Summary
The Supreme Court upheld termination of UCO Bank’s Permanent Machinery of Arbitration proceedings but set aside the High Court’s finding that NTC and the Union were not liable for the textile mill’s debts. The dispute over the undertaking’s takeover and inherited liabilities required adjudication in the recovery proceedings. The Court revived the relevant proceedings, allowed an application to implead the respondents, and preserved all objections and merits for independent determination.
Issues
- Whether the PMA was the appropriate forum for the disputed takeover liability.
- Whether the High Court could decide the respondents’ substantive debt liability while reviewing the arbitral notice.
- How the bank could pursue its recovery remedies.
Held
- The dispute required determining whether takeover of the textile undertaking transferred the borrower company’s liabilities. It could not simply be treated as an inter se dispute between two public-sector establishments within the administrative arbitration mechanism. Recovery proceedings were the appropriate route for that adjudication. (¶¶ 15, 19, 20, 21)
- The High Court could uphold the challenge to the PMA notice, but should not have conclusively absolved the respondents of debt liability in that writ proceeding. Whether liabilities and secured assets were taken over, and whether the Union was liable as guarantor, required an opportunity to present relevant material and evidence. (¶¶ 20, 21, 22)
- Quashing the arbitral notice stood, but the finding of non-liability was set aside. The pending proceedings were revived for completion according to law, and the bank could apply to bring the respondents on record in the recovery proceedings. (¶ 23)
- The respondents retained their objections. The Recovery Officer or Tribunal was to decide liability independently on the record, permitting evidence if necessary and without influence from either court’s observations. All contentions remained open. (¶ 23)
Result
Appeal partly allowed without costs. Quashing of PMA notice sustained; High Court’s non-liability finding set aside and recovery proceedings revived with liberty to seek impleadment. Connected special leave petition disposed of.