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

- **Citation:** [2016] 6 S.C.R. 635
- **Court:** Supreme Court of India
- **Decided:** 2016
- **Case number:** Civil Appeal Nos. 60426048of2011
- **Bench:** Jagdish Singh Khehar, Adarsh Kumar Goel
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/anita-international-v-tungabadra-sugar-works-mazdoor-sangh-and-others-31547
- **Pages:** 68

## Headnote

Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 - Recovery proceedings under - Propriety of - Company
ordered to be wound up by Company Court - Possession of the
assets thereof taken by Official Liquidator - Lender-Bank sought
permission of the Company Court by filing application in the pending
company petition, to pursue the recovery proceedings against the
Company under the 1993 Act - Company court by order dated
10.3.2000 granted the permission 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 Debt Recovery
Tribunal - Recovery certificate was issued by the Tribunal -
Recovery Officer thereupon proceeded with the sale of the properties
of the Company - Objections thereto raised by the Workers ' Union
of the Company and by the Official Liquidator were overruled by
the Recovery Officer - Jn Writ Petitions challenging recovery
proceedings, the High Court asked the writ petitioners to approach
the Debt Recovery Tribunal - Recovery Officer sold the property in
auction - Company applications were filed challenging the auction
sale of the property by Recovery Officer - Ex Director of the
Company also filed company application seeking setting aside of
the auction sale - The applications were dismissed by the Company
Court - The appeal against the order of the company Judge was
allowed setting aside the auction sale and confirmation thereof -
On appeal, held: The order dated 10.3.2000 passed by the Company
Court, was having jurisdiction to pass the same and hence was
binding on the Recovery Officer - The condition imposed by the
Company Court could not have been violated by the Recovery Officer
- Thus the sale made by the Recovery Officer was in violation of
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[2016] 6 S.C.R.
the order dated 10.3.2000 - The order is equally binding on the
auction-purchaser.
Judgment/Order - An order/judgment, until set aside by a
competent court, would have the force of law - It is not open to the
parties to the lis or third parties to disobey the order/judgment
considering it, on their own, as void or non-est.
Dismissing the appeals, the Court
HELD: 1. The condition imposed by the Company Court
could not be violated by the Recovery Officer. The sale made by
the Recovery Officer in violation of the orders passed by the
Company Court, was without the authority of law. Therefore, it is
not correct to say that the order dated 10.3.2000 being wholly
void and non est could not have any bearing on the proceedings
conducted by the Recovery Officer, including the sale of the
properties of the Company under liquidation and also, the
confirmation thereof by the Recovery Officer. The acceptance of
the bid of appellant-auction purchaser by the Recovery Officer and
the confirmation of the sale in its favour were clearly impermissible,
and therefore, deserve to be set aside. [Paras 39, 42) [696-D; 697F-G; 698-B)
M V. Janardhan Reddy v. Vijaya Bank 2008 (7) SCR
520 : (2008) 7 SCC 738; Official Liquidator, Uttar
Pradesh and Uttarakhand v. Allahabad Bank 2013 (4)
SCR 207 : (2013) 4 SCC 381 - relied on.
2. 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. It cannot be said that the order passed by the
Company Court in the High Court at Madras dated 10.3.2000, lacked
the jurisdictional authority. Since the Company Court which passe

## Text

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[2016] 6 S.C.R. 635
ANITA INTERNATIONAL
v.
TUNGABADRA SUGAR WORKS MAZDOOR
SANGH - AND OTHERS
(Civil Appeal Nos. 6042-6048 of201 I)
JULY04, 2016
[JAGDISH SINGH KHEHAR AND ADARSH KUMAR
GOEL, JJ.)
Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 - Recovery proceedings under - Propriety of - Company
ordered to be wound up by Company Court - Possession of the
assets thereof taken by Official Liquidator - Lender-Bank sought
permission of the Company Court by filing application in the pending
company petition, to pursue the recovery proceedings against the
Company under the 1993 Act - Company court by order dated
10.3.2000 granted the permission 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 Debt Recovery
Tribunal - Recovery certificate was issued by the Tribunal -
Recovery Officer thereupon proceeded with the sale of the properties
of the Company - Objections thereto raised by the Workers ' Union
of the Company and by the Official Liquidator were overruled by
the Recovery Officer - Jn Writ Petitions challenging recovery
proceedings, the High Court asked the writ petitioners to approach
the Debt Recovery Tribunal - Recovery Officer sold the property in
auction - Company applications were filed challenging the auction
sale of the property by Recovery Officer - Ex Director of the
Company also filed company application seeking setting aside of
the auction sale - The applications were dismissed by the Company
Court - The appeal against the order of the company Judge was
allowed setting aside the auction sale and confirmation thereof -
On appeal, held: The order dated 10.3.2000 passed by the Company
Court, was having jurisdiction to pass the same and hence was
binding on the Recovery Officer - The condition imposed by the
Company Court could not have been violated by the Recovery Officer
- Thus the sale made by the Recovery Officer was in violation of
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the order dated 10.3.2000 - The order is equally binding on the
auction-purchaser.
Judgment/Order - An order/judgment, until set aside by a
competent court, would have the force of law - It is not open to the
parties to the lis or third parties to disobey the order/judgment
considering it, on their own, as void or non-est.
Dismissing the appeals, the Court
HELD: 1. The condition imposed by the Company Court
could not be violated by the Recovery Officer. The sale made by
the Recovery Officer in violation of the orders passed by the
Company Court, was without the authority of law. Therefore, it is
not correct to say that the order dated 10.3.2000 being wholly
void and non est could not have any bearing on the proceedings
conducted by the Recovery Officer, including the sale of the
properties of the Company under liquidation and also, the
confirmation thereof by the Recovery Officer. The acceptance of
the bid of appellant-auction purchaser by the Recovery Officer and
the confirmation of the sale in its favour were clearly impermissible,
and therefore, deserve to be set aside. [Paras 39, 42) [696-D; 697F-G; 698-B)
M V. Janardhan Reddy v. Vijaya Bank 2008 (7) SCR
520 : (2008) 7 SCC 738; Official Liquidator, Uttar
Pradesh and Uttarakhand v. Allahabad Bank 2013 (4)
SCR 207 : (2013) 4 SCC 381 - relied on.
2. 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. It cannot be said that the order passed by the
Company Court in the High Court at Madras dated 10.3.2000, lacked
the jurisdictional authority. Since the Company Court which passed
the order dated 10.3.2000 did not lack jurisdiction in the facts of this
case, the order dated 10.3.2000 was neither invalid nor void. [Para
44) (699-A-C]
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS
MAZDOOR SANGH
Kiran Singh v. Chaman Paswan 1955 (1) SCR 117;
Sadashiv Prasad Singh v. Harendar Singh 2014 (1) SCR
249 : (2015) 5 SCC 574; Jagmittar Sain Bhagat v.
Director, Health Services, Haryana 2013 (8) SCR 77 :
(2013) 10 sec 136 - held inapplicable.
3. It is not' 'open, either to parties to a /is 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 /is or a third party, who considers
an order passed by a Court as void or non est, must approach a
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, the same would
have the force of law, and any act/action carried out in violation
thereof, would be liable to be set aside. To conclude otherwise,
may have disastrous consequences. 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. (Para 45) [699-D-H]
Krishnadevi Malchand Kamathia
v.
