ALLAHABAD BANK v. CANARA BANK AND ANR

Citation: [2000] 2 S.C.R. 1102

Court: Supreme Court of India

Bench: M. JAGANNADHA RAO, N. SANTOSH HEGDE

Judgment text

ALLAHABAD BANK v. CANARA BANK AND ANR. APRIL 10, 2000 [M. JAGANNADHARAO AND SANTOSH HEGDE, JJ. ] Debt Laws: Recovery ofDebts Due to Banks and Financial Institutions Act! 1993- Sections 17, 18, 19, 25-30 and 34-Jurisdiction ofRecovery Officeras against Companies Court-Held, Recove1y officer has exclusive jurisdiction in respect of decree passed by Tribunal. Companies Act 1956-Secs. 442, 537, 446(1), (2), (3), 529, 529-A and 530-Debt Recovery Trikunal passing a decree against a Company-Recovery Proceedings pending-Petition for Winding Up of debtor Company by other creditors-Held, execution of ce11ificate ofdebts payable to Banks and Financial Institutions are within the exclusivejurisdiction ofTribunal-Legal Proceedings before Tribunal cannot be stayed by Company Court. Recpvery of Debts-One of the creditors of a Company obtaining certificate-Proceedings for recovery pending-Other creditors whose claim has not been adjudicated by the Tribunal, cannot be impleaded at recovery stage.

Civil Procedure Code 1908-Section 73-Decree obtained by unsecured creditor-Monies deposited in Court-Held, priorities among creditors to be decided by Tribunal-Companies Act-Sec. 529-A-Directions- issued to Supreme Court Registry to release monies to Tribunal-Tribunal to disburse monies after ascertaining workmen's dues. / Interpretation ofStatutes-Principle ofPurposive interpretation-Discussed. Maxims-Maxim "Generalia Speicalibus non derogant"-Meaning of The appellant filed an application before the Debt Recovery Tribunal, Delhi under section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for recovery of same due to them and a ALLAHABAD BANK v. CANARA BANK 1103 simple money decree was passed with interest at 18% and interest tax levy at 0. 75% p. a. Recovery Case was filed by them for recovery before the Recovery Officer.

The debtor company filed an appeal before the appellate Tribunal and there was no stay since the company defaulted in deposit of -the money directed to be deposited. An application was filed by respondent No. 1 also under the Act of 1993 in the Debit Recovery Tribunal, Delhi for recovery. The said application of the Respondent is pending in the Delhi Tribunal under the Act of 1993. Canara Bank filed an interlocutory application before the Recovery Officer for impleadment in the recovery case of the appellant, seeking prorata distribution of sale proceeds from auctions of the debtor company's properties. The appellant Banks opposed the same contending that since no orders have been passed in favour of Canara Bank in its application 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 the question was premature and that the said issue could be considered after sale proceeds were received by the Tribunal. These applications were dismissed. Since the Recovery Officer declined to confirm a sale in respect of a property of the debtor company and directed a fresh auction, the appellant Bank filed a writ petition under Articles 226 and 227. Canara Bank then filed applications in the Debt Recovery Tribunal under section 22 of the Act of 1993 seeking stay of recovery proceedings in the recovery proceedings, which were pending. Canara Bank filed an application in the companies court in a pending winding up petition under sections 442 and 537 of the Companies Act 1956 seeking stay of recovery proceedings and for staying sales of assets of company by the appellant Bank.

In the said application the Company Judge passed an order staying the further sale of assets of the Company in the recovery case in the DRT and also restraining disbursement of monies already realised in other sales. In appeal to this Court, the Appellant contended that the 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 -v--' provisions viz.

, Section 18 which ousts the jurisdiction of all Courts or other auth(_)rities (except the Supreme Court and the High Court exercising powers under Articles 226 and 227) in relation to matters covered by ·· Section 17 which covers the entire procedure from the filing of an application under section 18, to the 'adjudication' and 'recovery', that these matters are taken out from the purview of the Companies Act 1956, inciuding Sections 442, 537 and Section 446 of the said Act, that the proceedings under the Act of 1993 cannot be stayed by the Company Court nor can they be transferred to the Company Court, that no leave from 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, that 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 1/200 saves only six statutes from the purview of Section 34(1) and the Companies Act, 1956 is not one of them, that hence, the Act of 1993, overrides sections 442 and 537 and also section 446 of the Companies Act.

