2012 (10) TMI 233 - SC - Companies Law

Sick Industrial Companies - BIFR - overriding application over the provisions of Transfer of Property Act - Respondent-Company was declared a sick industrial company Company dispose of the surplus land and payment of the sale consideration in instalments - Possession of land was given to appellant in part performance of sale agreement - all instalments were not paid - BIFR passed its order and fixed cut-off date and issued directions that sale of land will require BIFR s prior approval - Appellant argued that they had interest in land by virtue of agreement and, therefore, their interests were duly protected under Transfer of Property Act as provisions of Transfer of Property Act would prevail Held that - scheme for rehabilitation or restructuring of a sick industrial company undertaken by a specialized body like the BIFR/AAIFR should, as far as legally permissible, remain obstruction free and the events should take place as pre-ordained, during consideration and successful implementation of the formulated scheme - jurisdiction is vested in BIFR/AAIFR to issue directives, declarations and prohibitory orders within the rationalized scope and limitations prescribed under Section 22(1), 22(3) and 22A of the Act of 1985. Provisions of Sick Industrial Companies (Special Provisions) Act, 1985 shall have precedence and overriding effect over the provisions of Transfer of Property Act, 1882.

Issues Involved:
1. Ambit and scope of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, and its overriding application over the Transfer of Property Act, 1882.
2. Validity and enforceability of the agreement for sale of land between the parties.
3. Jurisdiction and powers of the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) under the Act of 1985.
4. Impact of Section 53A and Section 54 of the Transfer of Property Act, 1882, on the agreements in question.
5. Role and powers of the BIFR in issuing directives and declarations under Section 22(3) of the Act of 1985.
6. Overriding effect of the Act of 1985 over other laws, specifically the Transfer of Property Act, 1882.

Detailed Analysis:

1. Ambit and Scope of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985:
The judgment discusses the legislative intent behind the Act of 1985, emphasizing its remedial and ameliorative nature aimed at the revival and rehabilitation of sick industrial companies. Section 22 suspends legal proceedings and contracts against the properties of a sick company during the preparation or implementation of a scheme. The Court held that the provisions of Section 22 are of wide connotation and would normally bring specified proceedings, contractual and non-contractual liabilities within its ambit.

2. Validity and Enforceability of the Agreement for Sale of Land:
The agreements for the sale of land between the parties were executed before and after the presentation of the revival scheme to the BIFR. The Court noted that an agreement to sell does not create any interest in the immovable property itself. It was held that the BIFR had the power to issue declarations in relation to such agreements under Section 22(3) of the Act of 1985, and the sale proceeds were integral to the revival scheme.

3. Jurisdiction and Powers of BIFR and AAIFR:
The BIFR has wide powers to impose restrictions and issue directives for the smooth implementation of the revival scheme. The AAIFR had disturbed the BIFR's order, permitting the sale of the land, which was later set aside by the High Court. The Supreme Court upheld the High Court's decision, affirming the BIFR's jurisdiction to oversee the sale of assets and ensure compliance with the revival scheme.

4. Impact of Section 53A and Section 54 of the Transfer of Property Act, 1882:
Section 53A provides a right of a transferee in part performance of the contract but does not create title in the property. The Court held that the provisions of the Act of 1985 have an overriding effect over the Transfer of Property Act, 1882, and the BIFR's directives under Section 22(3) would prevail.

5. Role and Powers of BIFR in Issuing Directives and Declarations:
The BIFR's power to issue declarations under Section 22(3) includes suspending or modifying contracts, agreements, and other instruments to which the sick industrial company is a party. This power is subject to the limitations specified in the proviso to Section 22(3). The Court emphasized that the BIFR's directives are essential for the effective implementation of the revival scheme.

6. Overriding Effect of the Act of 1985:
The Act of 1985, being a special statute, has an overriding effect over other laws, including the Transfer of Property Act, 1882. The Court reiterated that the provisions of the Act of 1985 shall prevail to ensure the smooth sanctioning and implementation of the revival scheme for sick industrial companies.

Conclusion:
The Supreme Court dismissed the appeals, upheld the BIFR's order dated 16th July, 2009, and set aside the AAIFR's order dated 28th May, 2010. The Court directed the parties to appear before the BIFR for further proceedings in accordance with the law, emphasizing the need for expeditious disposal. The judgment reinforces the wide powers of the BIFR under the Act of 1985 and its overriding effect over other laws to facilitate the revival of sick industrial companies.

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