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PETITIONER: ALLAHABAD BANK

       Vs.

RESPONDENT: CANARA BANK & ANOTHER

DATE OF JUDGMENT:       04/04/2000

BENCH: M.J.Rao, N.S.Hegde

JUDGMENT:

     M.JAGANNADHA RAO,J.

     Leave granted.

     The  case raises issues relating to the impact of  the provisions  of  the  Recovery  of Debts  due  to  Banks  and Financial Institutions Act, 1993 (hereinafter called the RDB Act  )  on the provisions of the Companies Act,  1956.   The immediate  dispute  before  us is between  two  nationalised Banks,  the Allahabad Bank (appellant) on the one hand which has   obtained   a   simple   money   decree   against   the debtor-company  (M/s  M.S.Shoes (East) Co.  Ltd.   from  the Debt  Recovery  Tribunal at Delhi under the RDB Act and  the Canara  Bank on the other, whose claim as a secured creditor is  still pending before the same Tribunal at Delhi  against the same company.  The Allahabad Bank has appealed before us against  an order passed by the learned Company Judge  under sections  442 and 537 of the Companies Act, (in a winding up petition by Ranbaxy Ltd.) staying the sale proceedings taken out  by the Allahabad Bank before the Recovery Officer under the  RDB  Act.   Applications for winding up  the  defendant company  are  pending  in the Delhi High Court.  As  yet  no winding  up  order  has  been   passed  nor  a   provisional liquidator  appointed  as  contemplated by  section  446(1). Point  has been raised by the respondent - Canara Bank  that the appellant Allahabad Bank is obliged to seek leave of the Company  Court under the Companies Act, 1956 and the Company Court can stay these proceedings as aforesaid under Sections 442  and  537  for  the ultimate  purpose  of  deciding  the priorities,  in  the  event of a winding up order  or  other order appointing a provisional liquidator being passed under section  446(1)  of  the  Companies Act,  1956.   After  the appellant  obtained decree from the Debt Recovery  Tribunal, some  properties  of  the  company have  been  sold  by  the Recovery  Officer.   Appellant  contends that  the  Tribunal under  the  RDB  Act can itself deal with  the  question  of appropriation  of  sale proceeds in respect of sales of  the company properties held at the instance of the appellant and the  priorities and that the appellant alone is entitled  to all  the  sums  so  realised.  The  matter  was  argued  and judgment  was  reserved.   Thereafter,   our  attention  was invited  by the learned counsel for the respondent -  Canara Bank  to  the Amending Ordinance(Ordinance 1 of 2000)  which came  into force with effect from 17.1.2000.  The effect  of the Ordinance and in particular section 19(19) then fell for

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consideration.   Question  of  distribution   of  the   sale proceeds by Company Court/Tribunal and method of working out priorities  among  creditors was argued.  The facts  of  the case are as follows:  The appellant Bank filed O.A.No.109 of 1995  before the Debt Recovery Tribunal, Delhi under section 19  of the RDB Act, 1993 for recovery of Rs.21,49,29,520 and a  simple money decree was passed on 13.1.1998 with interest at  18%  and interest tax levy at 0.75% p.a.  Recovery  Case (R.C.No.9  of  98)  was  filed by  the  Allahabad  Bank  for recovery  before  the Recovery Officer.  The debtor  Company filed  appeal  No.270 of 1998 before the appellate  Tribunal and  there  was  no stay inasmuch as there  was  default  in deposit of the money directed to be deposited.  O.A.  No.784 of  1996 was filed by the Canara Bank also under the RDB Act in  the  Debt  Recovery  Tribunal, Delhi for  a  decree  for Rs.14,40,05,982.98  plus interest and it was said that a sum of  about  Rs.25 crores was due from the same company.   The said  O.A.  of Canara Bank is pending in the Delhi  Tribunal under  the  RDB  Act.  The Canara Bank  filed  interlocutory application  before the Recovery Officer for impleadment  in the  said  recovery  case of the appellant,  viz.,  R.C.9/98 seeking pro-rata distribution of sale proceeds from auctions of  the  debtor  company’s properties.  The  appellant  Bank resisted the same contending that inasmuch as no orders have been  passed in favour of the Canara Bank in its claim filed before  the  Delhi Tribunal against the same company,  there was  no question of impleading the Canara Bank.  As  regards proportionate disbursement of sale proceeds, it was observed that  that  question was premature and that the  said  issue could be considered after sale proceeds were received by the Tribunal.   These  applications were dismissed  on  28.9.98. The  property  of  the debtor company  situated  at  Village Kherki  Daula,  admeasuring Ac 32.64 was sold on 8.1.99  for Rs.2,30,11,200.   The  sale was confirmed on 16.2.99 by  the Recovery  Officer.   Property  of  the  Company  at  village Dundahera  admeasuring Ac 4.23 was also sold on 15.1.99  for Rs.3,17,34,375, but the Recovery Officer declined to confirm that  sale and directed fresh auction and the appellant Bank filed W.P.  under Articles 226, 227.  Canara Bank then filed applications  in the Debt Recovery Tribunal under section 22 of  the  RDB  Act in January,1999 seeking stay  of  recovery proceedings  in  RC  No.9/98.  They were heard  on  25.2.99, adjourned  to 3.3.99 then to 5.3.99.  On 5.3.99, the counsel for  Canara  Bank informed the Recovery Officer that it  had filed Company application No.296 of 1999 in Company Petition No.141/95 (being a winding up petition filed by Ranbaxy Ltd. against  M.S.Shoes  Co.)  under  sections 442,  537  of  the Companies  Act for stay of the appellant’s Recovery Case, RC No.9/98.   The said CA 296/99 was filed by Canara Bank in CP 141/95  under  section 442 and section 537 of the  Companies Act  seeking stay of RC 9/98 and for staying sales of assets of  company  by  the appellant Bank.  Later on  Canara  Bank filed  CA 323/99 again under section 442 and section 537 for similar  reliefs  as in CA 296/99.  On 9.3.99,  the  learned Company  Judge passed the impugned order in CA 323/99  under section  442  read  with section 537 of  the  Companies  Act staying the further sale of assets of the Company in RC 9/98 in  OA  109/95 and also restraining disbursement  of  monies already  realised  in other sales.  It is against the  above order  dated  9.3.99  that this appeal has  been  preferred. (While narrating the facts, we have not referred to a number of other proceedings taken out by the debtor- company before various Courts to stall the sales.  In fact allegations have been  made  that the action of the Canara Bank in trying  to stall  sales  - which are being held at the instance of  the

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Allahabad   Bank   -   was     intended   to   benefit   the debtor-company.These  allegations were, of course, denied by the  Canara Bank.  We shall refer to some subsequent  events which  took  place during the pendency of this  appeal.   On 14.5.99  this  Court  passed  an  order  in  favour  of  the Allahabad  Bank  directing  that  the  sale  of  the  debtor company’s  property in shed No.15 to go on but that the sale proceeds  be  not distributed.  Unfortunately, the sale  was not  held  for quite some time due to an omnibus stay  order dated  29.6.99 passed by the Tribunal at Delhi.  That  order was  stayed  by the Appellate Tribunal, Bombay  on  29.6.99. The  sale  did not take place even by 7.1.2000.  This  Court then  issued  further  orders on 7.1.2000 for  sale  of  the company’s  property  in  Shed No.15.   Thereafter,  sale  of Industrial  Shed No.15/Category-II under SFS at Rohtak Road, Industrial  Complex, New Delhi-110005 was held on 28.1.2000. (The  raw material and machinery in the shed which were said to  have  been  mortgaged to Canara Bank  were  removed  and segregated.   An  order  was  passed that  an  inventory  be prepared  and  to remove the pledged property).  It  appears the  sale proceeds of about Rs.  20 lakhs are in deposit  in this  Court.   Now, the position is that some sale  proceeds are  in deposit in the Tribunal and some in this Court,  all such sales having been held at the instance of the appellant Bank alone.  Questions have been raised by the respondent as to  whether  the  Tribunal  can  entertain  proceedings  for recovery,  execution proceedings, and also for  distribution of  monies  realised  by sales of properties  of  a  company against  which  winding up proceedings are pending,  whether leave  is  necessary and as to which Court is to  distribute the  sale  proceeds and according to what  priorities  among various  creditors?  In this appeal, Sri Soli Sorabjee,  the learned  Attorney  General  for   India  appearing  for  the appellant,  Allahabad Bank has submitted that the RDB Act of 1993   is  a  special   statute  intended  for   expeditious adjudication  and  recovery  of  debts   due  to  banks  and financial   institutions  and  it   contains   two   crucial provisions.   One  of  them is section 18  which  ousts  the jurisdiction  of all Courts or other authorities (except the Supreme  Court  and the High Court exercising  powers  under Articles 226, 227) in relation to matters covered by section 17  and that section 17 covers the entire procedure from the filing   of  an  application  under   section  19,  to   the ‘adjudication’  and ‘recovery’.  These matters are taken out from  the  purview of the Companies Act, including  sections 442,  537 and section 446 of the said Act.  The  proceedings under  the RDB Act cannot be stayed by the Company Court nor can  they be transferred to the Company Court.  No leave  of the  Company Court is necessary either for the filing of the OA for adjudication of the debt nor for executing the decree passed  by  the  Tribunal.  Section 34(1)  gives  overriding effect  to  the  provisions of the Act save as  provided  in section 34(2).  Section 34(2) as amended by Ordinance 1/2000 proceedings  saves  only  six statutes from the  purview  of section  34(1).  The Companies Act, 1956 is not one of them. Hence,  the  RDB Act, 1993 overrides sections 442,  537  and also section 446 of the Companies Act.  It is contended that even  otherwise  section 446 cannot be invoked in this  case because there is no winding up order nor an order appointing a  provisional  liquidator  so far.  So  far  as  principles underlying   section   73  CPC   are  concerned,   even   if applicable,-  on  facts, they are not attracted  before  the Tribunal  since no decrees have been obtained from any Civil Court  or  Debt  Recovery  Tribunal   by  the  Canara   Bank (respondent)  nor any steps as visualised by section 73 have

