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Swaraj Infrastructure Pvt. Ltd. v. Kotak Mahindra Bank Ltd.

Civil Appeal · 2019 INSC 108Decided 29 Jan 2019
Civil Appeal No. 1291 of 2019
Justice Rohinton Fali Nariman · Justice Navin Sinha

Background

Kotak Mahindra Bank had advanced loans worth around Rs.48 crores to the appellant companies and obtained recovery orders from the Debts Recovery Tribunal (DRT), followed by recovery certificates, but auction attempts to recover the dues failed. The bank then filed a winding-up petition before the Bombay High Court under the Companies Act, which was admitted; the companies appealed, arguing that once the DRT process was invoked the bank could not also pursue winding up without first giving up its security.

Decision Breakdown

The Supreme Court held that a winding-up petition is not itself a "debt recovery" proceeding and so is not barred by the Recovery of Debts Act's exclusive-jurisdiction clause: the two remedies can run in parallel. It also held that, unlike under the Provincial Insolvency Act, the Companies Act does not require a secured creditor to relinquish its security merely to file a winding-up petition; that obligation only arises later, at the stage of proving a claim after a winding-up order is made. Pursuing both DRT recovery and winding-up simultaneously is not "blowing hot and cold" by the creditor. The appeals were dismissed with no order as to costs.

Lesson Learnt

A bank or secured creditor pursuing one legal recovery route (like the DRT) does not lose the right to simultaneously pursue a winding-up petition against a defaulting company: the law allows parallel remedies, and a creditor need not give up its security just to file for winding up.

Official source (sci.gov.in)View Judgment (PDF)

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