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TMI Blog2012 (10) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate resolution of the Board of Directors, its name was changed to 'NRC Limited' on 4th August, 1994 (hereinafter referred to as the 'Respondent-Company'). The Respondent-Company was engaged in the manufacture of viscos filament yarn, chemicals and allied products with its factory at Mohane, Kalyan, District Thane. As per the facts on record, the Respondent-Company was declared a 'sick industrial company' in the year 1987, but as its net worth turned positive, vide order dated 10th January, 1994 passed by the Board for Industrial and Financial Restructuring (for short, the 'BIFR'), it was discharged from the purview of the Act of 1985. The Respondent-Company had arranged finances and invested nearly Rs. 86 crore in the financial year 2005-06 whereafter it started incurring losses because reduction in the customs duty seriously affected its business. Because of the financial crunch faced by the Respondent-Company, a consortium of five nationalized banks comprising of Punjab National Bank, Dena Bank, Canara Bank, Indian Overseas Bank and the Bank of Baroda had sanctioned a term loan as well as a working capital loan, secured by the current assets a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Appellant-Company. 4. There is some dispute between the parties with regard to the manner and time in which these payments were or were not made. On failure to attain the object of restructuring, the Respondent-Company submitted a proposal to the consortium of banks for Corporate Debt Restructuring (CDR) and improving the performance and to achieve positive results during the year 2006-07. The CDR mechanism used the land sale proceeds. Upon making the proposal, the Respondent-Company discontinued its production activity in the nylon plant. The CDR Empowered Group approved the package for restructuring of debts on 21st January, 2008 but still it could not improve the financial business position of the Respondent-Company till the period ending on 30th June, 2008. On or about 24th September, 2008, the consortium banks released their interest over the property. An agreement with the recognized employees' unions was also entered into on 5th September, 2008 but then it ran into problems, as it was contended by the Labour Unions that their dues should be cleared first and on transfer of land, Appellant-Company should provide 18 acres of land for a proposed employee's colon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated copy of the CDR scheme approved by consortium of banks within a period of 15 days. (iii) PNB (OA) shall confirm to the Board within a period of 15 days under copy to the company that all the secured creditors who had charge over the land had approved sale of 350 acres of land belonging to the company at Kalyan, Thane Dist. To K. Raheja Universal Pvt. Ltd. For a sum of Rs. 166.40 crore. The secured creditors who had charge over the land shall clearly indicate whether the company had obtained their approval before entering into MOU and agreement for sale of 350 acres of land with K. Raheja Universal Ltd. under copy to the company the OA (PNB) and the Board. Secured creditors shall also similarly submit copy of their approval for sale of investments, giving details of the investments. OA shall also submit copies of the approvals given by the secured creditors for the sale of the said land along with the copies of valuation report and the details of the valuer and the procedure followed based on which the sale consideration of Rs. 166.40 crores was arrived at. OA shall also submit a copy of the approvals by secured creditors for sale of investment giving details of the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de certain findings of the BIFR as well as passed certain other directions. It is useful to refer to some of the findings recorded by the AAIFR in its order which are as under: "22. ... The BIFR has also not considered the impact of Section 22A or the transactions, contracts/agreements entered into between the company and third parties prior to the filing of reference when the company was not a sick entity. If the BIFR was of the view that the agreement for sale of land was not in the interest the company, it could have suspended the contract under Section 22(3) of SICA as it was a pre-existing contract. Despite arguments to the contrary, the BIFR has not given any reasons to justify how Section 22A of SICA applies to a pre-existing agreement for sale entered into between the company and a third party prior to filing of the reference. In fact, the agreement for sale is a clog on the absolute ownership of the property of the appellant company and the property cannot be said to be free from encumbrance unless the registered agreement for sale is cancelled. The property under agreement cannot be sold to others during the subsistence of agreement for sale. ** ** ** 24. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a non starter because the sick industrial company will be unable to fulfill its repayment obligations for the period between the cut off date as stipulated in the impugned order and date of sanction of the scheme, The issue can be resolved by determining a prospective cut off date. Section 17(4)(b) of SICA vests in the BIFR the necessary power to review and modify its orders under Section 17(3) of SICA. Therefore, in our view the cut off date fixed by the BIFR in the impugned order is required to be suitably modified by the BIFR." 8. With the above findings, the AAIFR recorded that the scheme could be approved but subject to pre-payment of the entire remaining consideration of Rs. 124.64 crores, as per its directions, for setting off labour dues. In other words, it permitted the land, though an asset of the company, to be sold. The correctness and legality of this order of the AAIFR was questioned by the Appellant-Company, the Respondent-Company and the NRC Mazdoor Sangh before the High Court. These Writ Petitions, along with other connected Writ Petitions, were disposed of by the High Court by a common judgment dated 29th July, 2011. The High Court, primarily, framed two questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for ERS and appropriately crystallized amount for ex-employees dues as per the settlement dated 5/9/2008 with NRC Mazdoor Sangh. The AIFR further observed that if the BIFR considers it necessary to make payment to the workers as provided for in the agreement with the workers, before the sanction of the revival scheme, it could do so to alleviate the hardships of the workers." 9. After dealing with these two questions at length, the High Court was of the opinion that BIFR order dated 16th July, 2009 was within the scope of Section 22(3) of the Act of 1985. It held that the order of the AAIFR permitting the sale of the land in furtherance to the agreement between the parties was not sustainable as it was part of the scheme and sale had been permitted subject to the final orders of the BIFR. This judgment of the High Court is impugned by the Appellant- Company before us. Legislative Scheme of the Act of 1985 : 10. The framers of law felt that the existing institutional arrangements and procedure for revival and rehabilitation of potentially viable sick industrial companies are both inadequate and time consuming. Multiplicity of law and the regulatory agencies makes the adoption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1985 11. Having dealt with the legislative history and object of the Act of 1985, we may now examine the very nature of this legislation. The Act of 1985 basically and predominantly is remedial and ameliorative in so far as it empowers the quasi-judicial body, the BIFR, to take appropriate measures for revival and rehabilitation of the potentially viable sick industrial companies and for liquidation of non-viable companies. It is regulatory only to a limited extent. The provisions of the Act of 1985 impose an obligation on the sick industrial companies and potentially sick industrial companies to make references to the BIFR within the time specified under the Act of 1985. Default thereof is punishable under the provisions of the Act of 1985. Largely, the proceedings before the BIFR are specific to rehabilitation or winding up of the sick company and the Act of 1985 hardly contemplates adversarial proceedings. The bodies constituted under the Act of 1985 would least exercise their jurisdiction to a lis between any party or upon the rival interests of the parties. With regard to the matters covered under the Act of 1985, the jurisdiction of the civil courts is ousted and the matters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view taken in Shree Vallabh Glass Works Ltd. (supra). In this case, this Court, while examining the language of Section 22 of the Act of 1985, came to the conclusion that it was certainly a wide provision. In the totality of the circumstances, the safeguards stated under Section 22 of the Act of 1985 are only against any impediment that is likely to be caused in the implementation of the scheme. If the matter falls outside the purview of the scheme and the dues are not reckoned or included in the sanctioned scheme of rehabilitation, recovery of sales tax dues would not be covered under this provision and as such the bar of Section 22(1) of the Act of 1985 would not operate. This Court held as under:- "... The language of Section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by Section 22 of the Act. So, we are of the view that though the language of Section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng inter alia for execution, distress or the like against any of the properties of the industrial company and no suit for recovery of money or for the enforcement of any security, shall lie or be proceeded with further, except with the consent of the Board or as the case may be, the Appellate Authority. The said statutory injunction will operate when an inquiry had been initiated under Section 16 or a scheme referred to under Section 17 is under preparation and/ or inter alia a sanctioned scheme is under implementation. It is not disputed before us that the amount awarded in favour of the Respondent by the Council finds specific mention in the sanctioned scheme which is under implementation. 