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been taken by the Canara Bank.  It is urged that Courts must interpret  the RDB Act of 1993 so as to subserve the purpose of  realisation  of thousands of crores of Bank funds  which are  due.  The legislature intended to avoid the long  drawn proceedings  in the Civil Court as well as under section 442 and  446 and 537 of the Companies Act and this is now  clear from  section 19(19) as re-enacted by Ordinance 1/2000 which permits  even the working out of priorities by the Tribunal. Several  rulings  of  this Court and of  High  Courts  under various  other  statutes  have been cited before us  and  we shall  refer  to  them  at the  appropriate  stage.   It  is submitted  that  the appellant Bank having got a decree  and having  got  the properties sold is solely entitled  to  the entirety  of these proceeds and there is no question of  the appellant  sharing  the sale proceeds with others nor is  it necessary  to wait till the Canara Bank gets a decree in its O.A.    pending  before  the   Delhi  Tribunal.    Important submissions  have been made by the learned Attorney  General as  to the effect of section 19(19) introduced by  Ordinance 1/2000, it is contended by the learned Attorney General that only section 529A of the Companies Act is attracted and that too  for  a  limited  purpose if a  question  of  "workman’s portion"  is involved.  No such question has arisen so  far. Hence  no  other provision of the Companies Act,  much  less section  529(1) or (2) are attracted.  In the Company Court, any secured creditor who has not stood out of winding up but wants  to  come before the Company Court has to give up  his security  and  prove his debt before the liquidator to  seek dividends  as per the insolvency rules mentioned in  section 529(1),  read  with  sections  45 to 50  of  the  Provincial Insolvency  Act  and  stand  in the  queue  along  with  all unsecured  creditors  under  section   529(2).   Even   that procedure  is  applicable  only  in respect  of  any  monies realised  by the Company Court and not by the Tribunal.  The limited extent to which secured creditors can claim priority under the RDB Act is as limited by section 19(19) of the RDB Act  and  this  is covered by section 529A alone  read  with sub-clause (c) to the proviso to section 529(1).  The effect of  these  provisions is that if any monies are realised  by Canara  Bank by standing outside winding up and if any  part of  such  realisations of the Canara Bank are taken away  by the liquidator for payment to workmen, only to the extent of such  "workmen’s portion", can the Canara Bank have priority over  other creditors.  Otherwise, Canara Bank cannot invoke Section  529(1),  (2) and that too before the Tribunal.   On the  other  hand,  learned counsel for the Canara  Bank  Sri Y.P.Narula  has submitted that when a winding up petition is pending in the Company Court, it is necessary that the leave of  the  Company  Court is obtained for obtaining  a  decree before  the  Tribunal or for execution before  the  Recovery Officer.  Sections 442, 446, 537 applied even to proceedings under  the  RDB Act.  Leave is necessary under  section  537 even  if  no  winding up order is passed.  It  is  therefore necessary  to stay the sale proceedings before the  Recovery Officer  or the distribution of sale proceeds.  The  Company Court  alone  can sell the properties of the Company in  the winding  up  proceedings.  The recovery proceedings must  be stayed  and then the proceedings must be transferred to  the Company Court and thereafter, once the proceeds of sale come before  the Company Court, the said Court alone will have to distribute  the monies according to priorities as  mentioned in  sections  446(2)(d), 529, 529A and 530 etc.  The  Canara Bank  is  also  a nationalised bank and merely  because  the Allahabad  Bank has been able to get a decree from the  Debt Recovery  Tribunal  earlier than the Canara Bank, under  the

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RDB   Act,  the  Allahabad  Bank   can  not  be  allowed  to appropriate  the entire sale proceeds recovered by it.  Even if  the Canara Bank has only a ‘claim’ and not a decree - in view  of section 2(g), its security has preference.   Unlike section 73 CPC, section 446 does not require a decree and it is  sufficient  to  prove  a  debt  before  the  liquidator. Alternatively, it is submitted that even before the Tribunal section  73  CPC  and  also section 529(1) and  (2)  of  the Companies  Act  read  with  sections  529A,  530  etc.   are attracted  for purposes of distribution of the sale proceeds and  working  out priorities, assuming that jurisdiction  of the Company Court is excluded in so far as recovery of debts due to Banks and financial institutions are concerned.  From the  aforesaid  contentions, the following points arise  for consideration:   (1) Whether in respect of proceedings under the  RDB Act at the stage of adjudication for the money  due to  the Banks or financial institutions and at the stage  of execution  for  recovery  of monies under the RDB  Act,  the Tribunal  and the Recovery Officers are conferred  exclusive jurisdiction  in their respective spheres?  (2) Whether  for initiation of various proceedings by the Banks and financial institutions  under the RDB Act, leave of the Company  Court is necessary under Sections 537 before a winding up order is passed  against the Company or before provisional liquidator is  appointed  under section 446(1) and whether the  Company Court  can  pass  orders of stay of proceedings  before  the Tribunal,  in  exercise  of powers under section  442?   (3) Whether after a winding up order is passed under Section 446 (1)  of  the  Company  Act or a  provisional  liquidator  is appointed,  whether  the Company Court can stay  proceedings under  the RDB Act, transfer them to itself and also  decide questions  of  liability,  execution,   and  priority  under section 446 (2) and (3) read with sections 529, 529A and 530 etc.   of  the Companies Act or whether these questions  are all  within the exclusive jurisdiction of the Tribunal?  (4) Whether,  in  case  it is decided that the  distribution  of monies is to be done only by the Tribunal, the provisions of section  73 CPC and sub- clause (1) and (2) of section  529, section  530 of the Companies Court also apply - apart  from section  529A - to the proceedings before the Tribunal under the  RDB Act?  (5) Whether in view of provisions in  section 19(2)  and  19(19)  as introduced by Ordinance  1/2000,  the Tribunal  can permit the appellant Bank alone to appropriate the entire sale proceeds realised by the appellant except to the  limited  extent  restricted by section 529A?   Can  the secured  creditors like the Canara Bank claim under  section 19(19)  any  part of the realisations made by  the  Recovery Officer  and is there any difference between cases where the secured  creditor  opts to stand outside the winding up  and where  he  goes before the Company Court?  (6) What  is  the relief  to  be  granted on the facts of the case  since  the Recovery Officer has now sold some properties of the company and the monies are lying partly in the Tribunal or partly in this  Court?  Points 1:  This point concerns the question as to  the  exclusive  jurisdiction  of the  Tribunal  and  the Recovery  Officer in their respective spheres.  The RDB  Act is,  as disclosed by its preamble, an Act to provide for the establishment  of Tribunals for expeditious adjudication and recovery  of debts due to banks and financial  institutions. The  said Act is the result of two Reports, one of 1981 of a Committee  headed  by  Sri  T.  Tiwari and the  other  by  a Committee  headed  by  Sri M.  Narasimham in  1991.   As  on 30.9.90,  more  than  15 lakh cases filed by  public  sector Banks  and  about 304 cases filed by financial  institutions were  pending in various civil courts, and recovery of debts

