgment debtor from transferring or charging the property in
any way, and all persons from taking any benefit from such transfer D
or charge.
(I )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
settltng the terms of the proclamation of sale.
(2) The Order shall be proclaimed at some place on or adjacent to E
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
property and then upon a conspicuous part of the court house,
and also, where the property is land paying revenue to the
government, in the office of the Collector of the District in which F
the land is situate and, where the property is land situate in village,
also in the office of the Gram Panchayat, if any, havingjurisdiction
over that village."
To support the contention advanced at the hands ofleamed senior
counsel representing the respondents, reliance was placed on Jehal Tanti G
v. Nageshwar Singh9 • The following observations recorded therein, are
of relevance:
"JO. The nature and effect ofan alienation made in violation ofan
order of injunction was considered in Tayabbhai M. Bagasarwalla
----
(2013) 14 sec 689
9
H
678 SUPREME COURT REPORTS [2016) 6 S.C.R.
A 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 that
B issue in the first instance as a preliminary issue before granting or
setting aside the relief already granted. An application raising
objection to the jurisdiction to the court is directed to be heard
with all expedition. Sub-rule (2), however, says that the command
in sub-rule (I) does not preclude the com1 from granting such
interim relief as it may consider necessary pending the decision
c on the question ofjurisdiction. In our opinion, the provision merely
states the obvious. It makes explicit 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
D 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 addnterim injunction was granted. Then the defendants came
forward objecting to the grant of injunction and also raising an
objection to the jurisdiction of the court. The court overruled the
E objection as to jurisdiction and made the interim injunction absolute.
The defendants filed an appeal against the decision on the question
ofjurisdiction. While that appeal was pending, several other interim
orders were passed both by the civil court as well as by the High
Court. Ultimately, no doubt, the High Court has found that the
F civil court had no jurisdiction 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.
G The question is whether the said decision of the High Court means
that no person can be punished for flouting or disobeying the
interim/interlocutory orders while they were in force i.e. for
violatipns and disobedience committed prior to the decision of the
High Court on the question ofjurisdiction. Holding that by virtue
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 679
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
of the said decision of the High Court (on the guestion of A
jurisdiction), no one can be punished thereafter for disobedience
or violation of the interim orders committed prior to the said
decision of the High Court, would indeed be subversive of the
rule oflaw and would seriously erode the dignity and the authority
of the courts. We must repeat that this is not even a case where
B
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 conseguences of
their disobedience and violation of the interim injunction committed
by them prior to the High Court's decision on the guestion of c
jurisdiction.
28. The correct principle, therefore, is the one recognised and
reiterated in Section 9-A-:-to wit, where an objection to jurisdiction
ofa civil court is raised to entertain a suit and to pass any interim
orders therein, the Court should decide the question ofjurisdiction D
in the first instance butthat does not mean that pending the decision
on the question ofjurisdiction, the Court has no jurisdiction to pass
interim orders as may be called for in the facts and circumstances
of the case. A mere 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 E
guestion 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 is open to the F
court to modify these orders while holding that it has no jurisdiction
to try the suit. .... "
(emphasis supplied)
26. It was the emphatic contention of learned counsel for the
respondents, that the sole purpose for requiring the Official Liquidator to
participate in the proceedings before the ORT, was to keep the interest G
of the creditors before the Company Court (where winding up
proceedings had been initiated by other creditors), secure. The interest
of the creditors before the Company Court could be secure, only ifthe
sale of the properties of the company under winding up was made by
H
680 SUPREME COURT REPORTS [2016] 6 S.C.R.
A 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 justified in setting aside the order passed by the
B
learned Single Judge.
27. Mr. P. Chidambaram, learned senior counsel in rejoinder and
in response to the three contentions advanced at the hands of the
respondents, invited this Court's attention to Sections 18, 19 and 34 of
the RDB Act. The same are extracted hereunder:
c
"18. Bar of Jurisdiction.--On and from the appointed day, no court
or other authority shall have, or be entitled to exercise, any
jurisdiction, powers or authority (except the Supreme Court, and
a High Court exercisingjurisdiction under articles 226 and 227 of
the Constitution) in relation to tne matters specified in section 17.
D
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
E continued and nothing contained in this section shall, after such
commencement, apply to such proceedings.
