ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS MAZDOOR SANGH - AND OTHERS

The Judgment of the Court was delivered by JAGDISH SINGH KHEHAR, J. I. Leave granted in Special Leave Petition (C) Nos. 7490-7491 of2014.

2Copy pinpoint2. 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.

3Copy pinpoint3. 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

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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).

4Copy pinpoint4. 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, 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.

5Copy pinpoint5. On 1.8.2001, the workers' union of Deve Sugars Ltd. was granted the responsibility to overlook security arrangements of the establishment of Deve Sugars Ltd ..

6Copy pinpoint6. 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

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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."

7Copy pinpoint7. 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.

8Copy pinpoint8. 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

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MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]

proceedings, at the hands of the Recovery Officer, because their salary 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 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.

9Copy pinpoint9. 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 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 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

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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

11Copy pinpoint11. 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

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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.

12Copy pinpoint12. 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

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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 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 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

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MAZDOOR SANGH [JAGDJSH SINGH KHEHAR, J.]

13Copy pinpoint13. 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 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 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

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14Copy pinpoint14. 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 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 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

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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

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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 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 transferred, unless the Company Court had jurisdiction to decide

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MAZOOOR SANGH [JAGDISH SINGH KHEHAR, J.]

the ~stions which were raised before the UC Tribunal. there 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 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 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 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

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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

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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.

16Copy pinpoint16. 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

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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 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 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

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MAZDOOR SANGH (JAGDISH SINGH KHEHAR, J.]

of the Company Court cannot, therefore, be kept out of the process.

17Copy pinpoint17. 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 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, 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 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 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

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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.

18Copy pinpoint18. 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

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· 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

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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

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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 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 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

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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 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 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

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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

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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 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 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 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 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

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(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

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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 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 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

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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 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 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 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

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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.

19Copy pinpoint19. 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 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 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 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 neither varied nor vacated. The same, according to learned counsel,

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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.

20Copy pinpoint20. 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

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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 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 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

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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 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; 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 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 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

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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 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 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)

21Copy pinpoint21. On the jurisdictional aspect, learned senior counsel for the 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 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

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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 ....."

22Copy pinpoint22. 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'.

23Copy pinpoint23. 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 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 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

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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 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 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 or for one person. it may not be so for another purpose or another 12erson." (emphasis supplied)

24Copy pinpoint24. 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

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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 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 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

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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

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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 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 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