Bombay
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Environmental Action Group 2011 (3) SCR 291 : (2011)
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3 SCC 363; Official Liquidator, Uttar Pradesh and
Uttarakhand v. Allahabad Bank 2013 (4) SCR 207 :
(2013) 4 SCC 381; Jehal Tanti v. Nageshwar Singh
I
·' (2013) 14 sec 689 _; relied On
4. It is not correct to say 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. 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 the Company raised a challenge
to the proceedings before the Recovery Officer by asserting, that
the reserve price of Rs.IO crores fixed for the property being
put to auction, was too low. The fact, that in the process of sale .of
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the properties of the Company only two bids were received, has
not been disputed. It is also not disputed, that whilst one of the
bidders was the appellant, the other bidder was a sister company
of the appellant. In sum and substa.nce therefore, there was only
one bidder. For the above reasons, in additi<_Jn to those recorded
by the High Court, it is not possible for the Court to accept the
claim of the appellant on the ground of equity. [Para 471 (700-DG)
5. It is also not correct to say that the sale conducted by
the Rec9very Officer on 11.8.2005, and the order of confirmation
thereof passed by the Recovery Officer on 12.9.2005, ou~ht to
have been assailed only in proceedings under Section 30 of the
Recovery of Debts Due to Banks and Financial Institutions Act,
1993. 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 Ofiicer and its confirmation were in utter
violation of the order dated 10.3.2000, and therefore, the
concerned parties were justified in approaching the High Court
at Madras. [Para 48] [701-A-D)
6. It also cannot be said that the order dated 10.3.2000
passed by the Company Court, while disposing of Company
Application Nos. 1251-1253 of 1999, filed by the Bank, was not
binding on the appellant as that order was an order in persomm1.
In the application filed by the Bank, the prayer made was, thaf
the Bank be permitted leave to proceed with recovery
proceedings before the DRT. 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. And secondly, no coercive steps would be taken
against the assets of the company during or after the conclusion
of the proceedings before the Tribu1.ial. It cannot be said that the
aforesaid order passed by the High Court was an order in
personam. The above order had a clear and binding effect on the
proceedings permitted to be initiated before the DRT, and further,
that it was equally binding on the Recovery Officer. And
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS
MAZDOOR SANGH
accordingly, the same would also be binding on those claiming
through sale proceedings conducted by the Recovery Officer.
Thus, the order dated 10.3.2000 was also binding on the appellant
before this Court. [Para 49) [701-D-H; 702-A-B)
Allahabad Bank v. Canara Bank 2000 (2) SCR 1102 :
(2000) 4 SCC 406; Andhra Bank v. Official Liquidator
2005 (2) SCR 776 : (2005) 5 SCC 75; Rajasthan State
Financial Corporation v. Official Liquidator 2005(3)
Suppl. SCR 1073: (2005) 8 SCC 190; Industrial Credit
and Investment Corporation of India Ltd. v. Srinivas
Agencies 1996 (2) SCR 960 : (1996) 4 SCC 165;
Dhurandhar Prasad Singh v. Jai Prakash University
2001 (3) SCR 1129: (2001) 6 SCC 534; J Radhy Shyam
v. Shyam Behari Singh AIR 1971 SC 2337 : 1971 (1)
SCR 783; Navalkha and Sons v. Sri Ramanya Das 1970
(3) SCR 1 : (1969) 3 SCC 537 - 1·eferred to.
2000 (2) SCR 1102
2008 (7) SCR520
Case Law Reference
referred to
relied on
2005 (2) SCR 776
referred to
Para6
Para 13
Para 15
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2005 (3) Suppl. SCR 1073
referred to
Para 15
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2013 (4) SCR 207
relied on
2014 (1) SCR 249
held inapplicable
1996 (2) SCR 960
referred to
Paras 15, 45
Para 16
Para20
2011 (3) SCR 291
relied on
Para23
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(2013) 14 sec 689
relied on
1955 (1) SCR 117
held inapplicable
2001 (3) SCR 1129
2013 (8) SCR 77
1971 (1 ) SCR 783
1970 (3) SCR 1
referred to
held inapplicable
referred to
· referred to
Para 25
Para 27
Para 27
Para 27
Para 29
Para 29
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 60426048of2011.
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From the Judgment and Order dated 17.09.2009 of the High Court
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of Judicature at Madras in OSA Nos. 59, 61,62,63,76,77 & 82 of2009
WITH
C. A. Nos. 5501-5502 of2016.
P. Chidambaram, Salman Khurshid, S. Ganesh, V. Giri, Sr. Advs.,
AlokAggarwal, Apoorv Kurup, Vikas Mehta, Varun Tikmani, Roh it Rathi,
Gaurav Tanwar, Ms. Anushree Menon, Rajat Sehgal, Antony Julian,
Manav Vohra, Ms. Garima Prashad, Advs. for the Appellants.
