Whether any person can disobey order passed by court on ground that it was void?

The question is whether pending the decision in

respect of objection to the jurisdiction, no person can be

punished for flouting or disobeying the interim/interlocutory

orders while they were in force i.e for violations and

disobedience committed prior to the decision on the question

of jurisdiction ?

Held :- The nature and effect of an alienation made in

violation of an order of injunction was considered in

Tayabbhai M. Bagasarwalla v. Hind Rubber Industries (P)

Ltd.,(1997)3 SCC443 and the following propositions were laid

down:

Section 9-A(1) CPC says that if an objection is

raised to the jurisdiction of the court at the hearing of an

application for grant of, or for vacating, interim relief, the 10

court should determine that issue in the first instance as a

preliminary issue before granting or setting aside the relief

already granted. An application raising objection to the

jurisdiction to the court is directed to be heard with all

expedition. Sub-section (2), however, says that the command

in sub-section (1) does not preclude the court from granting

such interim relief as it may consider necessary pending the

decision on the question of jurisdiction. The provision merely

states the obvious. It makes explicit what is implicit in law.

Just because an objection to the jurisdiction is raised, the

court does not become helpless forthwith-nor does it become

incompetent to grant the interim relief. It can. At the same

time, it should also decide the objection to jurisdiction at the

earliest possible moment. This is the general principle and

this is what Section 9-A reiterates. For ex., the plaintiff asked

for temporary injunction. An ad interim injunction was

granted. Then the defendants came forward objecting to the

grant of injunction and also raising an objection to the

jurisdiction of the court. The court overruled the objection as

to jurisdiction and made the interim injunction absolute. The

defendants filed an appeal against the decision on the

question of jurisdiction. While that appeal was pending,

several other interim orders were passed both by the civil

court as well as by the High Court. Ultimately, no doubt, the

High Court has found that the civil court had no jurisdiction

to entertain the suit but all this took about six years. Can it be

said that orders passed by the civil court and the High Court

during this period of six years were all non est and that it is

open to the defendants to flout them merrily, without fear of 

any consequence. Admittedly, this could not be done until the

High Court's decision on the question of jurisdiction. The

question is whether the said decision of the High Court

means that no person can be punished for flouting or

disobeying the interim/interlocutory orders while they were in

force i.e for violations and disobedience committed prior to

the decision of the High Court on the question of

jurisdiction ? Holding that by virtue of the said decision of the

High Court (on the question of jurisdiction), no one can be

punished thereafter for disobedience or violation of the

interim orders committed prior to the said decision of the

High Court, would indeed be subversive of the rule of law and

would seriously erode the dignity and the authority of the

courts. We must repeat that this is not even a case where a

suit was filed in the wrong court knowingly or only with a

view to snatch an interim order. As pointed out hereinabove,

the suit was filed in the civil court bona fide. We are of the

opinion that in such a case, the defendants cannot escape the

consequences of their disobedience and violation of the

interim injunction committed by them prior to the High

Court's decision on the question of jurisdiction.

 Learned senior counsel for the

respondents, placed reliance on Krishnadevi Malchand Kamathia v. Bombay

Environmental Action Group (2011) 3 SCC 363,

 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.

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6042-6048 OF 2011

Anita International Vs Tungabadra Sugar Works Mazdoor Sangh –

and others 

Dated:July 04, 2016.

Citation:2016 SCC OnLine SC 655,

1. Leave granted in Special Leave Petition (C) Nos. 7490-7491 of 2014.

2. Two company petitions, i.e., Company Petition Nos. 170 of 1995

and 35 of 1997 were filed by Videocon International Ltd. and Tapti

Machines Pvt. Ltd., for winding up of Deve 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 16.4.1999. An Official Liquidator was accordingly directed 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.Page 2

3. The State Bank of Mysore had also extended some loans to Deve

Sugars Ltd.. When Deve Sugars Ltd. defaulted in the repayment of the

loans, the State Bank of Mysore filed Original Application Nos. 440 of 1997

and 1300 of 1997, before the Debts Recovery Tribunal, Bangalore,

(hereinafter referred to as, the DRT, Bangalore) for the recovery of

Rs.22,31,78,558.55. During the course of the instant proceedings, the

DRT, Bangalore issued a recovery certificate in the sum of Rs.8.40 crores. It

would be relevant to mention, that the State Bank of Mysore also filed

Company Application Nos.1251-1253 of 1999, in the pending Company

Petition No.170 of 1995, before the High Court at Madras, seeking leave to

proceed with the recovery proceedings before the DRT, Bangalore, under the

Recovery of Debts Due to Banks and Financial Institutions Act, 1993

(hereinafter referred to as, the RDB Act).

4. The Company Court in the High Court at Madras, while granting

leave to the State Bank of Mysore, passed the following order on 10.3.2000

(while disposing of Company Application Nos. 1251-1253 of 1999):

“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

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 Court made the following orders:-

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)

2Page 3

A perusal of the above order reveals, that leave was granted, subject to the

condition that the Official Liquidator, was impleaded before the DRT,

Bangalore, and further, that no coercive steps would be taken against the

assets of the company – Deve Sugars Ltd., during or after the conclusion of

proceedings before the DRT, Bangalore.

5. On 1.8.2001, the workers’ union of Deve Sugars Ltd. was granted

the responsibility to overlook security arrangements of the establishment of

Deve Sugars Ltd..

6. Immediately after the DRT, 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

company in liquidation, at the hands of the Recovery Officer of the DRT,

Bangalore (hereinafter referred to as, the Recovery Officer). Simultaneously,

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 of 2003,

with a prayer that it be permitted to seek execution of the recovery

certificate dated 15.5.2002 (for recovering the amounts due to it, from out of

the assets of Deve 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 of 2003, the Registry of the High Court at Madras,

relied upon a judgment rendered by this Court in Civil Appeal No. 2536 of

3Page 4

2000 (reported as Allahabad Bank v. Canara Bank1

). While not entertaining

Company Application No.1300 of 2003, the Registry of the High Court

recorded the following endorsement:

“ORDER

As per order in Civil Appeal no.2536/00 as reported in 2000 (3)

SCC 205. Leave is not necessary.”

7. Consequent upon the return of Company Application No.1300 of

2003, 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 Sugars Ltd..

Accordingly, the State Bank of Mysore approached the Recovery Officer, for

the disposal of the assets of Deve Sugars Ltd., in continuation of the

recovery certificate issued by the DRT 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 the procedure prescribed

under the RDB Act. The auction of the properties of Deve Sugars Ltd., in

the first instance, was fixed for 1.10.2014.

8. At the instant juncture, the workers’ union (Tungabadra Sugar

Works Mazdoor Sangh), of Deve Sugars Ltd., approached the High Court of

Karnataka, by filing Writ Petition No.37991 of 2004. 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 proceedings, at the hands of the

1

(2000) 4 SCC 406

4Page 5

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 of Karnataka, 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 recovery proceedings against Deve Sugars Ltd. before the DRT,

the High Court at Madras, had directed that the Official Liquidator be

impleaded as a respondent before the DRT. 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 DRT).

The Official Liquidator sought deferment of the sale proceedings at the hands

of the Recovery Officer, under Section 529A of the Companies Act. It would

be relevant to mention, that the objections raised by the workers’ union and

the Official Liquidator, were overruled by the Recovery Officer.

9. It is also pertinent to mention, that the auction scheduled by the

Recovery Officer for 1.10.2004, could not be conducted. Accordingly, a

fresh proclamation was issued, for the auction of the properties of Deve

5Page 6

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.10 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.10.25 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 RDB 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.

10. 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. At the instant

juncture, the appellant – Anita International, filed Company Application

No.1811 of 2005 before the High Court at Madras for removal of the security

agency. At the said juncture, Videocon International Ltd. and Tapti

Machines Pvt. Ltd. filed Writ Petition No.26564 of 2005 before the High

Court of Karnataka. The above writ petition, and Writ Petition No.37991 of

2004 (filed by the workers’ union) were heard by a learned single Judge,

6Page 7

wherein the auction purchaser – Anita International, raised a preliminary

objection. It was submitted, that the petitioners before the High Court had

an efficacious alternative remedy, under the RDB 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 the hands of the Recovery Officer. It would be

relevant to mention, that the above two writ petitions were disposed of by

the High Court of Karnataka, 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 DRT, Bangalore. The above common order

dated 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

DRT, Bangalore, by filing appeals. As a matter of abundant caution, the

appellate Court ordered, that the DRT, Bangalore, would deal with the

controversy, uninfluenced by the orders passed by the High Court.

11. In compliance with, and in continuation of the outcome before the

High Court of Karnataka, the workers’ union preferred AOR No.15 of 2006

and Videocon International Ltd. preferred AOR No.1 of 2007. 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 Deve Sugars Ltd.

conducted on 11.8.2005, in favour of Anita International was confirmed.

7Page 8

Simultaneously, one N. Ponnusamy, an ex-Director of Deve Sugars Ltd.,

filed Company Application Nos.2740-2742 of 2007 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 confirmation order dated

12.9.2005, after the payment of the consideration amount. The challenge

raised by N. Ponnusamy was primarily on the ground that the reserve price

of Rs.10 crore was too low. N. Ponnusamy, also sought transfer of the

recovery proceedings, from the DRT, Bangalore, to the High Court at

Madras. While entertaining the proceedings initiated by N. Ponnusamy, the

High Court by its order dated 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.1811 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, 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 27.10.2006), and in consonance with the above order,

the Official Liquidator was obliged to file an appeal, to challenge the auction

sale (dated 11.8.2005), as well as, the order of confirmation (dated

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

8Page 9

an appeal, to assail the orders passed by the Recovery Officer. The other

applications, which came up for hearing jointly were likewise dismissed, as

the said applicants, had already availed of the appellate remedy, before the

DRT, Bangalore. As against the above, the application filed by Anita

International for possession of the property purchased by way of auction at

the hands of the Recovery Officer, was allowed.

