Altamas Kabir, C.J.
1. These appeals arise out of a common judgment and order passed by a learned Single Judge while disposing of the two writ applications filed by the Tata Iron & Steel Company Limited (Tisco) and the Bihar State Industrial Development Corporation Limited (BSIDC), being CWJC No. 3510 of 2000 (P) and CWJC No. 8842 of 2000 (P).
2. The first of the two writ petitions was filed by TISCO against the order dated 1/2/2000 passed by the Presiding Officer, Debts Recovery Tribunal, Patna, in OA No. 2 of 1997, whereby the petition filed by the Bank of India, Chirkunda Branch, Dhanbad under Section 19(4) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was allowed ex parte with costs and interest pendente lite and future at the rate of 12 per cent per annum until full and final realization of the amounts. A direction was given to issue certificate under Section 19(7) of the aforesaid Act and to forward the same to the Recovery Officer, Debts Recovery Tribunal Patna, for execution under Sections 25 and 28 of the said Act. The petitioner also challenged the order dated 7/2/2000 passed by the Tribunal whereunder the certificate under Section 19(7) has been drawn up against the petitioner and forwarded to the Recovery Officer, Debts Recovery Tribunal, Patna.
3. The Bihar State Industrial Development Corporation Limited (hereinafter referred to as the BSIDC) filed a writ application challenging the common order-dated 1st February, 2000 passed by the Presiding Officer, Debts Recovery Tribunal, Patna, in Case No. OA 2 of 1997 and the subsequent orders dated 14th and 28th August 2000 passed by the Recovery Officer, Debts Recovery Tribunal, Patna in Recovery Proceedings No. 17 of 2000 for recovery of the certificate amount from the petitioner and in favour of the respondent-company.
4. While both the petitioners challenged the common order dated Ist February, 2000 mainly on the ground that it had been passed in violation of the rules of natural justice, it was also urged that in the absence of necessary parties, the amounts could not be recovered from the petitioner. Furthermore, the impugned orders are not based on any ground. On the other hand, the stand taken by the respondent-company was that this Court should not interfere with the impugned orders under Article 226 of the Constitution of India, since a statutory alternative remedy was available to the petitioner.
5. The appellant Bank filed an, application under Section 19 of the 1993 Act for recovery of the alleged debt amount from the respondents and the writ petitioner and the same was registered as Case No. OA 2 of 1997 by the Debts Recovery Tribunal at Patna. On behalf of the respondent Bank, it was claimed that Kumardhubi Engineering Works became sick and its assets were taken over by the State of Bihar. Later on by an Act of the Bihar Legislature the assets of Kumardhubi Engineering Works were transferred to BSIDC and a new company known as Kumardhubi Metal and Casting Engineering Limited was formed. The BSIDC entered into a joint venture with TISCO in order to revive and rehabilitate the unit and as per the terms of the collaboration between BSIDC and TISCO, made on 1.5.1995, it was decided that BSIDC would hold 51% of the shares, whereas TISCO would hold 49%.
6. In the petition, it was pleaded that the total working capital disbursed to the company by the Bank was Rs. 320 lakhs. According to the Bank, the respondents herein, the respondents executed renewal instruments from time to time, and lastly on 25th April, 1995. It was alleged that during this period, the management accumulated huge losses and the outstanding balance in the account of the Company with the Bank went up from Rs. 14 lakhs to 195 lakhs within one month without any matching security in the form of current assets. It was alleged that attempts were being made to divert funds and since the sale proceeds of the movable assets of the Company were not being deposited with the Bank, the Bank was compelled to file a suit for realization of Rs. 3,56, 97, 104/90P inclusive of the interest calculated at contractual rate, upto the date of filing of the suit. As will appear from the order impugned in these appeals, nobody appeared on behalf of the Company or the Bihar State Industrial Development Corporation Ltd. TISCO, the first appellant, appeared and filed show cause, which was not accepted on the ground that it had not been filed by the proper person. It was stated that even TISCO did not choose to appear before the Tribunal later on, and the case was taken up for hearing ex parte against the defendants.
7. It was submitted on behalf of the writ petitioners that the application for recovery of the debt amount was not maintainable against the petitioners, since they were only shareholders and the alleged loans had been taken by the Company from the Bank. It was also urged that the impugned orders had been passed by the Tribunal in violation of the principles of natural justice, without proper notice and without hearing the petitioners. It was lastly submitted that the impugned orders were not passed on any ground as the Presiding Officer, Debts Recovery Tribunal, Patna, allowed the claim of the petitioner without deciding what was the amount of debt and whether the claim for realisation of Rs. 35.69.704.90P inclusive of interest was proper or not.
