Tata Iron and Steel Co. Ltd. Vs. Kumardhubi Metal Casting Engg. Ltd. and Presiding Officer and ors. - Court Judgment

Excerpt:
- - the two are interconnected and have a good deal in common. as these proceedings were being adjourned at the request of the bar, the court must not fail in its duty to give its opinion on the jurisdiction of the proceedings. normally, such a circumstance ought not to be rendered that the case is good for being heard either at the high court or the bench but when a winding up order is passed the proceedings are arranged to be transferred to the principal seat, where by law the liquidation proceedings are attached. 15. at present, as the law sufficiently provides on how to take care of the situation, should the debt be of a corporate body like a company, the court is not going into the merits on the quantum of the debt and the matter of strict proof liability under the law. 16. perhaps, it has not been noticed by the respondent, the bank of india, that even under the enactment, the recovery of debts due to banks and financial institutions act, 1993, section 20(19) clearly refers to the companies act, 1956, and enjoins that the tribunal should have due regard to section 529a of the companies act, 1956. if that be the case, then section 529a of the companies act, in turn, makes a reference to section 529. section 529 gives guidance that if there be creditors, then there would be a pari passu ranking amongst them. ravi s. dhavan, c.j. 1. these proceedings are preliminary in nature and upon having heard learned counsel for the parties, on consent by all of them no aspect of the merits of the claim of any party is decided. but certain preliminary questions have arisen and these must be answered. 2. these preliminary questions are : the aspect which gave occasion to these issues is an order, which had been passed on may 16, 2000, by the judge in c. w. j. c. no. 5510 of 2000 that regard being had in the circumstances that a company petition no. 2 of 1996 (r) for winding up of kumardhubi metal casting and engineering ltd., p. o. kumardhubi, district dhanbad, is pending. in the circumstances all other matters relating to the recovery of debts of the creditor, including proceedings arising out of or challenging the order of the tribunal under the recovery ofdebts due to banks and financial institutions act, 1993, be transferred to the bench of the patna high court at ranchi. the order of the judge, aforesaid, is reproduced below : 'heard learned counsel for the petitioner and the bank. learned counsel for the bank submits that company petition no. 2 of 1996 (r) for winding up of respondent no. 4 is pending before the company judge of the ranchi bench of this court. the two are interconnected and have a good deal in common. in order to avoid conflicting decisions/ orders, let this case be placed before the judge at the ranchi bench, who has been assigned the original company jurisdiction, after obtaining orders of the hon'ble chief justice. it will be open to learned counsel for the bank to raise the question ot maintainability of the present writ petition which has been preferred without availing of the statutory remedy of appeal.' 3. this in itself gave rise to two aspects (a) whether the chief justice could transfer these proceedings to ranchi and (b) within the same high court could there be winding up proceedings before two company judges. 4. in the circumstances, the present letters patent appeal had been filed by the petitioner tata iron and steel company ltd., for consideration of issues on these two aspects. 5. by the letters patent appeal, the order of the learned judge dated may 16, 2000, is challenged. it has been submitted that the law prohibits an order being passed by a chief justice in transferring these matters to the ranchi bench. further, this argument has come as side wind that in one high court there may only be one company judge and all winding up proceedings will be before that company judge and that these proceedings would be at the principal seat of the high court. 6. only these aspects are to be considered today. these matters must see an opinion of the court as by next week, the issue would remain frustrated and that would be inappropriate that the court was called upon to answer these questions and it adjourned the matter to evade the answer. as these proceedings were being adjourned at the request of the bar, the court must not fail in its duty to give its opinion on the jurisdiction of the proceedings. 7. in answer to the first aspect whether cases at patna may be transferred to the bench at ranchi a special enactment will need to be referred to. the creation of the ranchi bench was by an act of parliament known as the high court at patna (establishment of permanent bench at ranchi) act, 1976 (act no. 57 of 1976). as the enactment is very brief it is reproduced : '1. short title.-this act may be called the high court at patna (establishment of a permanent bench at ranchi) act, 1976. 2. establishment of a permanent bench of high court at patna at ranchi.--there shall be established a permanent bench of the high court at patna at ranchi, and such judges of the high court at patna, being notless than three in number, as the chief justice of that high court may, from time to time, nominate, shall sit at ranchi in order to exercise the jurisdiction and power for the time being vested in that high court in respect of cases arising in the districts of hazaribagh, giridih, dhanbad, ranchi, palamau and singhbhum : provided that the chief justice of that high court may, in his discretion, order that any case or class of cases arising in any such district shall be heard at patna.' 8. in addition, the patna high court rules also provide as to where cases arising out of the district of hazaribagh, giridih, dhanbad, ranchi, palamau and singhbhum will be heard. chapter 26, rule 3 provides that cases arising out of these districts will be heard at ranchi. but the proviso in no uncertain terms mentions that the chief justice of the high court may in his discretion direct that any case arising in any such district may be heard at patna. 