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to  Banks  in  a  sum of Rs.5622  crores  and  to  financial institutions in a sum of Rs.  391 crores, was held up.  That was  the immediate cause for the passing of the Act.   Under sub-clause  (4)  of Section 1 of the RDB Act, it  is  stated that the Act will not apply if the debt due is less than Rs. 10  lakhs or such other amount as may be notified.   Section 2(d)  defines ’Banks’ as including (i) Bank Companies,  (ii) corresponding  new  banks, (iii) State Bank of  India,  (iv) subsidiary  Banks  and (v) Regional Rural  Banks.   ’Banking Company’  is defined in Section 2(e) and ’Corresponding  New Bank  is  defined in Section 2(f) and it refers  to  Section 5(da)  of the Banking Regulation Act, 1949.  Clause (da)  of Section  5  of  the Banking Regulation  Act,  1949,  defines ’corresponding  new  banks’ as Banks constituted  under  the Banking   Companies   (   Acquisition    and   Transfer   of Undertakings)  Act,  1970  and  Section  3  of  the  Banking Companies  ( Acquisition and Transfer of Undertakings)  Act, 1980.   About  20  nationalised banks have  come  under  the purview  of  RDB  Act.    Section  2(h)  defines  ’financial institutions’  and  refers to public financial  institutions falling  within  Section  4A of the Companies  Act,  1956  - namely  (i) the Industrial Credit and Investment Corporation of  India  Ltd;  (ii) the Industrial Finance Corporation  of India;   (iii)  the  Industrial Development Bank  of  India; (iv)  the  Life Insurance Corporation of India and  (v)  the Unit  Trust  of India.  Other financial  institutions  since notified  are  large in number.  Section 2(g) as amended  by Ordinance  1/2000  defines ’debt’ as meaning  any  liability which  is  "claimed"  as due from any person to  a  Bank  or financial  institutions.   It  includes  the  liability  and interest  in cash or otherwise, whether secured or unsecured or  whether  payable  under a decree or order of  any  civil Court  or otherwise and subsisting, and legally  recoverable on,  the  date  of the application filed  to  the  Tribunal. Exclusive  Jurisdiction of the Tribunal under Sections 17 18 and 25 of the RDB Act:  (i) adjudication, (ii) execution The initial  question is as to the jurisdiction of the  Tribunal under  Sections  17  and  18 of the RDB Act  in  the  matter passing  the order of adjudication and to what extent it  is exclusive.    The   next  question   will  be  whether   the jurisdiction  of the Recovery Officer is also exclusive  for purposes  of  execution of the adjudication order passed  by the  Tribunal.   (i)adjudication  by   Tribunal:   Does  the Tribunal  have  exclusive jurisdiction?  We shall  refer  to Sections  17 and 18 in Chapter III of the RDB Act which deal with  adjudication of the debt.  "Section 17:  Jurisdiction, powers  and  authority of Tribunals - (1) A  Tribunal  shall exercise,  on and from the appointed day, the  jurisdiction, powers  and  authority to entertain and decide  applications from  the  banks and financial institutions for recovery  of debts  due to such banks and financial institutions.  (2) An Appellate Tribunal shall exercise, on and from the appointed day,  the  jurisdiction, powers and authority  to  entertain appeals against any order made, or deemed to have been made, by  a  Tribunal  under  this   Act.   Section  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 Article  226 and 227 of the Constitution) in relation to the matters  specified in Section 17." It is clear from  Section 17  of  the  Act  that  the   Tribunal  is  to  decide   the applications  of  the Banks and Financial  Institutions  for recovery  of debts due to them.  We have already referred to the  definition  of  ’debt’ in Section 2(g)  as  amended  by

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Ordinance  1/2000.   It  includes   "claims"  by  Banks  and financial  institutions and includes the liability  incurred and  also  liability under a decree or otherwise.   In  this context  Section  31  of  the Act is  also  relevant.   That section  deals with transfer of pending suits or proceedings to  the  Tribunal.  In our view, the word  ’proceedings’  in Section  31  includes  an  ’execution  proceedings’  pending before  a  Civil Court before the commencement of  the  Act. The  suits and proceedings so pending on the date of the Act stand transferred to the Tribunal and have to be disposed of "in  the same manner" as applications under Section 19.   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 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.  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 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.  That  section  reads  as follows:   "Section 34 (1):  Act to have over-riding effect- (1)  Save  as  otherwise provided in sub- section  (2),  the provisions of this Act shall 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) and the Sick Industrial Companies ( Special Provisions ) Act, 1985 ( 1  of 1986)." The provisions of section 34(1) clearly  state

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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.  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 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.  Thus, the adjudication of liability  and the  recovery of the amount by execution of the  certificate are  respectively  within the exclusive jurisdiction of  the Tribunal  and  the  Recovery Officer and no other  Court  or authority much less the Civil Court or the Company Court can go into the said questions relating to the liability and the recovery  except as provided in the Act.  Point 1 is decided accordingly.   Points  2 and 3:  Does the Act  override  the provisions  of  Sections 442 and 537 and Section 446 of  the Company  Act?   These points deal with the question  whether the  Company Court can stay proceedings before the  Tribunal or  the  Recovery Officer under section 442 and whether  the said  court  can stall proceedings under section 537  unless leave  is  obtained.   Question  also arises  in  regard  to ‘priorities’  under  section 446(2)(d), read  with  sections 529,  529A, 530 of the Companies Act and whether the Company Court  alone  can  distribute and  decide  priorities  among creditors  or  whether the Tribunal can do this in  view  of section  19(19) of the RDB Act, as introduced by Ordinance 1 of  2000.   It is necessary first to refer to Sections  442, 537 and then to 446(1)(2) and 446(3).  of the Companies Act. Sections 442 and 537 deal with situations before the passing of a winding up order.  Under section 442, at any time after the  filing of a winding up petition and before the  passing of  a  winding  up order, the Company, or  any  creditor  or contributors  may  apply  for stay of suits  or  proceedings before  the  High court/supreme Court and for  this  purpose file  an application in those Courts.  If, they are  pending in  other  courts, applications may be filed in the  Company court  to  stay those proceedings and the said Courts  where applications  are  filed can stay the suits or  proceedings. Under section 537, where any Company is being wound-up by or subject  to  the supervision of the Court,  any  attachment, distress  or  execution put in force, without leave  of  the Company Court, against the estate or effects of the Company, after the commencement of the winding up, or any sale held - without  the leave of the Court, if any of the properties or effects  of  the Company, after such commencement, shall  be void.   Nothing  in this section applies to any  proceedings for the recovery of any tax or import or any dues payable to the  government.   After  a  winding  up  order  is  passed, provisions   of  section  446   become  applicable.    Under sub-clause  (1)  of section 446, when a winding up order  is passed  or  the  official  liquidator   is  appointed  as  a provisional  liquidator,  no suit or other legal  proceeding shall  be commenced, or if pending at the date of winding up order, shall be proceeded with against the company,except by

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leave  of  the Court and subject to such terms as the  Court may  impose.  Under sub-clause (2), the Company court shall, notwithstanding  anything contained in any other law for the time  being  inforce,  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 arise in course of the winding up of  the Company.   This  provision  applies  whether  such  suit  or proceeding  has  been institutes, or is instituted, or  such claims  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. Sub-clause  (3) of section 446 is important.  It states that any  suit  or proceeding by or against the Company which  is pending in any Court other than that in which the winding up of  the Company if proceeding, may, notwithstanding anything contained  in any other law for the time being in force,  be transferred  to and disposed of by that Court.  Question  of leave  and  control by the Company Court:  Learned  Attorney General  has,  in this connection, relied upon  Damji  Valji Shah  &  Another vs.  Life Insurance Corporation of India  & Others  [1965 (3) SCR 665 = AIR 1966 SC 135] 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  the  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 the LIC against the Company before the Tribunal and its Directors 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.  It  was held  by this Court:  "In view of section 41 of the LIC Act, the  Company  Court  has no jurisdiction  to  entertain  and adjudicate  upon any matter which the Tribunal is  empowered to  decide or determine under that Act.  It is not  disputed that  the  Tribunal  has  jurisdiction   under  the  Act  to entertain and decide matters raised in the petition filed by the  corporation  under section 15 of the LIC Act.  It  must follow  that the consequential provisions of sub-section (1) of  section 446 of the Companies Act will not operate on the

