Supreme Court rules on SARFAESI Act vs. SICA conflict, upholding secured creditors' rights.

The Supreme Court determined that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) prevails over the Sick Industrial Companies (Special Provisions) Act (SICA) in cases of inconsistency. This decision allows secured creditors to proceed with debt recovery measures under SARFAESI Act without hindrance from SICA protections for sick industrial companies. The interpretation of "where a reference is pending" in SICA was broadened to include all stages of proceedings before the Board for Industrial and Financial Reconstruction (BIFR). The court's ruling affirmed SARFAESI Act's precedence over SICA in the context of secured debt recovery, leading to the dismissal of the appeals.

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Issues Involved:
1. Interplay between the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
2. Whether SARFAESI Act prevails over SICA.
3. Interpretation of "where a reference is pending" in Section 15(1) proviso 3 of SICA.

Issue-Wise Detailed Analysis:

1. Interplay between SICA and SARFAESI Act:
The judgment examines the interaction between SICA and SARFAESI Act, focusing on how these statutes, both dealing with debt recovery, coexist. SICA aims at the rehabilitation of sick industrial companies, while SARFAESI Act facilitates the recovery of debts by banks and financial institutions without court intervention. The court scrutinizes the legislative intent behind these acts and their respective non obstante clauses to determine their precedence.

2. Whether SARFAESI Act prevails over SICA:
The court concludes that SARFAESI Act prevails over SICA to the extent of inconsistency. This conclusion is drawn from the legislative scheme and the specific provisions within SARFAESI Act, notably Section 35, which states that SARFAESI Act will override other laws. The court emphasizes that SARFAESI Act, being a later enactment and containing a broader non obstante clause, is intended to take precedence over SICA, particularly in the context of secured creditors recovering their debts.

3. Interpretation of "where a reference is pending" in Section 15(1) proviso 3 of SICA:
The court interprets the term "where a reference is pending" in Section 15(1) proviso 3 of SICA to include all stages of proceedings before the BIFR, not just the initial reference stage. This interpretation is essential to ensure that the legislative intent of allowing secured creditors to recover their debts under SARFAESI Act is not thwarted by pending proceedings under SICA. The court rejects the narrower interpretation by the Orissa High Court, which limited "reference" to the initial filing stage, and supports a broader interpretation that encompasses the entire process until the final resolution by BIFR.

Conclusion:
The Supreme Court holds that SARFAESI Act prevails over SICA in cases of inconsistency, allowing secured creditors to proceed with debt recovery measures under SARFAESI Act without being hindered by the protections offered to sick industrial companies under SICA. The court also clarifies that the term "where a reference is pending" in SICA includes all stages of proceedings before BIFR, ensuring that the objectives of SARFAESI Act are not undermined. Consequently, the appeals are dismissed, affirming the precedence of SARFAESI Act over SICA in the context of secured debt recovery.

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