Official liquidator - DRT - RDB act - jurisdiction - Supreme Court

1) Allahabad Bank v. Canara Bank and another[1]
2) Rajasthan State Financial Corpn. and another v. Official Liquidator and another[2]
3) M. V. Janardhan Reddy v. Vijaya Bank and others
4) Damji Valji Shah v. LIC of India
5) Andhra Bank v. Official Liquidator and another
6) Jitendra Nath Singh v. Official Liquidator and others
7) International Coach Builders Ltd. v. Karnataka State Financial Corpn
8) A.P. State Financial Corpn. v. Official Liquidator
9) Jyoti Bhushan Gupta and others v. The Banaras Bank Ltd
10) Gada and another v. Central Bank of India and others

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2511 OF 2013
(Arising out of S.L.P. (C) No. 35627 of 2011)
The Official Liquidator, U.P. and
Uttarakhand ... Appellant
Versus
Allahabad Bank and others



17. In Rajasthan State Financial Corporation and another (supra), when the appeal came up for hearing before the two learned Judges, a submission was put forth that there was a conflict between the decisions in Allahabad Bank (supra) and International Coach Builders Ltd. (supra) and, taking note of the importance of the question of law involved, the matter was referred to a larger Bench. The three-Judge Bench analysed the ratio laid down in Allahabad Banks case and International Coach Builders Ltd. (supra) and, after referring to various authorities, held 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 RDB 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. Thereafter, the bench summed up the legal position. The pertinent part of the said summation is reproduced below:

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(i) A Debt 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, though its Recovery officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him.

 xxx xxx xxx

(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 realization of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-in-liquidation.

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18. From the aforesaid verdict, it is vivid that the larger Bench approved the law laid down in Allahabad Bank (supra). In fact, it is noticeable that the larger Bench has observed that in Allahabad Banks 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.

19. From the aforesaid authorities, it clearly emerges that the sale has to be conducted by the 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 realization of the dues of the banks and financial institutions.

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26. We have referred to the said passage for the purpose of highlighting that an appeal lies to the 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. The 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.

 27....................... Therefore, this Court in Allahabad Banks case has opined that it is the DRT which would have the exclusive jurisdiction when a matter is agitated before the DRT. The dictum in the said case has been approved by the three-Judge Bench in Rajasthan State Financial Corporation and another (supra). It is not a situation where the Official Liquidator can have a choice either to approach the 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 the DRT. Be it noted, an order passed under Section 30 of the RDB Act by the 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.