12. Dissatisfied with the order passed by the Company Court, the

applicants raised a challenge to the order dated 3.3.2009 (passed in C.A.

Nos.1811 of 2005, 854 of 2006 and 2740-2742 of 2007 – 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 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 of Deve Sugars Ltd.. There

was nothing to indicate, that the said objections were ever 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.

9Page 10

Secondly, no material had been placed before the High Court 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).

Thirdly, even after the workers’ union had raised objections before the

Recovery 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.

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 permitted only on the day preceding the date of auction (namely, on

10.8.2005), leading to the inference, that the entire process of auction was a

mere formality.

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.

10Page 11

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 10.3.2000 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.

13. While dealing with the proposition of law declared by this Court in

the Allahabad Bank case1

, 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

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,

that the High Court by relying on the judgment in M.V. Janardhan Reddy v.

Vijaya Bank2

, 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

Application Nos.1251-1253 of 1999 (in pending Company Petition No.170 of

1995), and having obtained an order from the High Court dated 10.3.2000,

2

(2008) 7 SCC 738

11Page 12

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 DRT,

Bangalore. The High Court also expressed the view, that the order dated

10.3.2000 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 10.3.2000) of the Company Court in the High

Court at Madras. Relying on the decision of this Court in the M.V.

Janardhan Reddy case2

, 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.

12Page 13

14. Having concluded as above, the High Court vide the impugned

order dated 17.9.2009, directed as under:

“Hence the following judgment is made:

(i) The auction sale in question is set aside;

(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 of all 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

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.”

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 RDB Act. To canvass the above proposition, learned counsel

placed reliance on a number of judgments of this Court. The submissions

advanced in this behalf, are being narrated hereunder:

(i) Reliance was first placed on the Allahabad Bank case1

. It was pointed

out, that the above judgment was rendered on 10.4.2000. 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 RDB Act requires the Tribunal alone

to decide applications for recovery of debts due to banks or

13Page 14

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 the

liability of the defendant and then it has to issue a certificate 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

Supreme Court or of a 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 RDB

 Act are exclusive so far as the question of adjudication of the

liability of the defendant to the appellant Bank is concerned.

(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 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 25 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 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. Further, Section 34 of the Act

gives overriding effect to the provisions of the RDB Act. …..

xxx xxx xxx

The provisions of Section 34(1) clearly state that the RDB Act

overrides other laws to the extent of “inconsistency”. In our

opinion, the prescription of an exclusive Tribunal both for

 adjudication and execution is a procedure clearly inconsistent with

realisation of these debts in any other manner.

24. There is one more reason as to why it must be held that the

jurisdiction of the Recovery Officer is exclusive. The Tiwari

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

14Page 15

 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 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

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 RDB Act, 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, the 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

transferred. Section 15 of the Life Insurance Corporation Act, 1956

— which we may say, roughly corresponds to Section 17 of the

RDB 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. Section

41 of the LIC Act conferred exclusive jurisdiction on the said

Tribunal just like Section 18 of the RDB Act, 1993. There the

Company was ordered to be wound up by an order of the Company

Court passed under Section 446(1) 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

the questions which were raised before the LIC Tribunal, there was

no purpose of requiring leave of the Company Court or permitting

transfer. …..

xxx xxx xxx

31. It may also be noticed that in the LIC Act of 1956, there was no

provision like Section 34 of the RDB 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

secured creditor (here Canara Bank) against realisations by other

15Page 16

creditors (like Allahabad Bank) under Section 529-A read with

 proviso ( c) to Section 529(1) can arise before the Tribunal only if

Canara Bank has stood outside winding-up and realised amounts

and if it shows that out of the amounts privately realised by it,

some portion has been rateably taken away by the liquidator under

 clauses ( a ) and ( b) of the proviso to Section 529(1). 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(1)(b).

xxx xxx xxx

73. If none of the conditions required for applying 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.

xxx xxx xxx

76. The next question is whether the amounts realised under the

RDB Act at the instance of the appellant can be straight away

released in its favour. Now, even if Section 19(19) read with 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

 because of Section 529-A(1)( 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) 1 SCC 228

there is an obligation resting on this Court to see that no secured

or unsecured creditors including banks or financial institutions,

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 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

16Page 17

recover its dues from Deve Sugars Ltd. by initiating proceedings under the

RDB Act, nor the jurisdiction to interfere with the recovery proceedings by

directing that no coercive steps would be taken against Deve Sugars Ltd.,

during or after the conclusion of the proceedings before the DRT, 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

10.3.2000), was jurisdictionally and legally impermissible, and as such, was

liable to be ignored.

(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 case1

.

Learned counsel invited our attention to the position expressed in

paragraph 19 of the cited judgment, which is extracted hereunder:

“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 RDB Act

at the instance of the appellant can be straight away released in its

favour. Now, even if Section 19(19) read with 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 because of Section 529-A(1)(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) 1 SCC 228 there is an obligation resting on this Court to see

that no secured or unsecured creditors including banks or financial

institutions, 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)

3

(2005) 5 SCC 75

17Page 18

(iii) In chronological order, learned counsel next relied upon the

judgment in Rajasthan State Financial Corporation v. Official Liquidator4

,

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: (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 Court

specifically overruled the view taken by the High Court that it was not

necessary for the financial corporations to seek permission of the

Company Court to stay outside the winding-up proceedings. It was

held that Sections 529(1) 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 Section 46-B of the SFC Act.

16. In International Coach Builders Ltd. v. Karnataka State Financial

Corpn (2003) 10 SCC 482 this Court considered the correctness of the

views expressed by the Karnataka High Court 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 corporations

are affected by the provisions in Sections 529 and 529-A of the

Companies Act. It was also held that the 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 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 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

4

 (2005) 8 SCC 190

18Page 19

company and is in liquidation. The conflict, if any, is in the view that

the Debts Recovery Tribunal 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 35 of 1985 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 terms 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 of the Company Court

cannot, therefore, be kept out of the process.

17. Thus, on the authorities what emerges is that once a winding-up

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 31 of the 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 of

Section 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

19Page 20

 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 of the Companies Act in the matter of distribution among the

creditors. The right to sell under the SFC Act or under 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 security. The distribution in a case 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 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 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

International Coach Builders Ltd. The Debts Recovery Tribunal and

the District Court entertaining an application under Section 31 of the

SFC Act should issue notice to the Liquidator and hear him before

ordering a sale, as the representative of the creditors in general.

18. In the light of the discussion as above, we think it proper to sum

up the legal position thus:

(i) A Debts Recovery Tribunal acting under the Recovery of Debts Due

to Banks and Financial Institutions Act, 1993 would be entitled to

 order the sale and to sell the properties of the debtor, even if a

company-in-liquidation, through its Recovery Officer but only after

notice to the Official Liquidator or the Liquidator appointed by the

Company Court and after hearing him.

( ii) A District Court entertaining an application under Section 31 of

the SFC Act will have the power to order sale of the assets of a

borrower company-in-liquidation, but only after notice to the Official

Liquidator or the Liquidator appointed by the Company Court and

after hearing him.

(iii) If a financial corporation acting under Section 29 of the SFC Act

seeks to sell or otherwise transfer the assets of a debtor

company-in-liquidation, the said power could be exercised by it only

after obtaining the appropriate permission from the Company Court

and acting in terms of the directions issued by that court as regards

associating the Official Liquidator with the sale, the fixing of the upset

20Page 21

price or the reserve price, confirmation of the sale, holding of the sale

proceeds and the distribution thereof among the creditors in terms of

Section 529-A and Section 529 of the Companies Act.

( iv) In a case where proceedings under the Recovery of Debts Due to

Banks and Financial Institutions Act, 1993 or the SFC Act are not set

in motion, the 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)

Relying 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 Recovery

Officer, to sell the assets of the company in liquidation, under the provisions

of the RDB 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.

(iv) Learned counsel then placed reliance on the M.V. Janardhan

Reddy case2

. 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.

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 of law, was rightly set aside by the Company Judge and no

grievance could be made.

21Page 22

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 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

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 the

Official Liquidator without avoidable delay.

(D) The petitioner Bank shall file the valuer’s report in the court

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.

(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

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

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 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 as filed by the

applicant Company.

Under the above circumstances, the applicant Company is permitted

to go ahead with the proposed sale of the assets of the Company

22Page 23

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 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 doubt 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 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 of and inconsistent with the specific

condition imposed by the Company Court. In our considered opinion,

therefore, the appellant cannot take any advantage of confirmation of

sale by the Recovery Officer who did not possess the power to confirm

sale.

xxx xxx xxx

27. It is true that when the Company Judge set aside the sale on

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)

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 the Court. Here

23Page 24

again, learned counsel has drawn a fine distinction. It was asserted, that

even in the above judgment, this Court had not disputed nor disturbed the

exclusive jurisdiction of the Recovery Officer in executing a recovery

certificate.

(v) Last of all learned counsel placed reliance on Official Liquidator,

Uttar Pradesh and Uttarakhand v. Allahabad Bank5

, and drew our 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

RDB Act being a subsequent legislation and being a special 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 DRT with the association of the Official 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 RDB 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 DRT 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 of India (2013) 2 SCC 101.

32. Once the Official Liquidator is associated, needless to say, he 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 RDB Act.

5

(2013) 4 SCC 381

24Page 25

xxx xxx xxx

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 DRT

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 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 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 RDB Act, which is a special

enactment. DRT has the powers under the RDB 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 Sections 25 to 28 (both

inclusive) of the RDB Act. Thus, the auction, sale and challenge are

completely codified under the RDB Act, regard being had to the special

nature of the legislation.”

