9911796707
TMI Blog2016 (2) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant company was declared sick and ICICI was appointed as the Operating Agency to formulate a rehabilitation scheme. On 3.7.1991, the first rehabilitation scheme prepared by the Operating Agency was sanctioned, which envisaged the takeover of the appellant company by one Mahavir Plantation Limited - i.e. appellant No.2. The first scheme was finally declared a failure, and the Appellant No.1 company, on 17.1.1995, was directed to submit a fresh, comprehensive, revised rehabilitation scheme which was duly circulated. Objections to the said scheme were heard by the BIFR and the scheme finally sanctioned was in the form of a change of management of the appellant no.1 company subject to various modifications to be carried out. After the Appellant No.1 company's management changed hands, the second scheme, after being reviewed from time to time, was declared as failed on 16.5.2000. Despite efforts by the Operating Agency to attempt to revive the company, all such efforts failed, and ultimately, on 30.4.2001, BIFR, on the basis of the recommendation of the Operating Agency, formed a prima facie opinion that the appellant No.1 company should be wound up under Section 20(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck Industrial Companies (Special Provisions) Act, 1985, the Bombay High Court wound up the appellant No.1 company. 7. While matters stood thus, the Delhi High Court passed the impugned order on 24.7.2008, as has been stated hereinabove, in which it was of the view that Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985, when construed to include all proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, would make the present proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, abate on the facts of this case. Ultimately, in this view of the matter, and differing with a judgment of the Orissa High Court, the Delhi High Court disposed of the appellants' writ petition as having become infructuous. 8. Appeals have been filed against the said order by the present appellants which appeals, as has been stated hereinabove, raise interesting questions of law on the interplay of the Sick Industrial Companies (Special Provisions) Act, 1985 with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 9. A few subsequent events also need to be stated for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 SCC 166, which held that the Sick Industrial Companies (Special Provisions) Act, 1985 has overridden the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993. The said Act, being a predecessor to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and dealing with the same subject matter as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - namely, recovery of debts due to banks and financial institutions, would lead to the conclusion that the 2002 Act is also overridden. He further contended that Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 expressly refers to the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993, and since Section 34(2) of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993, refers to the Sick Industrial Companies (Special Provisions) Act, 1985, Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 should also be construed so as to include a reference to the Sick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, expressly omits any reference to the Sick Industrial Companies (Special Provisions) Act, 1985, making it clear that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. That being the case, he argued that this Court's judgment in KSL & Industries Ltd. Vs. Arihant Threads Ltd., (2015) 1 SCC 166, is, therefore, clearly distinguishable. He also argued that at the end of the day, since the movable property of the appellant No.1 company had been sold off, and since various High Courts - including Bombay and Madras - have passed a number of orders, both winding up the company and dismissing petitions challenging the action of his client in proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, all that remains is sale of the immovable property of the appellant No.1 Company and that, therefore, nothing really remains in these appeals, which have become infructuous. Discussion:- 12. The arguments of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. (2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned under section 18 notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er been made; and (ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded. Section 32. Effect of the Act on other laws (1) The provisions of this Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any law other than this Act. (2) Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of section 72A of the Income-tax Act, 1961 (43 of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub- section (4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss than such reserve price, it shall be lawful for any officer of the secured creditor, if so authorised by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale. (5B) Where the secured creditor, referred to in sub-section (5A), is declared to be the purchaser of the immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, under sub-section (4) of section 13. (5C) The provisions of section 9 of the Banking Regulation Act, 1949(10 of 1949) shall, as far as may be, apply to the immovable property acquired by secured creditor under sub-section (5A).] (6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. (7) Where any action has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen's dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator: PROVIDED ALSO that in case the secured creditor deposits the estimated amount of workmen's dues, such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator: PROVIDED ALSO that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any. Explanation: For the purposes of this sub-section,-- (a) "record date" means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date; (b) "amount outstanding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Financial Assets and Enforcement of Security Interest Act 2002". 