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TMI Blog2014 (12) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, "shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority." “Application for recovery" cannot specifically be described as proceedings for execution, distress or the like against any of the properties, but it is certainly a proceeding which results in and in fact had resulted in the execution and distress against the property of the Company and is therefore liable to be construed as a proceeding for the execution, distress or the like against any of the properties of the industrial company - such a construction would be within the intendment of Parliament wherever the proceedings for recovery of a debt which has been secured by a mortgage or pledge of the property of the borrower are instituted - Surely, there is no purpose in construing that Parliament intended that such an application for recovery by summary procedure should lie or be proceeded with, but only its execution be interdicted or inhibited especially - the proceedings by way of an application for recovery according to a summary procedure as provided under the RDDB Act are not referred to in Section 22 simply because the RDDB Act had not then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yed pending the process of reconstruction. While the term "proceedings" under Section 22 did not originally include the RDDB Act, which was not there in existence. Section 22 covers proceedings under the RDDB Act. The provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act. - CIVIL APPEAL NO. 5225 OF 2008 - - - Dated:- 27-10-2014 - H.L. DATTU, S.A. BOBDE AND ABHAY MANOHAR SAPRE, JJ. JUDGMENT S. A. Bobde, J. - This appeal is placed before us by way of a reference, made by a two-Judge Bench of this Court, C.K. Thakker and Altamas Kabir, JJ. which heard the matter on an earlier occasion and held that the appeal deserves to be allowed and that the Judgment and Order passed by the High Court is liable to be set aside. In view of a difference of opinion having arisen on the interpretation of Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the 'RDDB' Act) the matter has been referred for decision to this Bench by the Hon'ble Chief Justice of India. 2. The present appeal is preferred by KSL Industries Ltd. ('appellant' fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amation of sale and for disclosure of its movable and immovable assets. 6. On 16.09.04, the Recovery Officer fixed the reserve price of the movable and immovable properties at ₹ 12.50 crores. On 18.10.04, the Company filed an appeal under Section 30 of the RDDB Act against the order dated 16.09.04 fixing reserve price of the movable and immovable properties at ₹ 12.50 crores. On 30.10.04, the appellant was declared the highest bidder at ₹ 12.52 crores and was thus successful. On 15.12.04, the Company moved an application for setting aside the ex-parte final order, passed on 15.07.03 by DRT Chandigarh in favour of IDBI, directing recovery of ₹ 25,26,60,836/- along with interest @ 7.8% p.a. The appellant, who had become the auction-purchaser of the company's properties objected to the prayer of the Company for setting aside the ex-parte order and applied for impleadment. Meanwhile, the Company got its property valued by Himachal Consultancy Organisation Ltd. The realizable value of the company's property had been valued at ₹ 20.22 crores. 7. On 26.07.05, DRT-I, Delhi allowed the Company's appeal filed under Section 30 of the RDDB Act ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be presumed even in the absence of any specific provision, that Parliament was aware of all the statutes enacted prior thereto; that the non-obstante clause had been inserted to ensure expeditious adjudication and recovery of debts due to banks and financial institutions. Thakker, J. also held that in view of sub-section (2) of Section 34 of the RDDB Act, which provides that the provisions of the Act are in addition to and not in derogation of inter alia SICA, which is an additional factor why the RDDB Act shall prevail. Kabir, J. as His Lordship then was, held that the non-obstante clause in Section 34(1) contains an exception, to be found in sub-section (2). Sub-section (2) provides that the Act shall be in addition to and not in derogation of inter alia the SICA. Further, that the overriding effect of RDDB Act would have an overriding effect over other enactments but supplemental to the provisions of SICA, and therefore, the provisions of SICA would prevail over the provisions of the RDDB Act. 13. Kabir, J. further held that since the proceedings for recovery had long been over, before the Company invoked provisions of the SICA Act, the Company would therefore not be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence was made to a larger Bench. SCHEME AND PURPOSE OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 [SICA] 17. The Statement of Objects and Reasons for the Sick Industrial Companies (Special Provisions) Act, 1985, sets out the following: While interpreting which of the two Acts i.e. The Sick Industrial Companies (Special Provisions) Act, 1985 [SICA] or the Recovery of Debts due to Banks and Financial Institutions Act, 1993 [RDDB Act] should prevail, in view of the non obstante clause contained in both, one of the important tests is the purpose of the two enactments. It is important to recognize and ensure that the purpose of both enactments is as far as possible, fulfilled. 