8. Both the writ petitions were opposed on behalf of the Bank mainly on the ground of alternative remedy. The learned Single Judge also took note of the fact that the Company, the Kumardhubi Metal Casting and Engineering Limited, having become sick, the matter was referred to the Board for Industrial and Financial Reconstruction (BIFR) for its possible revival and rehabilitation. Since none of the schemes proposed for reviving the Company were considered economically viable, by order dated 8th March, 1996, the BIFR recommended to the Patna High Court that the Company be wound up in the public interest.
9. Two appeals were preferred against the recommendation made by the Board for Industrial & Financial Reconstruction before the Appellate Authority, being Appeal Nos. 105 of 1996-and 5 of 1997, which were both dismissed by a common order dated 7th May, 1997. Pursuant to the recommendation of the Board for Industrial & Financial Reconstruction, a case, being Company Petition No. 2 of 1996, was registered before the Ranchi Bench of the Patna High Court in April, 1996. After due publication of notice, the Ranchi Bench of the Patna High Court, by its order dated 7th August, 1999, directed that the Company be wound up under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Since the Bank had been appointed as the Operating Agency in the course of inquiry before the Board for Industrial & Financial Reconstruction (BIFR), notice of the winding up proceeding was also served on the Bank.
10. As has been recorded by the learned Single Judge, despite appearing before the High Court, the Bank did not, at that stage, disclose that it had already filed a suit before the Debts Recovery Tribunal, Patna, which had been registered as OA No. 2 of 1997. For reasons best known to the Bank, It did not also disclose to the Debts Recovery Tribunal, Patna that a Company Petition had already been registered on the recommendations of the Board for Industrial and Financial Reconstruction for winding up of the Company. The Bank also failed to bring to the notice of the Debts Recovery Tribunal, before it passed its order on 1st February, 2000, that the High Court had already passed an order for winding up of the Company and had already appointed the Official Liquidator by its order dated 7th August, 1999. The learned Single Judge also recorded that the High Court had wanted to appoint the Bank as the Operating Agency in course of inquiry by the Board for Industrial and Financial Reconstruction, but on the Bank's refusal to act as the Operating Agency, the Official Liquidator was appointed as the liquidator of the Company and was also directed to take possession of all the assets of the Company. The learned Single Judge took note of the fact that inspite of having knowledge of the order of winding up and the appointment of the Official Liquidator by the High Court, the Company was not impleaded before the Debts Recovery Tribunal through the Official Liquidator.
11. The learned Single Judge then went on to examine the maintainability of the petition under Section 227 of the Constitution of India. After considering various decisions of the Hon'ble Supreme Court on the issue, the learned Single Judge was of the view that the High Court can interfere in respect of orders passed by the Debts Recovery Tribunal under Article 227 of the Constitution when the order is made without jurisdiction. Relying on the decision of the Hon'ble Supreme Court in the case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai, : AIR1999SC22 , the learned Singh Judge observed that it was settled law that in cases where the order is passed without jurisdiction or in violation of the principles of natural justice and in cases where the order is arbitrary, it is always open to the writ Court to entertain that writ petition instead of refusal on the ground of alternative remedy. The learned single Judge thereafter went on to observe that the presiding Officer of the Debts Recovery Tribunal, Patna, had failed to determine the question as to whether the defendants Nos. 2 and 3 could be treated as Certificate debtors. It was also observed that there was no discussion as to who took loan from the Bank and what was the exact amount of the loan. The Learned Single Judge observed that without discussing the said issue and without mentioning any ground, the Presiding Officer had allowed the claim of the Bank merely because the said two defendants failed to appear. In the said facts and circumstances, the learned Single Judge set aside the order dated 1st February, 2000 as being arbitrary and not a speaking order. The learned Single Judge set aside the certificate issued on the basis of the said order together with the consequention order and remitted the matter to the Presiding Officer, Debts Recovery Tribunal, Patna, to decide the issue afresh after impleading necessary parties and upon proper notice to the defendants. At the end of the judgment the learned Single Judge also advised a note of caution to the effect that before passing the final order, the Tribunal should bear in mind that the Official Liquidator had already been appointed by the High Court as the receiver of the Company in question. As indicated hereinbefore, the instant appeals have been filed against the said common judgment disposing of the two writ applications.