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proceedings  which  be pending before the Tribunal or  which may  be  sought  to  be commenced before or."  Just  as  the Company  Court was held incompetent to stay or transfer  and decide  the claims made before the LIC Tribunal because  the Company  Court  could not decide the claims before  the  LIC Tribunal,  the  said Court cannot, in our view,  decide  the claims  of  Banks and financial institutions.  On  the  same parity  of reasoning as in Damji Valji Shah’s case, there is no need for the appellant to seek leave of the Company Court to  proceed with its claim before the Debt Recovery Tribunal or  in  respect  of  the execution  proceedings  before  the Recovery  Officer.   Nor  can  they be  transferred  to  the Company  Court.  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 observing as follows:  "the provisions  of the  special  Act  i.e.   the  LIC  Act  will  override  the provisions of the general Act, the Companies Act which is an Act  relating  to Companies in general." We are of the  view that  the  appellant’s  case  under the RDB Act  -  with  an additional  section  like  section  34 - is  on  a  stronger footing  for holding that leave of the Company Court is  not necessary  under  section 537 or under section 446  for  the same  reasons.   If  the  jurisdiction of  the  Tribunal  is exclusive,  the  Company  Court cannot also use  its  powers under  section  442 against the  Tribunal/Recovery  Officer. Thus,  sections  442, 446 and 537 cannot be applied  against the   Tribunal.   Purposive   interpretation   adjudication, execution  and  working out priorities :  As there  is  some difference   between   various  High   Courts  as   to   the applicability  of the principle of purposive  interpretation to the RDB Act, we shall deal with the said question.  It is true  that  it  has been held in several judgments  of  this Court  that there is a special purpose behind the provisions in sections 442, 446 and 537 of the Companies Act, 1956.  It has  been,  in  fact,  so stated by  the  Federal  Court  in Governor  General in Council Vs.  Shirmani Sugar Mills  Ltd; (  AIR  (33) 1946 SC 16) under the Old Companies Act,  1913. Similarly,  this Court in Sudarshan Chits (India) Ltd.   Vs. O.   Sukukmaran Pillai and Ors.  (1984(4) SCC 657)  observed that  -not satisfied with sections 442 and 537 and also with Section  446(1) (which was similar to Section 171 of the Old Companies  Act,  1913),- Parliament enacted the Companies  ( Amendment) Act, 1960 and brought in the present sub-sections (2)  and (3) into section 446.  This Court pointed out  that instead  of  allowing  claims to be proceeded  with  against these companies in various Civil courts, Parliament declared that wherever winding up proceedings were pending or when an order of winding up was passed, it was necessary to save the company  "from  this prolix and expensive litigation and  to accelerate  the disposal of winding up proceedings", and  "a cheap   and  summary  remedy"   was  devised  by  conferring jurisdiction  on  the Company Court to entertain  suits  and proceedings  in  respect  of  claims  for  and  against  the company.   That  being  the object behind  enacting  Section 446(2),  it  was held that the Companies Act  "must  receive such construction at the hands of the court as would advance the  object and at any rate not thwart it".  In other words, the  principle of purposive interpretation was, as contended by  respondent’s  counsel,  applied while  construing  these provisions of the Companies Act.  This principle was applied by some High Courts to hold that provisions of the Companies Act  can be invoked against the Tribunal.  While it is  true that  the  principle  of purposive interpretation  has  been

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applied  by the Supreme Court in favour of jurisdiction  and powers  of  the  Company Court in Sudarshan Chits  (P)  Ltd. case,  and  other  cases the said principle,  in  our  view, cannot  be  invoked  in the present case  against  the  Debt Recovery Tribunal in view of the superior purpose of the RDB Act  and  the special provisions contained therein.  In  our opinion,  the  very same principle mentioned  above  equally applies  to the Tribunal/Recovery Officer under the RDB Act, 1993  because the purpose of the said Act is something  more important  than the purpose of sections 442, 446 and 537  of the  Companies Act.  It was intended that there should be  a speedy  and  summary  remedy for recovery  of  thousands  of crores  which  were  due  to  the  Banks  and  to  financial institutions,  so  that the delays occurring in  winding  up proceedings  could  be  avoided.  Tiwari  Committee  Report: adjudication,  execution  &  priorities:    In  the   Tiwari Committee  Report  of 1981, it was stated in  Chapter  VIII, para  8.2  that in respect of suits by Banks  and  financial institutions there have been abnormal delays at the stage of trial  as  well as the stage of execution in various  courts and  hence it stated:  "the principle that the State  should have  a special procedure to enforce its own demands  should equally  be  extended to the recovery of dues of  banks  and financial   institutions   as  well".   In  fact,   it   was recommended  that  a Tribunal under Articles 323A  and  323B should  be  constituted.  The Tribunal should not be  bogged down  by  the Civil Procedure Code but should have a  simple procedure  guided only by principles of natural justice.  It was  stated  by  the tribunals:  "should follow  simple  and summary  procedure  in  accordance with  the  principles  of natural  justice".   The  Tiwari Committee also  prepared  a draft  of  the proposed legislation, in Annexure XI  to  its Report.   It recommended disposal of cases in three  months. It  stated in Annexure XI to the Report that all  "execution proceedings"   were   to  be   initiated  only  before   the Adjudication  Officer  so  that such  execution  proceedings could  be completed speedily.  The above Report of 1981  was followed  ten  years later by the M.   Narasimham  Committee Report   which  in  Chapter  V  stated  that  the   ’special legislation’  recommended  by the Tiwari Committee  in  1981 should  be  immediately enacted.  The latter  Committee  too observed:   "We  regard setting up the Special Tribunals  as critical  to the successful implementation of the  financial sector reforms", to ensure speedy remedy of adjudication and execution   against   defaulters.   Even    in   regard   to ‘priorities’  among creditors, the said Committee stated  in Annexure  I as follows:  "The Adjudication Officer will have such  power to distribute the sale proceeds to the Banks and Financial   Institutions   being   secured   creditors,   in accordance  with inter-se agreement/arrangement between them and to the other persons entitled thereto in accordance with the  priorities in the law." The above recommendations as to working  out ‘priorities’ have now been brought into the Act with  greater  clarity  under section  19(19)  of  Ordinance 1/2000.   Priorities,  so far as the amounts realised  under the  RDB Act are concerned, are to be worked out only by the Tribunal  under the RDB Act.  Section 19(19) of the RDB  Act reads  as  follows:   "Where a certificate  of  recovery  is issued against a company registered under the Companies Act, 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."  Section  19(19)  is   clearly  inconsistent  with section 446 and other provisions of the Companies Act.  Only

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section   529A  is  attracted  to  proceedings  before   the Tribunal.  Thus, on questions of adjudication, execution and working  out priorities, the special provisions made in  the RDB  Act have to be applied.  Special law vs.  general  law: At  the  same time, some High Courts have rightly held  that the  Companies  Act  is a general Act and does  not  prevail under the RDB Act.  They have relied upon Union of India vs. India  Fisheries ( 1965(3) SCR 679) There can be a situation in  law  where  the  same statute is treated  as  a  special statute  vis-a-vis  one legislation and again as  a  general statute  vis-a-vis yet another legislation.  Such situations do  arise as held in Life Insurance Corporation of India vs. D.J.Bahadur  [AIR  1980  SC 2181].  It was  there  observed: "for  certain  cases, an Act may be general and for  certain other  purposes, it may be special and the Court cannot blur a  distinction when dealing with finer points of law".   For example,  a  Rent  Control Act may be a special  statute  as compared  to the Code of Civil Procedure.  But vis-a-vis  an Act permitting eviction from public premises or some special class  of  buildings, the Rent Control Act may be a  general statute.   In  fact in Damji Valji Shah and Anr.  Vs.   Life Insurance  Corporation  of  India and Ors.   (  1965(3)  SCR 665=AIR  1965  SC 135 already referred to), this  Court  has observed  that  vis-a-vis the LIC Act, 1956,  the  Companies Act,  1956  can  be treated as a general statute.   This  is clear  from  para  19 of that judgment.   It  was  observed: "Further,  the provisions of the Special Act, i.e.  LIC Act, will  override the provisions of the general Act, viz;   the Companies  Act  which  is an Act relating  to  companies  in general".   Thus,  some  High  Courts  rightly  treated  the Companies  Act  as a general statute, and the RDB Act  as  a special statute overriding the general statute.  Special law versus  special law:  Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle  that when there are two special laws, the  latter will  normally  prevail  over  the  former  if  there  is  a provision  in  the latter special Act giving  it  overriding effect,  can also be applied.  Such a provision is there  in the  RDB Act, namely, section 34.  A similar situation arose in  Maharashtra  Tubes  Ltd.    Vs.   State  Industrial  and Investment  Corporation  of  India (1993(2) SCC  144)  where there  was  inconsistency  between  two  special  laws,  the Finance  Corporation  Act,  1951  and  the  Sick  Industries Companies  (Special  Provisions)  Act,   1985.   The  latter contained  Section  32 which gave overriding effect  to  its provisions  and was held to prevail over the former.  It was pointed  out  by  Ahmadi,  J.  that  both  special  statutes contained  non-obstante clauses but that the "1985 Act being a  subsequent  enactment,  the non-obstante  clause  therein would  ordinarily  prevail over the non-obstante  clause  in Section  46-B  of the 1951 Act unless it is found  that  the 1985  Act  is  a general statute and the 1951 statute  is  a special  one".  Therefore, in view of section 34 of the  RDB Act, the said Act overrides the Companies Act, to the extent there  is  anything  inconsistent between the  Acts.   other rulings  of Supreme Court and High Courts cited by  counsel: It  was then argued for the respondents that the proceedings before the Tribunal/Recovery Officer under the RDB Act, 1993 are  ‘legal  proceedings’ and could be stayed under  section 537  read  with section 442 and reliance was placed  on  the decision of the Federal Court in Governor General in Council Vs.   Shirmani Sugar Mills Ltd.  ( AIR (33) 1946 FC 16).  In our view, this judgment cannot help the respondents.  In the above case the Income Tax Officer tried to demand income tax from  the  Company through a certificate got issued  by  the