18. The SICA was enacted to provide for timely determination of a body of experts for providing preventive, ameliorative, remedial and other measures that would need to be adopted to sick companies. The ill-effects of sickness in industrial companies such as loss of production, loss of employment, loss of revenue to the Central and State Governments and locking up of investible funds of banks and financial institutions were of serious concern to the Government and the society at lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a transferee company, the alteration of the memorandum or articles of association, reduction of the interest or rights of the shareholders and for continuation of legal proceedings, the sale or lease of the industrial undertaking etc. 26. It is in this background that Section 22, which provides for suspension of legal proceedings, is enacted. To the extent it is relevant here, the Section reads as under: 22. SUSPENSION OF LEGAL PROCEEDINGS, CONTRACTS, ETC. (1) Where in respect of an industrial company, an inquiry under Section 16 is pending, or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding-up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 22 only contemplates a stay of proceedings for the distress or execution of the properties of the sick company and suits for recovery and that therefore an application for recovery under the RDDB Act cannot be stayed, and must proceed. We might also observe that the consequence of accepting the submission that Section 22 cannot affect or render untenable an application for recovery under the RDDB Act, would result in an anomaly. The submission is that Section 22 lays down that only proceeding for winding up or execution, distress or the like shall not lie or be proceeded with where an enquiry is pending or a scheme is under preparation or consideration or a sanction scheme is under implementation etc.; whereas a proceeding for recovery of a debt may proceed. To put it another way, that a proceeding for recovery shall lie against a sick company but an order made in it could not be executed against any of the properties of the industrial company, the effect being that the proceedings may continue without any consequence. Thus there cannot be any execution or distraint against the properties of the company but creditors may continue to apply for recovery before the DRT. We do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was sought to be taken without recourse to Court. The Court held that the words proceedings and suit had to be construed differently as carrying different meanings, since, they had been used to denote different things. The Court concluded that Section 22(1) only prohibits recovery against the industrial company and there is no protection offered to guarantors against the recovery proceedings. 31. On the strength of this decision in Kailash Nath Agarwal (supra) it was contended that the application for recovery against the Company filed under the RDDB Act in the execution of which the appellant had purchased the property of the Company was neither a proceeding nor a suit within the meaning of Section 22. Therefore, the proceedings in the application for recovery remained ineffective by Section 22. We find, however, that the judgment in Kailash Nath Agarwal does not come to the aid of the appellant. That judgment did not consider the question that has arisen in this case. It dealt with the question regarding the scope of protection afforded to guarantors under Section 22(1) of the SICA, and held that there was no protection afforded to guarantors as distinct from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Objects and Reasons recited that more than fifteen lakhs of cases filed by the public sector banks and about 304 cases filed by the financial institutions involving recovery of debts of more than ₹ 5622 crores in dues of Public Sector Banks and about ₹ 391 crores of dues of the financial institutions were pending. The locking of such huge amounts of public money prevented proper utilisation and recycling of the funds for the development of the country. The RDDB Act was thus enacted to prevent such stagnation of huge amounts of public money due to the existing procedure for recovery of debts. The urgent need to work out a suitable mechanism through which the debts of the banks and financial institutions could be realised without delay was in the form of Special Tribunals, which would follow summary procedure. These Tribunals eventually came to be known as Debt Recovery Tribunals. 