9911796707
TMI Blog2000 (7) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 and within a period of six months, the petitioner shall make necessary arrangement to vacate the flat in favour of Anglo India Jute Mills and against the order passed on 15-4-1998 by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) dismissing its appeal. 2. Relevant facts, in brief, are that the Anglo India Jute Mills Company Limited (Respondent No. 7 herein) of which J.P. Goenka and A. Goenka (Respondent Nos. 8 and 9 respectively) are the erstwhile promoters became a sick industrial unit. Its case was referred to the BIFR in December 1987. The then promoters tried to revive the sick unit but their efforts remained unfruitful. A proposal was given by respondent No. 6 Company in or about September, 1992 for a revival of the sick unit. This proposal was accepted by the BIFR subject to certain conditions and a scheme to that effect was sanctioned on 4-2-1994. The sanctioned scheme dated 4-2-1994, inter alia , stipulated some obligations on the outgoing promoters and it is alleged that the said promoters fulfilled those obligation. The sanctioned scheme did not contain any provision regarding flat No. 34, Woodland Estate, Alipore, Calcutta, of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Apprehending that respondent No. 7 might resort to unlawful action to deprive and deny the first petitioner of its lawful tenancy rights of the flat in question, a suit for declaration was filed by it on 27-1-1996 under the West Bengal Premises Tenancy Act, 1956 ( WB Tenancy Act ) before Civil Court at Alipore, Calcutta. Respondent No. 7 submitted to the jurisdiction of Alipore Court and filed an application on 12-6-1996 under order 7 of rule 11 of the Code of Civil Procedure praying for stay of the proceedings and for rejection of the plaint. In view of pending proceedings before the BIFR. It was pointed out during the course of arguments that Alipore Court declined to grant ad-interim stay of the proceedings and now the matter is stated to be pending in Calcutta High Court and the proceedings in the said Suit No. 5 of 1996 have been stayed. 6. The petitioner alleges that BIFR arbitrarily and unlawfully varied the scope of original sanctioned scheme by summarily ordering, without any notice to petitioner No. 1, that petitioner No. 1 shall increase the rent payable to respondent No. 7 from Rs. 10,000 to Rs. 27,000 and vacate the flat within a period of six months. No heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the provisions of SICA to the present case is untenable. Misinterpretation by AAIFR of various provisions of SICA has led it to include a residential premises within the purview of industrial undertaking and thus it has erroneously proceeded to dismiss the petitioner s appeal in which primary question raised, in addition to the jurisdiction was the non-compliance with the provisions of natural justice. In this background, the petitioner has prayed for quashing of the impugned order. 8. On behalf of the respondents, it was contended that proper and adequate hearing was afforded to the petitioner. O.P. Chandak, who has signed and verified the plaint in civil suit before Civil Court and the proceedings in Calcutta High Court has described himself as the President and Constituted Attorney of the petitioner. He had notice of the proceedings before BIFR from the very beginning. In the meeting called by IFCI also, Mr. Chandak represented petitioner No. 1 and even before BIFR he had put in appearance. Mr. P.K. Basu, Constituted Attorney and Principal Officer of the petitioner No. 1 appeared before IFCI in a joint meeting held on 31-1-1997 describing himself as the Constituted At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocate appearing on behalf of respondent No. 6 and Dr. A.M. Singhvi, the learned Senior Advocate for respondent No. 7. 11. The primary questions for consideration are the competence and jurisdiction of BIFR and AAIFR to pass orders for eviction against the person in occupation claming to be a tenant, from residential flat owned by a Sick Industrial Company and to order enhancement and determination of rent payable for the tenanted premises and whether the impugned order passed by BIFR is vitiated due to non-observance of the principles of natural justice and non-providing of adequate hearing and opportunity to put forth its case. 12. SICA was enacted under entries 44 and 54 of the Union List by the Parliament. It is a complete and exhaustive code on the subject and was enacted to make in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures, which need to be taken with respect to such companies and the expedi- tious enforcement of the measures so determined and for mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as transferee company ]; ( d )the sale or lease of a part or whole of any industrial undertaking of the sick industrial company; [( da )the rationalisation of managerial personnel, supervisory staff and workmen in accordance with law;] ( e )such other preventive, ameliorative and remedial measures as may be appropriate; ( f )such incidental, consequential or supplemental measures as may be necessary or expedient in connection with or for the purposes of the measures specified in clauses ( a ) to ( e )." 15. One of the measures, which may be provided for in the scheme, to be framed by Operating Agencies, is the sale or lease of a particular or whole of an industrial undertaking or sick industrial company. Clauses ( i ), ( j ) and ( k ) of sub-section (2) of section 18 with reference to clause ( d ) of sub-section (1) of section 18 further clarifies in detail as regards sale or lease of a part or a whole of any industrial undertaking of Sick Industrial Company as under : ( i )sale of the industrial undertaking of the sick industrial company free from all encumbrances and all liabilities of the company or other such encumbrances and liabilities as may be specified, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of coming into operation of the sanctioned scheme or any provision thereof, the property shall be transferred to, and vest in, and the liability shall become the liability of, such other company or person or, as the case may be, the sick industrial company." 18. Sub-section (6A) of section 18 also does not provide that transfer of property of Sick Industrial company will be free of all encumbrances or that it will vest in the transferee company free from all encumbrances. 