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Collector   and  the  demand  was   sent  to  the   official liquidator.   The  official liquidator filed an  application under  Section 171 of the Old Act (corresponding to  Section 446(1)  of  the 1956 Act) and obtained stay and  required  a direction from the Company Court that the Income Tax Officer should seek leave under Section 232(1)(a) ( corresponding to section  537 of the 1956 Act).  It was held that the limited priority  extended  to  Crown debts was  not  sufficient  to enable the Income Tax Officer to avoid the provisions of the Companies Act and that the Crown was bound by the provisions of the Companies Act.  The cases in Re Webb and Co.  1922(2) Ch.369 (A) and Food Controller Vs.  Cork ( 1923 AC 647) were followed.   It  was also held that the proceedings taken  by the  Income  Tax  Officer  though  they  were  not  akin  to proceedings  in a court, they were still ’legal proceedings’ as  they  were initiated under a statute.  In  our  opinion, this  decision  cannot help the respondents inasmuch as,  as pointed out above, the jurisdiction of the Tribunal/Recovery Officer  under the RDB Act is exclusive and Section 34 gives overriding  effect  to  the provisions of the RDB  Act.   No provision  similar to section 34 was available in the  above case  before the Federal Court.  The decision of this  Court in  M.K.   Ranganathan Vs.  Govt.  of Madras ( AIR  1955  SC 604)  cannot  also help the respondent.  That was a case  in which  a  secured creditor standing outside the  winding  up sold  the  property  of the company, pending  a  winding  up petition, by private sale.  It was pointed out by this Court (see  para  15) that such a sale by a secured creditor,  who opted  to stand outside the winding up proceedings, would be permissible without leave of the Company Court.  It might be different if the secured creditor tried to sell the property through  a  Court by filing a suit or other proceeding.   It was  argued  there that the 1936 Amendment to the  Companies Act  in section 232(1) (corresponding to Section 537 of  the new  Act)  introduced  the words "or any sale  held  without leave  of  the  court of any of the properties",  and  those words  were  introduced  for  the purpose  of  staying  even private  sales  by  the secured creditor  unless  leave  was obtained  for such sales.  This contention was rejected  and it was held that, even after the 1936 Amendment, the private sale by the secured creditor standing outside the winding up proceedings  was  valid without leave of the Company  Court. Learned  counsel  for respondent relied upon para 24 of  the judgment  which  stated that Section 171  (corresponding  to section  446(1)) was supplementary to Section 232 and 229  ( corresponding  to Section 529 of the new Act).  But the said observations,  in our view, cannot help the respondents,  in view of the reasons given above.  When the matter was listed for  fresh  arguments,  learned counsel for  the  respondent relied  upon Ram Narain vs.  The Simla Banking &  Industrial Co.   Ltd.  [AIR 1956 SC 614]] to contend that in that  case the  Court ( the High Court of Punjab) which was winding  up the  Banking  company  was  held entitled  to  transfer  the execution  case pending before a Tribunal to the High  Court and  to  dispose  of the same.  That case is, in  our  view, distinguishable.  The facts there were that the Tribunal was one   constituted   under  the   Displaced   Persons   (Debt Adjustment)  Act,  1951, while the High Court of Punjab  was exercising  special powers under sections 45A, 45B & 45C  of the  Banking  Companies Act, 1949 (as amended in  1953)  for winding  up a Banking Company.  Earlier, under the 1913 Act, the  District Court was dealing with winding up  proceedings but  so far as Banking Companies were concerned, the Banking Companies Act, 1949 was amended in 1953 giving powers to the High  Court to wind up Banking companies.  It was held  that

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the latter Act of 1953 prevailed over the former Act of 1951 in  view of section 45A, and that the legislative  intention was  to  prescribe a speedy procedure for the winding up  of the   Banking  companies  outside   the  provisions  of  the Companies  Act,  1913.   Section   45B  conferred  exclusive jurisdiction on the High Court (there the Punjab High Court) in  this behalf.  The more important distinguishing  feature between  that case and the present one is that section 2  of the  Banking Companies Act, 1949 specifically provided  that its  provisions  would  be  in  addition  to  those  in  the Companies  Act and it was held that sections 171 and 232  of the  Companies Act, 1913 were available to the High Court as a  winding up Court to stay the execution proceedings  taken pursuant  to  the decree of the Tribunal under the 1951  Act and  to  transfer them to the High Court.  But the  position under  the RDB Act is different.  Sections 442, 446 and  537 are not saved by the RDB Act.  Even section 34(2) of the RDB Act  does  not  save the provisions of  the  Companies  Act. Learned  counsel for the respondent then relied upon certain observations  in  a  recent case in  Industrial  Credit  and Investment  Corporation Vs.  Srinivas Agencies ( 1996(4) SCC 165)  made in relation to RDB Act, 1993 and to sections  529 and  529A of the Companies Act.  That judgment related to  a batch  of appeals against the judgment of the Andhra Pradesh High Court dated 23.8.89 and certain SLPs.  (C) 10101/91 and 11055/91  (from  Kerala)(the Kerala SLPs were registered  as C.As.of  1996).   (  see here facts in ICICI  Vs.   Vanjinad Leathers  Ltd.   (AIR 1997 Ker.273).  It has to  be  noticed that  when the A.P.  High Court decided the matter and  when the  special leave petitions from Kerala were filed in 1991, the  RDB Act, 1993 had not yet been enacted.  But much later by  the  time  the  Civil appeals came up  for  disposal  on 22.2.96,  the  RDB Act of 1993 had been passed.   The  above ruling of this Court did not concern itself with the RDB Act directly  on  facts.   The only issues which arose  in  that case,  as  stated in para 5 of the judgment, were viz.   (1) when  should  leave of the winding up court be granted to  a secured  creditor to proceed with the suit after an order of winding  up has been made (2) when should a winding up court transfer to itself any suit or proceedings by or against the Company during the period of the winding up?  It was in that connection  that  in  para  9, a reference was  made  to  an argument  by  one of the counsel that in the case  of  suits which were pending before the date of liquidation, the court could  grant  leave  imposing "reasonable  conditions"  even against  secured  creditors so that genuine claims of  other secured  creditors were not affected.  As appears from  para 10 of the judgment, the learned counsel appearing for one of the  parties  in  that case, appears  to  have  incidentally referred to the provisions of the RDB Act, 1993 which had by then  come to be enacted, for contending that while  staying suits, the Company Court could impose reasonable conditions, keeping  the  rationale of the provisions of the RDB Act  in mind.   In  para 12, this Court accepted the  submission  of counsel  and in para 13, it was observed that while granting leave  to  such secured creditors i.e in suits, the  company court  "would also bear in mind the rationale behind the RDB Act".   In  that connection sections 529 and 529A were  also referred  to.  The said observations do not, in our opinion, have  any bearing on the questions before us relating to the exclusive  jurisdiction  of  the  Tribunal/Recovery  Officer under  the  RDB  Act.  Further, as we  shall  explain  under Points  4 and 5, section 19(19) of the Ordinance 1 of  2000, refers  only to section 529A and not to sections 529 (1)  or (2)  and  this is one other clear indication that the  other