The Appellant further contended that even otherwise Section 446 of the Act of 1956 cannot be invoked in this case because there is no winding up order nor an order appointing a provisional liquidator so far in respect of the debtor Company, that principles underlying Section 73 CPC are not ·• attracted before the Tribunal since no decrees have been obtained from any Civil Court or Debt. Recovery Tribunal by the Respondent nor any steps have been taken by the Canara Bank, that Courts must interpret the Act of 1993 so as to subserve the purpose of realisation of thousands of crores of Bank funds which are due, that the legislature intended to avoid the long drawn proceedings in the Civil Court as well as under Sections 442, 446 and 537 of the Act of 1956 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.

The appellant Bank contended that having obtained a decree and having got the properties sold it was 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, that only Section 529- A of the Companies Act is attracted and that too for a limited purpose if a question of "workman's portion" is involved, that no other provisions of the Companies Act, much less section 529(1) or (2) are attracted, that if a secured creditor wants to come before the Company Court in the winding ALLAHABAD BANK v. CANARA BANK 1105 -;. up proceedings he has to give up his security and prove his debt befol'. e the liquidator to seek dividends as per the insolvency rules mentioned in Section 529(1), read with Sections 45 to 50 of the Provisional Insolvency ".

___, Act and stand in the queue along with all unsecured creditors under Section 529(2), that even that is applicable only in respect of any monies realised by the Company Court and not by the Tribunal that the limited extent to which secured creditors can claim priority under the Act of 1993 is as limited by Section 19(19) of the Act of 1993 and this is covered by Section 529-A alone read with sub-clause (c) to the proviso to Section 529(1) and that the effect of these provisions is that if any monies are realised by Canara Bank by standing outside winding up and ifany part of such realisations of Canara Bank are taken away by the liquidator for payment of workmen, only to the extent of such "workmen's portion', can the Canara Bank have priority over other creditors, and otherwise, Canara Bank cannot invoke Section 529(1), (2) and that too before the Tribunal.

Appellant contended that in respect of the monies realised under the Act of 1993, the only restriction on the distribution of dividends is the one specified in Section 529-A, so far as secured creditors are concerned tha~ the secured creditor has no other general right of preference, sections 529(1) and (2) are also not attracted and that workmen's dues are entitled to highest priority even as against other secured creditors, 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 529- A(l)(b), 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, and that Canara Bank has neither realised any amount outside winding up nor has it lost any part of its ..

....

security towards workmen's dues• Respondents - Canara Bank contended that when a winding up Petition is pending in the Company Court, it is necessary that the leave of mlf the Company Court is obtained for obtaining a decree before the Tribunal or for execution before the Recovery Officer, that Sections 442, 446 and 537 of the Act of 1956 applied even to proceedings under the Act of 1993, that leave is necessary under Section 537 even if no winding up order is passed, that itis therefore necessary to stay the sale proceedings before the Recovery Officer or the distribut~on of sale proceeds, that the Company Court alone can sell the properties of the Company in the winding up proceedings, that 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 men· tioned in Sections 446(2)(d), 528, 529-A and 530 etc.

, that 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 Canara Bank, under the Act of 1993, Allahabad Bank can not be allowed to appropriate the entire sale proceeds recovered by it, that if Canara Bank has only a 'claim' and not a decree • in view of Section 2(g), its security has preference and that unlike Section 73 CPC, Section 446 of the Act of 1956 does not required a decree and it is sufficient to prove a debt before the liquidator. Alternatively, the Respondent contended that even before the Tribunal, Section 73 CPC and also Section 529(1) and (2) of Act 1956 read with Section 529-A, 530 etc. are attracted for purposes of distribution of the sale proceeds and working out priorities, assuming thatjurisdiction of the Company Courtis excluded in so far as recovery of debts due to Banks and financial institutions are concerned.

Respondent also contended that the proceedings before the Tribunal/Recovery Officer under the Act of 1993, are 'legal proceedings' and could be stayed under Section 537 read with Section 442 of the Act of 1956, that as per sec. 19(19) other secured creditors of the debtor company could seek or share the realisation made by the Recovery Officer and 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". Allowing the Appeal, the Court HELD : 1. The jurisdiction of the Tribunal in regard to adjudication is exclusive. The Recovery ofDebts Due to Banks andFinancial Institutions Act, 1993 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 ALLAHABAD BANK v. CANARA BANK . 1107 recovery of the debt specified in the ce'=tificate. The Tribunal is to adjudicate the liability of the Defendant and thenit 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 provi- .. sions of the Act, is ousted and the power of adjudication upon the liability is exclusively vestedin 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). (1127-A-C] 2. 1.