Tushar Mehta, ASG, F. S. Nariman, C. A. Sundaram, Huzefa
Ahmadi, Dr. Rajeev Dhawan, Sr. Advs.,Arunabh Chowdhury, Rahul
Pratap, Amar Dev Unniyal, Ms. Rohini Musa, Zafar Inayat, Abhishek
Gupta, Farrukh Rasheed, Amardev Uniyal, A. Raghunath, Sabheesh
Mohanan, Mahesh Agarwal, Shashank Manish, Abhinav Agrawal, E. C.
Agrawala, Mrs. Maneesha Dhir, Apoorve Karol, Vaibhav Tyagi, Gagan.
Gupta, Bhaskar Vali, R. N. Keshwani, Shivaji M. Jadhav, Gaurav Goel,
M.s. Pallavi Langar, Advs, for the Respondents.
The Judgment of the Court was delivered by
JAGDISH SINGH KHEHAR, J. I. Leave granted in Special
Leave Petition (C) Nos. 7490-7491 of2014.
2. Two company petitions, i.e., Company Petition Nos. 170 of
I 995 and 35 of I 997 were filed by Videocon International Ltd. and Tapti
Machines Pvt. Ltd., for winding up ofDeve Sugars Ltd. before the High
Court of Judicature at Madras. Deve Sugars Ltd. was running a sugar
factory in the State of Karnataka. Deve Sugars Ltd. was ordered to be
wound up on I 6.4.1999. An Official Liquidator was accordingly directed
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.
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 ApplicationNos.
440 of I 997 and I 300 of I 997, before the Debts Recovery Tribunal,
Bangalore, (hereinafter referred to as, the ORT, Bangalore) for the
recovery of Rs.22,31,78,558.55. During the course of the instant
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
proceedings, the ORT, 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.1251-1253of1999,
in the pending Company Petition No.170of1995, before the High Court
at Madras, seeking leave to proceed with the recovery proceedings before
the ORT, Bangalore, under the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (hereinafter referred to as, the ROB
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 Cou.rt 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)
A perusal of the above order reveals, that leave was granted,
subject to the condition that the Official Liquidator, was impleaded before
the ORT, Bangalore, and further, that no coercive steps would be taken
against the assets of the company - Deve Sugars Ltd., during or after
the conclusion of proceedings before the DRT, Bangalore.
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 ORT, Bangalore, issued the recovery
certificate, the State Bank of Mysore moved DCP No.1912 in Original
Application No.440 of 1997, seeking the disposal of the assets of the
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company in liquidation, at the hands of the Recovery Officer of the
ORT, Bangalore (hereinafter referred to as, the Recovery Officer).
Simultf!neously, the State Bank of Mysore being conscious of the order
passed by the High Court at Madras on 10.3.2000, filed Company
Application No.1300 of2003, with a prayer that it be permitted to seek
execution of the recovery certificate dated 15.5.2002 (for recovering
the amounts due to it, from out of the assets ofDeve Sugars Ltd.). It is
relevant to mention, that the aforesaid Company Application No.1300 of
2003 was not entertained by the Registry of the High Court at Madras.
While declining to entertain Company Application No.1300 of2003, the
Registry of the High Court at Madras, relied upon a judgment rendered
by this Court in Civil Appeal No. 2536 of2000 (reported as Allahabad
Bank v. Canara Bank 1). While not entertaining Company Application
No.1300 of2003, the Registty of the High Court recorded the following
endorsement:
"ORDER
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
of2003, it came to be assumed by the State Bank of Mysore, that leave
of the High Court, was not required for the sale of the assets of Deve
Sugars Ltd.. Accordingly, the State Bank of Mysore approached the
Recovery Officer, for the disposal of the assets ofOeve Sugars Ltd., in
continuation of the recovery certificate issued by the ORT dated
15.5.2002. On the above prayer of the State Bank of Mysore, the
Recovery Officer issued a proclamation of sale in Form-13, by following
the procedure prescribed under the ROB Act. The auction of the
properties of Oeve Sugars Ltd., in the first instance, was fixed for
1.10.2014.