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provisions  of  the Companies Act are  completely  excluded. The  decision  of the Delhi High Court in M/s  Major  Syntex Ltd.   Vs.   Punjab and Sind Bank [(67)1977 Delhi Law  Times 836]  no  doubt supports the contention of  the  respondents that  the Company Court’s jurisdiction prevails over that of the  Tribunal/Recovery Officer under the RDB Act, 1993.  The learned  Company  Judge in that case does, in  fact,  accept that  a  statute  which is a general one  vis-a-vis  another statute  can  also be a special one, vis-a-vis  yet  another statute.  But the Court, in our view, was not correct in its conclusion  that,  in this context, the Companies Act,  1956 was  not a general statute.  Further in the said judgment it was  stated  that the "non-obstante clause in section 34  of the  RDB Act cannot apply because the Acts did not overlap". According  to  the High Court, there was no  provision  like Section  446 in the RDB Act laying down the procedure as  to what  should be done in case of the passing of a winding  up order  by the Company Court nor a provision for recovery  of amounts  due  from  a  company against which  a  winding  up petition was pending or was ordered or for distribution from a  common  pool.  But, now section 19(19) introduced by  the Ordinance 1/2000 clarifies and removes any such doubts in as much  as  it  refers to execution and distribution  of  sale proceeds  by the Tribunal/Recovery Officer.  The observation that  the  RDB  Act does not operate in the same  field  and hence, leave of the Company Court is necessary under Section 446(1),  cannot  therefore  be accepted.  We hold  that  the Delhi  High  Court’s decision is not correctly decided.   We are  also unable to agree with the decision of the  Calcutta High  Court  in  UCO Bank Vs.  Concast  Products  Ltd.   (in liquidation)[1996  (2) Com.L.J.  449].  In that case a  suit which  was  filed in the High Court by the Bank against  the company  stood transferred to the Tribunal under the RDB Act by  virtue  of section 31.  Later on, the Company went  into liquidation.   The  High Court held that in view of  section 446  of  the  Companies  Act,  1956,  the  suit  had  to  be transferred back to the Company Court.  This was done on the basis  that  the Companies Act applied even  to  proceedings before the Tribunal.  This is not correct.  In our view, the decision  of  the Kerala High Court in ICICI  Vs.   Vanjinad Leathers  Ltd.   (  AIR 1997 Ker.273) relied  upon  for  the appellant, is correctly decided.  It was pointed out in that case  that  the records leading to the decision in  Srinivas Agencies  and batch ( 1996(4) SCC 165) show that suits filed by  Banks  and financial institutions were pending in  civil Courts  and a winding up petition was filed later on in  the High Court.  The Kerala High Court held that the suits would stand  transferred  to  the  Debt  Recovery  Tribunal  under section 31 of the RDB Act automatically and that section 446 of  the Companies Act, 1956 could not be invoked in view  of section  34  of the RDB Act.  The RDB Act was a special  law overriding another special law, the Companies Act.  Leave of the Company Court under Section 446(1) was not necessary nor could  the  suit be transferred to the Company  Court  under Section  446(2).   Similarly,  we are of the view  that  the Patna High Court’s decision in Bihar Sales Pvt.  Ltd.  In re [(  Vol.96)  Comp.  Cases.  40] is also  correctly  decided. There  the  decision of this Court in Srinivas Agencies  was not  accepted as laying down anything specific about the RDB Act  and  as  to its interpretation.  The  decision  of  the Kerala  High Court in Vanjinad Leathers Ltd.  was  followed. The  decision  of  the  Rajasthan High  Court  in  Rajasthan Finance   Corporation  Vs.    Official  Liquidator  (1963(2) Comp.LJ 309) relied upon for the respondent cannot be of any help.  That was a case which concerned itself with the State

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Finance Corporation Act, 1951.  Section 537 of the Companies Act  was applied and it was held that the Companies Act  did not yield to the provisions of the State Finance Corporation Act,  1951.   There  was no provision in the  State  Finance Corporation  Act, 1951 like section 34 which gave overriding effect  to  its provisions.  For the aforesaid  reasons,  we hold  that at the stage of adjudication under section 17 and execution  of  the  certificate under section 25  etc.   the provisions   of   the  RDB   Act,  1993   confer   exclusive jurisdiction  in  the Tribunal and the Recovery  Officer  in respect of debts payable to Banks and financial institutions and  there can be no interference by the Company Court under section  442  read with section 537 or under Section 446  of the  Companies Act, 1956.  In respect of the monies realised under  the  RDB  Act, the question of priorities  among  the Banks  and financial institutions and other creditors can be decided  only  by  the  Tribunal under the RDB  Act  and  in accordance with section 19(19) read with section 529A of the Companies Act and in no other manner.  The provisions of the RDB  Act,1993 are to the above extent inconsistent with  the provisions of the Companies act, 1956 and the latter Act has to  yield  to the provisions of the former.   This  position holds  good  during the pendency of the winding up  petition against the debtor-company and also after a winding up order is  passed.  No leave of the Company Court is necessary  for initiating  or continuing the proceedings under the RDB Act, 1993.   Points 2 and 3 are decided accordingly in favour  of the  appellant and against the respondents.  Point 4 and  5: We  have  already held that the adjudication, execution  and distribution of the sale-proceeds and working out priorities as  between  Banking  and financial institutions  and  other creditors  of  the defendant company - so far as the  monies realised  under  the RDB Act are concerned - has to be  done only by the Tribunal and not by the Company Court.  The next question is as to the manner of distribution of these monies between  the Banks or financial institutions on the one hand and the other creditors, secured or unsecured of the company under  winding up.  This question depends upon the effect of section  19(19)  of the RDB Act as introduced  by  Ordinance 1/2000.   Before  we go to section 19(19), we would like  to dispose  of another minor point raised by the respondent  on the  basis of section 19(2).  That sub-section permits other banks  or financial institutions to be impleaded in the main application  filed  under  section  19(1) by  a  Bank  or  a financial  institution.  Question is whether Canara Bank can be  impleaded  in the main application under section  19  at this  stage.   We may point out that section  19(2)  permits such  impleadment "at any stage of the proceedings before  a final  order is passed".  The final order here is the  order of  adjudication under section 19(1) as to whether the  debt is  due or not.  In the present case, the adjudication order in  respect of the debt has already been made long back  and therefore  section 19(2) does not permit any impleadment  in the  main  application  under section 19(1) at  this  stage. Hence,  this  relief for impleadment cannot be granted.   We shall  now  go  into  the effect of section  19(19)  of  the Ordinance  1/2000.   (a)Case where defendant company is  not ordered  to  be wound up:  Where the defendant company is  a company  against  which no winding up order is  passed,  the Company,  in our view, is like any other defendant and if in such  a  situation a question of priority arises before  the Tribunal,  in  respect of any monies realised under the  RDB Act,  as  between the Bank or financial institutions on  the one  hand and the other creditors on the other, it will,  in our  opinion,  be necessary for the Tribunal to decide  such