1956 42 The Securities Contracts (Regulation) Act 1956 In section 2 in clause (h) after sub-clause (ib) insert the following:-- " (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002". 1986 1 The Sick Industrial Companies (Special Provisions) Act 1985 In section 15 in sub-section (1) after the proviso insert the following:-- "PROVIDED FURTHER that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 where financial assets have been acquired by any securitisation company or reconstruction company under sub-section (1) of section 5 of that Act: PROVIDED ALSO that on or after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 where a reference is pending before the Board for Industrial and Financial Reconstruction such reference shall abate if the secured credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt possible, from the non-viable sick industrial companies through liquidation of those companies. It has been the experience that the existing institutional arrangements and procedures for revival and rehabilitation of potentially viable sick industrial companies are both inadequate and time-consuming. A multiplicity of laws and agencies makes the adoption of coordinated approach for dealing with sick industrial companies difficult. A need has, therefore, been felt to enact in public interest a legislation to provide for timely determination by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable despatch. The salient features of the Bill are- (i) application of the legislation to the industries specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, with the initial exception of the scheduled industry relating to ships and other vessels drawn by power, which may however be brought within the ambit of the legislation in due course; (ii) Identification of sickness in an industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the said Board on receipt of a reference or upon application or suo motu. If the Board is satisfied that the Company has indeed become a sick industrial company, the Board shall decide as to whether it is practicable for the Company to make its net worth positive within a reasonable time. This it may do under Section 17 of the Act, by order under sub-section (2) of Section 17. If this is not possible, then the Board may appoint an Operating Agency who will prepare a scheme for rehabilitation mentioned in Section 18 which the Board may then sanction. The scheme may provide for all or any of the things mentioned in the said Section, and finally, the scheme may work successfully, resulting in the Company's net worth turning positive, or may be unsuccessful. In the event of it being unsuccessful, the Board may modify such scheme or ask for the preparation of a new scheme. If, at the end of the day, the first scheme or any successive schemes ultimately fail, the Board has then to be of the opinion that such Company is not likely to make its net worth positive, and that therefore it is to forward its opinion under Section 20 of the Act to the concerned High Court to proceed with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. The setting up of Special Tribunals will not only fulfill a long-felt need, but also will be an important step in the implementation of the Report of Narasimham Committee. Whereas on 30th September, 1990 more than fifteen lakhs of cases filed by the public sector banks and about 304 cases filed by the financial institutions were pending in various courts, recovery of debts involved more than Rs. 5622 crores in dues of Public Sector Banks and about Rs. 391 crores of dues of the financial institutions. The locking up of such huge amount of public money in litigation prevents proper utilisation and recycling of the funds for the development of the country. The Bill seeks to provide for the establishment of Tribunal and Appellate Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. Notes on clauses explain in detail the provisions of the Bill." 17. The Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 took away the jurisdiction of the courts and vested this jurisdiction in tribunals established by the Act so as to ensure speedy recovery of debts due to the banks and financial institutions mentioned therein. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisition and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction. 2. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication of the proposed legislation initially to banks and financial institutions and empowerment of the Central Government to extend the application of the proposed legislation to non-banking financial companies and other entities; (m) non-application of the proposed legislation to security interests in agricultural lands, loans not exceeding rupees one lakh and cases where eighty per cent, of the loans are repaid by the borrower. 3. The Bill seeks to achieve the above objects." 