18. The award of the Council being an award, deemed to have been made under the provisions of the 1996 Act, indisputably is being executed before a Civil Court. Execution of an award, beyond any cavil of doubt, would attract the provisions of Section 22 of the 1985 Act. Whereas an adjudicatory process of making an award under the 1993 Act may not come within the purview of the 1985 Act but once an award made is sought to be executed, it shall come into play. Once the awarded amount has been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, it is but necessary for this Court to examine the scheme of the Act of 1985 and some of its relevant provisions. As already noticed, the Act of 1985 was enacted by the Legislature, primarily with the object of establishing a specialized body for revival, rehabilitation and even winding up of sick industrial companies and wherever necessary, providing them with financial assistance. The provisions contained in Chapter III of the Act of 1985, which deals with References, Inquiries and Schemes, are the relevant provisions which can throw some light on the matter and issues before us. Section 15 of the Act of 1985 places an obligation upon an industrial company, which has become sick in terms of that provision, to make a reference to the BIFR established under Section 4 of the Act of 1985 within the period of limitation prescribed. While under Section 15(2) where the Central Government or Reserve Bank of India or a State Government or a Public Financial Institution has sufficient reasons to believe that any industrial company has become, for the purpose of the Act of 1985, a sick industrial company, would also make a reference of such company to the Board for determination of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aration and sanction of the schemes for the revival of the sick industrial company. Where an order is made under Section 17(3) in relation to a sick industrial company, the operating agency is required to prepare, as expeditiously as possible, ordinarily within 90 days from the date of such order, a scheme with respect to such company providing for any one or more of the measures stated under sub-clauses (a) to (f) of Section 18(1) of the Act of 1985. The scheme so framed may provide for any one or more of the measures stated under clauses (a) to (m) of Section 18(2) of the Act of 1985. The scheme which has been prepared in consonance with the provisions of Section 18(1) and 18(2) then has to be examined by the BIFR in terms of Section 18(3) of the Act of 1985 and if the BIFR makes any modifications to the scheme, the same draft scheme, in brief, shall be published or caused to be published in such daily newspapers as the BIFR may consider necessary, for receipt of suggestions and objections, if any. In light of the suggestions and objections received in response to such publication, the BIFR may still make further modifications. Also, where the scheme relates to amalgamation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances and giving an opportunity of being heard to all concerned parties, is of the opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court as per the provisions of Section 20 of the Act of 1985 whereafter the company shall be wound up in accordance with the provisions of the Companies Act, 1956. The High Court may even appoint any officer of the operating agency as the liquidator of the sick industrial company. Section 21 of the Act of 1985 requires the operating agency to prepare an inventory, if so directed by the BIFR. 19. Sections 22 and 22A have a significant bearing upon the controversy that arises for consideration of the Court in the present case and it will be useful to refer to those provisions at this stage itself: "22. Suspension of legal proceedings, contracts, etc.- (1) Where in respect of an industrial company, an inquiry under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be specified by the Board: Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate. (4) Any declaration made under sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a court, tribunal, officer or other authority or of any submission, settlement or standing order and accordingly, - (a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and (b)&n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sanctioned thereunder for due implementation of the scheme, the BIFR may, by order, declare that with respect to the sick industrial company concerned, the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations or liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be specified by the BIFR. This power of the BIFR is subject to the proviso which states that the declaration made under this provision shall not be for a period exceeding two years and which may be extended by one year at a time, but the total period shall not exceed seven years in aggregate. Section 22A of the Act of 1985 empowers the BIFR to pass orders in the interest of the sick industrial company or even in public interest requiring the sick industrial company not to dispose of, except with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iments created by third parties and even by the management of the sick industrial company, in relation to the assets of the company. In other words, the object and purpose of the Act of the 1985 is to ensure smooth sanctioning of the scheme and its due implementation. Both these stages, i.e., pre and post sanctioning of the scheme by the BIFR, are equally material stages where the provisions of Sections 22 and 22A read with Section 32 of the Act of 1985 would come into play. Such an approach would also be acceptable as otherwise the entire scheme under Chapter III of the Act of 1985 would be frustrated. Doctrine of frustration envisages that an exercise of special jurisdiction in futility, is neither the requirement of legislature nor judicial dictum. 