Whether banking company is exempt from insolvency proceeding?

 In IV (2001) CLT 284(cited Supra) the question, whether the bank can claim exception from Insolvency proceedings under Section 8 of the Provincial Insolvency Act 1920 came up for consideration before the Allahabad High Court. The Allahabad High Court after consideringSection 8 of the Provincial Insolvency Act 1920, Section 5(c) of the Banking Regulation Act 1949 and Section 2(d) of the Banking Companies (Regulation and transfer of Undertakings) Act 1970, held that Punjab National Bank is a Govt. Company under Section 617 of the Companies Act 1956 and therefore it is exempted from Insolvency proceedings.

Madras High Court

Tmt. Lalitha vs State Bank Of Hydrabad on 9 March, 2007

The petition in I.A.40 of 2004 in I.P.142 of 2002 on the file of the III Additional Sub Judge, Madurai is the Revision Petitioner.

2. The Revision Petitioner filed I.P.No.142 of 2002 under Section 10 of the Provincial Insolvency Act 1920 to adjudicate her as Insolvent. The respondents herein are shown as a creditors in the insolvency petitions. She filed I.A.No.40 of 2004 praying to appoint an interim receiver of the property shown in Schedule 'A' of the main petition and to direct the interim receiver to take immediate possession of the said property for the purpose of preservation and administration of the estate, pending disposal of I.P.No.142 of 2002. The second respondent herein filed a counter affidavit opposing the application wherein the maintainability of the main petition itself against the Companies and Corporations was raised. The Court below by order dated 10.10.2006 dismissed the I.A.No.40 of 2004 and aggrieved by the same, the above Civil Revision Petition has been filed under Article 227 of the Constitution of India.

3. Heard the learned Counsel for the petitioner and the learned counsel for the first respondent bank and the learned counsel for the second respondent Corporation. I have also gone through the documents and Judgements referred to by them in support of their submissions.

4. The learned counsel for the Revision petitioner contended that insolvency act is a special act enacted much before other acts and therefore any bar which is created under the subsequent act will not apply to Insolvency proceedings.

5. Per Contra, the learned counsel for the first respondent bank submitted that the Insolvency act will not be applicable to Banking Companies and Corporations and therefore the Court below has correctly dismissed the I.A.No.40 of 2004. In support of his contentions, he relied on the decision reported in (1)IV(2001)CLT 284 (Nagendra Kumar Jain Vs. District Judge, Moradabad and Others), (2) 2005(3) CTC 513 (Digivision Electronics Ltd., Registered Office at No.A5 & 6, Industrial Estate, Guindy, Chennai- 32 Vs. Indian Bank, rep. By its Deputy General Manager, Head Office, 31, Rajaji Salai, Chennai - 1 and another).

6. I have considered the rival submissions carefully with regard to facts and citations.

7. In IV (2001) CLT 284(cited Supra) the question, whether the bank can claim exception from Insolvency proceedings under Section 8 of the Provincial Insolvency Act 1920 came up for consideration before the Allahabad High Court. The Allahabad High Court after consideringSection 8 of the Provincial Insolvency Act 1920, Section 5(c) of the Banking Regulation Act 1949 and Section 2(d) of the Banking Companies (Regulation and transfer of Undertakings) Act 1970, held that Punjab National Bank is a Govt. Company under Section 617 of the Companies Act 1956 and therefore it is exempted from Insolvency proceedings.

8. In 2005(3) CTC 513 (cited Supra) the Division Bench of this Court held that once a notice is issued under Section 13(2) of the Securitisation Act, the remedy is only to file a reply to the said notice and when the party wants to challenge under Section 13(4) of the Securitisation Act, the proper remedy is to file an appeal under Section 17 of the Act.

9. In the present case, it is not in dispute that first respondent Bank has already issued a notice dated 10.11.2003 under Section 13(2) of the Securitisation Act and another Notice dated 08.09.05 was issued under Section 13(4) of the very same Act. In such circumstances, the property involved in the above said two notices ought to be proceeded with in accordance with the provisions, contained in the act and no received could be appointed to take possession of property covered under Securitisation Act. It is also specifically mentioned in the notice dated 10.11.2003 that if the Revision petitioner fails to pay a sum of Rs.2,55,899.15 as on 10.11.2003, the Bank would exercise all or any of the rights detailed under Section 13(4) of the Act. In the notice dated 08.09.2005 issued under Section 13(4) of the Act, it was informed by the first respondent Bank that the possession was already taken on 31.05.2005 and if the Revision Petition fails to pay a sum of Rs.6,37,526.45 within 30 days, they would be constrained to sell the property for realising the dues. In such circumstances, the Court below is right in rejecting the application filed by the Revision petitioner to appoint an interim receiver to take possession of the property. Further, the maintainability of the Insolvency Petition itself against the Bank and Corporation is doubtful in view of the Judgement of the Allahabad High Court cited Supra and therefore I do not find any merits in the Civil Revision Petition and the same is liable to be dismissed.

10. In the result, this Civil Revision Petition is dismissed. No Costs. Connected C.M.P. is dismissed.

To

1. The III Additional Sub Judge, Madurai.

Print Page