Role of a company court cannot be marginalised

Written by Indu Bhan | Indu Bhan | Updated: Mar 27 2013, 07:33am hrs
Liquidators powers

An official liquidator (OL) can file an appeal against the orders of a recovery officer if the interests of creditors and workmen of a sick company are affected, the Supreme Court ruled in the case of Official Liquidator, UP & Uttarakhand vs Allahabad Bank. Once the OL is associated, needless to say, he has a role to see that there is no irregularity in conducting the auction and appropriate price is obtained by holding an auction in a fair, transparent and non-arbitrary manner in consonance with the Rules framed under the Recovery of Debts due to Banks and Financial Institutions Act, the apex court said, adding that this is a safeguard provided by the Act if the recovery officer acts unreasonably or arbitrarily.

In this case, Allahabad Bank, a secured creditor with whom certain properties were mortgaged, had sought recovery of around R40 crore with interest from Rajindra Pipes Ltd. Pursuant to the orders of the winding up passed by the Company Judge of the Allahabad High Court, the OL had taken over the possession of the assets of the sick company in 2002. After the property of the firm was sold in auction, the OL had filed objections relating to fixation of reserve price, the non-inclusion of certain assets and the manner of conducting it. The company judge had set aside the sale, prompting the Allahabad Bank to move the Division Bench, which quashed the orders of the company judge. While the OL argued that the role of a company court cannot be marginalised as it has the control over the assets of the company, the bank submitted that the jurisdiction of the company court cannot be equated with the jurisdiction exercised by the HC.

UP pleas on urban land dismissed

Dismissing around 100 appeals filed by the Uttar Pradesh government against the Allahabad High Courts decision, the Supreme Court has held that it is mandatory for the state government to issue a notice to a land holder before takeover of his surplus land under Section 10(3) of the Urban Land (Ceiling and Regulation) Act, 1976.

In the lead case, Hari Ram had filed a statement in September 1976 giving details of the vacant land he was holding in excess of ceiling limit prescribed under the Act. While the competent authority had issued a notification in 1997 stating the land measuring 52,513.30 sq metres shall be deemed to have been vested with the government, the prescribed authority in 1999 had directed the land holder to hand over possession of the surplus land. Aggrieved by the same, Hari Ram had moved the district judge, which quashed the takeover of the land on the grounds that no notice, as contemplated under Section 8(3) of the Act, was served on him.

The HC also found no reason to interfere with the trial courts orders. Even the Supreme Court held that the mere vesting of the land under Section 10(3) of the Act would not confer any right on the state government to have de facto possession of the vacant land unless there has been a voluntary surrender of vacant land by the land holder. It further said that the owners must be given notice before taking possession under the new Act of 1999.

Senior counsel Sunil Gupta, appearing for the state, had submitted that the expressions deemed acquisition and deemed vesting, which find a place in Section 10(3), would take in not only de jure possession but also de facto possession.

Summons for invalid cheque

The Supreme Court in the case of Iris Computers Ltd vs Askari Infotech Ltd had held that the magistrate taking the cognisance and issuing summons to an accused person in a cheque bounce case cannot recall his order due to lack of territorial jurisdiction.

In this case, Iris Computers had filed a complaint under Section 200 of the Code of Criminal Procedure 1973 against Askari Infotech for issuing cheque without sufficient funds under Section 138 of the Negotiable Instruments Act, 1881. The magistrate issued summons to the accused person, who moved an application under sections 202, 203 and 245 of the Code questioning the maintainability of the complaint due to lack of territorial jurisdiction of the court. The magistrate then recalled his order issuing summons and returned the complaint with a direction to present it before the competent court. The payee moved the Karnataka High Court for quashing of the magistrates order. The HC also concurred with the magistrates view.

Setting aside the HC order that held to be contrary to law, the apex court directed the magistrate to restore the complaint and proceed with the prosecution in the case.

However, it granted liberty to the payer to question the jurisdiction of the magistrate, while issuing summons to them, before an appropriate court, including the HC.