19.Application to the Tribunal.-(!) Where a bank or a financial
institution has to recover any debt from any person, it may make
an application to the Tribunal within the local limits of whose
F jurisdiction-
(a) the defendant, or each of 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
G
(b) any of 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 ofaction, wholly or in part, arises:
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 681
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
Provided that the bank or financial institution may, with the A
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, 2004 for the purpose of taking action under
the Securitisation and Reconstruction of Financial Assets and
8
Enforcement of Security Interest Act, 2002 (54 of 2002), if no
such action had been taken earlier under that Act:
Provided further that any application made under the first proviso
for seeking permission from the Debts Recovery Tribunal to
withdraw the application made under sub section (I) shall be dealt
with by it as expeditiously as possible and disposed of within thirty c
days from the date 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. D
(I A) 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 or
after the date of commencement of the Enforcement of the E
Security Interest and Recovery of Debts Laws (Amendment) Act,
2012 from any person instead of making an application under this
Chapter.
(I B) In case, a bank being, multi-State co-operative bank referred
to in sub-clause (vi) ofclause (d) of section 2 has filed an application F
under this Chapter and subsequently opts to withdraw the
application forthe purpose ofinitiating proceeding under the Multi-
State Co-operative Societies Act, 2002 (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 G
the application made under sub-section (IA) 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 casethe Tribunal refuses to grant permission for
withdrawal of the application filed under this sub-section, it shall
H
682 SUPREME COURT REPORTS (2016) 6 S.C.R.
A pass such orders after recording the reasons therefor.
(2) Where a bank or a financial institution, which has to recover
its debt from any person, has filed an application to the Tribunal
under sub-section (I) and against the same person another bank
or financial institution also has a claim to recover its debt, then,
B the later bank or financial institution may join the applicant bank
or financial institution at any stage of the proceedings, before the
final order is passed, by making an application to that Tribunal.
(3) Every application under sub-section (I) or sub-section (2) shall
be in such form and accompanied by such documents or other
c 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-
D section (I) of section 31.
(3A) If any application filed before thi!Tribunal for recovery of
any debt is settled prior to the commencement of the hearing
before that Tribunal or at any stage of the proceedings before the
final order is passed, the applicant may be granted refund of the
E fees paid by him at such rates as may be prescribed.
(4) On receipt of the application under sub-section (I) or sub-
section (2), the Tribunal shall issue summons requiring the
defendant to show cause within thirty days of the service of
summons as to why the relief prayed for should not be granted.
F
(5) The defendant shall, 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
G 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.
(SA) After hearing of the application has commenced, it shall be
continued from day-to-day until the hearing is concluded:
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 683
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
Provided that the Tribunal may grant adjournments if sufficient A
cause is shown, but no such adjournment shall be granted more
than three times to a party and where there are three or more
parties, the total number of such adjournments shall not exceed
six:
Provided further that, the Presiding Officer may grant such B
adjournments on imposing such costs as may be considered
necessary.
(6) Where the defendant claims to set-off against the applicant's
demand any ascertained sum of money legally recoverable by
him from such applicant, the defendant may, at the first hearing of. c
the application, but not a.!terwards unless pennitted 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 o
respect both of the original claim and of the set-off.
(8) A defendant in an application may, in addition to his right of
pleading a set-off under sub-section (6), set up, by way ofcounter-
claim againstthe claim ofthe applicant, any right or claim in respect
of a cause of action accruing to the defendant against the applicant E
either before or after the filing of the application but before the
defendant has delivered his defence or before the time limited for
delivering his defence has expired, whether such counter-claim is
in the nature of a claim for damages or not.
(9) A counter-claim under sub-section (8) shall have the same F
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.
(I 0) The applicant shall be at liberty to file a written statement in
answer to the counter-claim of the defendant within such period
G
as may be fixed by the Tribunal.
( 11) Where the defendant sets up a counter-claim and the applicant
contends that the claim the~eby raised ought not to be disposed of
by way of counter-claim but in an independent action, the applicant
may, at any time before issues are settled in relation to the
H
684 SUPREME COURT REPORTS [2016] 6 S.C.R.
A counter-claim, apply to the Tribunal for an order that such counter-
claim may be excluded, and the Tribunal may, on the hearing of
such application, make such order as it thinks fit.
(12) The Tribunal may make an interim order(whether by way of
injunction or stay or attachment) against the defendant to debar .
B him from transferring, alienating or otherwise dealing with, 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
c 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 local limits of the jurisdiction of the Tribunal; or
D
(iii) is likely to cause any damage or mischief to the property or
affect its value by misuse or creating third party interest,
the Tribunal may direct the defendant, within a time to be fixed by
it, either to furnish security, in such sum as may be specified in the
order, to produce and place at the disposal of the Tribunal, when
E
required, the said property or the value of the same, or such portion
thereof as may be sufficient to satisfy the certificate for the
recovery of debt, or to appear and show cause why he shou Id not
(urnish security.
(8) Where the defendant fails to show cause why he should not
F
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 favororotherwise owned
by the defendant as appears sufficient to satisfy any certificate
G for the recovery of debt.
(14) The applicant shall, unless theTribunal otherwise directs,
specify the property required to be attached and the estimated
value thereof.