(emphasis supplied)

16. In addition to the aforesaid submissions, Mr. S. Ganesh, Senior

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 Singh6

.

Learned counsel invited our attention to the scope of interference with

reference to a public auction, wherein third party rights have emerged,

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

6

(2015) 5 SCC 574

25Page 26

in the Sadashiv Prasad Singh case6

, as were pointedly brought to 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 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 2010] were a total

sham, as he was actually the brother of one of the 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.—(1)

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 (1), the Tribunal 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

26Page 27

the order made by the Recovery Officer in exercise of his powers

under Sections 25 to 28 (both inclusive).”

The High Court ought not to have interfered with in the matter

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 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

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-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 favour of

Sadashiv Prasad Sinha. Harender Singh approached the High Court

through CWJC 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 laches, 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 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 that the

impugned order dated 17-5-2010 passed by the High Court allowing

Letters Patent Appeal No. 844 of 2010 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 by Harender Singh is hereby dismissed.”

(emphasis supplied)

27Page 28

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

there having been no objection to the same, the auction sale was confirmed

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.

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 of Karnataka,

while disposing of Writ Petition No.26564 of 2005 (GM-DRT) preferred by

Videocon International Ltd. and Tapti Machines Pvt. Ltd. and Writ Petition

No.37991 of 2004 (GM-DRT) preferred by Tungbhadra Sugar 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 27.10.2006, 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,

28Page 29

while giving effect to an order passed by the Debts Recovery Tribunal,

strictly within the jurisdiction of the provisions 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:

“30. Appeal against the order of Recovery Officer.— (1)

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 (1), the Tribunal 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 RDB 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 10.3.2000 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

29Page 30

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. Insofar as the instant aspect of the

matter is concerned, it was submitted, that the order dated 10.3.2000

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 of an injunction, was liable to be set aside.

An injunction order, according 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 DRT,

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 not only beyond the jurisdiction of the Recovery Officer, but also

beyond the jurisdiction of the Debts Recovery Tribunal. In the instant view

of the matter, it was contended, that the impugned order dated 27.9.2009,

passed by the High Court at Madras, ought not to be interfered with.

19. While substantiating the first contention noticed in the foregoing

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

30Page 31

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

Court, 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 RDB Act. It was

therefore the contention of learned counsel for the respondents, that since

the State Bank of Mysore could seek recourse to the DRT, 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. 1250-1253 of 1999 in pending Company Petition No.170 of

1995 (and Company Petition No.35 of 1997) had been filed by the State

Bank of Mysore, before a Court having jurisdiction. And therefore, a Court

having jurisdiction in the matter, at the instance of the State Bank of

Mysore, had passed the order dated 10.3.2000. By the order dated

10.3.2000, 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 DRT, 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 DRT. The said order was neither

31Page 32

varied nor vacated. The same, according to learned counsel, was binding

between the parties. And therefore, it was contended, that the same could

not have been ignored or overlooked. It was submitted, that even if the

above order dated 10.3.2000, 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 Deve Sugars Ltd., was

clearly in the teeth of the injunction order passed by the Company Court on

10.3.2000, and as such, was liable to be set aside.

20. In order to repudiate the submissions advanced at the hands of

learned counsel for the appellant, based on the judgment rendered by this

Court in the Allahabad Bank case1

, reliance was placed on Industrial Credit

and Investment Corporation of India Ltd. v. Srinivas Agencies7

, and the

Court’s attention was drawn to the factual and legal position expressed

therein:

“1. The extent of right of secured creditors to realise their debts from

the assets of a company which is under winding up or has 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.

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

dispose of any 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

7

(1996) 4 SCC 165

32Page 33

jurisdiction to transfer such a suit or proceeding to itself and dispose

of the same. These follow from sub-sections (2) and (3) of Section 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-up

order, can proceed against the company, except by leave of the

company court vide sub-section (1) 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 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.

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 (1) 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 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 that in

case of such conflict, the interest of liquidator 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,

contested by the learned counsel appearing for the appellants.

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

33Page 34

substantive right of a secured creditor, specially in view of large sums

of money being advanced of late of such creditors and, on the other

hand, not jeopardise the interest of other secured creditors. According

to the learned counsel, these twin objects can be achieved if the

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 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.

10. 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

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 in

this regard by the company court does not deserve to be put in a

strait-jacket formula. 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 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 would 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)

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

respondents placed reliance on clauses (1) and (2) of Section 446 of the

Companies Act, 1956. The same are reproduced below:

“446. Suits stayed on winding up order. – (1) When a winding up order

has been made or the Official Liquidator has been appointed as

provisional liquidator, no suit or other legal proceeding shall be

commenced, or if pending at the date of the winding up order, shall be

proceeded with, against the company, except by leave of the (Tribunal)

and subject to such terms as the (Tribunal) may impose.

(2) (Tribunal) shall, notwithstanding anything, contained in any other

law for the time being in force, have jurisdiction to entertain, or

dispose of –

(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;

(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 up of

the company, or before or after the commencement of the Companies

(Amendment) Act, 1960 …..”

35Page 36

22. With reference to the judgment rendered in the Allahabad Bank

case1

, 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 Company

Court before initiating proceedings against a debtor under the provisions of

the RDB Act. It was therefore pointed out, that there was no dissimilarity of

the conclusions drawn by this Court in the Allahabad Bank case1

 and the

Srinivas Agencies case7

.

23. In addition to the above, learned senior counsel for the

respondents, placed reliance on Krishnadevi Malchand Kamathia v. Bombay

Environmental Action Group8

, 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 of Kerala 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 invalidity of an order has to approach the court for

relief of declaration that the order against him is inoperative and

therefore, not binding upon him. While deciding 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 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.”

8

(2011) 3 SCC 363

36Page 37

18. In Sultan Sadik v. Sanjay Raj Subba AIR 2004 SC 1377, this

Court took a similar view observing that once an order is declared non

 est by the court only then the judgment of nullity would operate erga

 omnes i.e. for and against everyone concerned. Such a declaration is

permissible if the court 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. The order may be

hypothetically a nullity and even if its 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 person.”

(emphasis supplied)

24. In addition to the above, reliance was placed on Order XXI Rule 58

of the Code of Civil Procedure, which is extracted below:

“58. Adjudication of claims to, or objections to attachment of,

property. - (1) 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 liable to such attachment, the

Court shall proceed to adjudicate upon the claim or objection in

accordance with the provisions herein contained:

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.

(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.

(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

37Page 38

(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 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 (1), 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 recovery certificate issued by the

DRT. To support the aforementioned proposition, learned senior counsel

placed reliance on the 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:

“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 RDB Act for recovery of a sum of Rs

39,93,47,701 with interest from the Company, namely, M/s Rajindra

38Page 39

Pipes Ltd., which was decreed by the Debts Recovery Tribunal,

Jabalpur (DRT) 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 subsequently transferred to DRT 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 of which the Official

Liquidator had taken over the possession of the assets of the

Company on 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 Company

Court for impleading 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 (DRT). The learned Company Judge, on 13-2-2004, granted

permission for proceeding with the attachment and sale of the assets

for recovery of the dues under the RDB Act. It is worth stating here

that no condition was imposed.

3. After auction and confirmation of sale by DRT, the

auction-purchaser filed an application before the learned Company

Judge for issuance of a direction to the Official Liquidator to give

physical 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 liability under

Section 529-A of the 1956 Act. A direction 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 Bank

case1

 by concluding as under:

“35. It has been submitted by Mr Banerji, learned Senior Counsel,

that if the Company Court as well as DRT can exercise jurisdiction in

respect of the same auction or sale after adjudication by DRT, there

would be duality of exercise of jurisdiction which the RDB Act does

39Page 40

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 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 efflux of time. If more time is consumed, it would

be really difficult on the part of the banks and financial institutions to

 realise their dues. Therefore, this Court in Allahabad Bank case has

opined that it is DRT which would have the exclusive jurisdiction

when a matter is agitated before DRT. The dictum in the said case has

 been approved by the three-Judge Bench in Rajasthan State Financial

 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 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 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 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.

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 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

40Page 41

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-à-vis DRT as 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 of DRT.

37. In view of the aforesaid analysis, we concur with the view

expressed by the Division Bench and hold that the Official Liquidator

can prefer an appeal before DRT. As he was prosecuting the lis in all

genuineness before the Company Court and defending the order

before the Division Bench, we grant him four weeks’ time to file an

appeal after following the due procedure. On such an appeal being

preferred, DRT shall deal with the appeal in accordance with law. DRT

is directed to decide the appeal within a period of two months after

offering an opportunity of hearing to all concerned. Till the appeal is

disposed of, the interim order passed by this Court shall remain in

force. We hasten to clarify that we have not expressed anything on the

merits of the case.”

(emphasis supplied)

25. Reliance was then placed on Order XXI Rule 54 of the Code of Civil

Procedure, which is extracted hereunder:

“54. Attachment of immovable property.- (1) Where the property is

immovable, the attachment shall be made by an Order prohibiting the

judgment debtor from transferring or charging the property in any

way, and all persons from taking any benefit from such transfer or

charge.

(1)A The Order shall also require the judgment debtor to attend court

on a specified date to take notice of the date to be fixed for settling the

terms of the proclamation of sale.

(2) The Order shall be proclaimed at some place on or adjacent to

such property by beat of drum or other customary mode, and a copy

of the Order shall be affixed on a conspicuous part of the property and

then upon a conspicuous part of the court house, and also, where the

property is land paying revenue to the government, in the office of the

Collector of the District in which the land is situate and, where the

property is land situate in village, also in the office of the Gram

Panchayat, if any, having jurisdiction over that village.”

To support the contention advanced at the hands of learned senior counsel

representing the respondents, reliance was placed on Jehal Tanti v.

