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2015 (4) TMI 1197 - HC - Indian LawsViolation of the provisions of SICA - seeking to take possession of the immovable properties of the petitioner company pursuant to the notice issued under the provisions of SICA Act - Held that - The present Writ petition is, barred by the principles of res-judicata and is liable to be dismissed on this short ground. The present Writ Petition has been filed only to drag on proceedings, again prevent the respondent-bank from taking possession of their immoveable properties, and in realising even a part of the mounting debt by putting the secured assets to sale. The present Writ Petition is clearly an abuse of process of Court, and is liable to be dismissed as such. Though the Writ Petition is liable to be dismissed on the aforesaid two grounds, we shall examine the contentions urged by Sri C.B.Rammohan Reddy, Learned Counsel for the petitioner, on the scope of the relevant provisions of SICA and the SARFAESI Act, as these issues would frequently arise. As the SARFAESI Act came into force on 21.06.2002 the starting point for the third proviso, to Section 15(1) of SICA, to be attracted is on or after 21.06.2002. If proceedings were pending before the BIFR on 21.06.2002, and on the conditions stipulated in the third proviso being satisfied, the reference stood abated. As the petitioners made a reference to the BIFR, under Section 15(1) of SICA, by their application dated 10.10.2013, the question of pendency of a reference before the BIFR, on or after the commencement of the SARFAESI Act, does not arise and the third proviso to Section 15(1) of SICA has no application. The SARFAESI Act is concerned mainly with the recovery of the debt, by banks and financial institutions, without recourse to any court or tribunal. It permits securitisation of the debt and aims at minimising non-performing assets. The SICA, a pre -existing legislation, provides for timely detection of sick and potentially sick companies owning industrial undertakings and the speedy determination by the BIFR of remedial and ameliorative measures, and enforcement of such measures. The different purposes of the two Acts must be kept in mind while examining the inter -play between the provisions of the two and eschew, if permissible, a readiness to hold that their provisions overlap or tread over each other While interpreting a provision containing a non-obstante clause it should first be ascertained what the enacting part of the Section provides, on a fair construction of the words used according to their natural and ordinary meaning, and the non-obstante clause is to be understood as operating to set aside as no longer valid anything contained in any other law which is inconsistent with the Section containing the non-obstante clause. While Section 35 of the SARFAESI Act gives over-riding effect of that Act over other laws which are inconsistent therewith, the second and third provisos, which were inserted into the SICA in the year 2002, by the SARFAESI Act itself, cannot be construed as being inconsistent with the SARFAESI Act. On a reading of Sections 35 and 37 of the SARFAESI Act together it is clear that, in the event of any of the provisions of the SICA not being inconsistent with the provisions of the SARFAESI Act, the application of both the Acts, namely, the SARFAESI Act and the SICA would complement each other. Since, however, the second proviso, divesting the jurisdiction of the BIFR, has been incorporated in Section 15(1) of SICA itself, in view of Section 41 of the SARFAESI Act and the Schedule thereto, a harmonious construction of the provisions of SICA and the SARFEASI Act, especially where the second proviso to Section 15(1) of SICA is attracted, does not arise. From the proceedings of the BIFR dated 21.01.2014, it is evident that the assets of the petitioner, mortgaged to Karur Vysya Bank Ltd. and Axis Bank Ltd were acquired from them by IARC (a securitisation company). The requirement of Section 5(1) of the SARFAESI Act was, therefore, satisfied. Consequently the second proviso to Section 15(1) was attracted, and the petitioner was prohibited from making a reference to the BIFR by their letter dated 10.10.2013, more than a decade after the SARFAESI Act, 2002 came into force on 21.06.2002. The pre-condition for the BIFR to cause an enquiry under Section 16 is, a reference made to it, by the board of directors of a sick industrial company, under Section 15(1) of SICA and its first proviso. As no reference could have been made by the petitioner to the BIFR, in view of the embargo placed on it by the second proviso to Section 15(1) of SICA, the non-obstante clause under Section 22(1) of SICA has no application, and neither the securitisation company nor the first respondent-bank, are obligated to obtain the consent of BIFR to realise the security in accordance with the provisions of the SARFAESI Act and the Rules made thereunder. It is no function of the Court to add words to the second proviso to Section 15(1) of SICA on the premise that it would, otherwise, defeat the objects of SICA. Hardship if any, which may possibly result, is for the legislative branch of the State to consider. In view of the bar under the second proviso to Section 15(1) of SICA, the very reference to the BIFR is without jurisdiction, and consequently the subsequent act of registration of the reference as Case No.89 of 2013, or commencement of the enquiry under Section 16(1) of SICA or for that matter remedial measures being taken under Section 17 to 19 of SICA, by the BIFR are also without jurisdiction and a nullity. Once the jurisdiction of the BIFR has been divested by the mandatory impact of the second proviso to Section 15(1), the BIFR cannot pass any orders under SICA. As the invalidity of proceedings before a Court/Tribunal, which suffer from inherent lack of jurisdiction, can be set up even in collateral proceedings it would suffice for this Court to declare the reference made by the petitioner to the BIFR, by their letter dated 10.10.2013, and registration of the reference as Case No.89 of 2013, as a nullity. As these proceedings are void, it is enough for the Court to declare it so, and it collapses automatically. Viewed from any angle, the petitioner is not entitled to the relief sought for. The Writ Petition must be, and is accordingly, dismissed.
