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2006 (12) TMI 234 - SC - Companies LawWhether the provisions of the Arbitration and Conciliation Act, 1996 would prevail over the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985? Held that - The High Court should have dealt with the question properly with reference to the nature of the relevant orders and the context in which they were made and if it was still of the view that the power vested in B.I.F.R. under section 22(3) of SICA enabled it to override all those orders, it should have normally remitted the application made by the respondent to B.I.F.R. so as to enable it to take a decision on the prayer of the respondent in the context of the proceedings pending before B.I.F.R. and all elements relevant for the purpose of such a decision. The High Court has also not considered how far it will be appropriate to permit the sale of the assets of a Company which is before B.I.F.R. for a scheme of revival.
Issues Involved:
1. Whether the provisions of the Arbitration and Conciliation Act, 1996 ('the 1996 Act') would prevail over the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA'). 2. Validity of the High Court's order directing the sale of shares despite the Board's refusal. 3. Jurisdiction and powers of the Board for Industrial and Financial Reconstruction (BIFR) under SICA. 4. Interpretation of the term "judicial authority" under the 1996 Act. 5. Application of the non-obstante clauses in both SICA and the 1996 Act. Detailed Analysis: 1. Whether the provisions of the 1996 Act would prevail over SICA: The primary question was whether the Arbitration and Conciliation Act, 1996 would take precedence over the Sick Industrial Companies (Special Provisions) Act, 1985. The court noted that both Acts contain non-obstante clauses. The 1996 Act is a complete code by itself and provides that an arbitral award becomes enforceable as if it were a decree once the time for making an application to set it aside has expired or such an application has been refused. However, the court concluded that the provisions of SICA, aimed at achieving a higher public interest, would still apply despite Section 5 of the 1996 Act. 2. Validity of the High Court's order directing the sale of shares despite the Board's refusal: The court observed that during the pendency of an inquiry before the Board, the respondent could sell its shares but was restrained by the Board's orders. The High Court's direction for the sale of shares despite the Board's refusal was questioned. The court emphasized that the Board, being a quasi-judicial authority, exercises various powers under the Code of Civil Procedure and is considered a judicial authority for the purposes of the 1996 Act. The court concluded that while the High Court's order may have been improper, it did not interfere with it due to the sale proceeds already being deposited with the Board. 3. Jurisdiction and powers of the Board under SICA: The court discussed the statutory provisions of SICA, highlighting that the Board has the power to pass orders during the pendency of an inquiry, including restraining the company from disposing of its assets. Section 22(1) of SICA provides for automatic suspension of certain proceedings, while Section 22(3) allows the Board to declare the suspension of contracts, agreements, settlements, awards, etc. The court clarified that the Board's power to suspend the operation of an award under Section 22(3) is necessary to achieve the objectives of SICA. 4. Interpretation of the term "judicial authority" under the 1996 Act: The term "judicial authority" is not defined in the 1996 Act but includes courts and other authorities performing judicial or quasi-judicial functions. The court referred to various judgments to conclude that the Board is a judicial authority within the meaning of Section 5 of the 1996 Act. This interpretation was necessary to ensure that the Board's orders are given due consideration and not overridden by arbitral awards without proper scrutiny. 5. Application of the non-obstante clauses in both SICA and the 1996 Act: The court noted that both Acts contain non-obstante clauses, and the ordinary rule of construction is that the latter shall prevail. However, the ultimate conclusion depends on the legislative intent and the context of the statutes. The court emphasized the need for harmonious construction and concluded that while the 1996 Act aims to limit judicial intervention in arbitration matters, the broader public interest objectives of SICA justify its precedence in cases involving sick industrial companies. Conclusion: The court dismissed the appeal, noting that the sale proceeds of the shares had already been deposited with the Board, making interference with the High Court's order futile. However, the court laid down the law for future guidance, emphasizing the need for the Board to act within the statutory framework of SICA while considering the principles of judicial amity and comity. The court also highlighted the importance of expeditious proceedings under SICA to prevent misuse by not so scrupulous debtors.
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