(IS) The Tribunal may also in the order direct the conditional
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 685
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.)
attachment of the whole or any portion of the property specified A
under sub-section (14 ).
( 16) If an order of attachment is made without complying with
the pro-visions of sub-section ( 13), such attachment shall be void.
(17) In the case of disobedience of an order made by the Tribunal
under sub-sections (12), (13) and (18) or breach of any of the 8
tenns 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. c
(18) Where it appears to the Tribunal to be just and convenient,
the Tribunal may, by order,-
(a) appoint a receiver of any property, whether before or after
grant of certificate for recovery of debt;
D
(b) remove any person from the possessionor custody of the
property;
(c) commit the same to the possession, custody or management
of the receiver;
(d) confer upon the receiver all such powers, as to bringing and E
defending suits in the courts or filing and defending application
before the Tribunal and for the realization, management, protection,
preservation and improvement of the property, the collection of
the rents and profits thereof, the application and disposal of such
rents and profits, and the execution of documents as the owner
F
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 G
registered under the Companies Act, 1956 (I of 1956) the Tribunal
may order the sale proceeds of such company to be distributed
among its secured creditors in accordance with.the provisions of
section 529A of the Companies Act, 1956 and to pay the surplus,
if any, to the company.
H
686 SUPREME COURT REPORTS [2016] 6 S.C.R.
A (20) The Tribunal may, after giving the applicant and the defendant
an opportunity of being heard, pass such interim or final order,
including the order for payment of interest from the date on or
before which payment of the amount is found due up to the date
ofrealization or actual payment, on the application as it thinks fit
to meet the ends of justice.
B
(20A) Where it is proved to the satisfaction of the Tribunal that
the claint 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
c 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. '
(22)· The Presiding Officer shall issue a certificate under his
D signature on the basis of the order of the Tribunal to the Recovery
Officer for recovery of the amount of debt specified in the
certificate.
'·
(23) Where the Tribunal, which has issued a certificate of recovery,
is satisfied that the property is situated within the local limits of
E the jurisdiction of two or more Tribunals, it may send the copies of
the certificate of recovery for execution to such other Tribunals
where the property is situated:
Provided that in a case where the Tribunal to which the certificate
ofrecovery is sent for execution finds that it has no jurisdiction to
F comply with the certificate ofrecovery, it shall return the same to
the Tribunal which has issued it.
(24) The application made to the Tribunal under sub-section (I)
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 the
G
date ofreceipt of the application.
(25) The Tribunal may make such orders and give such directions
as may be necessary or expedient to give effect to its orders or to
prevent abuse of its process or to secure the ends of justic~.
H xxx xxx xxx
ANITA INTERNATrONAL v. TUNGABADRA SUGAR WORKS 687
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.)
34. Act to ha~e over-riding effect.-( I) Save as provided under A
sub-section (2), the provisions of thi.s Act shall have effect
notwithstanding anything inconsistent therewith contained in any
other law for the time being in f\)rce or in any instrument having
effect ,by virtue nf any law other i:han this Act.
(2) The provisions of this Act or the rules made thereunder shall B
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 ofl951), the UnitTrustoflndiaAct,
1963 (52of1963), the Industrial Reconstruction Bank of India
Act, 1984 (62of1984), the Sick Injustrial Companies (Special
Provisions) Act, 1985 (I of 1986) and the Small Industries
c
Development Bank of India Act, 1989 (39 of 1989)."
Based on the aforesaid provisions, it was asserted, that the
provisions of the ROB Act envisaged a complete ouster of the Company
Court, and that neither the Company Court nor any other Court, could
have exercised j1,1risdiction vested in the ROB A,ct. It was submitted, D
that the Official Liquidator has no participatory role. under the ROB Act.
The Official Liquidator has jurisdictional c.ontrol, over the assets of a
company under winding up, under the Companies Act. In this behalf,
learned seniOr counsel for the appellant, placed reliance on Kiran Singh
v. Chaman Paswan 10, and pointed out to the following observations E
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 F
principle well established that a decree passed by a court without
jurisdiction is a nullity. and that its invalidity could be set up
whenever and wherever it is sought to be enforced or relied upon.
even at the stage of execution and even in collateral proceedings.
