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TMI Blog2019 (11) TMI 1766X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of SICA, in particular, Section 22 shall prevail over the provision for Recovery of Debts in the RDDB Act. If that be the position of law, then the learned senior counsel is right in his submission that the impugned order could not have been passed by the DRT. The decision of the Supreme Court in the case of Managing Director (supra) was in context with a civil suit filed by the respondent for recovery of a particular amount in the court of the Civil Judge. The Supreme Court looked into Section 22 of the Act, 1985 and held that a suit would be barred when an inquiry under Section 16 of the SICA is pending - It is a well-settled principle of law that a judgment and decree passed by a court or tribunal, lacking inherent jurisdiction, would be a nullity. The impugned order passed by the DRT as well as the recovery certificate and the order of attachment passed by the Recovery Officer is not sustainable in law - Application allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner herein, as initiated by Respondent No.1 before the Recovery Officer, Learned Debts Recovery Tribunal No.1, Ahmedabad, (including the operation, implementation and execution of impugned Order dated 31st January, 2018, and the Impugned Attachment, both dated 31st January, 2018, over the movable and immovable properties of the Petitioner) (e) For ad-interim reliefs in terms of Prayers (b) and (c ) above; (f) For costs of and incidental to this petition; (g) For such other and further reliefs as the nature and circumstances of the case may require." 3. The case of the writ applicant, in his own words, as pleaded in the writ application, is as under; "1. The Petitioner is a Public Limited Company, incorporated under the provisions of Companies Act, 1956 (now Act of 2013). having its registered office at Plot No.1, Sonvay Bhaislay Industrial Area, Rau- Pithampur, Link Road, Rau-453332 (Indore). M.P.. The Petitioner is engaged in manufacturing/producing of quality cotton yarn and knitted fabric since 1997 with 71040 spindles and 31 circular knitting machines. At present, the Company is operating on 100% job work basis for the Bombay Rayon Fashions Limited (BRFL), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned with the present Petition. However, these Respondents have been impleaded in the present Petition, since they are Respondents in the lmpugned Recovery Proceeding. FACTS OF THE CASE 5. The brief facts relevant and material leading to the filing of the present Writ Petition are enumerated as under: 5.1 The Petitioner on 30th October, 2002 filed a Reference under Section 15(1) of the Sick & Industrial Companies (Special Provision) Act, 1985 (since repealed) [SICA] before The Board for Industrial and Financial Reconstruction [BIFR]. The said Reference was registered as Case No.743 of 2002 [Reference]. Hereto annexed and marked at Exhibit "A" hereto is a copy of the letter dated 30th December, 2002 addressed by BIFR inter alia confirming the filing of the Reference by the Petitioner. 5.2 Meanwhile, the erstwhile Global Trust Bank Limited ("GTB") raised certain purported claims against the Petitioner on the basis of certain purported Undertaking and Bills/ Hundies allegedly executed by the Petitioner in favour of GTB to clear dues of GTB on account of Respondent No.2. On the basis of these purported claims, GTB filed Company Petition No.2 of 2003 against the Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and marked at Exhibit "E" is a copy of the order dated 23rd January, 2006, passed by BIFR. 5.7 In view of the Reference and absence of leave obtained on part of Respondent No.1, the above Company Petition was dismissed by the Hon'ble Madhya Pradesh High Court by its order dated 7th May, 2014. Hereto annexed and marked at Exhibit "F" is a copy of the order dated 7TH May, 2014, passed by the Hon'ble Madhya Pradesh High Court. 5.8 It is pertinent to note that, from year 2004 to 2014 on one pretext or the other, the Application seeking stay of Original Application was never heard. It is further pertinent to note that the Petitioner had also good case on merits to prove that the purported claim of Respondent No.1 against the Petitioner in the Original Application was false and untenable and that no amounts were due and payable by the Petitioner to Respondent No.1 as alleged in the said Original Application. Thereafter, without dealing with the issue of bar to file the Original Application under Section 22 of SICA and deciding the application of the Petitioner seeking stay of the Original Application, the Learned DRT by its Order and Judgment dated 1st December. 2014. ["impugned Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a copy of the reply dated 9th December, 2016, of Respondent No.1. Hereto annexed and marked at Exhibit "L" is a copy of the Impugned Order dated 29th March, 2017 passed by the Recovery Officer. 5.11 The Petitioner then filed Affidavit Disclosing Assets to place on record that the assets of the Petitioner were encumbered with charge/mortgage created by the Petitioner in favour of its Lenders. However, the Recovery Officer then by Impugned Order dated 31st January, 2018, attached the Bank Accounts of the Petitioner and issued Impugned Attachment over the movable and immovable properties of the Petitioner. Hereto annexed and marked at Exhibit "M" is a copy of the Affidavit of Disclosure of Assets filed by the Petitioner. Hereto annexed and marked at Exhibit "N" is a copy of the Impugned Order dated 31st January, 2018, of the Recovery Officer, Learned DRT Ahmedabad and Exhibit "0" is a copy of Impugned Order of Attachment dated 31st January, 2018, issued by the Recovery Officer, Learned DRT Ahmedabad. 