SWARAJ INFRASTRUCTURE PVT. LTD. versus KOTAK MAHINDRA BANK LTD.

Citation: [2019] 1 S.C.R. 682 · Decided: 29-01-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Dismissed

Cited by 1 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
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SWARAJ INFRASTRUCTURE PVT. LTD.
v.
KOTAK MAHINDRA BANK LTD.
(Civil Appeal No. 1291 of 2019)
JANUARY 29, 2019
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Companies Act, 1956:
ss. 439, 434(1)(a) and (1)(b), 441(2) and 529 – Winding up
petition – By the secured creditor/respondent-Bank, after obtaining
decree from Debts Recovery Tribunal and a recovery certificate
based thereon – Maintainability of the petition – Plea of debtor
companies inter alia that the petition was barred by provisions in
s.17 r/w. s.18 of Recovery of Debts Act; that the creditor must either
relinquish its security and stand in line in winding up proceeding
or realize its security outside the winding up proceeding; and that
in the present case s.434(1)(b) would be attracted and not
s.434(1)(a) – On appeal, held: Winding up proceeding is not a
proceeding for realization of debts and therefore would not be
covered by the language of s.17 r/w. ss.18 and s.34 of Debts
Recovery Act – u/s. 439, a secured creditor’s petition for winding
up is maintainable without any requirement for relinquishing its
security – In view of s.529(1)(c), s.47 would be applicable and not
s.9(2) of the Provincial Insolvency Act and hence winding up petition
cannot be deemed to commence at the time of presentation of the
petition – Reliance on s.441(2) by the debtors, is misplaced – At the
stage at which the winding up petition was filed, the same could not
have been filed u/s.434(1)(b) and hence s.434(1)(b) was inapplicable
– Winding up petition was maintainable – Recovery of Debts Due
to Banks and Financial Institutions Act, 1993 – ss.17, 18 and 34 –
Provincial Insolvency Act, 1920 – ss.9(2) and 47.
ss.434(1)(a) and (1)(b) – Applicability of the provisions –
Held: Applicability of sub-s.(b) of s.434(1) does not mean that
provision under sub-clause (a) of s.434(1) shall cease to be
applicable – Each one of the sub-clauses of s.434(1) are not mutually
exclusive.
[2019] 1 S.C.R. 682
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Dismissing the appeals, the Court
HELD:1. A winding up proceeding is not a proceeding that
can be referred to as a proceeding for realization of debts and
would, therefore, not be covered by the language of Section 17
read with Section 18 of the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993. When it comes to a winding up
proceeding under the Companies Act, 1956, since such a
proceeding is not “for recovery of debts” due to banks, the bar
contained in Section 18 read with Section 34 of the Recovery of
Debts Act would not apply to winding up proceedings under the
Companies Act, 1956. [Para 13][695-G-H; 696-A]
Amalgamated Commercial Traders (P.) Ltd. v. A.C.K.
Krishnaswami and Ors. (1965) 35 Comp Cas 456 (SC);
M/s IBA Health (India) Pvt. Ltd. v. M/s Info-Drive
Systems Sdn. Bhd. (2010) 10 SCC 553 : [2010] 12
SCR 137 – relied on.
Viral Filaments Ltd. v. Indusind Bank Ltd. (2001) 3 Mah
LJ 552 – approved.
Harinagar Sugar Mills Co. Ltd. v. M.W. Pradhan [1966]
3 SCR 948; Rajasthan State Financial Corporation v.
Official Liquidator (2005) 8 SCC 190 : [2005] 3 Suppl.
SCR 1073; Official Liquidator v. Allahabad Bank
(2013) 4 SCC 381 : [2013] 4 SCR 207 – referred to.
2.1 It is not correct to say that as per s. 441(2) of Companies
Act, the winding up of a company shall be deemed to commence
at the time of presentation of the petition for winding up, and that
the stage at which a secured creditor has to give up his security
is at the stage of the filing of the winding up petition itself. [Para
17][700-C-D]
2.2 Under Section 439 of the Companies Act, 1956, a
secured creditor’s petition for winding up is maintainable without
any requirement of it having to give up or relinquish its security.
This is in contrast to Section 9(2) of the Provincial Insolvency
Act, 1920. A provision akin to s. 9(2) of Provincial Insolvency
Act is absent in s. 439 of the Companies Act, 1956. [Para 17][700-
D-E, G-H]
SWARAJ INFRASTRUCTURE PVT. LTD. v. KOTAK
MAHINDRA BANK LTD.
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2.3 Section 529(1)(c) of the Companies Act, 1956 specifically
refers to the right of a secured creditor under the law of insolvency
“with respect to the estates of persons adjudged insolvent”. The
express language of Section 529(1)(c) of the Companies Act, 1956
makes it clear that it is Section 47 of the Provincial Insolvency
Act, 1920 alone that is attracted, and not Section 9(2). Section 47
of the Provincial Insolve

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