A defect of jurisdiction. whether it is pecuniary or territorial. or ,_
whether it is in respect of the subject-matter of the action. strikes a·
at the veiy authority of the court to pass any decree. and such a
defect cannot be cyred even by consent of parties, Ifthe questiop
now underoonsideration fell to be determined only on the application
of general principles governing the matter, there can be no doubt
1
'' 1955 (I) SCR 117 H
688 SUPREME COURT REPORTS [2016) 6 S.C.R.
A 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)
B Reliance was also placed on Dhurandhar Prasad Singh v. Jai
Prakash University 11 , and the Court's attention was drawn to the
following observations:
"20. de Smith, Woolf and Jowell in their treatise Judicial Review
of Administrative Action, 5th Edn., para 5-044, have summarised
the concept of void and voidable as follows:
c "Behind the simple dichotomy of void and voidable acts (invalid
and valid until declared to be invalid) lurk terminological and
conceptual problems of excruciating complexity. The problems
arose from the premise that if an act, order or decision is ultra
vires in the sense of outside jurisdiction, it was said to be invalid,
D 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.
E 131 has explained the expressions "void and voidable" as follows:
"A challenge to the validity of an act may be by direct action or by
way of collateral or indirect challenge. A direct action is one where
the principal purpose of the action is to establish the invalidity.
This will usually be by way of an application for judicial review or
F by use of any statutory mechanism for appeal or review. Collateral
challenges arise when the invalidity is raised in the course of some
other proceedings, the purpose of which is notto establish invalidity
but where questions of validity become relevant."
Thereupon, reference was made to Jagmittar Sain Bhagat v.
G 1
Director, Health Services, Haryana ~. 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:
11
<2001 >6 sec 534
H
1
~ <2013) 10sec 136
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 689
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
"9. Indisputably, it is a settled legal proposition that conferment of A
jurisdiction is a legislative function and it can neither be conferred
with the consent of the parties nor by a superior court, and ifthe
court passes a decree having no jurisdiction over the matter, it
would amount to nullity as the matter goes to the root of the cause.
Such an issue can be raised at any stage of the proceedings. The.
B
finding of a court or tribunal becomes irrelevant and unenforceable/
inexecutable once the forum is found to have no jurisdiction.
Similarly, if a court/tribunal inherently lacks jurisdiction,
acquiescence of party equally should not be permitted to perpetrate
and perpetuate defeating of the legislative animation. The court
cannot derive jurisdiction apart from the statute. In such eventuality c
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(l 9?9).3 SCC 722.)
D
10. In Sushil Kumar Mehta v. Gobind Ram Bohra (1990) 1 SCC
193, this Court, after placing reliance on a large number of its
earlier judgments particularly in Premier Automobiles Ltd. v.
Kamlekar Shantaram Wadke (1976) I SCC 496; Kiran Singh v.
Chaman Paswan AIR 1954 SC 340; and Chandrika Mi sir v. Bhaiya .
Lal AIR 1973 SC 2391 held, that a decree without jurisdiction is a E
nullity. It is a coram non judice; when a special statute gives a
right and also provides for a forum for adjudication of rights, remedy
has to be sought only under the provisions of that Act and the
common law court has no jurisdiction; where an Act creates an
obligation and enforces the performance in specified manner. F
"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
G
objection going to the nullity of the orderon the ground of want of
jurisdiction". Thus. for assumption of jurisdiction by a court or a
tribunal. existence of jurisdictional fact is a condition precedent.
But once such jurisdictional fact is found to exist, the court or
tribunal has power to decide on the adjudicatory facts or facts in
H
690 SUPREME COURT REPORTS [2016] 6 S.C.R.
A issue. (Vide Setrucherla Ramabhadraraju v. Maharaja of Jeypore
AIR 1919 PC 150; State of Gujarat v. Rajesh Kumar Chimanlal
Barot AIR 1996 SC 2664; Harshad Chiman Lal Modi v. D.L.F.
Universal Ltd. AIR 2005 SC 4446; and Carona Ltd. v. Parvathy
Swaminathan & Sons AIR 2008 SC 187)."
(emphasis supplied) ·
B
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 b~fore the Company
, Court under Section 446(1) of the Coll)panies Act. It was asserted, that
the order passed by the High Court was an order in personam, and as
c such, the aforesaid order dated 10.3 .2000 could not be considered as
binding on the,DRT, or for that matter, on the Recovery Officer of the
ORT. For the above proposition, learned senior counsel placed reliance
on the Andhra Bank case3, and drew the attention of this Court to the
following conclusions recorded therein:
D "31. Section 446 of the Companies Act indisputably confers a
wide power upon the Company Judge, but such a power can be
exercised only upon consideration of the respective contentions
of the parties raised in a suit or a proceei:ling or any claim made
by or against the company. Aquestion of determining the priorities
would also fall for consideration ifthe parties claiming the same
E 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
F that the same should have been exercised on consideration of the
factors laid down by this Court in M~rgan Stanley Mutual Fund v:
Kartick Das (1994) 4 SCC 225. An unreasoned order does not
subserve the doctrine of fair play. (See Mangalore Ganesh Beedi
Works v. CIT (2005) 2 SCC 329). .