Issues Involved:
1. Barred by the principles of res judicata. 2. Abuse of process of court. 3. Application of Section 22 of SICA. 4. Interplay between SARFAESI Act and SICA. 5. Application of non-obstante clauses. 6. Conditions under the second and third provisos to Section 15(1) of SICA. 7. Jurisdiction of BIFR. Detailed Analysis: A. Barred by the Principles of Res Judicata: The court determined that the present writ petition is barred by the principles of res judicata. The petitioner had previously filed W.P. No. 32980 of 2013 challenging the respondent-bank's actions under the SARFAESI Act while the matter was pending before the BIFR. The current petition raises similar contentions, which could and should have been raised in the earlier petition. The court emphasized that an adjudication is conclusive not only on the actual matter determined but also on every other matter that could have been litigated. Therefore, the present writ petition is barred and liable to be dismissed on this ground. B. Abuse of Process of Court: The court found that the present writ petition is an abuse of the process of court. The petitioner had failed to comply with previous orders to deposit amounts as directed by the DRAT and the Division Bench of this Court. The petitioner has continuously avoided repayment and used legal proceedings to delay the respondent-bank from taking possession of the secured assets. The court concluded that the writ petition was filed to drag on proceedings and prevent the respondent-bank from realizing the debt, thereby constituting an abuse of the court process. C. Application of Section 22 of SICA: The court examined the scope of Section 22 of SICA, which provides for the suspension of legal proceedings against a sick industrial company. However, the court noted that Section 41 of the SARFAESI Act amended SICA by inserting the second and third provisos to Section 15(1). The second proviso prohibits making a reference to the BIFR if financial assets have been acquired by a securitization or reconstruction company under the SARFAESI Act. The court held that the second proviso to Section 15(1) of SICA was attracted, barring the petitioner from making a reference to the BIFR. D. Interplay Between SARFAESI Act and SICA: The court emphasized the different purposes of the SARFAESI Act and SICA. The SARFAESI Act aims at the quick enforcement of security interests and recovery of debts without court intervention, whereas SICA focuses on the revival and rehabilitation of sick industrial companies. The court noted that the SARFAESI Act, being a later enactment with a non-obstante clause, would prevail over SICA in case of conflict. E. Application of Non-Obstante Clauses: The court discussed the effect of non-obstante clauses in both SICA and the SARFAESI Act. It held that the non-obstante clause in Section 35 of the SARFAESI Act, being a later enactment, would prevail over the provisions of SICA. The court also noted that Section 37 of the SARFAESI Act provides that its provisions are in addition to and not in derogation of other laws, including SICA. F. Conditions Under the Second and Third Provisos to Section 15(1) of SICA: The court rejected the argument that the conditions of the third proviso (requiring 75% of secured creditors' consent) should be read into the second proviso. The court held that the language of the second proviso is plain and unambiguous, prohibiting references to the BIFR when financial assets are acquired by a securitization or reconstruction company under the SARFAESI Act. G. Jurisdiction of BIFR: The court concluded that the reference made by the petitioner to the BIFR was without jurisdiction due to the bar under the second proviso to Section 15(1) of SICA. Consequently, any subsequent actions by the BIFR, including registration of the reference, were also without jurisdiction and a nullity. The court declared that the petitioner could not claim protection under SICA, and the respondent-bank was not disabled from proceeding under the SARFAESI Act. Conclusion: The writ petition was dismissed with exemplary costs of Rs. 25,000 to be paid to the first respondent-bank within four weeks. The court found that the petition was barred by res judicata, an abuse of the court process, and that the petitioner could not claim protection under SICA due to the provisions of the SARFAESI Act.
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