It is not the intendment of the Act of 1993 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 certificates granted under Section 19 (22) has to be executed only by the Recovery Officer. No dual jurisdiction at different stages are contemplated. Further, Section 34 of the Act gives overriding effect to the provision of the Act of 1993. The provisions of Section 34(1) clearly state that the Act of 1993 overrides other laws to the extent of 'inconsistency'. The prescription ofan exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner. (1121-F-G; 1122-C] . _, 2. 2.

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. (1122-F-G] Tiwary Committee Report, referred to. ' ~ 3. 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. Leave of the Company Courtis 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 power under Section 442 against the TribunaVRecovery Officer. Thus, Sections 442, 446 and 537 cannot be applied against the Tribunal. (1125-E; HJ Damji Valiji Shah and Am: v. LIC & Ors. , (1965] 3 SCR 665, referred to. 4. The principle of purposive interpretation cannot be invoked in the present case against . the Debt Recovery Tribunal in view of the superior purpose of the Act of 1993 and the special provisions contained therein. The very same principle mentioned above equally applies to the TribunaU Recovery Officer under the Act of 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 ~f thousands of crores which due to the Banks and to financial institutions, so thatthe delays occurring in winding up proceedings could be avoided.

Section 19(19) is clearly inconsistent with section 446 and other provisions of the Companies Act. Only 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 Act of 1993 have to be applied. The jurisdiction of the TribunaVRecovery Officer under the Act of 1993 is exclusive and Section 34 gives overriding effect to the provisions of the Act of 1993. --' {1126-G-H; 1127-A-B; 1128-D-E] Governor General in Council v. Shirmani Sugar Mills Ltd. , AIR (1946) 33 SC 16; Sudarshan Chits (India) Ltd. v. 0. Sukukmaran Pilai and Ors. , [1984) 4 SCC 657; Union ofIndia v. India Fisheries, (1965) 3 SCR 679; life Insurance Corporation of India v. D. J. Bahadur, AIR (1980) SC 218 and Maharashtra Tunes Ltd. v. State ofIndustrial and Investment Corporation of India, (1993) 2 SCC 144, referred to. Ram Narain v. The Simla Banking & Industrial Co. Ltd. , AIR (1958) SC 614; MK Ranganathan v.

Govt. of Madras, AIR (1955) SC 604; ICICI v. Srinivas Agencies, (1996) 4 SCC 165 and Rajasthan Finance Corporation v. Official liquidator, (1963) 2 Comp. L. J. 309, distinguished. Mis. Major Syntex Ltd. v. Punjab and Sind Bank, (1977) 67 DLT 836 and UCO Bank v. Concast Products Ltd. , (1966) 2 Com. L. J. 449, disapproved. ICICI v. Vanjinad Leathers Ltd. , AIR (1997) Ker. 273 and In Re Bihar ? ALLAHABAD BANK v. CANARA BANK 1109 Sales Pvt. Ltd. , vol. 96 Comp. Cases 40, approved. ...... ,.. - Re Webb and Co. , (1922) 2 Ch. 369(A) and Food Controller v. Cork, (1923) AC 647, referred to. ---· Tiwari Committee Report (1981) Chapter Vill para 82in Narasimham Committee Report, referred to. 5. At the stage of adjudication under Section 17 and execution of the certificate under Section 2,5 etc.

the provisions of the Act of 1993, confer exclusivejurisdictionin the Tribunal and the Recovery Officerin 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 Act of 1993, the question of priorities among the Banks and financial institutions and other creditors can be decided only by the Tribunal under the Act of 1993 and in accordance with Section 19(19) read with Section 529-Aofthe Companies Act and in no other manner. The provisions of the Act of 1993, are to the above extent inconsistent with the provisions ofthe 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 wind- -- ing up order is passed.

No leave of the Company Court is necessary for initiating or continuing the proceedings under the Act of 1993. (1134-D-F] -... 6. The adjudication order in respect of the present 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, the relief for impleadment cannot be granted. (1135-D] 7. Where the defendant company is a company against which no winding up orderis passed, the company, 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 Act of 1993, as between the bank or financial institutions on the one hand and the other creditors on the other, it will, be necessary for the Tribunal to decide such question on priority bearing in mind the principles underlying Section 73 of the Code of Civil ,. -- Procedure.

Section 22 of the Act of 1993, gives sufficiently wide powers to the Tribunal and the Appellate Tribunal to decide such questions ofpriori- ties, subject only to the principles of natural justice. In the present case, 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 ~ebt 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. [1135-F; G; 1136-C] Industrial Credit and Investment Corporation ofIndia ud v. Grapco Industries 11d & Others, [1999] 4 SCC 710 and Allahabad Bank, Calcutta v. Radha Krishna Maity & Others, [1999] 6 SCC 755 relied on. 8. 1. The contention of the Respondent that Section 19(19) gives priority to all ''secured creditors" to share in the sale proceeds before the Tribunal/Recovery Officer cannot, be accepted.