(emphasis supplied)
G
29. In order to make the final thrust, learned senior counsel
representing the appellant submitted, that an auction sale of the nature,
which is subject matter of consideration in the present controversy, was
not liable to be set aside, merely on account of some trivial infirmities in
the procedure adopted for the sale of the same. It was the submission
H of learned counsel, that only a material irregularity would persuade a
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 691
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
Court to interfere with such sale proceedings conducted in furtherance A
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".
"7. There can be no doubt that an application underO. XXI, Rule B
90 to set aside an auction-sale concerns the rights of a person
declared to be the purchaser. If the application is allowed, the
sale is set aside and the purchaser is deprived of his right to have
the sale confirmed by the Court under Rule 92. Such a right is a
valuable right, in that, upon such confirmation the sale becomes
absolute and the rights of ownership in the property so sold become
c
vested in him. A decision in such a proceeding, 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 XX!, D
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 ofrights accrued to him as a result of the auction-sale.
We, therefore, agree with the High Court that a letters patent
E
appeal lay against the order of the learned single Judge.
8. Rule 90 of 0. XXI of the Code, as amended by the Allahabad
High Court, inter alia provides that no sale shall be set aside on
the ground of irregularity or even fraud unless upon the facts
proved the Court is satisfied that the applicant has sustained injury
by reason of such irregularity or fraud. Mere proof of a material F
irregularity 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 G
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
13
AIR 1971SC2337 H
692 SUPREME COURT REPORTS [2016] 6 S.C.R.
A Ramanya Das 14 • And the Court's attention was drawn to the following
observations:
"7. In the present case the Division Bench has come to the
conclusion that publicity was not as wide as originally proposed
by the Commissioners in their affidavit. The publication was made
B in four dailies namely The Hindu, Indian Express, the Hindustan
Times and The Statesman. There was no publication in the Times
offndia. Further out of the four newspapers in which publication
was made only in two there were 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
c 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
D again with wider publicity. There is also the affidavit of the State
Government dated August 29, 1963 in which the value of the
property was shown as Rs.13,40,000/-. Besides, on that very day,
one Gopaldas Darak had come before the Court with a higher
offer showing his bona fides and earnestness by depositing more
than one lakh of rupees. He came with the complaint that there
E was not sufficient publicity as to attract people from the north and
that as soon as he came to know he gave his offer. In these
circumstances the 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
F 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 sealed
tenders or in such manner as the Judge may direct. It appears
G that on April 17, 1964 at the instance of the Official Liquidator
and at the instance of a contributory the Court had approved of
the terms and conditions of sale which provide calling of sealed
tenders. On December 24, 1964 the learned Judge realised the
inefficacy of this Course and decided to abandon the original
H "(1969) 3 sec 537
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 693
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
procedure and put the properties to auction. But having made up A
his mind to resort to auction the learned Judge confined 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 ge~~ral public but was confined to two named persons.
B
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 wherein every member of the public is at liberty to
participate. No doubt, the device resorted to considerably raised
the previous bid yet it was not an adequate price having regard to c
the market value of the property to which reference has already
been made. The denial of opportunity to purchase the property by
persons who would have taken part in the auction bid but for
want of notice is a serious matter. In our opinion the learned Judge
having decided on December 24, 1964 that the property should be
D
potto 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 E
the Court and the Division Bench ought not to have interfered
with the discretion exercised by the Company Judge. It is true
that the discretion exercised by the Judge ought not to be interfered
with unless the Judge has gone wrong on principle. As already
pointed out the learned Company Judge having decided to put the
property to auction went wrong in not holding the auction as a
F
public auction after due publicity and this has resulted in prejudice
to the Company and the creditors in that the auction did not fetch
adequate price. The prejudice was inherent in the method adopted.
The petition of Padam Chand Agarwal also suggests that want of
publicity had resulted in prejudice. In these circumstances the G
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, I 965
should be set aside and there should be fresh sale of the property
H
694 SUPREME COURT REPORTS [2016) 6 S.C.R.
A either by calling sealed tenders or by auction in accordance with
law. The tender will be called or the auction will take place with
the minimum offer or with the starting bid often lakh rupees."
(emphasis supplied)
30. Based on the legal position declared by this Court in the above
B judgments, it was asserted, that the validity of the auction sale held on
11.8.2005 and the confirmation thereof on 12.9.2005 was natural and
normal in the facts and circumstances of this case. In order to restore
the aforestated validity, it was submitted, that the impugned order passed
by the High Court deserved to be set aside.