23. In Shree Vallabh Glass Works Ltd. (supra), this Court had taken a general view that in the light of Sections 16 and 19 of the Act of 1985, no proceedings for execution, distress or the like against any of the property of the company shall be allowed to be proceeded further except with the consent of the BIFR. Reference in this regard was made to the provisions of the Section 22(1) of the Act of 1985. Despite non-obstante language ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scheme is made effective, whichever is earlier, would be the matters which squarely fall within the ambit and scope of Section 22 of the Act of 1989 subject to their satisfying the ingredients stated under that provision. This would include the proceedings before the civil court, revenue authorities and/or any other competent forum in the form of execution or distress in relation to recovery of amount by sale or otherwise of the assets of the sick industrial company. It is difficult for us to hold that merely because a demand by a creditor had not been made a part of the scheme, pre or post-sanctioning of the same for that reason alone, it would fall outside the ambit of protection of Section 22 of the Act of 1985. The BIFR, being a specialised body which is required to act as per the legislative intent indicated above, has jurisdiction to examine the matter and grant or refuse its consent for institution, continuation and recovery of dues payable to a particular creditor, whatever the nature of such dues may be. If such an interpretation is not given, the very purpose of the Act of 1985 may stand defeated. For instance, a scheme is sanctioned by the BIFR and is at the stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such adoption and in such a manner as may be specified by the BIFR. In other words, all those instruments to which the sick industrial company is a party, will be subject to the orders of the BIFR. Further, such proceedings can even be modified by the BIFR, of course, for the limited purpose of implementing the scheme. The declarations made by the BIFR under Section 22(3) are subject to the restrictions of time as stated under the proviso to this section. The maximum period for which such a declaration in aggregate can continue is seven years. The legislative intent of giving an over-riding effect to the declarations of the BIFR, as contemplated under Section 22(3) of the Act of 1985, is further fortified by the language of Section 22(4), which states that any declaration made under Section 22(3) shall take effect notwithstanding anything contained in the Companies Act, 1956 or any other law, the memorandum and articles of association of the company or any instrument, decree, order of a court, settlement etc. Any remedy for enforcement of a right which may be available to a third party and any such proceedings before any court or tribunal shall remain stayed or be continued subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of statutes that every word and expression used by the legislature has to be given its proper and effective meaning as the legislature uses no expression without purpose or meaning. The maxim Lex Nil Frusta Jubet i.e. Law Commands nothing vainly further elucidates this principle. Of course, the power to make this declaration as already noticed is controlled by limitation of time as specified in the proviso to the Section. Lifting of such declaration by lapse of time or otherwise or in accordance with the provisions of Section 22(4) shall bring the status quo ante as if such declaration had never been made. Section 22A is obviously a power over and above the wide powers vested in BIFR under the provisions of Section 22 of the Act of 1985. Section 22 is the reservoir of the statutory powers empowering the BIFR to deal with the scheme, right from its presentation till its complete implementation in accordance with law, free of interjections and interference from other judicial processes. 29. Section 22A of the Act of 1985 empowers the BIFR to pass injunctive or restraint orders in relation to the assets of the sick industrial company. These injunctive orders are to be in operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of legislative intent to treat this law as a special law, in contradistinction to the other laws except the laws stated in the provisions and to ensure its effective implementation with utmost expeditiousness, runs through all these provisions. It also mandates that no injunction shall be granted by any court or authority in respect of an action taken or to be taken in pursuance of the powers conferred to or by under this Act. Case Law 32. In the case of Shree Vallabh Glass Works Ltd. (supra), as already noticed, this Court had taken a very wide view and given liberal constructions to the provisions of Section 22 and held that no proceedings for execution or distress or like proceedings against any of the properties of the company shall lie or be proceeded, except with the consent of the BIFR. The Court also held that the BIFR, at its discretion, may accord its approval for proceeding against the company. This view of wide interpretation was accepted by another Bench of this Court in the case of Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd. [1993] 2 SCC 144, wherein this Court took the view that the word 'proceedings' under Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts of limited jurisdiction, vested with the power of passing interim orders, could pass interim orders in exercise of its incidental power for sale of assets where the matter was pending before the BIFR. 35. On the analytical analysis of the above-stated dictum of this Court and the legislative purpose and object of the Act, it has to be held that on its plain reading the provisions of Sections 22(1) and 22(3) of the Act are the provisions of wide connotation and would normally bring the specified proceedings, contractual and non-contractual liabilities, within the ambit and scope of the bar and restrictions