9. taking these circumstances into account, that is, the act and the rules, the implication is clear that the jurisdiction of the ranchi bench has been defined and will only be to deal with cases as arise from the named districts. yet, discretion has been left with the chief justice that cases, as may be pending at the ranchi bench, given the circumstances, may be transferred to the principal seat at patna. but, there is a clear prohibition that cases at patna or of areas which are within the exclusive jurisdiction of the principal seat of the high court are not to be transferred to the ranchi bench. in the circumstances the order as was passed by learned judge on may 16, 2000, is in the teeth of the act and against the rules. should the chief justice pass an order transferring any case, which are of the jurisdiction of the principal seat, it would not be an error but an illegality. 10. the next question is on the pendency of the winding up proceedings of companies under liquidation and other matters arising out of the companies act, 1956. whether such proceedings are amenable to transfer between the principal seat and the circuit bench ? 11. the contention is that the winding up proceedings arising out of the company petition at the circuit bench has always been in error. perhaps, the contention is not incorrect. the error is remedial. the pendency of proceedings at the ranchi bench would suffer from an error of jurisdiction. the court was taken through the provisions of the companies act and also the companies (court) rules, 1959, and the submission of the appellant was, to the effect, that no such order may be passed by the chief justice as may be incompatible with the scheme of the aforesaid act and the rules. the contention was that the official liquidator is attached to the high court as having been provided by the companies act, 1956, by section 448, and by section 449 on a winding up order being made, the official liquidator by virtue of his office becomes the liquidator of the company. 12. thus, when a high court passes a winding up order the liquidator attached to the high court starts his function on the process of the winding up of the company and sees it through liquidation. the very jurisdiction to entertain an action for the winding up of a company is an original jurisdiction of the high court and is reserved for a company judge nominated by the chief justice and the requirement of the law is that the jurisdiction is exclusive and unfettered. there cannot be different winding up proceedings within the same high court away from the establishment of the liquidator attached to the high court. normally, such a circumstance ought not to be rendered that the case is good for being heard either at the high court or the bench but when a winding up order is passed the proceedings are arranged to be transferred to the principal seat, where by law the liquidation proceedings are attached. the establishment of the liquidator exists at the principal seat of the high court as the liquidator is attached to the high court. in the circumstances, in a high court there shall be only one company judge. thus, this is an appropriate case where the winding up proceedings, as are pending at ranchi, need to be transferred to the principal seat of the high court at patna, as such is the pattern set by law. 13. but the court having declared the law will not be passing an order with a direction for the simple reason that all these academics will be taken care of. another law, which has come into the offing' and on the appointed day will take effect, will render the ranchi bench as the new high court. this will happen by the bihar reorganisation act, 2000, which takes effect on november 15, 2000. thus, the law will apply equally. even at the new high court, there will be one company judge. the court finds that the registered office of the company is at kumardhubi within the district of dhanbad. thus, the question having been answered, it is not necessary for the court to pass a direction as by next week, the law will take its own course and the winding proceeding will then be before the company judge so nominated at the new high court. 14. the third aspect is as raised by a creditor, a respondent in the writ petition. the contention, which was being made very forcefully is that as a creditor, the respondent, the bank of india, is entitled to make an attachment and realise the debts as are due. the court indicated to counsel for this creditor that it is not necessary to go into this aspect of the merits. 15. at present, as the law sufficiently provides on how to take care of the situation, should the debt be of a corporate body like a company, the court is not going into the merits on the quantum of the debt and the matter of strict proof liability under the law. 16. perhaps, it has not been noticed by the respondent, the bank of india, that even under the enactment, the recovery of debts due to banks and financial institutions act, 1993, section 20(19) clearly refers to the companies act, 1956, and enjoins that the tribunal should have due regard tosection 529a of the companies act, 1956. if that be the case, then section 529a of the companies act, in turn, makes a reference to section 529. section 529 gives guidance that if there be creditors, then there would be a pari passu ranking amongst them. in this regard, not to be forgotten, is the observation of the supreme court in the matter of allahabad bank v. canara bank [2000] 101 comp cas 64 ; air 2000 sc 1535. in paragraph 75, the supreme court has given guidance that in the matter relating to realisation of debts the principle of pari passu ranking has to be kept in mind. however, when the matter relating to the merits of the matter is taken up in the writ petition, which now cannot be transferred out of patna in view of the 1976 act and the high court rules, parties may take recourse to their claims and defences, in argument, whatever they may be. 17. the letters patent appeal is allowed. the order of the learned judge dated may 16, 2000, is set aside. 18. the pendency of the company petition could be at the principal seat of. a high court, in context. but this is one of the rare cases where a direction is not being given in view of the circumstances which will change when the bihar reorganisation act, 2000, takes effect.