5-12 The Recovery Officer has adjourned the Impugned Recovery Proceeding to 24th April, 2018, for taking steps to sale the assets of the Petitioner in furtherance of the Impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order is already passed. The Bombay High Court in the matter of C.J. Gelatine Products Ltd. In re. reported in (1994) 81 Company Cases 890 has taken the view that the petition for winding up filed after commencement of the enquiry before the BIFR without the consent of the BIFR is void ab initio and the court has no jurisdiction to entertain the same. The Delhi High Court also in the matter of S.M. Singhvi vs. Bestavising Electronics Ltd. vs. reported in (2004) 118 Company Cases 742 has held that the winding up petition will not be maintainable when Section 22 of the SICA Act is attracted. Similarly the Allahabad High Court also in the matte of U.P. Stock Exchange Association Ltd. vs. Vegeopro Foods and Feeds Ltd., reported in (2006) 131 Company Cases 385 has held that if during the pendency of reference before the BIFR no sanction is obtained and the winding up petition is filed such a petition cannot be proceeded with. Similar is the view taken by this Court in the matter of Raymond Ltd. vs. Steel Tubes of India Ltd. In Company Petition No.27/2000 by the order dated 11th March, 2003. (5) In the present case also the record reveals that the petitioner had filed the present com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till realization of the total due amount of the applicant bank. 2. Let the certificate of Recovery be drawn up forthwith in Form No.31 and put up the signature in terms of the provision contained in Section 19(22) of the RDDB Act for issuance. 3. The Recovery Officer shall realize the amount as per the Recovery Certificate from the defendant No.1 and 2 according to the law and shall report compliance with remittance of recovery proceeding file for final withdrawal of the certificate by the bank and for consideration of return of documents by the Registry. Since the defendants Nos.3 and 4 have had first charge on the hypothecated property available in their favour, the Ld. Recovery Officer is directed to take care of this issue in the Recovery Proceedings. 4. Original Application stands disposed of against the defendants Nos.3 and 4." 9. We take notice of the fact that the contention with regard to the applicability of the provisions of SICA and its legal effect on the proceedings before the DRT was specifically raised and the same has also been recorded in para-6 of the impugned order. Para-6 reads thus "6. Defendant No.2 has filed written submission at Exh.R/53. Defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Recovery Certificate No.RC No.265/2014 drawn up by the Hon'ble Presiding Officer. You are hereby prohibited and restrained until further orders from transferring, alienating, creating third party interest, parting with possession, changing or dealing with the under mentioned property in any manner and that all persons be and that they are prohibited from taking any benefit under such transfer, alienation, possession or charge. Description of Property Land and building situated at Raupithampur Link Road, Tehsi: Mhow, Dist: Indore (M.P.), 453332, India, The admeasuring approximately area is 375298 square meter Non-Agriculture land admeasuring 18360 sq. Ft. situated at Survey No.855, Taluka: Kadi, Dist: Mahesana (Gujarat) Office situated at C.P. Ramasamy Road, Alwapret, Chennai-18. Description of Immovable Property Movable properties Viz. Plant and Machineries Stores, Inventory 13. In such circumstances, referred to above, the writ applicant had to come before this Court with the present writ application, questioning the legality and validity of the impugned order passed by the DRT and also the issue of the recovery certificate and the order of attachment. Submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company; (b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board. (3) Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under preparation or during the period] of consideration of any scheme under section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that 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 and liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act." 17. Section 18 of the Act, 1993 reads thus; "18. Bar of Jurisdiction.-On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17." 18. Mr. Thakore would submit that the Act, 1985 as well as the Act, 1993 are special laws. He would submit that SICA is a special law which deals with the reconstruction of the sick companies and the matters incidental thereto, though it is general as regard the other matters such as recovery of the debts. Mr. Thakore would submit that the RDDB Act is also a special law which deals with the recovery of money due to the banks or the financial institutions through a special procedure, though it may be general as regards the other matters such as the reconstruction of sick companies which it does not specifically dealt with. 19. Mr. Thakore would submit that in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that they are formal parties and they have nothing to say in the matter. ANALYSIS 25. Having heard the learned counsel appearing for the parties and having gone through materials on record, the only question that falls for our consideration is whether the DRT committed any error in passing the impugned order. 