31. We have given our thoughtful consideration to the complicated
c 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
0
consideration falls in a narrow compass. It is apposite, to crystalise the
dimensions of the dispute. Oeve Sugars Ltd. was ordered to be wound
up on 16.4.1999 (in Company Petition No.170 of 1995). The Official
Liquidator took possession of the assets of Oeve Sugars Ltd. situated at
Harige on 28.9.1999. The State Bank of Mysore filed Company
E Application Nos. 1251-1253 ofl 999, in thethen pending Company Petition
No.170 of 1995. Through the above applications, the State Bank of
Mysore sought leave of the Company Court in the High Court at Madras,
to pursue the recovery proceedings before the ORT, Bangalore .. On
10.3.2000, the Company Court granted leave" ... subject to the condition
t~at. .. no coercive steps are taken against the assets of the company
F
during or after the conclusion of the proceedings before the Tribunal. .. "
33. After the ORT, Bangalore issued the recovery certificate dated
15.5.2002, the State Bank of Mysore filed Company Application No.
1300 of2003, with a prayer that the bank be permitted to seek execution
of the recovery certificate. It is not a matter of dispute, that the Company
G
Court in the High Court at Madras, neither heard nor passed any order
on the above application. The admitted position is, that the Registry of
the High Court, at its own, returned the above Company Application
No.1300 of2003, by recording an endorsement, that leave of the High
Court was not necessary. The Recovery Officer thereafter proceeded
H with the sale of the properties ofOeve Sugars Ltd.
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 695
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
34. Tungabadra Sugar Works Mazdoor Sangha, the workers' union A
ofDeve Sugars Ltd., 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
B
were overruled by the Recovery Officer.
35. The workers' union, then assailed the recovery proceedings,
before the High Court of Karnataka, by fil irig Writ Petition No.3 7991 of
2004. Videocon International Ltd. and Tapti Machines Pvt. Ltd. also
filed WritPetition No.26564 of2005, before the High Court ofKarnataka.
In the above writ petitions, the petitioners assailed the sale proceedings c
before the Recovery Officer. Based on a preliminarynbjection raised by
the appellant-Anita International, the High Court ofKarnataka relegated
the petitioners to their remedy under the ROB Act, by a common order
dated 27.10 .2006. The above order was challenged through Writ Appeal
Nos. 2050 and 2051 of2006 before the High Court ofKarnataka. The D
writ appeals were dismissed on 23.2.2007.
36. The workers' union thereafter preferred AOR No. I 5 of2006
and Videocon International Ltd. filed AOR No. I of2007. 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 E
Deve Sugars Ltd. to Anita International, was con finned.
~
37. It would be relevant to mention, that as against the reserve
price of Rs. I 0 crores, Anita International - the appellant herein, made a
bid of Rs. I 0.25 crores. The same was accepted by the Recovery Officer
on I 1.8.2005, and confirmed on 12.9.2005. One N. Ponnusamy filed F
Company Application Nos. 2740-2742 of 2007, before the Company
Court in the High Court at Madras, wherein he.assailed the sale and
confinnation orders dated 11.8.2005 and 12.9.2005. In the above
applications, it was inter a/ia asserted, that the reserve price of Rs. I 0
crores was too low. The above company applications were dismissed
on 3.3.2009. A challenge raised against the same, was also dismissed G
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 H
696 SUPREME COURT REPORTS [2016] 6 S.C.R.
A RDB Act. A challenge raised to the above order dated 3.3.2009, by
way ofan intra-court appeal, was allowed by the High Court, on 17.9.2009.
It is this order, which is subject matter of challenge before this Court.
Stated concisely, the High Court expressed the view, that the proceedings
before the Recovery Officer, including the sale of the properties ofDeve
Sugars Ltd. on 11.8.2005 and the confirmation thereof on 12.9.2005,
B
had been conducted in disregard of the order of the Company Court in
the High Court at Madras, dated 10.3.2000 (in Company Application
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.
c 39. The principal debate raised before this Court, revolves around
the cause and effect of the order dated I0.3.2000, 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
D Recovery Officer, including the sale of the properties of Deve Sugars
Ltd. on 11.8.2005, and also, the confirmation thereof by the Recovery
Officer on 12.9.2005. According to the respondents, who support the
impugned order dated 17 .9.2009, the order dated 10.3 .2000 was valid, and
had a binding effect. And because, the proceedings conducted by the
Recovery Officer were in total disregard of the order dated 10.3.2000, it
E was submitted, that the impugned order was well founded.
40. In order to support their claim, it was submitted on behalf of
the appellants, that jurisdiction in matters ofrecovery agitated by banks
and financial institutions under the ROB Act, has been repeatedly
expounded by this Court. The concerned Debts Recovery Tribunals,
F 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 ofRecovery Officers, in matters
of execution of recovery certificates, was likewise exclusive. It was
the pointed contention oflearned counsel for the appellants, that in matters
G wherein banks and financial institutions approach a Debts Recovery
Tribunal, which on due consideration issues a recovery certificate, the
same can be executed only through a Recovery Officer. It was submitted,
that a Company Court has no jurisdiction, in the matter. Learned counsel
for the appellants, substantiated the above assertion on the basis of the
decisions rendered by this Court in the Allahabad Bank 1, the M.V.