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questions  of priority bearing in mind principles underlying section  73  of the Code of Civil Procedure.  Section 22  of the  RDB Act, in our view, gives sufficiently wide powers to the  Tribunal  and  the Appellate Tribunal  to  decide  such questions  of priorities, subject only to the principles  of natural  justice.  This Court has explained that the  powers under  section  22 are wider than those of Civil Courts  and the  only  restriction on its powers is that  principles  of natural  justice have to be followed.  See Industrial Credit and  Investment  Corporation  of  India  Ltd.   vs.   Grapco Industries  Ltd.  & Others [1999 (4) SCC 710] and  Allahabad Bank,  Calcutta vs.  Radha Krishna Maity & Others [1999  (6) SCC  755].   But under section 73 CPC, sharing in  the  sale proceeds  ( here, sale proceeds realised under the RDB  Act) is  permissible  only  if a person seeking  such  share  has obtained  a  decree  or an order of  adjudication  from  the Tribunal  and  has also complied with other conditions  laid down under section 73.  In the present case, the Canara Bank is  not  in a position to invoke the  principles  underlying section 73 CPC because it has not yet obtained any decree or adjudication  of  its  debt from the Tribunal.  Nor  has  it complied  with  other provisions underlying section 73  CPC. Hence  no  relief  can be granted on the basis of  the  said principles.   (b)  Position  of secured  creditors  standing outside  winding  up  and  also not so  standing  out:   The discussion here is confined to sharing the realisations made by  the Recovery Officer under the RDB Act where winding  up proceedings  are  pending in the Company Court  against  the defendant  company.  This is the crucial aspect of the  case upon  which  detailed arguments have been advanced  by  both sides.   Learned  counsel for the respondent contended  that other  secured creditors of the defendant company could seek or  share in the realisations made by the Recovery  Officer. Counsel  relied  upon the following words in section  19(19) "to   be  distributed  among   its  secured  creditors"  and contended  that  though the said words are followed  by  the words  "in accordance with the provisions of section 529A of the  Companies  Act, 1956", it is implicit that out  of  the sale  proceeds  secured creditors are paid  first.   Counsel submitted  that,  in  any  event, even if  section  529A  is attracted, the provisions of section 529(1) and (2) are also attracted by implication.  The sale proceeds realised by the appellant  Bank  will be subject to "claims" of  the  Canara Bank  as  a secured creditor, even if it has not obtained  a decree   or  adjudication  from   the  Tribunal.   The  mere existence  of the security is sufficient.  And as a  secured creditor  the  Canara  Bank  will  have  priority  over  the appellant  Bank which has no security in its favour.  On the other  hand, learned Attorney General has contended that  in respect  of the monies realised under the RDB Act, the  only restriction  on  the  distribution of dividends is  the  one specified  in section 529A, so far as secured creditors  are concerned.   The secured creditor has no other general right of  preference.   Sections  529(1)  and  (2)  are  also  not attracted.   Workmen’s dues are entitled to highest priority even  as against other secured creditors.  Any other secured creditor  like the respondent Bank has only a limited  claim of  priority  to the extent stated in section 529A and  that too  in  case the said secured creditor has opted  to  stand outside  the winding up proceedings and realised his dues on the security as per the terms of contract or by private sale as might have been permissible in law.  It is argued that in that  event, the secured creditor has only the benefit given by  sub-clause (b) of section 529A(1), namely, to the extent permitted  by  clause (c) of the proviso to section  529(1).

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Reading  the  definition of ’workmen’s portion’  in  section 529(3)(c) read with the illustration given in that clause, a secured  creditor who stands outside the winding up, in case he  loses any part of that security towards ’workmen’s dues’ at  the instance of the liquidator under clause (a), (b)  of the  proviso to section 529(1), then to that extent only  he has   priority  over  all   other  creditors  under  section 529A(1)(b).   His priority is confined again to amounts  not realised by him or the ’workmens portion’ above referred to, whichever  is  less.  In reply to this  submission,  learned counsel  for the respondent has submitted that the words  in the  first  part  of the clause (c) to  proviso  to  section 529(1)  "so much of the debt due to such secured creditor as could  not  be realised by him" meant the entire  unrealised amounts  of  the  secured  creditor   and  not  merely   the "workmen’s  portion".   To understand the submission, it  is necessary  to refer to section 529A as well as section  529, to  the  extent relevant for this discussion.  They read  as follows:   "Section 529-A:  Overriding preferential payments -  (1)  Notwithstanding  anything  contained  in  any  other provision  of  this Act or any other law for the time  being force,  in the winding up of a company - (a) workmen’s dues; and  (b)  debts due to secured creditors to the extent  such debts  rank  under clause (c) of the proviso to  sub-section (1)  of section 529 pari passu with such dues shall be  paid in priority to all other debts.  (2) The debts payable under clause  (a) and clause (b) of sub-section (1) shall be  paid in full, unless the assets are insufficient to meet them, in which  case they shall abate in equal proportions."  "S.529. Application  of insolvency rules in winding up of  insolvent companies--(1)  In  the winding up of an insolvent  company, the  same  rules shall prevail and be observed  with  regard to-- (a) debts provable;  (b) the valuation of annuities and future  and contingent liabilities;  and (c) the  respective rights  of secured and unsecured creditors;  as are in force for  the time being under the law of insolvency with respect to the estates of persons adjudged insolvent:  provided that the security of every secured creditor shall be deemed to be subject  to a pari passu charge in favour of the workmen  to the  extent  of the workmen’s portion therein, and, where  a secured  creditor, instead of relinquishing his security and proving  his  debt, opts to realise his security,-- (a)  the liquidator  shall  be entitled to represent the workmen  and enforce  such  charge;   (b)  any  amount  realised  by  the liquidator  by  way of enforcement of such charge  shall  be applied  rateably for the discharge of workmen’s dues;   and (c)  so  much  of the debt due to such secured  creditor  as could  not  be  realised by him by virtue of  the  foregoing provisions  of  this proviso or the amount of the  workmen’s portion  in his security, whichever is less, shall rank pari passu  with  the workmen’s dues for the purposes of  section 529A.   (2)  All  persons  who in any  such  case  would  be entitled  to  prove  for and receive dividends  out  of  the assets of the company, may come in under the winding up, and make  such  claims against the company as they  respectively are   entitled   to  make  by   virtue  of   this   section. (3)(a)................................... (b)......................................   (c)   "workmen’s portion",  in  relation  to  the  security  of  any  secured creditor  of a company, means the amount which bears to  the value  of the security the same proportion as the amount  of the workmen’s dues bears to the aggregate of- (i) the amount of workmen’s dues;  and (ii) the amounts of the debts due to the  secured  creditors.   Illustration-- The value  of  the security  of a secured creditor of a company is Rs.1,00,000.

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The  total amount of the workmen’s dues is Rs.1,00,000.  The amount  of  the  debts due from the company to  its  secured creditors  is  Rs.3,00,000.  The aggregate of the amount  of workmen’s  dues  and of the amounts of debts due to  secured creditors  is  Rs.4,00,000.   the workmen’s portion  of  the security  is,  therefore,  one-fourth of the  value  of  the security,  that  is Rs.25,000." The respondent’s  contention that   section  19(19)  gives   priority  to  all   "secured creditors"  to  share  in  the   sale  proceeds  before  the Tribunal/Recovery  Officer  cannot,  in   our  opinion,   be accepted.   The  said words are qualified by the  words  "in accordance  with the provision of section 529A".  Hence,  it is  necessary to identify the above limited class of secured creditors  who  have priority over all others in  accordance with  section  529A.   Secured   creditors  fall  under  two categories.  Those who desire to go before the Company Court and  those  who like to stand outside the winding  up.   The first  category  of  secured creditors mentioned  above  are those  who  go  before  the Company Court  for  dividend  by relinquishing   their  security  in   accordance  with   the insolvency  rules mentioned in section 529.  The  insolvency rules  are  those  contained  in sections 45 to  50  of  the Provincial Insolvency Act.  Section 47(2) of that Act states that  a  secured  creditor  who wishes to  come  before  the official  liquidator has to prove his debt and he can  prove his  debt  only  if  he relinquishes his  security  for  the benefit of the general body of creditors.  In that event, he will  rank with the unsecured creditors and has to take  his dividend  as  provided in section 529(2).  Till  today,  the Canara  Bank has not made it clear whether it wants to  come under  this category.  The second class of secured creditors referred  to  above  are  those   who  come  under   section 529A(1)(b)  read with proviso (c) to section 529(1).   These are those who opt to stand outside the winding up to realise their   security.   Inasmuch  as   section  19(19)   permits distribution  to  secured creditors only in accordance  with section  529A,  the said category is the one  consisting  of creditors  who stand outside the winding up.  These  secured creditors  in  certain  circumstances can  come  before  the Company Court (here the Tribunal)and claim priority over all other  creditors  for  release of amounts out of  the  other monies  lying  in  the Company Court (here,  the  Tribunal). This  limited priority is declared in section 529A(1) but it is  restricted only to the extent specified in clause (b) of section  529A(1).   The said provision refers to  sub-clause (c)  of the proviso to section 529(1) and it is necessary to understand   the  scope  of   the  said  provision.    Under sub-clause  (c)  of  the  proviso  to  section  529(1),  the priority  of  the  secured creditor who stands  outside  the winding up is confined to the "workmen’s portion" as defined in  section 529(3)(c).  ’Workmen’s portion’ means the amount which  bears  to  the  value  of  the  security,  the   same proportion  which the amount of the workmen’s dues bears  to the  aggregate  of (a) workmens dues and (b) the amounts  of the  debts  due to all the creditors.  This is explained  in the illustration under the said provision.  If the workmen’s dues  in  all  are (say) Rs.1 lakh and the debt due  to  all secured creditors is Rs.3 lakhs, the total amount due to all of them comes to Rs.4 lakhs.  Therefore, the workmen’s share come  to  25%(Rs.1  lakh out of Rs.  4 lakhs).  Now  if  the value  of  the security of a secured creditor ( like  Canara Bank)  is  Rs.1  lakh,  the   ’workmen’s  portion’  will  be Rs.25,000  which is the pro-rata amount to be shared by  the said  secured creditor.  By virtue of section 529A(1)(b) his priority  over  all others out of other monies available  in

