Whether a party can be held guity for disobedience of void order?

 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

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. 

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.
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
Citation:(2016) 9 SCC 44

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

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
34Page 35
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

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.
68Page 69
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.
69Page 70
70

Print Page