41Page 42

Nageshwar Singh9

. The following observations recorded therein, are of

relevance:

“10. The nature and effect of an alienation made in violation of an

order of injunction was considered in Tayabbhai M. Bagasarwalla v.

Hind Rubber Industries (P) Ltd. and the following propositions were

laid down:

“16. According to this section, if an objection is raised to the

jurisdiction of the court at the hearing of an application for grant of,

or for vacating, interim relief, the court should determine that issue in

the first instance as a preliminary issue before granting or setting

aside the relief already granted. An application raising objection to the

jurisdiction to the court is directed to be heard with all expedition.

Sub-rule (2), however, says that the command in sub-rule (1) does not

preclude the court from granting such interim relief as it may consider

necessary pending the decision on the question of jurisdiction. In our

opinion, the provision merely states the obvious. It makes explicit

what is implicit in law. Just because an objection to the jurisdiction is

raised, the court does not become helpless forthwith—nor does it

become incompetent to grant the interim relief. It can. At the same

time, it should also decide the objection to jurisdiction at the earliest

possible moment. This is the general principle and this is what

Section 9-A reiterates. Take this very case. The plaintiff asked for

temporary injunction. An ad interim injunction was granted. Then the

defendants came forward objecting to the grant of injunction and also

raising an objection to the jurisdiction of the court. The court

overruled the objection as to jurisdiction and made the interim

injunction absolute. The defendants filed an appeal against the

decision on the question of jurisdiction. While that appeal was

pending, several other interim orders were passed both by the civil

court as well as by the High Court. Ultimately, no doubt, the High

Court has found that the civil court had no jurisdiction to entertain

the suit but all this took about six years. Can it be said that orders

passed by the civil court and the High Court during this period of six

years were all non est and that it is open to the defendants to flout

them merrily, without fear of any consequence. Admittedly, this could

not be done until the High Court’s decision on the question of

jurisdiction. The question is whether the said decision of the High

Court means that no person can be punished for flouting or

disobeying the interim/interlocutory orders while they were in force

i.e. for violations and disobedience committed prior to the decision of

the High Court on the question of jurisdiction. Holding that by virtue

of the said decision of the High Court (on the question of jurisdiction),

9

(2013) 14 SCC 689

42Page 43

no one can be punished thereafter for disobedience or violation of the

interim orders committed prior to the said decision of the High Court,

would indeed be subversive of the rule of law and would seriously

erode the dignity and the authority of the courts. We must repeat that

this is not even a case where a suit was filed in the wrong court

knowingly or only with a view to snatch an interim order. As pointed

out hereinabove, the suit was filed in the civil court bona fide. We are

of the opinion that in such a case the defendants cannot escape the

consequences of their disobedience and violation of the interim

injunction committed by them prior to the High Court’s decision on

the question of jurisdiction.

28. The correct principle, therefore, is the one recognised and

reiterated in Section 9-A – to wit, where an objection to jurisdiction of

a civil court is raised to entertain a suit and to pass any interim

orders therein, the Court should decide the question of jurisdiction in

the first instance but that does not mean that pending the decision on

the question of jurisdiction, the Court has no jurisdiction to pass

interim orders as may be called for in the facts and circumstances of

the case. A mere objection to jurisdiction does not instantly disable

the court from passing any interim orders. It can yet pass appropriate

orders. At the same time, it should also decide the question of

jurisdiction at the earliest possible time. The interim orders so passed

are orders within jurisdiction when passed and effective till the court

decides that it has no jurisdiction to entertain the suit. These interim

orders undoubtedly come to an end with the decision that this Court

had no jurisdiction. It is open to the court to modify these orders

while holding that it has no jurisdiction to try the suit…..””

(emphasis supplied)

26. It was the emphatic contention of learned counsel for the

respondents, that the sole purpose for requiring the Official Liquidator to

participate in the proceedings before the DRT, was to keep the interest of

the creditors before the Company Court (where winding up proceedings had

been initiated by other creditors), secure. The interest of the creditors

before the Company Court could be secure, only if the sale of the properties

of the company under winding up was made by conforming to the

crystalised practices in getting the best price. Referring to the conclusions

43Page 44

drawn in the impugned order, it was submitted, that the auction sale

conducted by the Recovery Officer was farcical, as it was, with the sole

object of extending benefits to the appellant – Anita International. It was

therefore asserted, that the Division Bench of the High Court was fully

justified in setting aside the order passed by the learned Single Judge.

27. Mr. P. Chidambaram, learned senior counsel in rejoinder and in

response to the three contentions advanced at the hands of the

respondents, invited this Court’s attention to Sections 18, 19 and 34 of the

RDB Act. The same are extracted hereunder:

“18. Bar of Jurisdiction.—On and from the appointed day, no court or

other authority shall have, or be entitled to exercise, any jurisdiction,

powers or authority (except the Supreme Court, and a High Court

exercising jurisdiction under articles 226 and 227 of the Constitution)

in relation to the matters specified in section 17.

Provided that any proceedings in relation to the recovery of debts due

to any multi-State co-operative bank pending before the date of

commencement of the Enforcement of Security Interest and Recovery

of Debts Laws (Amendment) Act, 2012 under the Multi-State

Co-operative Societies Act, 2002 (39 of 2002) shall be continued and

nothing contained in this section shall, after such commencement,

apply to such proceedings.

19. Application to the Tribunal. – (1) Where a bank or a financial

institution has to recover any debt from any person, it may make an

application to the Tribunal within the local limits of whose

jurisdiction-

(a) the defendant, or each of the defendants where there are more

than one, at the time of making the application, actually and

voluntarily resides, or carries on business, or personally works for

gain; or

(b) any of the defendants, where there are more than one, at the time

of making the application, actually and voluntarily resides, or carries

on business, or personally works for gain; or

(c) the cause of action, wholly or in part, arises:

Provided that the bank or financial institution may, with the

permission of the Debts Recovery Tribunal, on an application made by

it, withdraw the application, whether made before or after the

44Page 45

Enforcement of Security Interest and Recovery of Debts Laws

(Amendment) Act, 2004 for the purpose of taking action under the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (54 of 2002), if no such

action had been taken earlier under that Act:

Provided further that any application made under the first proviso for

seeking permission from the Debts Recovery Tribunal to withdraw the

application made under sub-section (1) shall be dealt with by it as

expeditiously as possible and disposed of within thirty days from the

date of such application:

Provided also that in case the Debts Recovery Tribunal refuses to

grant permission for withdrawal of the application filed under this

sub-section, it shall pass such orders after recording the reasons

therefor.

(1A) Every bank being, multi-State co-operative bank referred to in

sub-clause (vi) of clause (d) of section 2, may, at its option, opt to

initiate proceedings under the Multi-State Co-operative Societies Act,

2002 (39 of 2002) to recover debts, whether due before or after the

date of commencement of the Enforcement of the Security Interest

and Recovery of Debts Laws (Amendment) Act, 2012 from any person

instead of making an application under this Chapter.

(1B) In case, a bank being, multi-State co-operative bank referred to

in sub-clause (vi) of clause (d) of section 2 has filed an application

under this Chapter and subsequently opts to withdraw the application

for the purpose of initiating proceeding under the Multi-State

Co-operative Societies Act, 2002 (39 of 2002) to recover debts, it may

do so with the permission of the Tribunal and every such application

seeking permission from the Tribunal to withdraw the application

made under sub-section (1A) shall be dealt with by it as expeditiously

as possible and disposed of within thirty days from the date of such

application:

Provided that in case the Tribunal refuses to grant permission for

withdrawal of the application filed under this sub-section, it shall

pass such orders after recording the reasons therefor.

(2) Where a bank or a financial institution, which has to recover its

debt from any person, has filed an application to the Tribunal under

sub-section (1) and against the same person another bank or financial

institution also has a claim to recover its debt, then, the later bank or

financial institution may join the applicant bank or financial

institution at any stage of the proceedings, before the final order is

passed, by making an application to that Tribunal.

(3) Every application under sub-section (1) or sub-section (2) shall be

in such form and accompanied by such documents or other evidence

and by such fee as may be prescribed:

Provided that the fee may be prescribed having regard to the amount

of debt to be recovered:

45Page 46

Provided further that nothing contained in this sub-section relating to

fee shall apply to cases transferred to the Tribunal under sub-section

(1) of section 31.

(3A) If any application filed before the Tribunal for recovery of any

debt is settled prior to the commencement of the hearing before that

Tribunal or at any stage of the proceedings before the final order is

passed, the applicant may be granted refund of the fees paid by him

at such rates as may be prescribed.

(4) On receipt of the application under sub-section (1) or sub-section

(2), the Tribunal shall issue summons requiring the defendant to

show cause within thirty days of the service of summons as to why

the relief prayed for should not be granted.

(5) The defendant shall, within a period of thirty days from the date of

service of summons, present a written statement of this defence:

Provided that where the defendant fails to file the written statement

within the said period of thirty days, the Presiding Officer may, in

exceptional cases and in special circumstances to be recorded in

writing, allow not more than two extensions to the defendant to file

the written statement.

(5A) After hearing of the application has commenced, it shall be

continued from day-to-day until the hearing is concluded:

Provided that the Tribunal may grant adjournments if sufficient cause

is shown, but no such adjournment shall be granted more than three

times to a party and where there are three or more parties, the total

number of such adjournments shall not exceed six:

Provided further that, the Presiding Officer may grant such

adjournments on imposing such costs as may be considered

necessary.

(6) Where the defendant claims to set-off against the applicant's

demand any ascertained sum of money legally recoverable by him

from such applicant, the defendant may, at the first hearing of the

application, but not afterwards unless permitted by the Tribunal,

present a written statement containing the particulars of the debt

sought to be set-off.