19. This Act was brought into force as a result of two committee reports which opined that recovery of debts due to banks and financial institutions was not moving as speedily as expected, and that, therefore, certain other measures would have to be put in place in order that these banks and financial institutions would better be able to recover debts owing to them. 20. In a challenge made to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 in Mardia Chemicals Ltd. Etc. v. Union of India (UOI) and Ors. Etc. Etc., (2004) 4 SCC 311, this Court went into the circumstances under which the Securitisation and Reconstruction of Financial Assets and En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vary looking to the different situations needed to be tackled and object sought to be achieved. In its Second Report, the Narasimham Committee observed that NPAs in 1992 were uncomfortably high for most of the public sector banks. In Chapter VIII of the Second Report the Narasimham Committee deals about legal and legislative framework and observed: "8.1. A legal framework that clearly defines the rights and liabilities of parties to contracts and provides for speedy resolution of disputes is a sine qua non for efficient trade and commerce, especially for financial intermediation. In our system, the evolution of the legal framework has not kept pace with changing commercial practice and with the financial sector reforms. As a result, the economy has not been able to reap the full benefits of the reforms process. As an illustration, we could look at the scheme of mortgage in the Transfer of Property Act, which is critical to the work of financial intermediaries...." One of the measures recommended in the circumstances was to vest the financial institutions through special statutes, the power of sale of the assets without intervention of the court and for reconstruction of assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contain the details of the amounts payable and the secured assets against which the secured creditor proposes to proceed in the event of non-compliance with the notice given under sub-section (2) of Section 13." [at para 34,36 and 38] 21. The "pivotal" provision namely Section 13 of the said Act makes it clear that banks and financial institutions would now no longer have to wait for a Tribunal judgment under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 to be able to recover debts owing to them. They could, by following the procedure laid down in Section 13, take direct action against the debtors by taking possession of secured assets and selling them; they could also take over the management of the business of the borrower. They could also appoint any person to manage the secured assets possession of which has been taken over by them, and could require, at any time by notice in writing to any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due from the borrower, to pay the secured creditor so much of the money as is sufficient to pay the secured debt. 22. In order to further the objects o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, because of the presence of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, none of the measures taken by the secured creditors under Section 13 of Securitisation Act can be proceeded with because of the bar contained in Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Hence, we have first to determine whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 overrides Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 as such overriding is only to the extent of the inconsistency between the two enactments. Such inconsistency is found in Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, by which any action taken to realize debts owing to the secured creditors of sick industrial companies cannot be proceeded with under the 2002 Act unless the BIFR accords permission under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. 25. It is now necessary to undertake a survey of the case law laid down by this court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies (Special Provisions) Act, 1985. 27. In Jay Engineering Works Ltd. v. Industry Facilitation Council and Anr., (2006) 8 SCC 677, this time this Court had to deal with the Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 vis-à-vis the Sick Industrial Companies (Special Provisions) Act, 1985. Both Acts contained non obstante clauses. This Court referred to the 1994 amendment to the Sick Industrial Companies (Special Provisions) Act, 1985 and stated that the amending Act being later than the 1993 Act, the Sick Industrial Companies (Special Provisions) Act, 1985 would, therefore, prevail. (See paragraph 27). 28. Similarly, in Morgan Securities and Credit Pvt. Ltd. v. Modi Rubber Ltd., (2006) 12 SCC 642, the Arbitration and Conciliation Act, 1996 contained a non obstante clause in Section 5 thereof. Despite this being a later Act, vis-à-vis the Sick Industrial Companies (Special Provisions) Act, 1985, this Court held that the Sick Industrial Companies (Special Provisions) Act, 1985 would prevail, inasmuch as the non obstante clause contained in the Arbitration and Conciliation Act, 1996 had only a limited application - it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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": "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. SICA is undoubtedly one such law. There is no doubt that both are special laws. SICA is a special law, which deals with the reconstruction of sick companies and matters incidental thereto, though it is general as regards other matters such as recovery of debts. The RDDB Act is also a special law, which deals with the recovery of money due to banks or financial institutions, through a special procedure, though it may be general as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 34 thereof specifically provides that the provisions of the Act or the Rules made thereunder shall