35. The 'debt' contemplated by the RDDB Act refers to the liability claimed as due, by a bank or a financial institution from any person, whether secured or unsecured or whether payable under a decree or order of any civil court or any arbitration award or under a mortgage and lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added to SICA w.e.f. 17.01.2000 by Act No. 1 of 2000. There is no doubt that when an Act provides, as here, that its provisions shall be in addition to and not in derogation of another law or laws, it means that the Legislature intends that such an enactment shall co-exist along with the other Acts. It is clearly not the intention of the Legislature, in such a case, to annul or detract from the provisions of other laws. The term in derogation of means in abrogation or repeal of. The Black's Law Dictionary sets forth the following meaning for derogation : The partial repeal or abrogation of a law by a later act that limits its scope or impairs its utility and force. It is clear that sub-section (1) contains a non-obstante clause, which gives the overriding effect to the RDDB Act. Sub-section (2) acts in the nature of an exception to such an overriding effect. It states that this overriding effect is in relation to certain laws and that the RDDB Act shall be in addition to and not in abrogation of, such laws. The SICA is undoubtedly one such law. 38. The effect of sub-section (2) must necessarily be to preserve the powers of the authorities under the SICA and sav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y construed. 43. The conflict that is said to arise is between Section 22 of the SICA which purports to make untenable proceedings for recovery of the debt against the sick company and suits for recovery on the one hand and on the other hand Section 34 of the RDDB Act contains an overriding effect to its own provision, obviously including those for recovery of debts. Some of the decisions of this Court dealing with this aspect may be noticed in Ram Narain v. Simla Banking Industrial Co. Ltd. AIR 1956 SC 614 : 1956 SCR 603. Two statutes, both containing non-obstante clauses providing that the particular provisions of the Act shall have effect (notwithstanding anything inconsistent contained therein in any other law for the time being in force) fell for consideration. The two Acts were the Banking Company Act 1949 and the Displaced Persons (Debt Adjustment) Act, 1951. This Court gave primacy to the Banking Companies Act. While doing so, this Court observed:- 7. .. It is therefore, desirable to determine the overriding effect of one or the other of the relevant provisions in these two Acts, in a given case, on much broader considerations of the purpose and policy underly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne, the focus must be on the principal subject-matter plus the particular perspective. For certain purposes, an Act may be general and for certain other purposes it may be special and we cannot blur distinctions when dealing with finer points of law. In law, we have a cosmos of relatively no absolutes -so too in life. 46. In Maharashtra Tubes Ltd. v. State Industrial Investment Corpn. Of Maharashtra Ltd. [1993] 2 SCC 144, the conflict arose between two special statues i.e. the State Financial Corporations Act, 1951 and the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). This Court came to the conclusion that the 1951 Act deals with the pre-sickness situation, whereas the 1985 Act deals with the post-sickness situation, and therefore, it was not possible to agree that the 1951 Act is a special statute vis- -vis the 1985 Act which is a general statute. The Court observed:- Both are special statues dealing with different situations notwithstanding a slight overlap here and there, for example, both of them provide for grant of financial assistance though in different situations. We must, therefore, hold that in cases of sick industrial undertakings the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Legislature was aware that it had enacted the earlier Act and yet chose to enact the subsequent Act with a non-obstante clause. In this case, however, the express intendment of Parliament in the non-obstante clause of the RDDB Act does not permit us to take that view. Though the RDDB Act is the later enactment, sub-section (2) of Section 34 specifically provides that the provisions of the Act or the rules thereunder shall be in addition to, and not in derogation of, the other laws mentioned therein including SICA. 50. The term not in derogation clearly expresses the intention of Parliament not to detract from or abrogate the provisions of SICA in any way. This, in effect must mean that Parliament intended the proceedings under SICA for reconstruction of a sick company to go on and for that purpose further intended that all other proceedings against the company and its properties should be stayed pending the process of reconstruction. While the term proceedings under Section 22 did not originally include the RDDB Act, which was not there in existence. Section 22 covers proceedings under the RDDB Act. 51. The purpose of the two Acts is entirely different and where actions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. 53. Moreover, we have found nothing contrary in the intention of the SICA to exclude a recovery application from the purview of Section 22, indeed there could be no reason for such exclusion since the purpose of the provision is to protect the properties of a sick company, so that they may be dealt with in the best possible way for the purpose of its revival by the BIFR. In State of Punjab v. The Okara Grain Buyers Syndicate Ltd. AIR 1964 SC 669, the Court articulated the importance of preserving the beneficent purpose of the statute and observed:- 14. .. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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