Summary
A secured creditor could maintain a Companies Act winding-up petition despite obtaining DRT adjudication and a recovery certificate. Debt recovery and winding up could proceed in parallel because the latter was not a debt-recovery proceeding within the RDB Act’s jurisdictional bar. Relinquishment of security was not required at petition presentation; the relevant election concerned proof of debt after a winding-up order. Admission of the petitions was upheld.
Issues
- Whether DRT adjudication barred a secured creditor’s winding-up petition.
- Whether the creditor had to relinquish security before presenting that petition.
- Whether Section 434(1)(b) excluded reliance on the statutory-demand route in Section 434(1)(a).
Provisions considered
- Sections 17, 18 and 34, Recovery of Debts Due to Banks and Financial Institutions Act, 1993Exclusive debt-adjudication and recovery jurisdiction did not bar a distinct winding-up proceeding under the Companies Act. (¶ 7–16)
- Sections 439(1)(b), 439(2), 441 and 529(1)(c), Companies Act, 1956Secured creditors could petition without surrendering security; deemed commencement did not import an insolvency petition’s relinquishment condition. (¶¶ 6, 17–18)
- Sections 9(2) and 47, Provincial Insolvency Act, 1920The election relevant to proof of claims after winding up arose under Section 47; Section 9(2)’s condition for an insolvency petition did not govern presentation of the company petition. (¶¶ 6, 17–18)
- Section 434(1)(a) and (b), Companies Act, 1956The deemed-inability instances were not mutually exclusive. On these facts the statutory-demand petition preceded the recovery certificate and could not then have proceeded under clause (b). (¶¶ 6, 19)
Held
- Allahabad Bank’s rule of exclusive DRT jurisdiction concerned debt adjudication and recovery, and displacement of Companies Act powers only to the extent of inconsistency. A winding-up proceeding was distinct and could run alongside DRT proceedings. (¶ 8–16)
- Section 439 expressly treated a secured creditor as entitled to petition without requiring prior relinquishment. Section 529 imported insolvency rules at the later proof-of-debt stage, not the separate petition condition in Section 9(2) of the Provincial Insolvency Act. Section 441 did not alter that conclusion. (¶ 17–18)
- The creditor could realise security and prove for the remaining debt, or surrender it to prove the whole debt, in accordance with the applicable claims rules. The stage for such election did not bar filing the winding-up petition. (¶ 17–18)
- Clause (b) of Section 434(1) did not displace clause (a). The petition was filed on 3 July 2015 after statutory notice, while the recovery certificate issued only on 12 August 2015. The appellants’ proposed bar was therefore also factually inapplicable. (¶ 19)
- Simultaneously pursuing the two available remedies did not amount to inconsistent election. With no bona fide defence to an otherwise maintainable petition, the companies could not resist it on the asserted grounds. (¶ 20)
Result
Appeals dismissed; admission of the winding-up petitions left undisturbed. No order as to costs.