Judgment:

Ravi S. Dhavan, C.J.

1. These proceedings are preliminary in nature and upon having heard learned counsel for the parties, on consent by all of them no aspect of the merits of the claim of any party is decided. But certain preliminary questions have arisen and these must be answered.

2. These preliminary questions are : the aspect which gave occasion to these issues is an order, which had been passed on May 16, 2000, by the judge in C. W. J. C. No. 5510 of 2000 that regard being had in the circumstances that a Company Petition No. 2 of 1996 (R) for winding up of Kumardhubi Metal Casting and Engineering Ltd., P. O. Kumardhubi, District Dhanbad, is pending. In the circumstances all other matters relating to the recovery of debts of the creditor, including proceedings arising out of or challenging the order of the Tribunal under the Recovery of

Debts Due to Banks and Financial Institutions Act, 1993, be transferred to the Bench of the Patna High Court at Ranchi. The order of the judge, aforesaid, is reproduced below :

'Heard learned counsel for the petitioner and the bank. Learned counsel for the bank submits that Company Petition No. 2 of 1996 (R) for winding up of respondent No. 4 is pending before the company judge of the Ranchi Bench of this court. The two are interconnected and have a good deal in common. In order to avoid conflicting decisions/ orders, let this case be placed before the judge at the Ranchi Bench, who has been assigned the original company jurisdiction, after obtaining orders of the Hon'ble Chief Justice.

It will be open to learned counsel for the bank to raise the question ot maintainability of the present writ petition which has been preferred without availing of the statutory remedy of appeal.'

3. This in itself gave rise to two aspects (a) whether the Chief Justice could transfer these proceedings to Ranchi and (b) within the same High Court could there be winding up proceedings before two company judges.

4. In the circumstances, the present Letters Patent appeal had been filed by the petitioner Tata Iron and Steel Company Ltd., for consideration of issues on these two aspects.

5. By the Letters Patent appeal, the order of the learned judge dated May 16, 2000, is challenged. It has been submitted that the law prohibits an order being passed by a Chief Justice in transferring these matters to the Ranchi Bench. Further, this argument has come as side wind that in one High Court there may only be one company judge and all winding up proceedings will be before that company judge and that these proceedings would be at the principal seat of the High Court.

6. Only these aspects are to be considered today. These matters must see an opinion of the court as by next week, the issue would remain frustrated and that would be inappropriate that the court was called upon to answer these questions and it adjourned the matter to evade the answer. As these proceedings were being adjourned at the request of the Bar, the court must not fail in its duty to give its opinion on the jurisdiction of the proceedings.

7. In answer to the first aspect whether cases at Patna may be transferred to the Bench at Ranchi a special enactment will need to be referred to. The creation of the Ranchi Bench was by an Act of Parliament known as the High Court at Patna (Establishment of Permanent Bench at Ranchi) Act, 1976 (Act No. 57 of 1976). As the enactment is very brief it is reproduced :

'1. Short title.-This Act may be called the High Court at Patna (Establishment of a Permanent Bench at Ranchi) Act, 1976.

2. Establishment of a permanent Bench of High Court at Patna at Ranchi.--There shall be established a permanent Bench of the High Court at Patna at Ranchi, and such judges of the High Court at Patna, being not

less than three in number, as the Chief Justice of that High Court may, from time to time, nominate, shall sit at Ranchi in order to exercise the jurisdiction and power for the time being vested in that High Court in respect of cases arising in the districts of Hazaribagh, Giridih, Dhanbad, Ranchi, Palamau and Singhbhum :

Provided that the Chief Justice of that High Court may, in his discretion, order that any case or class of cases arising in any such district shall be heard at Patna.'

8. In addition, the Patna High Court Rules also provide as to where cases arising out of the district of Hazaribagh, Giridih, Dhanbad, Ranchi, Palamau and Singhbhum will be heard. Chapter 26, Rule 3 provides that cases arising out of these districts will be heard at Ranchi. But the proviso in no uncertain terms mentions that the Chief Justice of the High Court may in his discretion direct that any case arising in any such district may be heard at Patna.