(7) The written statement shall have the same effect as a plaint in a

cross-suit so as to enable the Tribunal to pass a final order in respect

both of the original claim and of the set-off.

(8) A defendant in an application may, in addition to his right of

pleading a set-off under sub-section (6), set up, by way of

counter-claim against the claim of the applicant, any right or claim in

respect of a cause of action accruing to the defendant against the

applicant either before or after the filing of the application but before

the defendant has delivered his defence or before the time limited for

delivering his defence has expired, whether such counter-claim is in

the nature of a claim for damages or not.

46Page 47

(9) A counter-claim under sub-section (8) shall have the same effect as

a cross-suit so as to enable the Tribunal to pass a final order on the

same application, both on the original claim and on the

counter-claim.

(10) The applicant shall be at liberty to file a written statement in

answer to the counter-claim of the defendant within such period as

may be fixed by the Tribunal.

(11) Where the defendant sets up a counter-claim and the applicant

contends that the claim thereby raised ought not to be disposed of by

way of counter-claim but in an independent action, the applicant may,

at any time before issues are settled in relation to the counter-claim,

apply to the Tribunal for an order that such counter-claim may be

excluded, and the Tribunal may, on the hearing of such application,

make such order as it thinks fit.

(12) The Tribunal may make an interim order (whether by way of

injunction or stay or attachment) against the defendant to debar him

from transferring, alienating or otherwise dealing with, or disposing of,

any property and assets belonging to him without the prior

permission of the Tribunal.

(13)(A) Where, at any stage of the proceedings, the Tribunal is

satisfied, by affidavit or otherwise, that the defendant, with intent to

obstruct or delay or frustrate the execution of any order for the

recovery of debt that may be passed against him, -

(i) is about to dispose of the whole or any part of his property; or

(ii) is about to remove the whole or any part of his property from the

local limits of the jurisdiction of the Tribunal; or

(iii) is likely to cause any damage or mischief to the property or affect

its value by misuse or creating third party interest,

the Tribunal may direct the defendant, within a time to be fixed by it,

either to furnish security, in such sum as may be specified in the

order, to produce and place at the disposal of the Tribunal, when

required, the said property or the value of the same, or such portion

thereof as may be sufficient to satisfy the certificate for the recovery of

debt, or to appear and show cause why he should not furnish

security.

(B) Where the defendant fails to show cause why he should not

furnish security, or fails to furnish the security required, within the

time fixed by the Tribunal, the Tribunal may order the attachment of

the whole or such portion of the properties claimed by the applicant

as the properties secured in his favor or otherwise owned by the

defendant as appears sufficient to satisfy any certificate for the

recovery of debt.

(14) The applicant shall, unless the Tribunal otherwise directs, specify

the property required to be attached and the estimated value thereof.

47Page 48

(15) The Tribunal may also in the order direct the conditional

attachment of the whole or any portion of the property specified under

sub-section (14).

(16) If an order of attachment is made without complying with the

provisions of sub-section (13), such attachment shall be void.

(17) In the case of disobedience of an order made by the Tribunal

under sub-sections (12), (13) and (18) or breach of any of the terms on

which the order was made, the Tribunal may order the properties of

the person guilty of such disobedience or breach to be attached and

may also order such person to be detained in the civil prison for a

term not exceeding three months, unless in the meantime the

Tribunal directs his release.

(18) Where it appears to the Tribunal to be just and convenient, the

Tribunal may, by order,-

(a) appoint a receiver of any property, whether before or after grant of

certificate for recovery of debt;

(b) remove any person from the possession or custody of the property;

(c) commit the same to the possession, custody or management of the

receiver;

(d) confer upon the receiver all such powers, as to bringing and

defending suits in the courts or filing and defending application before

the Tribunal and for the realization, management, protection,

preservation and improvement of the property, the collection of the

rents and profits thereof, the application and disposal of such rents

and profits, and the execution of documents as the owner himself has,

or such of those powers as the Tribunal thinks fit; and

(e) appoint a Commissioner for preparation of an inventory of the

properties of the defendant or for the sale thereof.

(19) Where a certificate of recovery is issued against a company

registered under the Companies Act, 1956 (1 of 1956) the Tribunal

may order the sale proceeds of such company to be distributed among

its secured creditors in accordance with the provisions of section 529A

of the Companies Act, 1956 and to pay the surplus, if any, to the

company.

(20) The Tribunal may, after giving the applicant and the defendant an

opportunity of being heard, pass such interim or final order, including

the order for payment of interest from the date on or before which

payment of the amount is found due up to the date of realization or

actual payment, on the application as it thinks fit to meet the ends of

justice.

(20A) Where it is proved to the satisfaction of the Tribunal that the

claim of the applicant has been adjusted wholly or in part by any

lawful agreement or compromise in writing and signed by the parties

or where the defendant has repaid or agreed to repay the claim of the

applicant, the Tribunal shall pass orders recording such agreement,

compromise or satisfaction of the claim.

48Page 49

(21) The Tribunal shall send a copy of every order passed by it to the

applicant and the defendant.

(22) The Presiding Officer shall issue a certificate under his signature

on the basis of the order of the Tribunal to the Recovery Officer for

recovery of the amount of debt specified in the certificate.

(23) Where the Tribunal, which has issued a certificate of recovery, is

satisfied that the property is situated within the local limits of the

jurisdiction of two or more Tribunals, it may send the copies of the

certificate of recovery for execution to such other Tribunals where the

property is situated:

Provided that in a case where the Tribunal to which the certificate of

recovery is sent for execution finds that it has no jurisdiction to

comply with the certificate of recovery, it shall return the same to the

Tribunal which has issued it.

(24) The application made to the Tribunal under sub-section (1) or

sub-section (2) shall be dealt with by it as expeditiously as possible

and endeavor shall be made by it to dispose of the application finally

within one hundred and eighty days from the date of receipt of the

application.

(25) The Tribunal may make such orders and give such directions as

may be necessary or expedient to give effect to its orders or to prevent

abuse of its process or to secure the ends of justice.

xxx xxx xxx

34. Act to have over-riding effect.—(1) Save as provided under

sub-section (2), the provisions of this Act shall have effect

notwithstanding anything inconsistent therewith contained in any

other law for the time being in force or in any instrument having effect

by virtue of any law other than this Act.

(2) The provisions of this Act or the rules made thereunder shall be in

addition to, and not in derogation of, the Industrial Finance

Corporation Act, 1948 (15 of 1948), the State Financial Corporations

Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963),

the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984),

the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of

1986) and the Small Industries Development Bank of India Act, 1989

(39 of 1989).”

Based on the aforesaid provisions, it was asserted, that the provisions of the

RDB Act envisaged a complete ouster of the Company Court, and that

neither the Company Court nor any other Court, could have exercised

jurisdiction vested in the RDB Act. It was submitted, that the Official

49Page 50

Liquidator has no participatory role under the RDB Act. The Official

Liquidator has jurisdictional control, over the assets of a company under

winding up, under the Companies Act. In this behalf, learned senior

counsel for the appellant, placed reliance on Kiran Singh v. Chaman

Paswan10, and pointed out to the following observations recorded therein:

“6. The answer to these contentions must depend on what the

position in law is when a court entertains a suit or an appeal over

which it has no jurisdiction, and what the effect of Section 11 of the

Suits Valuation Act is on that position. It is a fundamental principle

well established that a decree passed by a court without jurisdiction is

a nullity, and that its invalidity could be set up whenever and

wherever it is sought to be enforced or relied upon, even at the stage

of execution and even in collateral proceedings. A defect of

jurisdiction, whether it is pecuniary or territorial, or whether it is in

respect of the subject-matter of the action, strikes at the very

authority of the court to pass any decree, and such a defect cannot be

cured even by consent of parties. If the question now under

consideration fell to be determined only on the application of general

principles governing the matter, there can be no doubt that the

District Court of Monghyr was coram non judice, and that its

judgment and decree would be nullities. The question is what is the

effect of Section 11 of the Suits Valuation Act on this position.”

(emphasis supplied)

Reliance was also placed on Dhurandhar Prasad Singh v. Jai Prakash

University11, and the Court’s attention was drawn to the following

observations:

“20. de Smith, Woolf and Jowell in their treatise Judicial Review of

Administrative Action, 5th Edn., para 5-044, have summarised the

concept of void and voidable as follows:

“Behind the simple dichotomy of void and voidable acts (invalid and

valid until declared to be invalid) lurk terminological and conceptual

problems of excruciating complexity. The problems arose from the

premise that if an act, order or decision is ultra vires in the sense of

outside jurisdiction, it was said to be invalid, or null and void. If it is

10 1955 (1) SCR 117

11 (2001) 6 SCC 534

50Page 51

intra vires it was, of course, valid. If it is flawed by an error

perpetrated within the area of authority or jurisdiction, it was usually

said to be voidable; that is, valid till set aside on appeal or in the past

quashed by certiorari for error of law on the face of the record.”

21. Clive Lewis in his work Judicial Remedies in Public Law at p. 131

has explained the expressions “void and voidable” as follows:

“A challenge to the validity of an act may be by direct action or by way

of collateral or indirect challenge. A direct action is one where the

principal purpose of the action is to establish the invalidity. This will

usually be by way of an application for judicial review or by use of any

statutory mechanism for appeal or review. Collateral challenges arise

when the invalidity is raised in the course of some other proceedings,

the purpose of which is not to establish invalidity but where questions

of validity become relevant.”

