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TMI Blog2013 (10) TMI 1586X X X X Extracts X X X X X X X X Extracts X X X X ..... covery certificate issued for recovery of dues owed to IFCI Limited (formerly known as the Industrial Financial Corporation of India Ltd.). The writ petition being W.P.(C) No.2294/2011 filed by IFCI limited also impugns the order dated 20.12.2010 (hereinafter referred to as the impugned judgment ) passed by the Appellate Tribunal on similar grounds as those urged in W.P.(C) No.1424/2011. As the subject matter of both the writ petitions is the same, they have been taken up together. 2. The controversy involved in the present writ petitions relates to whether, despite an earlier order issued by the Board for Industrial and Financial Reconstruction directing the sale of the assets of Rajasthan Glyoxal Limited (hereinafter referred to as the 'respondent company') under the provisions of Section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985, the Recovery Officer could auction the property of the respondent company in execution of the Recovery Certificate issued by the DRT-I. 3. The respondent company became a sick company within the meaning of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector appointed on the Board of the company is hereby discharged. 5. Respondent nos. 1 and 2 were directed to evaluate the assets of the respondent company in consultation with respondent no. 4 within one month from 09.02.1994 and further advertisement inviting offers for sale of the respondent company as a going concern without liabilities, on as is where is basis, were directed to be issued by 26.03.1994. However, the said directions were not complied with. Rajasthan State Industrial Development Investment Corporation Ltd. (hereinafter referred to as the RIICO ) has asserted that assets of the respondent company were advertised in February 1995, November 1995 and in November 1998, however, it is not disputed that the sale process was not pursued. 6. RIICO approached the BIFR in 1998 seeking certain modifications in the conditions for sale of assets of the respondent company as directed earlier and pursuant thereto, BIFR passed an order dated 30.04.1998 the operative part of which reads as under:- 2. We have carefully considered the submissions made by the RIICO and the other material on record and particularly kept in view the fact that hazardous chemicals are stored in the plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Liquidator attached with the Rajasthan High Court as on making enquiries with the Official Liquidator, RIICO was informed, by a letter dated 15.10.1999, that a winding up order in respect of the respondent company had not been received at the office of the Official Liquidator. 9. RIICO, RFC and SBBJ filed their written statements, before the DRT-I in OA 398/1998, stating the details of the financial assistance extended by the said parties to the respondent company and also pointed out that the BIFR had passed an order recording its opinion that it is just and equitable to wind up the respondent company and had further directed the sale of its assets. It was thus, contended that the winding up of the respondent company had commenced. The DRT-I passed a final order dated 01.04.2004 allowing the Original Application and issued a Recovery Certificate. 10. In so far as the contention of SBBJ, RFC and RIICO with regard to BIFR having commenced winding up of the respondent company was concerned, the DRT-I noted that the BIFR had directed sale of the assets of the respondent company. However, as there was no stay with regard to recovery proceedings, the recovery certificate could be is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of Rs. 3,53,12,084 (as on 01.12.2007) with future interest be registered. The Debt Recovery Officer was further requested to remit the amount due to RFC from the sale proceeds. 13. The auction for the said property was held on 11.02.2008 as scheduled. The bid submitted by the petitioner/auction purchaser for a sum of Rs. 1.60 crores was accepted as the highest bid and the petitioner was declared as a successful auction purchaser. 14. RFC addressed another letter dated 11.02.2008 once again reiterating its claim of the amount due from the respondent company. The letter also stated that RFC had requested help from the Officer of DRT as well as of the IFCI Limited in conducting the auction but did not receive a satisfactory response. RFC also requested for a confirmation of registration of their claim as well as information regarding the final outcome of the auction held on 11.02.2008. 15. RFC filed its objection on 10.03.2008, inter-alia, praying that the auction be set aside. The principal grievance stated by RFC was that they were not given notices with regard to the proceedings being conducted by the Recovery Officer. RFC further complained that they had not received a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer disposing off the objections of RFC/RIICO and confirming the sale in favour of the petitioner was transferred to Debt Recovery Tribunal II, Delhi for decision on all issues except the issue of jurisdiction which was at the material time pending consideration before the Appellate Tribunal. 19. The Appellate Tribunal allowed the appeal (Appeal No.200/2010) preferred by RFC against the order dated 16.03.2010 by the impugned judgment dated 20.12.2010 wherein the Appellate Tribunal held that the Recovery Officer had no jurisdiction to auction the said property. The Appellate Tribunal further granted liberty to the petitioner to approach the High Court for sanctioning of the sale and in the meanwhile directed that money deposited by the petitioner be returned alongwith interest @ 9%. 20. It is contended on behalf of the petitioner that the decision dated 01.04.2004 passed by the DRT-I had become final as no appeal had been preferred by RFC against the said order. That order having attained finality, the proceedings conducted by the Recovery Officer could not be challenged. It is further contended that RFC had accepted the order dated 01.04.2004 and had, in fact, requested that its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to and not in derogation of SICA. It was thus, contended on behalf of the RFC that the provisions of RDDB Act would not override the provisions of SICA. 23. We have heard the learned counsel for the parties at length. 