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the  Tribunal is restricted to Rs.25,000 only.  Reliance  is placed  by  the  learned counsel for the respondent  on  the words  "so much of the debt due to such secured creditor  as could  not  be  realised by him by virtue of  the  foregoing provisions  of this proviso" occurring in the first part  of the  said  proviso(c) to section 529(1).   Learned  Attorney General  on the other hand submitted that the first part  of clause  (c)  of the proviso to section 529(1) is to be  read along with the words "or the amount of the workmen’s portion in  his  security, whichever is less".  In other words,  the priority  of the secured creditor is only to the extent that any  part  of  the said security is lost in  favour  of  the workmen  consequent to demands made by the liquidator  under clause  (a), (b) or the said proviso to section 529(1).   No such  situation  has  arisen so far.  It is  contended  that where  a secured creditor keeps himself outside as stated in the  proviso to section 529(1) and seeks to recover his dues outside  the Company Court, if he loses part of his security towards workmen’s dues, he gets reimbursed to that extent as a  secured  creditor,  with  an  overriding  priority  under section  529A  (1)(b).   He  gets priority  over  all  other creditors  before  the Tribunal, to be compensated for  this loss  out  of the monies that may have been realised at  the instance  of  other  creditors before the Tribunal.   It  is pointed out that Canara Bank has neither realised any amount outside  winding up nor has it lost any part of its security towards workmen’s dues.  In our view, this contention of the learned  Attorney General is well founded and is entitled to be accepted.  In our opinion, the words "so much of the debt due to such secured creditor as could not be realised by him by  virtue  of  the  foregoing provisions  of  the  proviso" obviously  mean  the  amount  taken away  from  the  private realisation of the secured creditor by the liquidator by way of  enforcing the charge for workmen’s dues under clause (c) of  the  proviso to section 529(1) "rateably"  against  each secured  creditor.   To that extent, the secured creditor  - who has stood outside the winding up and who has lost a part of  the  monies  otherwise covered by security  -  can  come before  the Tribunal to reimburse himself from out of  other monies available in the Tribunal, claiming priority over all creditors,  by  virtue of section 529A(1)(b).  This  can  be exemplified  by three more examples.  (i) Let us assume that the  total amount due to a secured creditor is Rs.90,000 and he  has  a security valued at Rs.1 lakh.  This  security  is sufficient to cover his entire dues.  Let us assume that the total  amount due to all secured creditors is Rs.3 lakhs and workmen’s  dues are Rs.1 lakh, as in the illustration  given under  section  529A(3).  This creditor can be made to  part pro-  rata  upto with Rs.25,000 out of his security  of  one lakh  towards  the workmen’s dues.  This is  the  "workmen’s portion".   That  still  leaves with him  Rs.75,000  of  his security  but that is not sufficient to meet his total  dues of  Rs.90,000.   Still  Rs.15,000  of his dues  have  to  be cleared.   By  virtue of section 529A (1)(b), he  can  claim this sum of Rs.15000 from monies realised by other creditors in the Tribunal on the basis of section 529A (1)(b) claiming overriding priority as against all other creditors.  This is because the above amount is less than the ‘workmen’s dues of Rs.25,000  taken  away  from  the  realisation  out  of  his security,  as  prescribed  in clause (c) of the  proviso  to section  529(1).   That  is  what  is  meant  by  the  words "whichever  is less".  (ii) Take a case where the total dues of a secured creditor are only Rs.65,000 and his security is Rs.   1 lakh in value.  The other facts being the same as in the  illustration  to section 529(3), the  secured  creditor

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loses  his  security  rateably in a sum of  Rs.25,000.   The balance  of the available security is Rs.75,000 and that  is sufficient  to meet his entire debt of Rs.65,000.  He has no occasion  to  claim any extra amount as a  secured  creditor under  section  529A(1)(b).   This   situation  presents  no difficulty.   (iii) Take yet another case where the  secured creditor  has a security valued at Rs.1 lakh, but his  total dues are Rs.1.10 lakhs.  In other words, Rs.  10,000 are not secured.   Other  facts  are as in illustration  to  section 529(3).  He is made to part with Rs.25,000 towards workmen’s dues rateably.  He has Rs.75,000 available from his security but  he has to meet Rs.1,10,000 and that leaves a balance of Rs.35,000 (Rs.1,10,000 - Rs.75,000) to be recovered.  He can claim  overriding priority only upto Rs.25,000 as a  secured creditor,  under  clause (c) to proviso to  section  529(1). The  priority  is  restricted to Rs.35,000 only  because  as between  Rs.25,000  and Rs.35,000, the amount  of  Rs.25,000 answers  the  description  whichever is less..  It  will  be noticed  that,  after  claiming  Rs.  25,000  as  a  secured creditor  out  of the realisation of other creditors  before the  Tribunal, he has still dues upto Rs.10,000 which remain unsecured.  That was also the unsecured amount to start with initially.   The  above  examples   show  that  the  secured creditor  who stands outside the winding up and whose claims are  restricted to section 529A read with the clause (c)  of proviso to section 529(1), does not in the ultimate analysis stand  to  lose any part of his security merely because  the "workmen’s  portion"  is  taken   away  from  his  security. Whatever  he  loses towards "workmen’s portion’ out  of  his security,  can  be claimed by him as a secured  amount  with priority  over such creditors out of other realisations made by  other creditors whose monies are lying in the  Tribunal. At  the same time, his position would not improve from  what it  was originally and his priority would not extend to  his entire  unrealised  sums  which might be in  excess  of  his security.   But the point here is that the occasion for such a  claim  by  a secured creditor ( here the  Canara  Bank  ) against  realisations by other creditors (like the Allahabad Bank)  under  section 529A read with proviso (c) to  section 529(1) can arise before the Tribunal only if the 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 sub-clauses  (a)  and (b) of the proviso to section  529(1). It  is  only  then  that  it can claim  that  it  is  to  be re-imbursed  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   529A(1)(b). Therefore, the result is that the Canara Bank cannot rely on the  words  in section 19(19) vis, "to be distributed  among its  secured creditors" for claiming any amount lying in the Tribunal  towards its security nor can it claim priority  as against  the  Allahabad  Bank.  If none  of  the  conditions required  for  applying section 19(19) and section 529A  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 the Allahabad Bank, even if the Allahabad  Bank is  an unsecured creditor.  We hold accordingly on points  4 and  5.  Point 6:  By the sale of shed NO.15, a sum of Rs.20

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lakhs  has been realised and is lying in this Court.   Other sale  proceeds  in respect of previous sales are lying  with the  Recovery Officer.  In view of our findings on points  1 to  5, no part of the said amounts is payable to the  Canara Bank.   The  next question is whether the  amounts  realised under  the  RDB Act at the instance of the appellant can  be straightway  released  in its favour.  Now, even if  section 19(19)  read with section 529A 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  529A(1)(a).  There is no material before us to hold that  workmen’s dues of the defendant company have all  been paid.   In  view  of  the general principles  laid  down  in National  Textile Workers’ Union etc.  vs.  P.R.Ramakrishnan &  Others [AIR 1983 SC 75] 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 straightway.   We,  therefore,  direct the Registry  of  the Supreme  Court  to  make over the monies deposited  in  this Court  pursuant to sale of shed No.15, to the Debt  Recovery Tribunal, Delhi and it will be for the said Tribunal to find out if there are any workmen’s dues by issuing notice to the workmen   or   other  persons/bodies   which   can   furnish information  in  this behalf.  The above monies to  be  sent from  this  Court as well as the monies realised by  earlier sales,-  in  case  they  are  not  subject  to  any  pending litigation - have to be first released towards the workmen’s dues.  The balance remaining will then be released in favour of  the appellant Bank in accordance with law and subject to the various principles stated in this judgment.  In case any machinery  or goods pledged to the Canara Bank are lying  in the  two  other sheds already sold, it will be open  to  the Canara  Bank to move the Tribunal/Recovery Officer for their removal  and  for an inventory.  The impugned order  of  the High  Court is set aside, the appeal is allowed and disposed of  as  stated above.  There will be no order as  to  costs.