19. Section 22 of the Act provides for suspension of legal proceedings, contracts etc. in respect of an industrial company with respect to which an inquiry under section 16 of the Act is pending or for which any scheme referred to in section 17 is under preparation or consideration or sanctioned scheme is under implementation or where appeal under section 15 is pending. Section 22A of the Act empowers the Board, in certain circumstances, to direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets during the period of preparation or consideration of the scheme under section 18 or during the period beginning with the recording of opinion by the Board for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, over-rides the provisions of West Bengal Premises Tenancy Act, 1956. It is a self contained one. It contains detailed provisions regarding the preparation of schemes for sick industrial companies and implementation thereof. A scheme for a sick industrial company can, inter alia , provide for the sale or lease of a part or whole of any industrial undertaking of the sick industrial company [S. 18(1)( d ) of the Act]. Clauses ( i ), ( j ), ( k ) of sub-section 2 of section 18 of the Act contain provision about the sale or lease of the industrial undertaking/assets of the sick industrial company and the procedure therefor; industrial undertaking of a sick industrial company can be sold free from all encumbrances and all liabilities of the company or such other encumbrances or liabilities as may be specified, to any person, and a reserve price may be fixed for such sale; the industrial undertaking of the sick industrial company can be leased to any person. Provision for lease necessarily implies determination of the lease rent. Therefore, BIFR can, as part of a scheme prepared and sanctioned/modified under various provisions of S.18 of the Act, provide for lease or transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods which would be comprised in Entry 27 of List 2. The process of manufacture or production would be comprised in Entry 24 of List 2 except where the industry was a controlled industry when it would fall within Entry 52 of List 1 and the products of the industry would also be comprised in Entry 27 of list 2 except where they were the products of the controlled industries when they would fall within Entry 33 of List 3. . . . (p. 677) 24. In B. Vishwanathiah Co. v. State of Karnataka [1991] 3 SCC 358 quoting the aforementioned passage in Tika Ramji s Case ( supra ), it was held that it is not all aspects of the industry that fall within the scope of Entry 52 of List I. It is only one aspect of the industry, that is, the process of manufacture or production that falls under Entry 52 of List I. It does not include raw materials used in the industry or the distribution of the products of the industry. In Harakchand Ratanchand Banthia v. Union of India AIR 1970 SC 1453 and Kannan Devon Hills Produce Co. Ltd. v. State of Kerala AIR 1972 SC 2301 also this view was reaffirmed by the Supreme Court holding that ambit of Entry 52 of List I should be limited and confined o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislation is in respect of the same matter . If the legislation deals not with the matters which formed the subject of the earlier legislation but with other and distinct matters though of a cognate and allied character, then article 254(2) will have no application. The principle embodied in section 107(2) and article 254(2) is that when there is legislation covering the same ground both by the centre and by the Province, both of them being competent to enact the same, the law of the Centre should prevail over that of the State." (p. 757) 27. In Deep Chand v. State of U.P. AIR 1959 S.C. 648, it was held that repugnancy between two statutes may be ascertained on the basis of the following three principles : "(1) Whether there is direct conflict between the two provisions; (2) Whether Parliament intended to lay down an exhaustive code in respect of the subject-matter replacing the Act of the State Legislature; and (3) Whether the law made by Parliament and the law made by the State Legislature occupy the same field." (p. 665) 28. Three tests of inconsistency or repugnancy are referred to by Nicholas in his Australian Constitution, 2nd Edition : "1. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (3) Proceedings for the appointment of receiver." 34. It was held that eviction proceedings initiated by a landlord against a tenant company would not fall in the categories aforementioned. While holding so, it was held that : "We may, in this context, point out that, as indicated in the Preamble, the Act has been enacted to make special provisions, with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement legal proceedings contained in section 22(1) seeks to advance the object of the Act by ensuring that a proceeding having an effect on the working or the finances of a sick industrial company shall not be instituted or continued during the period the matter is under consideration before the Board of the Appellate Authority or a sanctioned scheme is under implementation without the consent of the Board or the Appellant Authority. It could not be the intention of Parliament in enacting the said provision to aggravate the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed properties are outside the purview of SICA. Handing over possession of the flat by petitioner company to respondent No. 7 has never been contemplated in the sanctioned scheme. 37. As noticed above, the scheme could provide for sale or lease of a part or whole of any industrial undertaking of the sick industrial company to the transferee company [Section 18 (1)( d ) of SICA] and thereby to transfer to the transferee industrial company of the business properties, assets and liabilities of the sick industrial company on terms and conditions, as may be specified in the Scheme [Section 18(2)( b ) of SICA]. Only the sale of industrial undertaking of sick industrial company could be free from all encumbrances. The flat in question cannot by any stretch of imagination be covered by the definition of industrial undertaking. The flat would be included only as an asset of the company. In case it has to be treated as a part of the asset of the sick industrial company, in that case assuming that the flat of respondent No. 7 company already stood transferred by virtue of clause ( b ) of sub-section (2) of section 18 of the SICA to the transferee company. In that case it is not provided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of Bombay High Court in Maharashtra State Financial Corpn. v. The Official Liquidator, High Court, Bombay and Liquidator of Atrois Chemicals (P.) Ltd. AIR 1993 Bom. 392 held that : "The property of the company does not vest in Court or Official Liquidator . The property remains the property of the company. The Official Liquidator cannot take possession of the property from the mortgagee in lawful possession ." [Emphasis supplied] 39. A Division Bench of this Court also in Globe Financiers (P) Ltd. v. Official Liquidator [1970] 40 Comp Case 1161 held : "There is no provision in the Companies Act that the liquidator shall sell properties of the company free from all restrictive covenants or legal disability. . ." 40. The petitioner is a company within the meaning of the Companies Act, 1956. Being a company it is an independent juristic entity. No notice was issued to it by BIFR before passing the impugned order. Since no notice was issued, it had no occasion to depute its representative during the hearings before the BIFR. On behalf of the respondents, it was contended that there are circumstances on record to suggest that the petitioner compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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