be in addition to, and not in derogation of, the other laws mentioned therein including SICA." [at paras 36, 39, 40, and 48] 33. A conspectus of the aforesaid decisions shows that the Sick Industrial Companies (Special Provisions) Act, 1985 prevails in all situations where there are earlier enactments with non obstante clauses similar to the Sick Industrial Companies (Special Provisions) Act, 1985. Where there are later enactments with similar non obstante clauses, the Sick Industrial Companies (Special Provisions) Act, 1985 has been held to prevail only in a situation where the reach of the non obstante clause in the later Act is limited - such as in the case of the Arbitration and Conciliation Act, 1996 - or in the case of the later Act expressly yielding to the Sick Industrial Companies (Special Provisions) Act, 1985, as in the case of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993. Where such is not the case, as in the case of Special Courts Act, 1992, it is the Special Courts Act, 1992 which was held to prevail over the Sick Industrial Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Section 34(2) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which expressly included the Sick Industrial Companies (Special Provisions) Act, 1985. The new legislative scheme qua recovery of debts contained in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has therefore to be given precedence over the Sick Industrial Companies (Special Provisions) Act, 1985, unlike the old scheme for recovery of debts contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. 35. Another interesting pointer to the same conclusion is the fact that Section 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is not made subject to Section 37 of the said Act. This statutory scheme is at complete variance with the statutory scheme contained in Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in which sub-section (1) of Section 34 containing the non obstante clause is expressly made subject to sub-section (2) (containing the Sick Industrial Companies (Special Provisions) Act, 1985) by the expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 1062 cases have been disposed of. Out of the cases disposed of, 264 cases were revived, 375 cases were under negotiation for revival process, 741 cases were recommended for winding up, and 626 cases were dismissed as not maintainable. These facts and figures speak for themselves and place a big question mark on the utility of the Sick Industrial Companies (Special Provisions) Act, 1985. The Committee further pointed out that effectiveness of the Sick Industrial Companies (Special Provisions) Act, 1985 as has been pointed out earlier, has been severely undermined by reason of the enormous delays involved in the disposal of cases by the BIFR. (See paragraphs 5.8, 5.9 and 5.15 of the Report). Consequently, the Committee recommended that the Sick Industrial Companies (Special Provisions) Act, 1985 be repealed and the provisions thereunder for revival and rehabilitation should be telescoped into the structure of the Companies Act, 1956 itself. 38. Pursuant to the Eradi Committee report, the Companies Act was amended in 2002 by providing for the constitution of a National Company Law Tribunal as a substitute for the Company Law Board, the High Court, the BIFR and the AAIFR. The Eradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 vis-à-vis the Sick Industrial Companies (Special Provisions) Act, 1985, leans in favour of creditors being able to realize their debts outside the court process over sick industrial companies being revived or rehabilitated. In fact, another interesting document is the Report on Trend and Progress of Banking in India 2011-2012 for the year ended 30.6.2012 submitted by the Reserve Bank of India to the Central Government in terms of Section 36(2) of the Banking Regulation Act, 1949. In table IV.14 the report provides statistics regarding trends in Non-performing Assets bank-wise, group-wise. As per the said table, the opening balance of Non-performing Assets in public sector banks for the year 2011-2012 was Rs. 746 billion but the closing balance for 2011-2012 was Rs. 1,172 billion only. The total amount recovered through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 during 2011-2012 registered a decline compared to the previous year, but, even then, the amounts recovered under the said Act co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his argument does not commend itself to us for the obvious reason that Section 34(2) refers to the Sick Industrial Companies (Special Provisions) Act, 1985 only for the purpose of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 and for no other purpose. This is quite apart from the fact that, as has been noted hereinabove, the non-reference to the Sick Industrial Companies (Special Provisions) Act, 1985 in Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was deliberate, as has been held by us hereinabove. 