8. At the instant juncture, the workers'. union (Tungabadra Sugar
Works Mazdoor Sangh), of Oeve Sugars Ltd., approached the High
Court of Karnataka, by filing Writ Petition No.3 7991 of2004. Through
the above writ petition, the workers' union assailed the recovery
proceedings initiated by the State Bank of Mysore, before the Recovery
Officer. The workers' union also sought an interim direction from the
High Court of Karnataka, to restrain the continuation· of the sale
• (2000) 4 sec 406
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS
MAZDOOR SANGH [JAGDISH SINGH KHEHAR, J.]
proceedings, at the hands of the Recovery Officer, because their salary
and provident fund dues, were still payable by Deve Sugars Ltd .. The
aforesaid prayer was made by asserting, that the workers' union had a
preferential claim, as against the claim of the State Bank of Mysore,
under the provisions of the Companies Act. A learned single Judge of
the High Court ofKarnataka, while issuing notice, directed that the sale
made by the Recovery Officer would be subject to the final outcome of
the writ petition. It would also be relevant to reiterate, that the Official
Liquidator was authorized by the High Court at Madras, to take over
possession of the properties of the company under liquidation. The Official
Liquidator had accordingly taken over possession of the said properties
on 28.9.1999. While permitting the State Bank of Mysore to pursue the
recovery proceedings against Deve Sugars Ltd. before the ORT, the
High Couti at Madras, had directed that the Official Liquidator be imp leaded
as a respondent before the ORT. The Official Liquidator, had also raised
objections to the purported sale by the Recovery Officer (in continuation
of the recovery certificate dated 15.5.2002, issued by the ORT). The
Official Liquidator sought deferment of the sale proceed in gs at the hands
of the Recovery Officer, under Section 529A of the Companies Act. It
would be relevant to mention, that the objections raised by the workers'
union and the Official Liquidator, were overruled by the Recovery Officer.
9. It is also pertinent to mention, that the auction scheduled by the
Recovery Officer for I. I 0.2004, could not be conducted. Accordingly,
a fresh proclamation was issued, for the auction of the properties of
Deve Sugars Ltd., fixing 11.8.2005 as the date for holding the auction.
The rival parties were also permitted to bring their buyers, if there was
anyone interested. The reserve price was fixed at Rs. IO crores. The
auction was actually conducted on 11.8.2005. The highest bid was made
by Anita International, the appellant before this Court. The bid of Anita
International of Rs. I 0.25 crores was accepted. The bidder deposited
the bid amount, within the stipulated period. No challenge was raised
against the auction conducted on 11.8.2005, within the postulated period
of 30 days, as is permissible in terms of the Rules framed under the
ROB Act. The Recovery Officer ordered the confirmation of the sale of
the auctioned property, after the expiry of statutory period, expressed in
Rules 60, 61, and 62 of the Second Schedule of the Income Tax Act (as
is applicable to proceedings, before Debts Recovery Tribunals), on
12.9.2005.
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IO. On 20.9.2005, the Recovery Officer appointed a Receiver, to
take possession of the property, sold at the auction. The Court
Commissioner allegedly took over possession of some of the properties,
and handed over the same to the auction purchaser-Anita International.
Atthe instant juncture, the appellant-Anita International, filed Company
Application No.1811 of2005 before the High Court at Madras for removal
of the security agency. At the said juncture, Videocon International Ltd.
and Tapti Machines Pvt. Ltd. filed Writ Petition No.26564 of2005 before
the High Court ofKarnataka. The above writ petition, and Writ Petition
No.37991 of2004 (filed by the workers' union) were heard by a learned
single Judge, wherein the auction purchaser-Anita International, raised
a preliminary objection. It was submitted, that the petitioners before the
High Court had an efficacious alternative remedy, under the ROB Act.