9. Taking these circumstances into account, that is, the Act and the rules, the implication is clear that the jurisdiction of the Ranchi Bench has been defined and will only be to deal with cases as arise from the named districts. Yet, discretion has been left with the Chief Justice that cases, as may be pending at the Ranchi Bench, given the circumstances, may be transferred to the principal seat at Patna. But, there is a clear prohibition that cases at Patna or of areas which are within the exclusive jurisdiction of the principal seat of the High Court are not to be transferred to the Ranchi Bench. In the circumstances the order as was passed by learned judge on May 16, 2000, is in the teeth of the Act and against the rules. Should the Chief Justice pass an order transferring any case, which are of the jurisdiction of the principal seat, it would not be an error but an illegality.

10. The next question is on the pendency of the winding up proceedings of companies under liquidation and other matters arising out of the Companies Act, 1956. Whether such proceedings are amenable to transfer between the principal seat and the circuit Bench ?

11. The contention is that the winding up proceedings arising out of the company petition at the circuit Bench has always been in error. Perhaps, the contention is not incorrect. The error is remedial. The pendency of proceedings at the Ranchi Bench would suffer from an error of jurisdiction. The court was taken through the provisions of the Companies Act and also the Companies (Court) Rules, 1959, and the submission of the appellant was, to the effect, that no such order may be passed by the Chief Justice as may be incompatible with the scheme of the aforesaid Act and the rules. The contention was that the official liquidator is attached to the High Court as having been provided by the Companies Act, 1956, by Section 448, and by Section 449 on a winding up order being made, the official liquidator by virtue of his office becomes the liquidator of the company.

12. Thus, when a High Court passes a winding up order the liquidator attached to the High Court starts his function on the process of the winding up of the company and sees it through liquidation. The very jurisdiction to entertain an action for the winding up of a company is an original jurisdiction of the High Court and is reserved for a company judge nominated by the Chief Justice and the requirement of the law is that the jurisdiction is exclusive and unfettered. There cannot be different winding up proceedings within the same High Court away from the establishment of the liquidator attached to the High Court. Normally, such a circumstance ought not to be rendered that the case is good for being heard either at the High Court or the Bench but when a winding up order is passed the proceedings are arranged to be transferred to the principal seat, where by law the liquidation proceedings are attached. The establishment of the liquidator exists at the principal seat of the High Court as the liquidator is attached to the High Court. In the circumstances, in a High Court there shall be only one company judge. Thus, this is an appropriate case where the winding up proceedings, as are pending at Ranchi, need to be transferred to the principal seat of the High Court at Patna, as such is the pattern set by law.

13. But the court having declared the law will not be passing an order with a direction for the simple reason that all these academics will be taken care of. Another law, which has come into the offing' and on the appointed day will take effect, will render the Ranchi Bench as the new High Court. This will happen by the Bihar Reorganisation Act, 2000, which takes effect on November 15, 2000. Thus, the law will apply equally. Even at the new High Court, there will be one company judge. The court finds that the registered office of the company is at Kumardhubi within the district of Dhanbad. Thus, the question having been answered, it is not necessary for the court to pass a direction as by next week, the law will take its own course and the winding proceeding will then be before the company judge so nominated at the new High Court.

14. The third aspect is as raised by a creditor, a respondent in the writ petition. The contention, which was being made very forcefully is that as a creditor, the respondent, the Bank of India, is entitled to make an attachment and realise the debts as are due. The court indicated to counsel for this creditor that it is not necessary to go into this aspect of the merits.

15. At present, as the law sufficiently provides on how to take care of the situation, should the debt be of a corporate body like a company, the court is not going into the merits on the quantum of the debt and the matter of strict proof liability under the law.

16. Perhaps, it has not been noticed by the respondent, the Bank of India, that even under the enactment, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section 20(19) clearly refers to the Companies Act, 1956, and enjoins that the Tribunal should have due regard to

section 529A of the Companies Act, 1956. If that be the case, then Section 529A of the Companies Act, in turn, makes a reference to Section 529. Section 529 gives guidance that if there be creditors, then there would be a pari passu ranking amongst them. In this regard, not to be forgotten, is the observation of the Supreme Court in the matter of Allahabad Bank v. Canara Bank [2000] 101 Comp Cas 64 ; AIR 2000 SC 1535. In paragraph 75, the Supreme Court has given guidance that in the matter relating to realisation of debts the principle of pari passu ranking has to be kept in mind. However, when the matter relating to the merits of the matter is taken up in the writ petition, which now cannot be transferred out of Patna in view of the 1976 Act and the High Court Rules, parties may take recourse to their claims and defences, in argument, whatever they may be.

17. The Letters Patent appeal is allowed. The order of the learned judge dated May 16, 2000, is set aside.

18. The pendency of the company petition could be at the principal seat of. a High Court, in context. But this is one of the rare cases where a direction is not being given in view of the circumstances which will change when the Bihar Reorganisation Act, 2000, takes effect.