LAWS(P&H)-2009-1-174

BANK OF INDIA Vs. OFFICIAL LIQUIDATOR

Decided On January 14, 2009
BANK OF INDIA Appellant
V/S
OFFICIAL LIQUIDATOR Respondents

JUDGEMENT

(1.) THE Bank of India which is a secured creditor of the assets of the company in liquidation seeks for a direction to forthwith remit the sale proceeds of the assets of the company for an amount of Rs. 2 crores with accrued interest thereon. Subsequent to the filing of the petition, there has been a recovery certificate issued by the Debts Recovery Tribunal -II, Chandigarh in O.A. No. 367 of 2006 in favour of the bank against the company in liquidation on September 19, 2008, directing a sum of Rs. 2,14,52,517.26 to be paid by the defendants with future interest at 16.32 per cent, with quarterly rests from the filing of the OA till the date of its realisation.

(2.) THE application is resisted by the official liquidator by stating that the company had also a right of recovery against the directors of the company on the basis of personal guarantees given by them and the enforcement against the assets only was not appropriate. The bank had not properly exercised its discretion in proceeding only against the assets of the company and not proceeding personally against the ex -directors of the company. Counsel appearing on behalf of official liquidator relies on the decision of the Hon 'ble Supreme Court in Reliance Airport Developers P. Ltd. v. Airport Authority of India : [2006] 10 SCC 1, had to support his contention that the exercise of discretion by a secured creditor shall be appropriate and the decision to proceed only against the secured assets depleted the funds to the extent that it was not possible to satisfy other unsecured creditors. Learned Counsel refers to the observation of the Hon 'ble Supreme Court defining the discretion to mean (page 32) : "Though the word 'discretion' literally means and denotes an uncontrolled power of disposal yet in law the meaning given to this word appears to be a power to decide within the limits allowed by positive rules of law as to the punishments, remedies or costs. This would mean that even if a person has a discretion to do something the said discretion has to be exercised within the limits allowed by positive rules of law. The literal ( -sic legal) meaning of the word 'discretion' therefore, unmistakably avoids untrammeled or uncontrolled power and more positively points out at there being a positive control of some of judicial principles."

(3.) THE contention on behalf of the official liquidator is untenable also on the ground that after the claim has been adjudicated and an order is passed by the Debts Recovery Tribunal when the amount was determined and a recovery certificate has also been issued, there is no width of discretion left to the official liquidator to withhold the payment and contend that the bank should proceed personally against the ex -directors. The Supreme Court had occasion to advert to the efficacy of resort by banks to Debts Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (the RDB Act) in the decision reported in Allahabad Bank v. Canara Bank : [2000] 101 Comp Cas 64 : [2000] 4 SCC 406. The decision was in the context of the right of banks to approach the Debts Recover}' Tribunal under the RDB Act even when the company was in liquidation by pointing out that the jurisdiction of the Tribunal in regard to adjudication of claims by the bank is exclusive and the Act requires the Tribunal alone to decide application for recovery of debts. There is no dual jurisdiction in this regard and a company court cannot again entertain an adjudication whether the bank would have resort to any other remedy. If such an exercise is undertaken, it will make meaningless the constitution of an exclusive Tribunal under the RDB Act and the primacy of the Tribunal that the Hon 'ble Supreme Court adverted to in the above decision.