12. Appearing in support of the two appeals, Mr. A. Allam, learned Advocate, firstly contended that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was a Code in itself with an inbuilt remedy of appeal under Section 20 of the said Act. Mr. Allam submitted that the Hon'ble Supreme Court had deprecated the practice of challenging orders of the Debts Recovery Tribunal under Articles 226 and 227 of the Constitution. In support of his submissions, he referred to the decision of the Hon'ble Supreme Court in the case of Punjab National Bank v. O.C. Krishnan and Ors., : AIR2001SC3208 , wherein it was, inter alia, observed that even though a provision under an Act cannot expressly oust the jurisdiction of the Court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court should refrain from exercising its jurisdiction under the said Constitutional provisions.
13. Mr. Allam also referred to the decision of the Hon'ble Supreme Court in the case of Sita Ram Singhania v. Bank of Tokyo-Mitsubishi Ltd. and Ors., : [1999]3SCR512 , wherein also it was observed that the High Court should not, as a matter of course, grant stay of proceedings before the Tribunal, as the very purpose of setting up Tribunals would be lost.
14. Although the creation of the Banking Tribunal was not under challenge in this proceeding, Mr. Allam referred to the decision of the Hon'ble Supreme Court in Union of India v. Delhi High Court Bar Association, : [2002]2SCR450 , wherein it had been held that the Parliament was competent to enact laws for establishing Banking Tribunals and that Articles 323-A and 323-B of the Constitution do not take away its Legislative competence.
15. The next case on the subject cited by Mr. Allam involves the decision of the Hon'ble Supreme Court in Allahabad Bank v. Canara Bank, AIR 2000 SC 1535 in which it was held that at the stage of adjudication under Section 17 and execution of the certificate under Section 25, the provisions of the Recovery of Debts Due to Banks and Financial Institution Act, 1993 confers exclusive jurisdiction in the Tribunal and the Recovery Officer in respect of the 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. The Hon'ble Supreme Court went on further to hold that a proceeding under the aforesaid Act cannot be stayed by the Company Court, nor can they be transferred to the Company Court and that upon application of the principles of purposive interpretation to the provisions of the aforesaid Act, it was clear that a claim could be filed before the Debts Recovery Tribunal under the 1993 Act, without obtaining leave of the Company Court under Section 446(1) of the Companies Act.
16. Mr. Allam submitted that the question relating to the jurisdiction of the Debts Recovery Tribunal and the provisions of the Companies Act and, in particular, Section 446 thereof, had also fallen for consideration of the Hon'ble Supreme Court in Andhra Bank v. Official Liquidator, : AIR2005SC1814 , in which the decision in the Allahabad Bank case (supra) was noticed and it was observed that while Section 446 of the Companies Act undisputedly confers wide powers upon the Company Judge, such power can be exercised only upon consideration of the respective contentions of the parties raised in a suit or proceeding or in a claim made by or against the Company. A question of determining the priority would also fall for consideration, if the parties claiming the same are before the Court.
17. Appearing for TISCO Mr. G.M. Mishra, learned Advocate contended that TISCO had been wrongly impleaded by the bank in the proceedings before the learned Debts Recovery Tribunal, Since TISCO was merely holding share in the company and was not, in any way, involved in the management thereof. Mr. Mishra urged that nowhere in the plaint filed before the Debts Recovery Tribunal, had it been indicated that TISCO had, at any point of time, taken any loan from the Bank on behalf of the Company, or had even stood guarantor in respect of any loan that had been taken by the Company.
18. It was urged that the plaint before the Tribunal had been drafted in such a manner so as to vaguely indicate that TISCO as one of the defendants had taken loan from the Bank for the running of the Company.
19. Mr. Mishra submitted that the entire exercise including TISCO as a party in the proceedings before the Debts Recovery Tribunal had been engineered in such a manner so as to convince the Debts Recovery Tribunal into making a decree against TISCO as well, although there was no determination in the proceedings that TISCO had either taken a loan from the Bank or that any amount was due as a debt to the Bank from TISCO.
20. Mr. Mishra's submissions were adopted by Mr. Rajesh Kumar appearing on behalf of the Bihar State Industrial Development Corporation. It was submitted that an attempt had been made to foist the liabilities both on TISCO as well as Bihar State Industrial Development Corporation, although they had nothing to do with the loan taken by the Company from the appellant Bank.
21. At the initial stage, while considering the admission of the appeals, we had directed notices to issue not only to the parties, but also to Mrs. Pal who had, in a connected proceeding, appeared on behalf of Kumardhubi Metal Casting and Engineering Congress Union, since we were of the view that the said Union should also be heard as the workmen of the Company were involved and were likely to be affected by any order that we might pass in these appeals.
22. Appearing on behalf of the workmen, Mrs. Pal submitted that in view of the provisions of Section 529-A of the Companies Act, 1956, the Official Liquidator should have been made a party before the Debts Recovery Tribunal since after the winding up order, the Official Liquidator became the custodian of the assets and liabilities of the company in liquidation and represented the interests of the workmen.
