Abatement of sick company reference follows when secured creditors cross the statutory threshold and enforce under securitisation law.
A pending reference under the sick industrial company law abates by operation of law when secured creditors representing not less than three-fourths in value of the amount outstanding take measures under the securitisation law. The appellate authority may examine abatement at the appeal stage because an appeal is a continuation of the original proceedings and the issue is a pure question of law. "Amount outstanding" refers to dues payable as reflected in the secured creditors' books, not the total amount originally borrowed. On that construction, the statutory threshold was satisfied and the declaration of abatement was upheld.
Issues: (i) Whether the appellate authority could declare the reference proceedings under the sick industrial company law to have abated after secured creditors invoked measures under the securitisation law. (ii) Whether the third proviso to Section 15(1) of the sick industrial company law is attracted only when the secured creditors represent not less than three-fourth in value of the amount outstanding, meaning the outstanding dues as per the books of account and not the total amount originally borrowed.
Issue (i): Whether the appellate authority could declare the reference proceedings under the sick industrial company law to have abated after secured creditors invoked measures under the securitisation law.
Analysis: The pending reference before the Board was treated as susceptible to abatement once the statutory conditions in the third proviso to Section 15(1) were met. The challenge based on restoration of the earlier writ proceedings did not survive, because the subsequent notice and winding-up opinion were separate proceedings and the earlier notice had already been cancelled. The appellate authority was entitled to examine the legal effect of the later measures under the securitisation law, as an appeal is a continuation of the original proceedings and the question of abatement is a pure question of law that can be considered at that stage.
Conclusion: The appellate authority had jurisdiction to decide the question of abatement, and the objection to its consideration of that issue was rejected.
Issue (ii): Whether the third proviso to Section 15(1) of the sick industrial company law is attracted only when the secured creditors represent not less than three-fourth in value of the amount outstanding, meaning the outstanding dues as per the books of account and not the total amount originally borrowed.
Analysis: The expression "amount outstanding" was construed in light of the securitisation law, particularly its explanation defining outstanding dues as principal, interest, and other dues payable as per the secured creditor's books. The legislative scheme was held to balance revival of sick companies with enforcement rights of secured creditors. The Court rejected a reading that would substitute the statutory expression "amount outstanding" with the total amount borrowed, holding that such a construction would be contrary to the text and purpose of the proviso. The prior precedents on the interplay between the two enactments were applied to hold that pending BIFR references abate when the statutory threshold is satisfied and measures under Section 13(4) are taken by the requisite secured creditors.
Conclusion: The proviso was held to be attracted on the facts, and the declaration that the reference proceedings had abated was upheld.
Final Conclusion: The appeal failed because the statutory conditions for abatement were satisfied and no legal infirmity was found in the impugned orders.
Ratio Decidendi: A pending reference under the sick industrial company law abates by operation of law when secured creditors representing not less than three-fourth in value of the amount outstanding, understood as dues payable to those secured creditors, take measures under Section 13(4) of the securitisation law.
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