Thereupon, reference was made to Jagmittar Sain Bhagat v. Director,

Health Services, Haryana12. In order to canvass the proposition, that

jurisdiction of courts/forums cannot be conferred by consent of parties, or

acquiescence or waiver. Reliance in this behalf was placed on the following

conclusions drawn by this Court:

“9. Indisputably, it is a settled legal proposition that conferment of

jurisdiction is a legislative function and it can neither be conferred with

the consent of the parties nor by a superior court, and if the court

passes a decree having no jurisdiction over the matter, it would amount

to nullity as the matter goes to the root of the cause. Such an issue can

be raised at any stage of the proceedings. The finding of a court or

tribunal becomes irrelevant and unenforceable/inexecutable once the

forum is found to have no jurisdiction. Similarly, if a court/tribunal

inherently lacks jurisdiction, acquiescence of party equally should not

be permitted to perpetrate and perpetuate defeating of the legislative

animation. The court cannot derive jurisdiction apart from the statute.

In such eventuality the doctrine of waiver also does not apply. (Vide

United Commercial Bank Ltd. v. Workmen AIR 1951 SC 230; Nai Bahu

v. Lala Ramnarayan AIR 1978 SC 22; Natraj Studios (P) Ltd. v. Navrang

Studios (1981) 1 SCC 523; and Kondiba Dagadu Kadam v. Savitribai

Sopan Gujar (1999) 3 SCC 722.)

10. In Sushil Kumar Mehta v. Gobind Ram Bohra (1990) 1 SCC 193,

this Court, after placing reliance on a large number of its earlier

judgments particularly in Premier Automobiles Ltd. v. Kamlekar

12 (2013) 10 SCC 136

51Page 52

Shantaram Wadke (1976) 1 SCC 496; Kiran Singh v. Chaman Paswan

AIR 1954 SC 340; and Chandrika Misir v. Bhaiya Lal AIR 1973 SC

2391 held, that a decree without jurisdiction is a nullity. It is a coram

 non judice; when a special statute gives a right and also provides for a

forum for adjudication of rights, remedy has to be sought only under

the provisions of that Act and the common law court has no

jurisdiction; where an Act creates an obligation and enforces the

performance in specified manner, “performance cannot be forced in any

other manner”.

11. The law does not permit any court/tribunal/authority/forum to

usurp jurisdiction on any ground whatsoever, in case, such an

authority does not have jurisdiction on the subject-matter. For the

reason that it is not an objection as to the place of suing; “it is an

objection going to the nullity of the order on the ground of want of

jurisdiction”. Thus, for assumption of jurisdiction by a court or a

tribunal, existence of jurisdictional fact is a condition precedent. But

once such jurisdictional fact is found to exist, the court or tribunal has

power to decide on the adjudicatory facts or facts in issue. (Vide

Setrucherla Ramabhadraraju v. Maharaja of Jeypore AIR 1919 PC 150;

State of Gujarat v. Rajesh Kumar Chimanlal Barot AIR 1996 SC 2664;

Harshad Chiman Lal Modi v. D.L.F. Universal Ltd. AIR 2005 SC 4446;

and Carona Ltd. v. Parvathy Swaminathan & Sons AIR 2008 SC 187).”

(emphasis supplied)

28. Whilst supplementing the above contentions, Mr. S. Ganesh,

learned senior counsel pointed out, that in the present controversy, the

State Bank of Mysore had preferred an application before the Company

Court under Section 446(1) of the Companies Act. It was asserted, that the

order passed by the High Court was an order in personam, and as such, the

aforesaid order dated 10.3.2000 could not be considered as binding on the

DRT, or for that matter, on the Recovery Officer of the DRT. For the above

proposition, learned senior counsel placed reliance on the Andhra Bank

case3

, and drew the attention of this Court to the following conclusions

recorded therein:

“31. Section 446 of the Companies Act indisputably confers a wide

power upon the Company Judge, but such a power can be exercised

52Page 53

only upon consideration of the respective contentions of the parties

raised in a suit or a proceeding or any claim made by or against the

company. A question of determining the priorities would also fall for

consideration if the parties claiming the same are before the court.

Section 446 of the Companies Act ipso facto confers no power upon

the court to pass interlocutory orders. The question as to whether the

courts have inherent power to pass such orders, in our opinion, does

not arise for consideration in this proceeding. Assuming such a power

exists, it was imperative that the same should have been exercised on

consideration of the factors laid down by this Court in Morgan Stanley

Mutual Fund v. Kartick Das (1994) 4 SCC 225. An unreasoned order

does not subserve the doctrine of fair play. (See Mangalore Ganesh

Beedi Works v. CIT (2005) 2 SCC 329).

(emphasis supplied)

29. In order to make the final thrust, learned senior counsel

representing the appellant submitted, that an auction sale of the nature,

which is subject matter of consideration in the present controversy, was not

liable to be set aside, merely on account of some trivial infirmities in the

procedure adopted for the sale of the same. It was the submission of

learned counsel, that only a material irregularity would persuade a Court to

interfere with such sale proceedings conducted in furtherance of statutory

power conferred upon such authority. To support the above contention,

reliance was placed by learned senior counsel firstly on the following

observations in the decision rendered by this Court in Radhy Shyam v.

Shyam Behari Singh13

.

“7. There can be no doubt that an application under O. XXI, Rule 90

to set aside an auction-sale concerns the rights of a person declared

to be the purchaser. If the application is allowed, the sale is set aside

and the purchaser is deprived of his right to have the sale confirmed

by the Court under Rule 92. Such a right is a valuable right, in that,

upon such confirmation the sale becomes absolute and the rights of

ownership in the property so sold become vested in him. A decision in

13 AIR 1971 SC 2337

53Page 54

such a proceeding, therefore, must be said to be one determining the

right of the auction-purchaser to have the sale confirmed and made

absolute and of the judgment-debtor conferred by Rule 90 to have it

set aside and a resale ordered. In our view an order in a proceeding

under Order XXI, Rule 90, is a ‘judgment’ inasmuch as such a

proceeding raises a controversy between the parties therein affecting

their valuable rights and the order allowing the application certainly

deprives the purchaser of rights accrued to him as a result of the

auction-sale. We, therefore, agree with the High Court that a letters

patent appeal lay against the order of the learned single Judge.

8. Rule 90 of O. XXI of the Code, as amended by the Allahabad High

Court, inter alia provides that no sale shall be set aside on the ground

of irregularity or even fraud unless upon the facts proved the Court is

satisfied that the applicant has sustained injury by reason of such

irregularity or fraud. Mere proof of a material irregularity such as the

one under Rule 69 and inadequacy of price realised in such a sale, in

other words injury, is, therefore, not sufficient. What has to be

established is that there was not only inadequacy of the price but that

that inadequacy was caused by reason of the material irregularity or

fraud. A connection has thus to be established between the

inadequacy of the price and the material irregularity.”

(emphasis supplied)

Additionally, reliance was placed on Navalkha and Sons v. Sri Ramanya

Das14. And the Court’s attention was drawn to the following observations:

“7. In the present case the Division Bench has come to the conclusion

that publicity was not as wide as originally proposed by the

Commissioners in their affidavit. The publication was made in four

dailies namely The Hindu, Indian Express, the Hindustan Times and

The Statesman. There was no publication in the Times of India.

Further out of the four newspapers in which publication was made

only in two there were two insertions and in the remaining two there

was only one insertion. This was contrary to what the Commissioners

have promised in their affidavit dated July 8, 1964. No doubt, other

efforts were made for giving publicity but these efforts were not

sufficient to attract more than one offer. When the case came for

confirmation on December 24, 1964 there was an application by Babu

Khan that the property was of much higher value and that fresh offers

must be invited again with wider publicity. There is also the affidavit

of the State Government dated August 29, 1963 in which the value of

the property was shown as Rs.13,40,000/-. Besides, on that very day,

one Gopaldas Darak had come before the Court with a higher offer

14 (1969) 3 SCC 537

54Page 55

showing his bona fides and earnestness by depositing more than one

lakh of rupees. He came with the complaint that there was not

sufficient publicity as to attract people from the north and that as

soon as he came to know he gave his offer. In these circumstances the

learned Single Judge was right in expressing his reluctance to confirm

the offer of Navalkha & Sons. He therefore decided to have an open

bid as between the appellant and Darak in the Court itself on that

very day. The complaint of Padam Chand Agarwal is that the second

step taken by the Single Judge of holding an auction without giving

wide publicity was not justified in law. Rule 273 of the Companies

(Court) Rules provides that all sales shall be made by public auction

or by inviting sealed tenders or in such manner as the Judge may

direct. It appears that on April 17, 1964 at the instance of the Official

Liquidator and at the instance of a contributory the Court had

approved of the terms and conditions of sale which provide calling of

sealed tenders. On December 24, 1964 the learned Judge realised the

inefficacy of this Course and decided to abandon the original

procedure and put the properties to auction. But having made up his

mind to resort to auction the learned Judge confined the auction to

only two persons namely the previous tenderer and the fresh tenderer.

The auction in question no doubt was conducted in a public place but

it was not a public auction because it was not open to the general

public but was confined to two named persons. Secondly it was not

held after due publicity. It was held immediately after it was decided

upon. It is, therefore, obvious that the sale in question was not a

public sale which implies sale after giving notice to the public wherein

every member of the public is at liberty to participate. No doubt, the

device resorted to considerably raised the previous bid yet it was not

an adequate price having regard to the market value of the property to

which reference has already been made. The denial of opportunity to

purchase the property by persons who would have taken part in the

auction bid but for want of notice is a serious matter. In our opinion

the learned Judge having decided on December 24, 1964 that the

property should be put to auction should have directed auction by

public sale instead of confining it to two persons alone. Since there

was want of publicity and there was lack of opportunity to the public

to take part in the auction the acceptance of the highest bid by the

learned Judge was not a sound exercise of discretion. It is contended

on behalf of the appellant that confirmation was discretionary with

the Court and the Division Bench ought not to have interfered with

the discretion exercised by the Company Judge. It is true that the

discretion exercised by the Judge ought not to be interfered with

unless the Judge has gone wrong on principle. As already pointed out

the learned Company Judge having decided to put the property to

auction went wrong in not holding the auction as a public auction

after due publicity and this has resulted in prejudice to the Company

55Page 56

and the creditors in that the auction did not fetch adequate price. The

prejudice was inherent in the method adopted. The petition of Padam

Chand Agarwal also suggests that want of publicity had resulted in

prejudice. In these circumstances the Company Judge ought not to

have confirmed the bid of the appellant in the auction held on

December 24, 1964. We are accordingly of opinion that the Division

Bench was right in holding that the order of the Company Judge

dated February 19, 1965 should be set aside and there should be

fresh sale of the property either by calling sealed tenders or by auction

in accordance with law. The tender will be called or the auction will

take place with the minimum offer or with the starting bid of ten lakh

rupees.”