26. As a neat question of law has been raised before us, we straightway go to the decision of the Supreme Court in the case of KSL & Industries Limited (supra). KSL was in appeal before the Supreme Court by way of a reference made by a two Judge Bench, which heard the matter and held that the appeal deserved to be allowed and that the judgment and order passed by the High Court, which was impugned, was liable to be set aside. However, in view of a difference of opinion having arose on the interpretation of Section 34 of the Act, 1993, the matter came to be referred for decision to a larger Bench. We quote the relevant observations, governing the position of law; "39. 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 suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 underlying the two Acts and the clear intendment conveyed by the language of the relevant provisions therein." 43. In a subsequent case, this Court held that the right to possession enacted by the Delhi Rent Control Act, 1958 was not controlled by the Slum Clearance Act and the right could be enforced in the manner provided in Section 25-B without obtaining prior permission of the competent authority under the Slum Clearance Act. The conflict arose since the Slum Clearance Act contained a nonobstante clause, to the effect that proceedings for eviction of tenants could not be taken without prior permission of the competent authority. The Delhi Rent Control Act conferred a right under Section 14-A to recover immediate possession in case the landlord had to vacate residential premises allotted to him by the Central Government. This right was conferred with a nonobstante clause. This Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provisions contained in the 1985 Act would ordinarily prevail and govern." 46. In a subsequent decision in Allahabad Bank Vs. Canara Bank[5], this Court held that with reference to the Companies Act, the RDDB Act should be considered as a "special law" though both laws could be treated as "special laws" in respect of recovery of dues by banks and financial institutions. 47. In a later case the question arose in the context of Special Court (Trial of offences Relating to Transactions in Securities) Act, 1992 and SICA. It was contended that in view of the special provisions contained in SICA no proceedings could have been initiated under the Special Court Act. The Court observed that though Section 32 of the SICA contained a non-obstante clause, there was a similar non-obstante clause in Section 13 of the Special Court Act. The Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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. 50. The purpose of the two Acts is entirely different and where actions under the two laws may seem to be in conflict, Parliament has wisely preserved the proceedings under the SICA, by specifically providing for sub- section (2), which lays down that the later Act RDDB shall be in addition to and not in derogation of the SICA. 51. We might add that this conclusion has been guided by what is considered to be one of the most crucial principles of interpretation viz. giving effect to the intention of the Legislature. The difficulty arose in this case mainly due to the absence of specific words denoting the intention of Parliament to cover applications for recovery of debts under the RDDB Act while enacting Section 22 of the SICA. As observed earlier, the obvious reason for this absence is the fact that the SICA was enacted earlier. It is the duty of this Court to consider SICA, after the enactment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 Vs. The Okara Grain Buyers Syndicate Ltd.[7], the Court articulated the importance of preserving the beneficent purpose of the statute and observed:- "14. …….. We shall therefore proceed to examine the provisions of the Act on the footing that the test for determining whether the Government is bound by a statute is whether it is expressly named in the provision which it is contended binds it, or whether it "is manifest that from the terms of the statute, that it was the intention of the legislature that it shall be bound", and that the intention to bind would be clearly made out if the beneficent purpose of the statute would be wholly frustrated unless the Government were bound." 53. Having answered the reference, we hold that the provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act. In these circumstances, as already directed by the two-Judge Bench of this Court, the Judgment and Order dated 23.02.06 of the High Court of Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company has become a sick industrial company, inter alia, upon receipt of a reference with respect to such company under Section 15. 8. Sub-section (1) of Section 22 of the Act 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 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt may not be a civil court but its jurisdiction in a case of this nature is limited." 12. If the civil court's jurisdiction was ousted in terms of the provisions of Section 22 of the Act, any judgment rendered by it would be coram non judice. It is a wellsettled principle of law that a judgment and decree passed by a court or tribunal lacking inherent jurisdiction would be a nullity. In Kiran Singh v. Chaman Paswan AIR 1954 SC 340 this Court held: (AIR p. 342, para 6) "6. … It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties." (See also Chief Engineer, Hydel Project v. Ravinder Nath 2008 2 SCC 350, SCC p. 361, para 26.) 13. In Mantoo Sarkar v. Oriental Insurance Co. Ltd. 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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