Karnataka High Court
T Devaraja vs Official Liquidator Of on 30 May, 2023
Bench: Alok Aradhe Byaaj, Arhj
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O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF MAY, 2023
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
O.S.A. NO.48 OF 2013
C/W
O.S.A. NO.36 OF 2013
IN O.S.A. NO.48 OF 2013
BETWEEN:
1. CANARA BANK
MADIWALA BRANCH
Digitally #20/01, HOSUR MAIN ROAD
signed by
RUPA V MADIWALA, BANGALORE 68
REP. BY ITS AUTHORIZED SIGNATORY.
Location:
High Court ...APPELLANT
of (BY SRI. D. ASWATHAPPA, ADV.,)
Karnataka
AND:
1. THE OFFICIAL LIQUIDATOR OF
M/S. KRITHIKA RUBBER INDUSTRIES
PVT. LTD. (IN LIQUIDATION)
ATTACHED TO HIGH COURT OF KARNATAKA
CORPORATE BHAVAN, 12TH FLOOR
RAHEJA TOWER, M.G. ROAD
BANGALORE-560001.
2. SRI. T. DEVARAJA
S/O M. TUKARAM RAO
AGED ABOUT 49 YEARS
NO.57, 16TH CROSS, 10TH MAIN
WILSON GARDEN, BANGALORE 30
...RESPONDENTS
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O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
(BY SRI. K.S. MAHADEVAN, ADV., FOR
SMT. REVATHY ADINATH NARDE, ADV., FOR R1
SRI. R. PARTHASARATHY, ADV., FOR
SRI. ASHOK NAIK, ADV., FOR R2)
THIS OSA IS FILED UNDER RULE 483 OF THE
COMPANIES ACT 1956, R/W RULE 9 OF THE COMPANIES
(COURT) RULES 1959, PRAYING TO ALLOW THE APPEAL BY
SETTING-ASIDE THE ORDER DATED 13.06.2013 PASSED IN
C.A. NO.190/2008 IN CoP NO.167/1999 ALLOWING THE
COMPANY APPLICATION AND SET-ASIDE THE AUCTION SALE
ONE IN EXECUTION OF THE RECOVERY CERTIFICATE ISSUED
BY THE DEBT RECOVERY TRIBUNAL (FOR SHORT DRT) IN
PURSUANCE TO THE AWARD DATED 26.06.2000 PASSED IN OA
NO.194/1997 FILED BY THE APPELLANT HEREIN AS SECURED
CREDITOR AND PASS ANY SUCH OTHER ORDER/S DEEM FIT
IN THE MATTER AND ETC.,
O.S.A. NO.36 OF 2013
BETWEEN:
1. T. DEVARAJA
S/O LATE M. TUKARAM RAO
AGED ABOUT 53 YEARS
NO.57, 16TH CROSS
10TH MAIN, WILSON GARDEN
LAKKASANDRA EXTN
BANGALORE-560030.
...APPELLANT
(BY SRI. R. PARTHASARATHY, ADV., FOR
SRI. ASHOK NAIK, ADV.,)
AND:
1. OFFICIAL LIQUIDATOR OF
M/S KRITIKA RUBBER INDUSTRIES
PVT LTD (IN LIQUIDATION)
ATTACHED TO HIGH COURT OF KARNATAKA
'F' WING, 4TH FLOOR, KENDRIYA SADAN
KORAMANGALA
BANGALORE-560034.
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O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
NOW OFFICE AT:
CORPORATE BHAVAN
26-27, 12TH FLOOR
RAHEJA TOWERS
M G ROAD, BANGALORE-1.
2. CANARA BANK
MADIWALA BRANCH
# 20/01, HOSUR MAIN ROAD
MADIWALA, BANGALORE-68
REPTD BY ITS AUTHORITSED SIGNATORY.
