"The official liquidator cannot have recourse to the doctrine of election. He can challenge the order passed by the recovery officer and appeal under the Recovery of Debts Due to Banks and Financial Institutions Act, 199
CS Professional · Corporate Restructuring, Valuation and Insolvency · PYQS · June 2015
"The official liquidator cannot have recourse to the doctrine of election. He can challenge the order passed by the recovery officer and appeal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 but cannot approach the company court to set aside the auction or confirmation of sale when the same has been confirmed by the recovery officer under the Act." Comment on the above statement giving the options, if any, available to the official liquidator in this regard.
Answer & Explanation:
The statement is correct . The official liquidator cannot have recourse to the doctrine of election in this context. The official liquidator has a crucial role under the Companies Act, 1956 (and now the Insolvency and Bankruptcy Code, 2016, in many aspects), protecting the interests of workmen and creditors. Hence, their association at the time of auction and sale is appropriate. When a matter is agitated before the Debts Recovery Tribunal (DRT), it is the DRT that has exclusive jurisdiction under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act). The language of the 1993 Act is clear that any person aggrieved can prefer an appeal. The official liquidator, whose association is mandatorily required in such proceedings, is undoubtedly a 'person aggrieved' relating to the action taken by the Recovery Officer, which includes the manner in which the auction is conducted or the sale is confirmed. Under these circumstances, the official liquidator cannot choose between forums (doctrine of election). Options available to the official liquidator: The official liquidator has only one remedy: Challenge the order passed by the Recovery Officer: The official liquidator can challenge the order passed by the Recovery Officer before the Debts Recovery Tribunal itself. Appeal under the RDDBFI Act, 1993: If dissatisfied with the DRT's decision, the official liquidator can further appeal under the provisions of the RDDBFI Act, 1993, to the Debt Recovery Appellate Tribunal (DRAT). The Supreme Court, in cases like Pravin Gada v. Central Bank of India [2013] 176 Comp Cas 101(SC) , Allahabad Bank v. Canara Bank [2000] 101 Comp Cas 64(SC) , and Rajasthan Financial Corporation v. Official Liquidator [2005] Com Cas 387(SC) , has held that the DRT has powers under the 1993 Act to make an inquiry and confirm, modify, or set aside the order made by the Recovery Officer. The auction, sale, and challenge process are completely codified under the 1993 Act, given its special nature as a legislation for debt recovery. Therefore, the official liquidator cannot approach the company court to set aside the auction or confirmation of sale once it has been confirmed by the Recovery Officer under the RDDBFI Act, as the DRT and DRAT provide the exclusive forum for such challenges.
Topics: Insolvency and Winding Up
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