(emphasis supplied)

30. Based on the legal position declared by this Court in the above

judgments, it was asserted, that the validity of the auction sale held on

11.8.2005 and the confirmation thereof on 12.9.2005 was natural and

normal in the facts and circumstances of this case. In order to restore the

aforestated validity, it was submitted, that the impugned order passed by

the High Court deserved to be set aside.

31. We have given our thoughtful consideration to the complicated

sequence of facts projected before us, as also, the legal submissions

advanced at the hands of learned counsel for the rival parties. We shall

now endeavour to record our conclusions, with reference to the issues

canvassed.

32. In our considered view, the controversy projected for our

consideration falls in a narrow compass. It is apposite, to crystalise the

dimensions of the dispute. Deve Sugars Ltd. was ordered to be wound up

on 16.4.1999 (in Company Petition No.170 of 1995). The Official Liquidator

took possession of the assets of Deve Sugars Ltd. situated at Harige on

56Page 57

28.9.1999. The State Bank of Mysore filed Company Application Nos.

1251-1253 of 1999, in the then pending Company Petition No.170 of 1995.

Through the above applications, the State Bank of Mysore sought leave of

the Company Court in the High Court at Madras, to pursue the recovery

proceedings before the DRT, Bangalore. On 10.3.2000, the Company Court

granted leave “…subject to the condition that… no coercive steps are taken

against the assets of the company during or after the conclusion of the

proceedings before the Tribunal…”

33. After the DRT, Bangalore issued the recovery certificate dated

15.5.2002, the State Bank of Mysore filed Company Application No. 1300 of

2003, with a prayer that the bank be permitted to seek execution of the

recovery certificate. It is not a matter of dispute, that the Company Court in

the High Court at Madras, neither heard nor passed any order on the above

application. The admitted position is, that the Registry of the High Court, at

its own, returned the above Company Application No.1300 of 2003, by

recording an endorsement, that leave of the High Court was not necessary.

The Recovery Officer thereafter proceeded with the sale of the properties of

Deve Sugars Ltd.

34. Tungabadra Sugar Works Mazdoor Sangha, the workers’ union of

Deve Sugars Ltd., objected to the execution of the recovery certificate by the

Recovery Officer. The Official Liquidator, who was ordered to be impleaded in

the recovery proceedings initiated by the State Bank of Mysore, vide order

dated 10.3.2000 (passed by the Company Court in the High Court at

57Page 58

Madras), also filed objections. All the above objections were overruled by

the Recovery Officer.

35. The workers’ union, then assailed the recovery proceedings, before

the High Court of Karnataka, by filing Writ Petition No.37991 of 2004.

Videocon International Ltd. and Tapti Machines Pvt. Ltd. also filed Writ

Petition No.26564 of 2005, before the High Court of Karnataka. In the

above writ petitions, the petitioners assailed the sale proceedings before the

Recovery Officer. Based on a preliminary objection raised by the appellant

–Anita International, the High Court of Karnataka relegated the petitioners

to their remedy under the RDB Act, by a common order dated 27.10.2006.

The above order was challenged through Writ Appeal Nos. 2050 and 2051 of

2006 before the High Court of Karnataka. The writ appeals were dismissed

on 23.2.2007.

36. The workers’ union thereafter preferred AOR No.15 of 2006 and

Videocon International Ltd. filed AOR No.1 of 2007. In both the above

matters, a challenge was raised to the order passed by the Recovery Officer

dated 12.9.2005, whereby the sale of properties of Deve Sugars Ltd. to Anita

International, was confirmed.

37. It would be relevant to mention, that as against the reserve price of

Rs.10 crores, Anita International – the appellant herein, made a bid of

Rs.10.25 crores. The same was accepted by the Recovery Officer on

11.8.2005, and confirmed on 12.9.2005. One N. Ponnusamy filed Company

Application Nos. 2740-2742 of 2007, before the Company Court in the High

58Page 59

Court at Madras, wherein he assailed the sale and confirmation orders

dated 11.8.2005 and 12.9.2005. In the above applications, it was inter alia

asserted, that the reserve price of Rs.10 crores was too low. The above

company applications were dismissed on 3.3.2009. A challenge raised

against the same, was also dismissed by the High Court at Madras.

38. The applications filed by the Official Liquidator and others were

considered collectively (with Company Application Nos. 2740-2742 of 2007)

and were rejected by a common order dated 3.3.2009, whereby all the

applicants were relegated to their remedy of appeal under the RDB Act. A

challenge raised to the above order dated 3.3.2009, by way of an intra-court

appeal, was allowed by the High Court, on 17.9.2009. It is this order, which

is subject matter of challenge before this Court. Stated concisely, the High

Court expressed the view, that the proceedings before the Recovery Officer,

including the sale of the properties of Deve Sugars Ltd. on 11.8.2005 and

the confirmation thereof on 12.9.2005, had been conducted in disregard of

the order of the Company Court in the High Court at Madras, dated

10.3.2000 (in Company Application Nos. 1251-1253 of 1999). The sale and

confirmation of the properties of Deve Sugars Ltd. in favour of Anita

International were accordingly set aside.

39. The principal debate raised before this Court, revolves around the

cause and effect of the order dated 10.3.2000, passed by the Company

Court in the High Court at Madras. According to learned counsel for the

appellants, the above order dated 10.3.2000 being wholly void and non est

59Page 60

could not have any bearing on the proceedings conducted by the Recovery

Officer, including the sale of the properties of Deve Sugars Ltd. on

11.8.2005, and also, the confirmation thereof by the Recovery Officer on

12.9.2005. According to the respondents, who support the impugned order dated

17.9.2009, the order dated 10.3.2000 was valid, and had a binding effect. And

because, the proceedings conducted by the Recovery Officer were in total disregard

of the order dated 10.3.2000, it was submitted, that the impugned order was well

founded.

40. In order to support their claim, it was submitted on behalf of the

appellants, that jurisdiction in matters of recovery agitated by banks and

financial institutions under the RDB Act, has been repeatedly expounded by

this Court. The concerned Debts Recovery Tribunals, before whom recovery

proceedings are initiated, have exclusive jurisdiction in the matter. It was

also pointed out, that this Court has clearly declared, that even the

jurisdiction of Recovery Officers, in matters of execution of recovery

certificates, was likewise exclusive. It was the pointed contention of learned

counsel for the appellants, that in matters wherein banks and financial

institutions approach a Debts Recovery Tribunal, which on due

consideration issues a recovery certificate, the same can be executed only

through a Recovery Officer. It was submitted, that a Company Court has no

jurisdiction, in the matter. Learned counsel for the appellants,

substantiated the above assertion on the basis of the decisions rendered by

this Court in the Allahabad Bank1

, the M.V. Janardhan Reddy2

, the Andhra

60Page 61

Bank3

, the Rajasthan State Financial Corporation4

, and the Official

Liquidator, Uttar Pradesh and Uttarakhand5

 cases.

41. According to learned counsel for the appellants, it was apparent,

that the action of a Recovery Officer in conducting sale proceedings and

ordering the confirmation thereof for executing a recovery certificate fell

squarely within his jurisdiction under the RDB Act. And his jurisdiction

being exclusive, as declared by this Court could not be interfered with or set

aside. It is in the above context, that it was also the pointed assertion of

learned counsel representing the appellant, that the order passed by the

Company Court in the High Court at Madras dated 10.3.2000 was without

jurisdiction. Learned counsel representing the appellant however cautioned

this Court, not to confuse the power of the Recovery Officer in executing

recovery certificates (through sale of the debtor’s properties), with the

apportionment of the sale proceeds. It was urged, that the concern of the

appellant – Anita International, was limited to the sale of the properties of

Deve Sugars Ltd., which it had purchased on 11.8.2005, which was

confirmed by the Recovery Officer on 12.9.2005. It was submitted, that the

appellant –Anita International has no concern with the distribution of the

sale proceeds, and as such, the issue of distribution of the sale proceeds

should not fall within the consideration of the present determination.

42. It is not possible for us to accept the contentions advanced on

behalf of the appellants. In this behalf, it would be relevant to mention,

that in the M.V. Janardhan Reddy case2

, the Company Court by an order

61Page 62

dated 13.8.1999 required that its permission should be obtained before the

Recovery Officer finalized the sale. Thereafter, the Company Court by an

order dated 25.3.2005, directed that sale by the Recovery Officer, was subject

to confirmation by the Company Court. In the above sequence of facts, this

Court clearly held, that the condition imposed by the Company Court could

not be violated by the Recovery Officer. It was concluded, that the sale made

by the Recovery Officer in violation of the orders passed by the Company

Court, was without the authority of law, the same was accordingly set aside.