H
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 697
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
Janardhan Reddy:, the Andhra Bank3, the Rajasthan State Financial A
Corporation•, 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 confinnation thereof for executing a recovery certificate B
fell squarely within his jurisdiction under the RDBAct. And his jurisdiction
being exclusive, as declared by this Court could not be interfered with or
set aside. It is in the above context, that it was also the pointed assertion
of learned counsel representing the appellant, that the order passed by
the Company Court in the High Court at Madras dated 10.3 .2000 was
without jurisdiction. Learned counsel representing the appellant however c
cautioned this Court, not to confuse the power of the Recovery Officer
in executing recovery certificates (through sale of the debtor's properties),
with the apportionment of the sale proceeds. It was urged, that the
concern of the appellant-Anita International, was limited to the sale of
the properties ofDeve Sugars Ltd., which it had purchased on 11.8.2005, D
which was confinned 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
determination.
E
42. It is not possible for us to accept the contentions advanced on
behalf of the appellants. In this behalf, it would be relevant to mention,
that in the M.V. Janardhan Reddy case:, the Company Court by an
order dated 13.8.1999 required that its pennission should be obtained
before the Recovery Officer finalized the sale. Thereafter, the Company
Court by an order dated 25.3.2005, directed that sale by the Recovery F
Officer, was subject to confirmation by the Company Court. In the
above 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 G
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
of a Recovery Officer, in executing the recovery certificate. In our
considered view, the above contention is immaterial to the issue under
H
698 SUPREME COURT REPORTS [2016] 6 S.C.R.
A consideration. The issue under consideration is, whether or not, an order
passed by the Company Court (in the present case, the order dated
10.3.2000) was binding on the Recovery Officer? Ana;·whether the
proceedings conducted by the Recovery Officer, in violation of the above
order, were sustainable in law? We have no hesitation irrconcluding,
that fo the M.V. Janardhan ReQs!ycase~, an order passed by the Company
B 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.
c 43. In addition to the above, reference may be made to the judgment · .;;
rendered by this Court in the Official Liquidator, Uttar Pradesh and
Uttarakhand cases. In paragraph 36 of the above judgment (extracted
in paragraph xxx 24 xxx hereinabove), this Court has taken due notice
of the ·proposition, with reference to a case where an order, had been
D passed by the Company Court. The proposition dealt with was in a
situation where, the Company Court had imposed a condition on the
~ecovery Officer, that permission of the Company Court would be
obtained, before the Recovery Officer conducted the sale and confirmation
of the movable or immovable properties, ofthe debtor. It was held, that the
order passed by the Company Court, was binding on the Recovery Officer.
E 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 conclusion, also expressed, that
F the above issue had nothing to do with the proposition, whether an Official
Liquidator can approach a Company Court, to seek the setting aside of the
auction and the sale conduced by the Recovery Officer. It would be relevant
to mention, that the judgments relied upon by learned counsel for the
appellants, were duly taken into consideration in the Official Liquidator, Uttar
Pradesh and Uttarakhand cases. In view of the above, we are of the
G considered view, that the pointed issue canvassed before us, at the hands of
leamed counsel for the appellants, stands answered against the appellant in
paragraph 36 ofthe 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 ofleamed counsel for the
H appellants.
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS 699
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
44. Despite our above conclusion, it is imperative for us to notice, that A
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 beforethe jurisdictional Company Court, or alternatively,
intervene in a pending winding up petition. Since there is no bar restraining
a bank or a financial institution from approaching a Company Court, by filing
B
a winding up petition, it is not possible to conclude, that the jurisdictional
Company Court, is not possessed with the determinative authority/
competence to 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 I0.3.2000, lacked the jurisdictional authority. c
Since we have concluded that the Company Court which passed the order
dated I0.3.2000 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.
45. We are also of the ~onsidered view, as held by the Court in the
Krishnadevi Malehand Kamathia case8, that it is not open either to parties D
to a /is or to any third parties, to determine at their own, that an order
passed by a Court is valid or void. A party to the /is or a third party, who
considers an order passed by a Court as void or 11011 est, must approach
a Court of competent jurisdiction, to have the said order set aside, on
such grounds as may be available in law. However, till an order passed
by a competent Court is set aside, as was also held by this Court in the E
Official Liquidator, Uttar Pradesh and Uttarakhand 5 and the Jehal Tanti 9
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 F
after six years. In other words, an order passed by a Court having no
jurisdiction, had subsisted for six years. This Court held, that the said
order could not have been violated_ while it subsisted. And further, that
the violation ofthe order, before it is set aside, is liable to entail punishment,
for its disobedience. For us to conclude otherwise, may have disastrous
consequences. In the above situation, every cantankerous and G
quarrelsome litigant would be entitled to canvass, that in his wisdom, the
judicial order detrimental to 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.