The said words are qualified by the words ''in accordance with the provision of Section 529A". Hence, it is neiessary to identify the above limited class of secured creditors who have priority over all others in accordance with Section 529A. [1139-E] 8. 2. The words in proviso section 529(1) that, "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(l)(b). [1141-E] 8. 3. The secured creditor who stands outside the winding up and whose claims are restricted to Section 529-A 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 outofother 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 C. A.

No. 323 of 1999. Soli J. Sorabjee, Attorney General, Kapil Sibal, Indveer Singh Alag, Pradeep K. Bhakshi, Y. P. Narula, Abhijeet Chatterjee, Mrs. Sada Chandra, Suresh A. Shroff, Manish Singhvi, Ms. Rashmi Verma, Sunil Dogra, Ms. Monica Shanna, Ms. Sayali Pathak, A. S. Chandok, Siboney Sagar and V. Sibal for the appearing parties. The Judgment of the Court was delivered by 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 (Mis 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 44~ 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 1 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. l. 2000. The effect of the Ordinance and in particular section 19(19) then fell for 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 Recov- ery 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 then~ was no stay inasmuch as. there was default in deposit of the money directed to be deposited. O. A. No. 784of1996 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. , RC. 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 qut:stion 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 Banlc filed W. P. under Articles 226, 227. Canara Banlc then filed applications in the Debt Recovery Tribunal under section 22 of the RpB 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 Banlc informed the Recovery Officer that it had filed Company application No. 296 of 1999 in Company Petition No. 141195 (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 Banlc 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 Banlc. Later on Canara Banlc 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 109195 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 Banlc in tryiug to stall sales - which are being held at the instance of the Allahabad Banlc - 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 Ithe Allahabad Banlc 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-ll under SFS at Rohtak Road, Industria1 Complex, New ~ Delhi-110005 was held on 28. 1. 2000. (The raw materia1 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 sa1e proceeds of about Rs. 20 lakhs are in deposit'in this Court. Now, the position is that some sa1e proceeds are in deposit in the Tribuna1 and some in this Court, a11 such sa1es having been held at the instance of the appellant Bank a1one. Questions have been raised by the respondent as to whether the Tribuna1 can entertain proceedings for recovery, execution proceedings, and a1so for distribution of monies rea1ised by sa1es 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 Genera] for India appearing for the appellant, Allahabad Bank has submitted that the RDB Act of 1993 is a specia1 statute intended for expeditious adjudication and recovery of debts due to banks and financial institutions and it contains two crucia1 provisions. One of them is section 18 which ousts the jurisdiction of a11 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 Tribuna1. 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 a1so 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 provisiona1 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 been taken by the Canara Bank. It is urged that Courts must inteipret the RDB Act of 1993 so as to subserve the puipose ofrealisation 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 pennits 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 erttirety 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 112000, it is contended by the learned Attorney General that only section 529A of the Companies Act is attracted and that too for a limited puipose 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 iiquidator 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 haye 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 of 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 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 subclause (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? ·D (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 aild is there any difference between cases where the secured creditor opts to stand outside the winding up and where he goes before the Company C()hrt?

p (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 exclu~e jurisdiction of the Tribunal and the Recovery Officer in their respectiye spheres. The RDB Act is, as disclosed by its ~ble, an Act to provide for . the establishment of Tribunals for expeditlous 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 Banlcs and about 304 cases filed by financial institutions were pending in various civil courts, and recovery of debts 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. 'Banlcing 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 Banlcing Regulation Act, 1949. Clause (da) of Section 5 of the Banlcing Regulation Act, 1949, defines 'corresponding new banks' as Banks constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Sectlpn 3 of the Banlcing Companies ( Acquisition and Transfer of Undertaking~) Act, 1980. About 20 nationalised banlcs have come under the purview of RDB Act.

I 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 Developm~t·Bank 1 of India; (iv) the Life Insurance Corporation of India and (v) the U~t 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 adjudicatiof} and to what extent it is exclusive. Th\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 ofJurisdiction- On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority ( except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the T 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 tl1e. definition of 'debt' in Section 2(g) as amended by 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. Onc_e 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 ofCertificate 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 anyt11ing inconsistent tlierewith 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 y 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(l)(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 All~abad 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 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(l)(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 t laid down in National Textile Workers' Union etc. v. 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. V. M. Appeal allowed.