contained in Sections 22(1) and 22(3) of the Act of 1985 respectively. The legislative intent is explicit that the BIFR has wide powers to impose restrictions in the form of declaration and even prohibitory/injunctive orders right from the stage of consideration of a scheme till its successful implementation within the ambit and scope of Sections 22(3) and 22A of the Act. Section 22 of the Act of 1985 is very significant and of wide ramifications and application. More often than not, the jurisdiction of the BIFR is being invoked, necessitated by varied actions of third partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of the scheme. It is difficult to state with precision the principle that would uniformly apply to all the proceedings/suits falling under Section 22(1) of the Act of 1985. Firstly, it will depend upon the facts and circumstances of a given case, it must satisfy the ingredients of Section 22(1) and fall under any of the various classes of proceedings stated thereunder. Secondly, these proceedings should have the impact of interfering with the formulation, consideration, finalization or implementation of the scheme. Once these ingredients are satisfied, normally the bar or limitation contained in Section 22(1) of the Act of 1985 would apply. For instance, execution of a decree against the assets of a company, if permitted, is bound to result in disturbing the scheme, which has or may be framed by the BIFR. The sale of an asset during such execution or even withdrawing the money from the bank account of the company would certainly defeat the very purpose of the protection sought to be created by the Legislature under Section 22(1) of the Act of 1985. On the other hand, a proceeding taken out for possession of the tenanted premises, under the provisions of Karnataka Rent Contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this Court had, in the case of Jay Engg. Works Ltd. (supra), taken the view that the Interest on Delayed Payments to Small Scale and Ancillary Industries Undertaking Act, 1993 shall have to give way for enforcement of the provisions of the Act of 1985. In the case of Tata Davy Ltd. (supra) also, the Court took the view that the State Sales Tax Act would have to be read and construed in comity to the provisions of the Act of 1985 which shall have the overriding effect. In the case of Tata Motors Ltd. (supra), this Court was concerned with the provisions of mismanagement and oppression contained in Sections 391 and 394 of the Companies Act and whether the Company Court will have the jurisdiction to pass orders in preference to the proceedings pending before the Court under the Act of 1985. The Court while holding the primacy of the Act of 1985 held as under: - "SICA furthermore was enacted to secure the principles specified in Article 39 of the Constitution of India. It seeks to give effect to the larger public interest. It should be given primacy because of its higher public purpose. Section 26 of SICA bars the jurisdiction of the civil Courts. What scheme should be prepared b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as to resolve the confusion and conflict, which was in existence, as the courts were forced to decide the disputes according to their own notions of justice and fair play. The Act of 1882 does not have application to a particular situation or class of persons. On the contrary, the Act of 1985 is a special legislation providing for imperative functioning of specialized bodies like the BIFR and AAIFR and is intended to apply to a very specific situation, i.e., where a company is a sick industrial company. It has no application even to other different kinds of companies within the purview of the Companies Act, except sick industrial companies. The Legislature has undoubtedly given an overriding effect to the provisions of the Act of 1985 and even restricted the jurisdiction of the civil courts, as is demonstrated from the language of Sections 26 and 32 of the Act of 1985. Thus, we have no hesitation in holding that the provisions of the Act of 1985 shall prevail over the provisions of the Act of 1882. Discussion on Merits with reference to Factual Matrix of the Case 41. Having dealt with the basic legal questions arising for consideration of this Court in the facts of the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll dated 1st March, 2007 for sale of the land belonging to the company. The BIFR, while approving the scheme, had taken into consideration these events in relation to the sale of the land. Thereafter, the parties executed Supplementary Agreements dated 29th September, 2007 and 17th August, 2010. The Agreements provided for pre-ponement of the instalments payable in terms of the Agreements as well as giving of possession of the land to the Appellant Company. The Agreement dated 29th September, 2007 was executed when the rehabilitation scheme was pending consideration before the BIFR, while the Agreement dated 17th August, 2010 was executed subsequent to the adoption of the Scheme by the BIFR. It appears from the record that the Second Supplementary Agreement dated 17th August, 2010 was not executed between the parties with prior approval of the BIFR. The BIFR, vide its order dated 16th July, 2009, had placed certain restrictions and had not permitted the transfer of the land without its prior approval. It had also raised certain other queries including valuation, etc. This order was set aside by the AAIFR, which had permitted the sale of the land in favour of the Appellant Company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an