23. Mrs. Pal submitted that once a winding up order is passed by the Company Judge, all legal proceedings pending before different authorities could thereafter be proceeded with only after due permission had been obtained from the learned Company Judge in seisin of the matter under Section 446 of the Companies Act, 1956. Mrs. Pal submitted that in the instant case, since the Bank had filed an application before the Debts Recovery Tribunal without obtaining such permission, the entire proceedings before the Debts Recovery Tribunal stood vitiated and all orders passed therein had been rightly set aside by the learned Single Judge.
24. Mrs. Pal submitted that although in the case of Allahabad Bank v. Canara Bank (supra) it was held by the Hon'ble Supreme Court that the proceedings before the Debts Recovery Tribunal did not require the sanction from the Company Judge under Section 446 of the above Act, the company should have been made a party through the Official Liquidator, so that the interest of the workmen could be protected. Mrs. Pal submitted that the judgment and decree of the Debts Recovery Tribunal must be treated to be a nullity on account of the fraudulent manner in which the same had been obtained by the Bank by concealing the fact that the company Court was already in seisin of the matter and had appointed the Official Liquidator to take possession of the assets and liabilities of the Company under liquidation. Mrs. Pal relied on the decision of the Hon'ble Supreme Court in the case of S.P. Chengalvaraya Naidu v. Jagannath and Ors., reported in : AIR1994SC853 , wherein it was observed that the Courts of law are meant for imparting justice between the parties and the principles of finality of a litigation should not be made to become an engine of fraud in the hands of dishonest litigants.
25. Mr. Pal also relied on the decision of the Hon'ble Supreme Court in the case of Vishnu Mahadeo Pendse v. Rajen Textiles Mills Limited, : AIR1975SC2079 wherein it was held that in a suit for possession in respect of properties which were in the hands of the Liquidator, the suit was not maintainable, since the Liquidator had not been made a party. Mrs. Pal submitted that it had been observed by the Hon'ble Supreme Court that until the company was dissolved it retained its distinct identity though in the case of a company under liquidation, the administration of its affairs passed to the Liquidator and, as a result, a declaration for dissolution cannot be made in the absence of the Liquidator. Mrs. Pal contended that the suit was incompetent both on the score of non-joinder of the Official Liquidator, and also on account of the fact that the Company Court was in seisin of the matter and no leave had been obtained by the Bank inspite of having knowledge of the Company proceedings before filing of the claim before the Debts Recovery Tribunal.
26. Having considered the submissions made on behalf of the respective parties and keeping in mind the decision of the Hon'ble Supreme Court in Allahabad Bank v. Canara Bank, AIR 2000 SC 1535 (supra) referred to Mr. Allam, we are of the' view that the bank ought to have disclosed before the Debts Recovery Tribunal that a proceeding for winding up of the company had been initiated in the Jharkhand High Court pursuant to the recommendations made by the Board for Industrial and Financial Reconstruction (BIFR) and that the Official Liquidator had already been appointed in the said proceedings and by operation of Section 456 of the Companies Act, 1956 became the holder of the assets and liabilities of the company under liquidation. It is, no doubt, true that the provisions of the Recovery of the Debts to the Banks and Financial Institutions Act, 1993 empowers the Bank and financial institutions to approach the Debts Recovery Tribunal for recovery of its dues, but, in the instant case, when the properties of the company under liquidation were in custodia legts and such fact was within the knowledge of the Bank, it should have at least impleaded the company in liquidation through the Official Liquidator.
27. Apart from the above, we are also convinced with the submissions made on behalf of the TISCO and the Bihar State Industrial Development Corporation have a good deal of force since neither of the two organisations had taken any loan from the Bank for running the affairs of the company and no attempt had also been made by the Debts Recovery Tribunal to ascertain and quantify any amount due and payable from TISCO and the Bihar State Industrial Development Corporation to the appellant Bank. The order passed by the Debts Recovery Tribunal was vitiated on such score also.
28. The object of impleading the company through the Official Liquidator has a purpose behind it, since the Official Liquidator is the representative of the workmen in the winding up proceedings and even in the Allahabad Bank case (supra), the priority of payment of dues in terms of Section 529-A of the Companies Act had been taken note of. Under Section 529-A of the Companies Act, dues of the workmen rank pan passu with that of the secured creditors and such fact has to be taken into consideration, where proceedings for recovery of money against a company in liquidation is involved.
29. In such circumstances, we see no reason to interfere with the order of the learned Single Judge and the appeals are both disposed of with the aforesaid observations. There will, however, be no order as to costs.