43. Shri Sundaram is also correct when he refers to the judgment of this Court in Shree Chamundi Mopeds v. Church of South India Trust Association, (1992) 3 SCC 1. In the said judgment, this Court has held: "In the instant case, the proceedings before the Board under Sections 15 and 16 of the Act had been terminated by order of the Board dated April 26, 1990 whereby the Board, upon consideration of the facts and material before it, found that the appellant-company had become economically and commercially non-viable due to its huge accumulated losses and liabilities and should be wound u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Authority. In that view of the matter, it cannot be said that any proceedings under the Act were pending before the Board or the Appellate Authority on the date of the passing of the order dated August 14, 1991 by the learned Single Judge of the Karnataka High Court for winding up of the company or on November 6, 1991 when the Division Bench passed the order dismissing O.S.A.No. 16 of 1991 filed by the appellant company against the order of the learned Single Judge dated August 14, 1991. Section 22(1) of the Act could not, therefore, be invoked and there was no impediment in the High Court dealing with the winding up petition filed by the respondents....." [at para 10] 44. A reading of the said judgment also shows that the order of stay of the BIFR's opinion to wind up the company and the dismissal of the appeal therefrom by the AAIFR would not in any manner revive the reference under Section 15 of the Appellant No. 1 Company. For this reason also, it is clear that after the orders of the BIFR and AAIFR have been upheld by dismissal of the writ petition filed before the Delhi High Court by the impugned judgment, there can be said to be no revival of reference proceedings befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition of the law. 47. It is clear that a purely literal interpretation of the expression "where a reference is pending" can yield the result that the Orissa High Court reached. In fact, Chapter III of the Sick Industrial Companies (Special Provisions) Act, 1985 specifically refers, in the Chapter heading, to references, inquiries and schemes. While Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 deals with references, Section 16 deals with inquiries into the working of Sick Industrial Companies. Section 18 then deals with preparation and sanction of schemes. 48. What has to be examined is whether this purely literal rendering of the expression "where a reference is pending" is correct or not. First and foremost, it is important to note that the third proviso to Section 15(1) uses the words "is pending". A reference has been held to be pending the moment it is received by the Board. In Real Value Appliances Ltd. v. Canara Bank & Ors., (1998) 5 SCC 554, this Court had to decide whether the mere registration of a reference by the BIFR would result in the automatic cessation of all proceedings which are pending in civil courts and the company court agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when an inquiry is instituted, but also after preparation and sanction of a scheme right till the stage the scheme has worked out successfully or till the BIFR gives its opinion to wind up the company. 49. The expression "reference" used in Section 15(1) proviso 3 is used in contra distinction to the expression "proceedings" in Section 22. "Proceedings" under Section 22 are actions taken against the sick company, whereas "references" are actions initiated by a sick company - it is perhaps for this reason that the third proviso to Section 15(1) uses the expression "reference" instead of the expression "proceedings". 50. Another important aspect as to the construction of the third proviso to Section 15(1) is the meaning of the expression "such reference shall abate". One of the meanings of the expression "abate" is "to put an end to; to curtail; to come to naught". (See Ramanatha Aiyar's Law Lexicon). A reference can be said to abate in one or several ways. One obvious way that a reference abates is where the Board, after inquiry, rejects the reference for the reason that the Board is satisfied that the Company is not a sick industrial company as defined under the Act. Another way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets Reconstruction P. Ltd. v. M/s. Haryana Concast Limited & Anr., (Civil Appeal No. 3646 of 2011), has held, agreeing with a judgment of the Delhi High Court, and disapproving a judgment of the Punjab and Haryana High Court, that a Company Court exercising jurisdiction under the Companies Act, has no control in respect of sale of a secured asset by a secured creditor in exercise of powers available to such creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Some of the observations made by this Court are interesting in that this Court has held that the Securitisation Act is a complete code in itself, and that earlier judgments rendered in the context of the State Financial Corporation Act, 1951 or the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 cannot be held applicable to the Securitisation Act. Further, the very incorporation of certain provisions of the Companies Act in the Securitisation Act themselves harmonise the latter Act with the Companies Act in respect of workers debts under Section 529A of the Companies Act. In a significant paragraph, this Court has held: "The aforesaid vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies (Special Provisions) Act, 1985. 3. In a situation where there are more than one secured creditor of a sick industrial company or it has been jointly financed by secured creditors, and at least 60 per cent of such secured creditors in value of the amount outstanding as on a record date do not agree upon exercise of the right to realise their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to have full play. 4. Where, under Section 13(9) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the case of a sick industrial company having more than one secured creditor or being jointly financed by secured creditors representing 60 per cent or more in value of the amount outstanding as on a record date wish to exercise their rights to enforce their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, being inconsistent w ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
