Liquidator Must Co-Operate With Debt Tribunal Orders

No prior permission of the company judge is necessary for the debt recovery tribunal to appoint a commissioner to make an inventory of a company under liquidation.

Though there is an apparent conflict between the power of the company judge dealing with liquidation proceedings, and that of the tribunal, the Supreme Court held that the official liquidator and the commissioner of the tribunal should cooperate in such matters.

The Andhra Pradesh High Court had taken a contrary view on this question. It had held that since the tribunal was subject to the supervisory jurisdiction of the high court, it could not deal with properties which were with the official liquidator.

This ruling has been set aside by the apex court in the State Bank of Hyderabad vs Pennar Paterson case.

In this case, the winding up proceedings were initiated before the company judge and he had appointed a provisional liquidator.

The bank and members of a consortium, meanwhile, moved the tribunal praying that the liquidator should be restrained from making any payment to the depositors of the company or any other persons.

The tribunal appointed a commissioner for making an inventory of the properties. When he approached the liquidator, he did not cooperate asserting that he would abide by the orders of the high court.

The tribunal then passed an order directing the liquidator to cooperate with its commissioner. If the liquidator did not cooperate, the commissioner was allowed to seek police help in making the inventory.

The liquidator then moved the company judge seeking to restrain the commissioner. The matter was referred to a Division Bench, which held in favour of the liquidator.

The Supreme Court had dealt with a case involving the powers of the company judge and the tribunal two years ago in the Allahabad Bank vs Canara Bank case.

There was a demand in this case to review that judgment as the tribunal had been given unregulated powers.

But the Supreme Court did not find it necessary to refer that question to a larger Bench. It was held that no permission of the company judge was necessary for initiating or continuing the proceedings under the debt recovery law.

The Supreme Court clarified that Section 19(18)(e) of the Recovery of Debts Due to Banks and Financial Institutions Act empowered the tribunal to appoint a commissioner to prepare inventory of properties of the debtors.