2019 (11) TMI 1766 - HC - Indian Laws

Continuity of recovery proceedings which are pending before the Recovery Officer pursuant to the Recovery Certificate granted by the learned DRT in favour of respondent No.1 - whether the DRT committed any error in passing the impugned order? HELD THAT - As a neat question of law has been raised before us we straightway go to the decision of the Supreme Court in the case of KSL Industries Limited 2014 (12) TMI 1023 - SUPREME COURT . KSL was in appeal before the Supreme Court by way of a reference made by a two Judge Bench which heard the matter and held that the appeal deserved to be allowed and that the judgment and order passed by the High Court which was impugned was liable to be set aside. However in view of a difference of opinion having arose on the interpretation of Section 34 of the Act 1993 the matter came to be referred for decision to a larger Bench. The dictum of law as laid in KSL Industries Ltd. is very clear. The provisions of SICA in particular Section 22 shall prevail over the provision for Recovery of Debts in the RDDB Act. If that be the position of law then the learned senior counsel is right in his submission that the impugned order could not have been passed by the DRT. The decision of the Supreme Court in the case of Managing Director (supra) was in context with a civil suit filed by the respondent for recovery of a particular amount in the court of the Civil Judge. The Supreme Court looked into Section 22 of the Act 1985 and held that a suit would be barred when an inquiry under Section 16 of the SICA is pending - It is a well-settled principle of law that a judgment and decree passed by a court or tribunal lacking inherent jurisdiction would be a nullity. The impugned order passed by the DRT as well as the recovery certificate and the order of attachment passed by the Recovery Officer is not sustainable in law - Application allowed.

Summary

Issues Involved:
1. Jurisdiction of the DRT in light of the pending BIFR proceedings.
2. Validity of the recovery certificate and attachment orders issued by the DRT.
3. Applicability of Section 22 of the SICA Act, 1985.

Detailed Analysis:

1. Jurisdiction of the DRT in light of the pending BIFR proceedings:
The petitioner argued that the DRT lacked jurisdiction to proceed with the recovery application due to the pending reference before the BIFR under Section 22 of the SICA Act, 1985. The petitioner highlighted that the company was registered as a sick unit with the BIFR before the DRT proceedings commenced. The Gujarat High Court acknowledged that the DRT should have suspended the proceedings given the pending BIFR reference, as outlined in Section 22 of the SICA Act, which mandates the suspension of legal proceedings against a sick industrial company.

2. Validity of the recovery certificate and attachment orders issued by the DRT:
The DRT issued a recovery certificate and subsequent attachment orders against the petitioner. The High Court noted that these orders were passed without considering the legal bar imposed by Section 22 of the SICA Act. The court emphasized that any judgment or order passed by a tribunal lacking jurisdiction is a nullity. Consequently, the recovery certificate and attachment orders were deemed invalid as they were issued without jurisdiction.

3. Applicability of Section 22 of the SICA Act, 1985:
Section 22 of the SICA Act mandates the suspension of legal proceedings, including suits for recovery of money against an industrial company, once a reference is pending before the BIFR. The court referred to several Supreme Court judgments, including KSL & Industries Ltd. vs. Arihand Threads Limited & Ors. and Managing Director, Bhoruka Textiles Limited vs. Kashmiri Rice Industries, which upheld the precedence of SICA over other recovery laws. The High Court reiterated that the provisions of SICA, particularly Section 22, prevail over the RDDB Act, thereby rendering any proceedings or orders under the RDDB Act null and void if initiated without the BIFR’s consent.

Conclusion:
The Gujarat High Court quashed the impugned order passed by the DRT, the recovery certificate, and the order of attachment issued by the Recovery Officer, deeming them null and void. The court allowed the respondent bank to institute fresh proceedings in accordance with the law, without prejudice to the rights and contentions of either party. The pending appeal before the Appellate Tribunal was rendered non-surviving due to this order.