...RESPONDENTS
(BY SRI. K.S. MAHADEVAN, ADV., FOR
SMT. REVATHY ADINATH NARDE, ADV., FOR R1
SRI. D. ASWATHAPPA, ADV., FOR R2)
THIS OSA IS FILED U/S 483 OF THE COMPANIES ACT,
1956, R/W SECTION 4 OF THE KARNATAKA HIGH COURT ACT,
1961, PRAYING TO SET ASIDE THE ORDER DATED 13.06.2013
PASSED IN COMPANY APPLICATION NO.190/2008 BEING FILED
IN COMPANY PETITION NO.167/1999 VIDE ANNEXURE-A
PASSED BY THE HON'BLE SINGLE JUDGE OF COMPANY
COURT, AT BANGALORE AND CONSEQUENTLY DISMISS THE
COMPANY APPLICATION NO.190/2008 BEING FILED IN
COMPANY PETITION NO.167/1999 TO MEET THE ENDS OF
JUSTICE. TO PASS SUCH OTHER OR DIRECTION AS DEEM FIT
UNDER THE CIRCUMSTANCE OF THE CASE.
THESE APPEALS COMING ON FOR FINAL HEARING, THIS
DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:
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O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
JUDGMENT
These appeals under Section 483 of the Companies
Act, 1956 read with Rule 9 of Companies (Code) Rules,
1959 have been filed against the order dated 13.06.2013
passed by Learned Company Judge by which company
application filed by the official liquidator under Section
537 read with Section 456 of the Companies Act has
been allowed and the auction of the property held on
05.10.2005, which was confirmed on 16.11.2005 as well
as sale certificate dated 02.02.2006 issued by the Debt
Recovery Tribunal has been set aside. In addition, the
respondents in the company application were directed
to hand over the possession of the property in question.
O.S.A.No.48/2013 has been filed by the financial
institution viz., Canara Bank whereas,
O.S.A.No.36/2013 has been filed by the auction
purchaser.
O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
2. Facts leading to filing of these appeals briefly
stated are that M/s Kritika Rubber Industries Private
Limited (hereinafter referred to as 'the Company' for
short) had availed of financial assistance from the
Canara Bank (hereinafter referred to as 'the Bank' for
short). However, the company defaulted in making
repayment of the amount of loan to the bank.
Thereafter, the bank initiated the proceedings for
recovery of the aforesaid amount before the Debt
Recovery Tribunal, Bangalore (hereinafter referred to as
'the Tribunal' for short). Therefore, the bank on
19.02.1997 initiated proceedings for recovery of the
amount before the Tribunal. A petition for winding up
of the company viz., Co.P. No.167/1999 was filed by one
of the creditors viz., Colonel D.B.Singh on 19.06.1999
against the company. On 30.03.2000, the aforesaid
petition for winding up of the company was admitted.
The recovery proceedings viz., O.A.No.194/1997
initiated by the bank against the company was allowed
O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
by the tribunal on 26.06.2000. In execution
proceedings, recovery officer by an order dated
27.06.2005 attached the property No.67G in Sy.No.205
measuring 4026 square feet situated at Bommasandra,
Anekal Village, Bangalore Rural Taluk (hereinafter
referred to as 'the schedule property' for short).
Thereafter, a public notice of auction of sale was issued
on 02.10.2005 by recovery officer of the tribunal to sell
the schedule property.
3. In pursuance of the aforesaid public notice,
the auction was conducted on 05.10.2005, which was
confirmed on 16.11.2005. Thereafter, the Tribunal
issued a sale certificate on 02.02.2006 in favour of
auction purchaser. After the sale certificate was issued,
the petition for winding up of the company as allowed
on 29.06.2006.
O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
4. The Official Liquidator filed a company
application viz., C.A.No.190/2008 under Section 537 of
the Act on 06.03.2008 seeking a declaration that the
sale of assets of the company by the bank in favour of
auction purchaser is void. The learned Company Judge
by an order dated 25.11.2008 allowed the aforesaid
company application and declared the sale to be void
and directed the respondents in the company
application to hand over the assets. Thereafter, the
bank as well as the auction purchaser filed appeals
under Section 483 of the Companies Act, 1956
(hereinafter referred to as 'the Act' for short) seeking to
set aside the order dated 25.11.2008 passed by the
Company Judge. A division bench of this court set
aside the order passed by learned Company Judge and
remitted the matter to the company court for fresh
consideration.
O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
5. Thereafter, in pursuance of the order of
remand, company had by an order dated 13.06.2013
inter alia held that during the pendency of the company
petition, the recovery officer of the tribunal attached
the property on 27.06.2005 and auctioned the same. It
was further held that Official Liquidator represents the
secured creditor as well as the workmen and therefore,
he cannot be kept out of sale proceedings. The learned
Company Judge therefore, set aside the certificate of
sale dated 02.02.2006 and directed the auction
purchase to hand over the possession.