The explanation tendered by learned senior counsel representing the

appellants was, that even in the above judgment, this Court had not

disturbed the exclusive jurisdiction of a Recovery Officer, in executing the

recovery certificate. In our considered view, the above contention is

immaterial to the issue under consideration. The issue under consideration

is, whether or not, an order passed by the Company Court (in the present

case, the order dated 10.3.2000) was binding on the Recovery Officer? And,

whether the proceedings conducted by the Recovery Officer, in violation of

the above order, were sustainable in law? We have no hesitation in

concluding, that in the M.V. Janardhan Reddy case2

, an order passed by the

Company Court was held to be binding on the Recovery Officer. Based on

exactly the same consideration, we are of the view, that the acceptance of

the bid of Anita International by the Recovery Officer on 11.8.2005, and the

confirmation of the sale in its favour on 12.9.2005, were clearly

impermissible, and therefore, deserve to be set aside.

62Page 63

43. In addition to the above, reference may be made to the judgment

rendered by this Court in the Official Liquidator, Uttar Pradesh and

Uttarakhand case5

. In paragraph 36 of the above judgment (extracted in

paragraph xxx 24 xxx hereinabove), this Court has taken due notice of the

proposition, with reference to a case where an order, had been passed by

the Company Court. The proposition dealt with was in a situation where,

the Company Court had imposed a condition on the Recovery Officer, that

permission of the Company Court would be obtained, before the Recovery

Officer conducted the sale and confirmation of the movable or immovable

properties, of the debtor. It was held, that the order passed by the Company

Court, was binding on the Recovery Officer. In the above judgment it was

concluded, that it was not open to the Recovery Officer to confirm the sale of the

properties at his own, and such a sale and confirmation of movable or immovable

properties made by the Recovery Officer, without the permission of the Company

Court, were liable to be set aside. This Court while recording its above conclusion,

also expressed, that the above issue had nothing to do with the proposition,

whether an Official Liquidator can approach a Company Court, to seek the setting

aside of the auction and the sale conduced by the Recovery Officer. It would be

relevant to mention, that the judgments relied upon by learned counsel for the

appellants, were duly taken into consideration in the Official Liquidator, Uttar

Pradesh and Uttarakhand case5

. In view of the above, we are of the considered

view, that the pointed issue canvassed before us, at the hands of learned counsel

for the appellants, stands answered against the appellant in paragraph 36 of the

63Page 64

above judgment. We endorse, and are obliged to follow, the view expressed by this

Court, as noticed above. Accordingly, we find no merit in the first contention

advanced at the hands of learned counsel for the appellants.

44. Despite our above conclusion, it is imperative for us to notice, that for

recovery of a debt due to a bank or a financial institution, the concerned bank or

financial institution, can legitimately initiate proceedings, by filing a winding up

petition before the jurisdictional Company Court, or alternatively, intervene in a

pending winding up petition. Since there is no bar restraining a bank or a

financial institution from approaching a Company Court, by filing a winding up

petition, it is not possible to conclude, that the jurisdictional Company Court, is

not possessed with the determinative authority/competence to entertain a claim

raised by such bank or financial institution. In view of the above, it is not possible

for us to accept, as was suggested on behalf of the appellants, that the order

passed by the Company Court in the High Court at Madras dated 10.3.2000,

lacked the jurisdictional authority. Since we have concluded that the Company

Court which passed the order dated 10.3.2000 did not lack jurisdiction, we hereby

hold, that in the facts of this case, the above order dated 10.3.2000 was neither

invalid nor void.

45. We are also of the considered view, as held by the Court in the

Krishnadevi Malchand Kamathia case8

, that it is not open either to parties

to a lis or to any third parties, to determine at their own, that an order

passed by a Court is valid or void. A party to the lis or a third party, who

considers an order passed by a Court as void or non est, must approach a

64Page 65

Court of competent jurisdiction, to have the said order set aside, on such

grounds as may be available in law. However, till an order passed by a

competent Court is set aside, as was also held by this Court in the Official

Liquidator, Uttar Pradesh and Uttarakhand5

 and the Jehal Tanti9

 cases, the

same would have the force of law, and any act/action carried out in

violation thereof, would be liable to be set aside. We endorse the opinion

expressed by this Court in the Jehal Tanti case9

. In the above case, an

earlier order of a Court was found to be without jurisdiction after six years.

In other words, an order passed by a Court having no jurisdiction, had

subsisted for six years. This Court held, that the said order could not have

been violated while it subsisted. And further, that the violation of the order,

before it is set aside, is liable to entail punishment, for its disobedience. For

us to conclude otherwise, may have disastrous consequences. In the above

situation, every cantankerous and quarrelsome litigant would be entitled to

canvass, that in his wisdom, the judicial order detrimental to his interests,

was void, voidable, or patently erroneous. And based on such plea, to avoid

or disregard or even disobey the same. This course can never be permitted.

46. To be fair to learned counsel for the appellants, it needs to be

noticed, that reliance was also placed on behalf of the appellants on the

Kiran Singh10, the Sadashiv Prasad Singh6

, and the Jagmittar Sain Bhagat12

cases, to contend, that a decree passed by a Court without jurisdiction was

a nullity, and that, its invalidity could not be corrected, even by the consent

of the concerned parties. We are of the considered view, that the

65Page 66

proposition debated and concluded in the judgments relied upon by learned

counsel for the appellants (referred to above) are of no relevance, to the

conclusions drawn in the foregoing paragraph. In our determination

hereinabove, we have not held, that a void order can be legitimized. What

we have concluded in the foregoing paragraph is, that while an order passed

by a Court subsists, the same is liable to be complied with, till it is set

aside.

47. The submission canvassed at the hands of learned counsel for the

appellants, that the impugned sale dated 11.8.2005, and its confirmation

on 12.9.2005, should not be interfered with on the ground of equity, as the

appellant had made the entire payment in 2005, and the Recovery Officer

had ordered confirmation of the sale, as no objection had been raised

against the same. We find it difficult to persuade ourselves to accept the

above contention. In this behalf, one cannot lose sight of the fact that the

Official Liquidator, as well as, the workers’ union had raised objections before

the Recovery Officer at the very initial stage. Even a former Director of Deve

Sugars Ltd. – N. Ponnusamy raised a challenge to the proceedings before

the Recovery Officer by asserting, that the reserve price of Rs.10 crores fixed

for the property being put to auction, was too low. The fact, that in the

process of sale of the properties of Deve Sugars Ltd. only two bids were

received, has not been disputed. It is also not disputed, that whilst one of

the bidders was the appellant – Anita International, the other bidder was

Synergy Steel Ltd. – a sister company of the appellant. In sum and

66Page 67

substance therefore, there was only one bidder. For the above reasons, in

addition to those recorded by the High Court (noticed in paragraph xxx 12

xxx, hereinabove), it is not possible for us to accept the claim of the

appellant on the ground of equity. Reliance placed by learned counsel on

the judgments rendered by this Court, in support of the instant contention,

is also unacceptable, as the factual position in the judgments relied upon,

are inapplicable to the facts and circumstances of this case. In view of the

above, we find no merit in the contention advanced.

48. It was also submitted on behalf of the appellants, that the sale

conducted by the Recovery Officer on 11.8.2005, and the order of

confirmation thereof passed by the Recovery Officer on 12.9.2005, ought to

have been assailed only in proceedings under Section 30 of the RDB Act. It

was submitted, that since an efficacious alternative remedy was available to

the parties, which had approached the Company Court in the High Court at

Madras, the interference at the hands of the High Court was neither just

nor proper. The instant submission is wholly devoid of substance and

deserves to be rejected. We are of the considered view, that there was

sufficient justification for the parties to have approached the Company

Court in the High Court at Madras, for the reason that they were seeking

the enforcement of the order dated 10.3.2000, passed by the Company

Court itself. The sale made by the Recovery Officer on 11.8.2005, and its

confirmation on 12.9.2005, were in utter violation of the order dated

10.3.2000, and therefore, the concerned parties were justified in

67Page 68

approaching the High Court at Madras. In the above view of the matter, we

find no merit in the instant contention as well.

49. Last of all, we may advert to the contention, that the order dated

10.3.2000 passed by the Company Court in the High Court at Madras,

while disposing of Company Application Nos. 1251-1253 of 1999, filed by

the State Bank of Mysore, was not binding on the appellant. Insofar as the

instant contention is concerned, it was submitted, that the said order

passed by the High Court was an order in personam, and as such, the

aforesaid order could not be considered as an order binding on the

appellant before this Court. We find no merit in the instant contention, as

well. In this behalf, it would be relevant to mention, that in the application

filed by the State Bank of Mysore, the prayer made was, that the State Bank

of Mysore be permitted, leave to proceed with recovery proceedings before

the DRT, Bangalore. By the order dated 10.3.2000, the Company Court in

the High Court at Madras, while granting leave, imposed two conditions.

Firstly, the Official Liquidator would have to be impleaded by the bank in the

recovery proceedings before the DRT, Bangalore. And secondly, no coercive

steps would be taken against the assets of the company during or after the

conclusion of the proceedings before the Tribunal. It is not possible for us

to accept, that the aforesaid order passed by the High Court was an order in

personam. We are of the view, that the above order had a clear and binding

effect on the proceedings permitted to be initiated before the DRT,

Bangalore, and further, that it was equally binding on the Recovery Officer.

And accordingly, in our view, the same would also be binding on those

claiming through sale proceedings conducted by the Recovery Officer. In

the above view of the matter, there can be no doubt, that the order dated

10.3.2000 was also binding on the appellant before this Court. For the

above reasons, we find no merit even in the last contention advanced by

learned counsel for the appellants.

50. For all the reasons recorded hereinabove, we find no merit in the

instant appeals. The same are accordingly dismissed. While affirming the

impugned order passed by the High Court, we confirm the setting aside of

the sale made by the Recovery Officer in favour of the appellant – Anita

International on 11.8.2005, and the confirmation thereof by the order of the

Recovery Officer dated 12.9.2005.

………………………………….J.

(Jagdish Singh Khehar)

………………………………….J.

(Adarsh Kumar Goel)

New Delhi;

July 04, 2016.

Print Page