It was accordingly prayed, that the petitioners be relegated to their
alternative remedy. Company Application No.854 of 2006 was filed
before the Company Court in the High Court at Madras, wherein a
challenge was raised to the sale of the assets of Deve Sugars Ltd., at
the hands of the Recovery Officer. It would be relevant to mention, that
the above two writ petitions were disposed of by tlie High Court of
Kamataka, by a common order dated 27.10.2006. The petitioners before
the Karnataka High Court were allowed to avail of their alternative
remedy before the ORT, Bangalore. The above common order dated
27.10.2006 was challenged, by filing Writ Appeal Nos.2050 and 2051 of
2006. Both the above writ appeals were dismissed on 23 .2.2007. Liberty
was, however, reserved with appellants, by permitting them to approach
the ORT, Bangalore, by fit ing appeals. As a matter of abundant caution,
the appellate Court ordered, that the ORT, Bangalore, would deal with
the controversy, uninfluenced by the orders passed by the High Court.
11. In compliance with, and in continuation of the outcome before
the High Court ofKarnataka, the workers' union preferred AOR No.15
of2006 and Videocon International Ltd. preferred AOR No.I of2007.
In the above appeals, a challenge was raised to the order dated 12.9.2005
passed by the Recovery Officer, whereby the sale of the properties of
Deve Sugars Ltd. conducted on 11.8.2005, in favour of Anita International
was confirmed. Simultaneously, one N. Ponnusamy, an ex-Director of
· Deve Sugars Ltd., filed Company Application Nos.2740-2742 of2007
before the Company Court in the High Court at Madras, and sought the
setting aside of the auction sale dated 11.8.2005, as well as, the
ANITA INTERNATIONAL v. TUNGABAORA SUGAR WORKS
MAZOOOR SANGH [JAGDISH SINGH KHEHAR, J.]
confinnation 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. I 0 crore was too low. N. Ponnusamy,
also sought transfer of the recovery proceedings, from the ORT,
Bangalore, to the High Court at Madras. While entertaining the
proceedings initiated by N. Ponnusamy, the High Court by its order dated
24.10.2007, passed an ex parte interim order of stay. Anita International
and State Bank of Mysore, filed detailed objections, to the applications
filed by the Official Liquidator, as well as, by the aforementioned N.
Ponnusamy. All the applications filed in C.A. No.18 I I of 2005 were
taken up for consideration, collectively. By a common order dated
3.3.2009, the application filed by the Official Liquidator was dismissed,
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 2 7. I 0 .2006), and in consonance with the above order, the
Official Liquidator was obi iged to file an appeal, to challenge the auction
sale (dated I 1.8.2005), as well as, the order of confirmation (dated
12.9.2005) passed by the Recovery Officer. Likewise, the proceedings
initiated by N. Ponnusamy, also did not yield any result. His claim was
also rejected on the ground, that he too could have availed of the remedy
of filing an appeal, to assail the orders passed by the Recovery Officer.
The other applications, which came up for hearingjointly were likewise
dismissed, as the said applicants, had already availed of the appellate
remedy, before the ORT, Bangalore. As against the above, the application
filed by Anita International for possession of the property purchased by
way of auction at the hands of the Recovery Officer, was allowed.
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 of2005, 854 of2006 and 2740-2742 of2007 - in Company
Petition No. 170 of 1995) by filing O.S.A. Nos. 59-63, 76, 77 and 82 of
2009. The impugned order in the present appeals dated 17.9.2009, was
passed by a Division Bench of the Company Court in the High Court at
Madras. In arriving at its conclusions, the High Court took into
consideration inter alia the following factors:
Firstly, the Official Liquidator had raised objections before the
Recovery Officer, in respect of the sale of the properties ofOeve Sugars
Ltd .. There was nothing to indicate, that the said objections were ever
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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 ..
Secondly, no material had been placed before the High Cou11 to
indicate, that the valuation report (dated 24.3 .2002) and the inventory
(dated 25.11.2004) were prepared after giving notice to the Official
Liquidator, who was undoubtedly in exclusive custody of the properties
(which were subject matter of auction).
Thirdly, even after the workers' union had raised objections before
the Re~overy Officer, no material was placed before the High Court,
that there was proper application of mind at the hands of the Recovery
Officer, leading to the inference, that the objections were rejected in a
casual and lackadaisical manner.