6. Being aggrieved, the bank filed a review
petition viz., R.P.No.600/2013, which was dismissed by
a Company Judge by an order dated 10.10.2013.
Thereafter, the auction purchaser and the bank have
filed these appeals. In the aforesaid factual
background, these appeals arise for our consideration.
O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
7. Learned counsel for the auction purchaser as
well as for the bank at the outset submitted that the
order passed by the learned Company Judge is per
incuriam in as much as the same has been passed in
ignorance of law laid down by Hon'ble Supreme Court
in 'BANK OF MAHARASHTRA VS. PANDURANG
KESHAV GORWARDKAR AND OTHERS', (2013) 7 SCC
754. Learned counsel has invited the attention of this
court to paragraph 67.6 of the aforesaid decision. It is
contended that the Recovery of Debts Due to Banks And
Financial Institution Act, 1993 is a special law and a
later law and therefore, has an overriding effect over the
provisions of the Act. It is further submitted that in
any case, if the Official Liquidator was aggrieved, he
ought to have approached the tribunal and had no
option to initiate the proceedings before the company
court. In support of aforesaid submissions reference has
been made to decision of the Hon'ble Supreme Court in
'OFFICIAL LIQUIDATOR, UTTAR PRADESH AND
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O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
UTTARAKHAND VS. ALLAHABAD BANK AND
OTHERS', (2013) 4 SCC 381. On the other hand,
learned counsel for the Official Liquidator fairly
submitted that the controversy involved in this appeal is
covered by a decision of Hon'ble Supreme Court in
BANK OF MAHARASHTRA supra. However, it is
submitted that the Official Liquidator be granted the
liberty to make a claim on behalf of the secured creditor
as well as the workmen before the Bank.
8. We have considered the rival submissions
made on both sides and have perused the record.
Admittedly, in the instant case, after the auction was
held on 05.10.2005, which was confirmed on
16.11.2005, a sale certificate was issued on 02.02.2006.
Thereafter, after a period of four months, by an order
dated 29.06.2006, winding up petition was allowed.
Thus, prior to appointment of Official Liquidator, the
auction was already held, which was confirmed and the
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O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
sale certificate was duly issued to the auction
purchaser. The Hon'ble Supreme Court in BANK OF
MAHARASHTRA in para 67.6 has held as under:
Where the winding-up petition against
the debtor company is pending but no order
of winding up has been passed nor has any
provisional liquidator been appointed in
respect of such company at the time of order
of sale by DRT and the properties of the
debtor company have been sold in execution
of the recovery certificate and proceeds of
sale realized and full disbursement of the
sale proceeds has been made to the bank or
financial institution concerned, the
subsequent event of the debtor company
going into liquidation is no ground for
reopening disbursement by DRT.
9. Thus, from aforesaid enunciation of law, it is
evident that at the time when the order of sale is made
and the properties have been sold in execution of the
recovery certificate, when no order of winding up has
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O.S.A. No.48 of 2013
C/W O.S.A. No.36 of 2013
been passed or no provisional liquidator has been
appointed, the sale cannot be re-opened.
10. However, it appears that the aforesaid
decision of the Hon'ble Supreme Court was not brought
to the notice of the learned Company Judge. Therefore,
in view of the law laid down by Hon'ble Supreme Court
in BANK OF MAHARASHTRA supra, and therefore, the
association of Official Liquidator with the sale was not
required as the same was conducted prior to
appointment of the Official Liquidator.
11. For yet another reason, the impugned order
cannot be sustained. The Hon'ble Supreme Court in
OFFICIAL LIQUIDATOR supra has held that a person
aggrieved by an action taken by the Recovery Officer has
to approach the tribunal and cannot take recourse to
doctrine of election. In the instant case, the only
remedy available to the Official Liquidator was to
challenge the order passed by the Recovery Officer
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C/W O.S.A. No.36 of 2013
before the Tribunal. On this ground also, the order
passed by the learned Company Judge cannot be
sustained. The impugned order dated 13.06.2013
passed by learned company Judge is set aside.
In the result, the appeals are allowed.
Sd/-
JUDGE
Sd/-
JUDGE
SS