24. The question to be considered is whether DRT-I lacked the jurisdiction to undertake recovery proceedings initiated by IFCI Ltd. The other aspect that also requires consideration is whether RFC could object to the sale of the said property in the proceedings conducted before the Recovery Officer, which were admittedly being conducted in accordance with the final order dated 01.04.2004 and the recovery certificate issued by the DRT-I, after having accepted the said order and not having preferred any appeal against the same. 25. The provisions of Section 32 of SICA and Section 34 of RDDB Act are relevant and are reproduced as under:- 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the provisions of the earlier statutes and thus, providing for a non obstante clause in later enactments ought to be interpreted as overriding the earlier enactments. In addition to the aforesaid principles, the Courts would also endeavour to resolve the conflict between two statutes so as to ensure that the objects of both the conflicting statutes are given effect to. In this context, it is relevant to note that SICA has been enacted in public interest with the object of securing timely detection of sick/potentially sick companies owning industrial undertakings and to take expeditious preventive and ameliorative measures with respect to such companies to avoid industrial sickness. The policy of SICA is to ensure that the productive assets of the country are protected and preserved in public interest. The policy of the RDDB Act is to provide for expeditious adjudication and recovery of debts dues to banks and financial institutions in order to ensure that public funds are not unduly blocked in litigation. 27. In our view, the question whether an order passed under Section 20(4) of SICA would denude the jurisdiction of the DRT to proceed with the recovery of debts due to banks in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cure sickness in Industry and its provisions undoubtedly have to be interpreted in a manner so as to give full effect to achieve its objectives 29. The provisions of Section 20 of SICA are relevant and are reproduced as under: 20. Winding up of sick industrial company. (1) Where the Board, after making inquiry under section 16 and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of 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. (2) The High Court shall, on the basis of the opinion of the Board, order winding up of the sick industrial company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956 (1 of 1956). (3) For the purpose of winding up of the sick indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minated in an order recording that it is just and equitable to wind up the company then in such circumstance, the next step is for liquidation of the company which has to be conducted under the directions of the High Court in accordance with the provisions of the Companies Act. Although BIFR has been granted the power of directing the sale of assets of a company, the same is only in aid of meeting the claims of creditors in the winding up proceedings and accordingly the BIFR is required to forward the sale proceeds to the concerned High Court for distribution of the proceeds in accordance with Section 529A and other provisions of the Companies Act to meet the claims of various creditors. The provisions of SICA are not concerned with adjudication or recovery of debts. Thus once an order under Section 20 of SICA has been passed and, consequently, the process to rehabilitate a sick company under SICA has been conclusively abandoned there could be no rationale in not giving effect to the provisions of RDDB Act to enable banks and financial institutions to recover their dues. 32. The RDDB Act occupies a field which is completely different from SICA, and its underlying object is expediti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can go into the said questions relating to the liability and the recovery except as provided in the Act. xxxx xxxx xxxx xxxx 50. ...... we hold that at the stage of adjudication under Section 17 and execution of the certificate under Section 25 etc. the provisions of the RDB Act, 1993 confer exclusive jurisdiction on the Tribunal and the Recovery Officer in respect of debts payable to banks and financial institutions . 34. In view of the decision in the case of Allahabad Bank (supra), the DRT would have exclusive jurisdiction with regard to adjudication and recovery of dues to banks and financial institutions. Keeping in view the principal object of the two statutes, it is obvious that in so far as the adjudication and recovery of dues is concerned, the provisions of RDDB Act must be given effect unless the same are barred. In the present case, SICA admittedly does not proscribe any proceedings against a sick company in respect of which the BIFR has already come to a conclusion that it is just and equitable for it to be wound up. 35. There is no specific bar with regard to the initiation of or continuance of a recovery proceeding in cases of sick companies where BIFR has concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d nor is any appeal, under Section 25 of SICA, pending before the Appellate Authority for Industrial and Financial Reconstruction. Thus, there is no specific bar for initiation of proceedings or continuation of such proceedings under RDDB Act. It is apparent that at the relevant stages of proceedings under SICA, that is, at the stage of inquiry, preparation of a scheme and implementation of a sanctioned scheme, where the legislature wanted to bar recovery or distress proceedings against assets of an industrial company, an express provision to that effect was enacted. In the event, an order under section 20(4) of SICA was read as prohibiting recovery proceedings under the RDDB Act, the same would amount to extending the bar under Section 22(1) of SICA even at the stage where BIFR, after completing its inquiry, has come to a conclusion that it is not feasible to rehabilitate the sick company. This, in our view, is not warranted. It would not be apposite to restrict the operation of RDDB Act in cases where no proceedings under SICA for rehabilitation of the company are pending. 37. In the case of KSL Industries Ltd. (supra), Justice Thakker has expressed an opinion that the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction. On the contrary, the DRT had been established under the RDDB Act for recovery of dues for banks and financial institutions and thus, has the jurisdiction to adjudicate and recover the debts due to banks and financial institutions. In the case of Dr. Jagmittar Sain Bhagat (supra), the District Consumer Disputes Redressal Forum entertained a complaint by a Government employee with regard to recovery of penal rent from his retirement benefits, however, the complaint was dismissed on merits. The appeal against the decision of the District Forum was dismissed by the State Commission holding that the District Forum had no jurisdiction to entertain a complaint since the complainant was not a consumer. It is in this context that the Supreme Court held that the Consumer Reddressal Forums having been established under the Consumer Protection Act, 1986 could not derive any jurisdiction to entertain a complaint of a Government servant in respect of his retirement benefits as he did not fall within the definition of a consumer. In that case, the entire proceedings were without jurisdiction as there was no inherent jurisdiction in the Consumer Forums to entertain a complaint. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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