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2008 (5) TMI 423 - SC - Companies LawWhether Article 183 of the Limitation Act shall have any application in regard to the applicability of the provisions of the Limitation Act? Whether such a Scheme could be placed for approval before BIFR? Held that - Appeal allowed. Before BIFR could approve a scheme, the same must be drawn in terms of the provisions of the Act and not de hors the scheme. The order of BIFR dated 1-5-2007 also clearly show that it has granted its approval in view of the observations made by the appellate authority. It might have done so keeping in view the doctrine of judicial discipline in mind. The order of BIFR is not an outcome of any pre-application of mind. There is no finding that it has taken into consideration all the relevant facts. There is nothing to show that such an order is fair or reasonable or meets the requirements of law. Thus not only the judgment of the High Court but also the orders of BIFR as also the AAIFR should be set aside and the matter should be remitted to the BIFR so as to enable it to proceed in accordance with the provisions of S1CA afresh.
Issues Involved:
1. Interpretation/application of the Sick Industrial Companies (Special Provisions) Act, 1984 (SICA) vis-a-vis the Companies Act, 1956. 2. Jurisdiction of the Company Court when a reference has been made to the Board for Industrial and Financial Reconstruction (BIFR). 3. Validity of the Scheme approved by the High Court under Section 391 of the Companies Act, 1956. 4. The effect of the non obstante clause in SICA on the Companies Act, 1956. 5. The role of BIFR and AAIFR in the approval of schemes for sick companies. Issue-wise Detailed Analysis: 1. Interpretation/Application of SICA vis-a-vis the Companies Act, 1956: The primary issue in this case was the interpretation and application of the provisions of SICA in relation to the Companies Act, 1956. The Supreme Court upheld that SICA, being a special statute, has precedence over the Companies Act, 1956, which is a general statute. The Court emphasized that wherever there is an inconsistency between the two Acts, SICA would prevail due to its non obstante clause in Section 32, which states that the provisions of SICA will override any other law. 2. Jurisdiction of the Company Court: The Court examined whether the Company Court had jurisdiction to entertain proceedings under Section 391 of the Companies Act, 1956, when a reference was already made to BIFR. It was held that the jurisdiction of the Company Court is subject to the provisions of SICA. The Court referred to its previous judgment in NGEF Ltd. v. Chandra Developers (P.) Ltd., reiterating that the jurisdiction of the Company Court arises only when BIFR or AAIFR recommends winding up of the company under Section 20 of SICA. The Company Court does not have concurrent jurisdiction with BIFR. 3. Validity of the Scheme Approved by the High Court: The Scheme approved by the High Court under Section 391 of the Companies Act was challenged on the grounds that it did not include all creditors and was approved while proceedings were pending before AAIFR. The Supreme Court found that the High Court erred in approving the Scheme without considering the objections raised by the appellant and without ensuring that all creditors were included. The Court emphasized that the revival and restructuring of a sick company should be considered by a single forum, i.e., BIFR, to avoid conflicting decisions. 4. Effect of the Non Obstante Clause in SICA: The non obstante clause in Section 32 of SICA was a critical point of discussion. The Court held that this clause ensures that the provisions of SICA have overriding effect over any other law, including the Companies Act, 1956. This means that any scheme for the revival or merger of a sick company must comply with SICA's provisions and cannot be approved under the Companies Act if it conflicts with SICA. 5. Role of BIFR and AAIFR in Approval of Schemes: The Court scrutinized the role of BIFR and AAIFR in approving schemes for sick companies. It was noted that BIFR is the specialized body formed under SICA to consider such schemes. The Court found that BIFR had not applied its mind independently to the Scheme approved by the High Court and had merely followed the appellate authority's directions. The Court emphasized that BIFR must prepare and sanction schemes in accordance with SICA's provisions, ensuring that all relevant facts and objections are considered. Conclusion: The Supreme Court set aside the judgment of the High Court, as well as the orders of BIFR and AAIFR, and remitted the matter to BIFR to proceed afresh in accordance with SICA. The Court clarified that BIFR must independently evaluate and approve any scheme for the revival or merger of a sick company, ensuring compliance with SICA and considering all relevant objections and facts. The appeal was allowed with no order as to costs.
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