Fourthly, the inspection of the properties of the company under
winding up, by the intending purchasers (for the auction sale scheduled
on 11.8.2005) was pennitted only on the day preceding the date of auction
(namely, on I 0.8.2005), leading to the inference, that the entire process
of auction was a mere fomrnlity.
Fifthly, on the advertised date fixed for the auction (on 11.8.2005)
the Recovery Officer received only two bids. Despite the above, he
closed the bid on 11.8.2005 itself. Insofar as the above two bids are
concerned, it was felt, that there was for all intents and purposes only a
singular bid; One of the bidders was Anita International- the appellant
herein, and the other bid was by Synergy Steel Ltd. - a sister company
of the appellant-Anita International. In sum and substance therefore,
the Recovery Officer closed the bid, after receiving a singular bid.
Sixthly, after holding the auction on 11.8.2005, the Recovery Officer
confirmed the sale in favour of Anita International on 12.9.2005. This
could not have been done, in view of the order dated I 0.3.2000 passed
by the High Court at Madras, wherein it was directed, that no coercive
steps would be taken against the assets of the company under liquidation,
during or after the conclusion of the proceedings before the DRT,
Bangalore. And as such, the State Bank of Mysore could not have
proceeded with, the sale of the assets of Deve Sugars Ltd.
ANITA INTERNATIONAL v. TUNGABADRA SUGAR WORKS
MAZDOOR SANGH [JAGDJSH SINGH KHEHAR, J.]
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,
thatthe High Court by relying on the judgment in M.V. Janardhan Reddy
v. Vijaya Bank\ and after taking note of the fact, that the State Bank of
Mysore had applied to the Company Court of the High Court at Madras,
for liberty to recover its dues from Deve Sugars Ltd., by filing Company
Application Nos.1251-1253of1999 (in pending Company Petition No.170
of 1995), and having obtained an order from the High Court dated
I 0.3.2000, was bound by the same. The High Court also concluded,
that the above order dated 10.3.2000 was binding, on the Recovery Officer
of the ORT, Bangalore. The High Court also expressed the view, that
the order dated I 0.3 .2000 had unambiguously directed, that no coercive
steps would be taken against the assets of the company under winding
up. Accordingly, the High Court held, that the State Bank of Mysore
could not take advantage of the sale of the assets of the company, or the
.confirmation thereof at the hands of the Recovery Officer, as the same
were in clear violation, of the order (dated I 0.3.2000) of the Company
Court in the High Court at Madras.· Relying on the decision of th is 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,
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14. Having concluded as above, the High Court vide the impugned
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order dated 17.9.2009, directed as under:
"Hence the followingjudgment 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 ofall the creditors and also the workers' union,
a fresh sale is ordered to be made by the Recovery Officer after
following the procedural formalities and after preparation of a
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 ROB 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 case 1• It
was pointed out, that the above judgment was rendered on I 0.4.2000.
And in the above view of the matter, the declared position of law was
clear and explicit well before the controversy in hand was determined
by the High Court at Madras. From the cited judgment, learned counsel
for the appellant placed reliance on the following observations:
"21. In our opinion, the jurisdiction of the Tribunal in regard to
adjudication is exclusive. The ROB Act requires the Tribunal alone
to decide applications for recovery of debts due to banks or
financial institutions. Once the Tribunal passes an order that the
debt is due, the Tribunal has to issue a certificate under Section
19(22) [formerly under Section 19(7)] to the Recovery Officer
for recovery of the debt specified in the certificate. The question
arises as to the meaning of the word "recovery" in Section 17 of
the Act. It appears to us that basically the Tribunal is to adjudicate
ANITA INTERNATIONAL v. TUNGABAORA SUGAR WORKS
MAZOOOR SANGH [JAGDISH SINGH KHEHAR, J.]
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 ofa High Court exercising power under Articles
226 or 227 of the Constitution.) This is the effect of Sections 17
and 18 of the Act.
22. We hold that the provisions of Sections 17 and 18 of the ROB
Act are exclusive so far as the question of adjudication of the
liability of the defendant to the appellant Bank is concerned.