agreement for sale entered into prior to the passing of the Transfer of Property Act, it was the accepted doctrine in India that the agreement created an interest in the land itself in favour of the purchaser. For instance, in Fati Chand Sahu v. Lilambar Sing Das [1871] 9 B.L.R. 433 a suit for specific performance of a contract for sale was dismissed on the ground that the agreement, which was held to create an interest in the land, was not registered under s. 17, clause(2) of the Indian Registration Act of 1866. Following this principle, Markby J. in Tripoota Soonduree v. Juggur Nath Dutt [1875] 24 W.R. 321 expressed the opinion that a covenant for pre-emption contained in a deed of partition, which was unlimited in point of time, was not enforceable in law. The same view was taken by Baker J. in Allibhai Mahomed Akuji v. Dada Alli Isap A.L.R. 1931 Bom. 578 where the option of purchase was contained in a contract entered into before the passing of the Transfer of Property Act. The decision of the Judicial Committee in Maharaj Bahadur Singh v. Bal Chanad 48 I.A. 376 was also a decision relating to a contract of the year 1872. In that case, the proprietor of a hill entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against such property in his hands." The second paragraph of s. 40 taken with the illustration establishes two propositions: (1) that a contract for sale does not create any interest in the land, but is annexed to the ownership of the land and (2) that the obligation can be enforced against a subsequent gratuitous transferee from the vendor or a transferee for value but with notice. Section 14 of the Act states as follows: "14. No transfer of property can operate to create an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong." Reading S. 14 along with S. 54 of the Transfer of Property Act its manifest that a mere contract for sale of immovable property does not create any interest in the immovable property and it therefore follows that the rule of perpetuity cannot be applied to a covenant of pre-emption even though there is no time limit within which the option has to be exercised. It is true that the second paragraph of s. 40 of the Transfer of Property Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consequences in law. Suffices it to note that memorandum of understanding and agreement to sell the land belonging to the company between the appellant and the respondent-company was signed prior to the presentation of the scheme before the BIFR. However, second supplementary agreement was executed not only subsequent to the presentation of the scheme before the BIFR but even after the BIFR had passed an order under Section 17(3) of the Act of 1985. It cannot be disputed that even the sale proceeds received under the agreements have been utilized for the revival of the company to a large extent. The agreement with the workers dated 5th September, 2008 stands testimony to this fact. Once the asset of the company and/or its sale proceeds have been integral part of the formation and finalization of the revival scheme, such transaction by any stretch of imagination cannot be stated to be beyond the ambit and scope of Section 22(3) of the Act of 1985. Thus BIFR has the power to issue declarations in relation to contracts, agreements, settlements, awards, standing orders or even other instruments in force to which the sick industrial company is a party. The power to suspend or power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te as 30th July, 2007, as indicated in the CDR Scheme. The CDR scheme had been approved, after taking into consideration the agreement to sell and the sale proceeds likely to be received therefrom. The BIFR had passed certain directions/declarations in the order passed under Section 17(3) of the Act of 1985 requiring the company to state clearly the details of the land to be sold including survey numbers as well as the remaining land with the company and confirming if the remaining land was adequate for functioning nd viability of the company on long term basis. The BIFR raised the query whether all the secured creditors who had charge over the land, had approved the sale of 350 acres of land belonging to the respondent-company at Kalyan, Thane for a sum of Rs. 166.40 crore and for entering into memorandum of understanding with the appellant company in that behalf. Besides issuing a directive that assets including investments will require prior approval of the BIFR as the company was under the purview of SICA, it also issued a clear prohibitory order requiring the secured creditors not to take any coercive steps against the company without prior permission of the BIFR. This order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Sections 22(3) and 22(4) expires, the declaration would cease to exist and the appellant would be entitled to enforce its rights in accordance with law as if no such declaration or restriction ever existed. 51. The principle of law that emerges from the afore-referred discussion, which consistently has judicial benediction, is that a 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. Wide 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. 52. An objection to the maintainability of a composite petition, taken before the High Court, has been reiterated before this Court, of course, half-heartedly. Argument is that Article 227 vests the High Court with supervisory powers while Article 226 is the reservoir of extra-ordinary jurisdiction of the High Court ..... 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