H
700 SUPREME COURT REPORTS (2016] 6 S.C.R.
A 46. To be fair to learned counsel for the appel !ants, it needs to be
noticed, that reliance was also placed on behalf of the appellants on the
Kiran Singh 10, the Sadashiv Prasad Singh 6, and the Jagmittar Sain
Bhagat 1 ~ cases, to contend, that a decree passed by a Court without
jurisdiction was a nullity, and that, its invalidity could not be corrected,
even by the consent of the concerned parties. We are of the considered
B
view, that the proposition debated and concluded in the judgments relied
upon by learned counsel for the appellants (referred to above) are of no
relevance, to the conclusions drawn in the foregoing paragraph. In our
determination hereinabove, we have not held, that a void order can be
legitimized. What we have concluded in the foregoing paragraph is, that
c while an order passed by a Court subsists, the same is liable to be complied
with, till it is set aside. ·
47. The submission canvassed at the hands oflearned 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
D 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 contention. In this behalf, one cannot lose sight of the
factthat the Official Liquidator, as well as, the workers' union had raised
objections before the Recovery Officer at the very initial stage. Even a
E former Director ofDeve Sugars Ltd. - N. Ponnusamy raised a challenge
to the proceedings before the Recovery Officer by asserting, that the
reserve price of Rs. I 0 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.
F 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
G equity. Reliance placed by learned counsel on the judgments rendered
by this Court, in support of the instant contention, is also unacceptable,
as the factual position in the judgments relied upon, are inapplicable to
the facts and circumstances of this case. In view of the above, we find
no merit in the contention advanced.
H
ANITA INTERNATIONAL v. TUNGABAORA SUGAR WORKS 701
MAZOOOR SANGH [JAGDISH SINGH KHEHAR, J.]
48. Jt was also submitted on behalf of the appellants, that the sale A
co11ducted by the Recovery Officer on I l.8.2005, and the order of
confirmation thereof passed by the Recovery Officer on 12.9.2005, ought
to have been assailed only in proceedings under Section 30 of the ROB
Act. It was submitted, that since an efficacious alternative remedy was
available to the parties, which had approached the Company Court in
B
the High Court at Madras, the interference at the hands of the High
Court was neither just nor proper. The instant submission is wholly
do::void of substance and deserves to be rejected. We are of the considered
view, that there was sufficient justification for the parties to have
approached the Company Court in the High Court at Madras, for the
reason that they were seeking the enforcement of the order dated c
10.3.2000, passed by the Company Court itself. The sale made by the
Recgvery Officer on 11.8.2005, and its confirmation on 12.9.2005, were
in utter violation of the order dated I 0.3.2000, and therefore, the
concerned parties were justified in approaching the High Court at
Madras. In the above view of the matter, we find no merit in the instant
contention as well.
0
49. Last of all, we may advert to the contention, that the order
dated 10.3.2000 passed by the Company Court in th~ 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.
E
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 on
the appellant before this Court. We find no merit in the instant contention,
as well. In this beha_lf, it would be relevant to mention, that in the ,
application filed by the State Bank of Mysore, the prayer made was, F
that the State Bank of Mysore be permitted, leave to proceed with
recovery proceedings before the ORT, Bangalore. By the order dated
I 0.3.2000, the Company Court in the High Court at Madras, while granting
leave, imposed two conditions. Firstly, the Official Liquidator would have
to be impleaded by the bank in the recovery proceedings before the
DRT, Bangalore. And secondly, no coercive steps would be taken against G
the assets of the company during or after the conclusion of the proceedings
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
H
702 SUPREME COURT REPORTS [2016] 6 S.C.R.
A 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
above view of the matter, there can be no doubt, that the order dated
I 0.3.2000 was also binding on the appellant before this Court. For the
B
above reasons, we find no merit even in the last contention advanced by
learned counsel for the appellants.
50. For all the reasons recorded hereinabove, we find no merit in
the instant appeals. The same are accordingly dismissed. While affirming
the impugned order passed by the High Court, we confirm the setting
c aside of the sale made by the Recovery Officer in favour of the appellant
-Anita International on 11.8.2005, and the confirmation thereof by the
order of the Recovery Officer dated 12.9.2005.
Kalpana K. Tripathy Appeals dismissed.
D
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