(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 2? to 30. It is not the intendment of the
Act that while the basic liability of the defendant is to be decided
by the Tribunal under Section 17, the banks/financial institutions
should go to the civil court or the Company Court or some other
authority outside the Act for the actual realisation of the amount.
The certificate granted under Section 19(22) has. in our opinion,
to be executed only by the Recovery Officer. No dual jurisdictions
at different stages are contemplated. Fmther, Section 34 of the
Act gives overriding effect to the provisions of the ROB Act.
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The provisions of Section 34( !) clearly state that the ROB Act
overrides other laws to the extent of "inconsistency". In our
opinion, the prescription of an exclusive Tribunal both for
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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
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Committee which recommended the constitution of a Special
Tribunal in 1981 for recovery of debts due to banks and financial
institutions stated in its report that the exclusive jurisdiction of the
Tribunal must relate not only in regard to the adjudication of the
liability but also in regard to the execution proceedings. It stated
in Annexure XI of its report that all "execution proceedings" must
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.
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Question of leave and control by the Company Court:
30. Learned Attorney General has, in this connection, relied upon
Damji Valji Shah v. LIC of India (1965) 3 SCR 665 to contend
that for initiating and continuing proceedings under the ROB Act,
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no leave of the Company Court is necessary under Section 446.
In that case, a Tribunal was constituted under the Life Insurance
Corporation Act, 1956. Question was whether under Section 446
of the Companies Act, 1956, t~e said proceedings could be stayed
and later be transferred to the Company Court and adjudicated in
that Court. It was held that the said proceedings could not be
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transferred. Section 15 of the Life Insurance Corporation Act,
1956 -
which we may say, roughly corresponds to Section 17 of
the ROB Act- enabled Life Insurance Corporation of India to
file a case before a Special Tribunal and recover various amounts
from the erstwhile life insurance companies in certain respects.
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Section 41 of the UC Act conferred exclusive jurisdiction on the
said Tribunal just like Section 18 of the ROB Act, 1993. There the
Company was ordered to be wound up by an order of the Company
C_ourt passed under Section 446( I) on 9-1-1959. The claim was
filed by LIC against the Company and its Directors before the
Tribunal in 1962. The respondents before the Tribunal contended
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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
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transferred, unless the Company Court had jurisdiction to decide
ANITA INTERNATIONAL v. TUNGABAORA SUGAR WORKS
651
MAZOOOR SANGH [JAGDISH SINGH KHEHAR, J.]
the ~stions which were raised before the UC Tribunal. there
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was no purpose of requiring leave of the Company Court or
permitting transfer ..... .
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31. It may a1so be noticed 'that in the UC Act of 1956, there was
no provision like Section 34 of the ROB Act giving overriding
effect to the provisions of the LIC Act. Still this Court upheld the
exclusive jurisdiction of the LIC Tribunal .....
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71. But the point here is that the occasion for such a claim by a
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secured creditor (here Canara Bank) against realisations by other
creditors (like Allahabad Bank) under Section 529-A read with
proviso (c) to Section 529( I) can arise before the Tribunal only if
Canara Bank has stood outside winding-up and realised amounts
and i.f it shows that out of the amounts privately realised by i.h
g>me.n01:tion has been rateably taken away by the liquidator under
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clauses (a) and (h) of the proviso to Section 529( I). It is only then
that it can claim that it is to be reimbursed at the same level as a
secured creditor with priority over the realisations of other creditors
lying in the Tribunal. None of these conditions is satisfied by Canara
Bank. Thus, Canara Bank does not belong to the class of secured
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creditors covered by Section 529-A( I )(b ).
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73. If none of the conditions required forapplying Section 19( 19)
and Section 529-A is; therefore, satisfied, then the claim of Canara
Bank before the Tribunal can only be on the basis of principles
underlying Section 73 CPC. There being no decree in its favour
from any court or from any Tribunal, and the other conditions of
Section 73 not having been satisfied, no dividend can be claimed
out of monies realised at the instance of Allahabad Bank, even if
Allahabad Bank is an unsecured creditor.
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76. The next question is whether the amounts realised under the
ROB Act at the instance of the appellant can be straight away
released in its favour.