TaxTMI 
TaxTMI 
2008 (5) TMI 423
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....s a company registered and incorporated under the 1956 Act. It took loan from Tata Finance Ltd., predecessor-in-interest of the appellant on interest @ 18 per cent per annum. Disputes and differences arose between the parties, which were referred to arbitral Tribunal. An award was passed on 30-7-2002 in the Arbitration proceedings for a sum of Rs. 1,51,36,795 together with interest @ 18 per cent per annum till payment and/or realization, it is stated that the total amount due to the appellant from the respondent would be near about 5.7 crores of rupees. There were other secured and unsecured creditors also. Proceedings under SICA 4. Respondent being unable to pay the dues made a reference in terms of section 15 of SICA before the Board for Industrial and Financial Reconstruction (BIFR). The BIFR appointed Industrial Development Bank of India (IDBI) as an operating agency. It purported to have considered various schemes. However, as Unit Trust of India (UTI) raised an objection for giving up any of its dues and there were six secured creditors and large number of unsecured creditors, BIFR on or about 27-10-2004 passed an order recommending winding up of the respondent. An appe....
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....provisions of the Companies Act. That the non obstante clause contained in the Sick Industries Act will have the effect of overriding and excluding the provisions of the Companies more so where there is an overlapping between the two Acts. That considering the scheme of the Sick Industries Act, the revival/restructing of the company cannot be considered by two separate forums separately. That the scheme involved financial reconstruction, sale of assets of the company and merger/take over by Wanbury. These issues expressly fall within the domain of the BIFR under section 18 of the Sick Industries Act. That a scheme could not be presented only in respect of selected unsecured creditors to the exclusion of the other similarly placed unsecured creditors such as the Petitioners. That the entire scheme was nothing but a fraud which was being played whereby the company and its assets were being transferred to Wanbury which was associated with the company itself." UTI also filed an objection 8. The said contentions of the appellant, however, were rejected by a learned Single Judge of the High Court by his order dated 13-4-2006 and the Scheme was approved. Order of t....
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....ing the appellant were heard. By an order dated 1-5-2007, BIFR is said to have sanctioned the Scheme-cum-merger of M/s. Wanbury Ltd. with the respondent. 12. We may also place on record that inter alia on the premise that the said Scheme of merger was approved in gross violation of this Court's order dated 15-12-2006, a contempt petition was filed. We are not concerned with the said Contempt Petition herein. Contentions 13. Mr. R.F. Nariman, learned Senior Counsel appearing on behalf of the appellant, in support of this appeal would submit :- 1.SICA being a special statute, the provision thereof shall prevail over the provisions of the 1956 Act. 2.The High Court committed a manifest error in entertaining the respondent's application for merger under sections 391 to 394 of the Act, although the matter was pending before the AAIFR. 3.The High Court failed to notice the binding precedent of this Court in NGEF Ltd. v. Chandra Developers (P.) Ltd. [2005] 8 SCC 219 wherein it has clearly been held that SICA will prevail over the 1956 Act. 4.The Division Bench of the High Court has failed to consider that the Company Judge had no jurisdiction to entertain any proceedi....
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....ed in section 18 in relation to the said company, it may, as soon as may be, by order in writing, direct any operating agency specified in the order to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to such company." 17. Section 18 provides for preparation and sanction of Scheme. Sections 18(1)(c), 18(3) and 18(6A) read as under :- "Section 18. Preparation and sanction of Schemes.-(1) Where an order is made under sub-section (3) of section 17 in relation to any sick industrial company, the operating agency specified in the order shall prepare, as expeditiously as possible and ordinarily within a period of ninety days from the date of such order, a scheme with respect to such company providing for any one or more of the following measures, namely :- ****** (c)the amalgamation of- (i)the sick industrial company with any other company, or (ii)any other company with the sick industrial company; (hereafter in this section, in the case of sub-clause (i ), the other company, and in the case of sub-clause (ii), the sick industrial company, referred to as 'transferee company'); (3)(a) The S....
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....iefs or concessions or sacrifices from the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority (any Government, bank, institution or other authority required by a scheme to provide for such financial assistance being hereafter in this section referred to as the person required by the scheme to provide financial assistance) to the sick industrial company. (2) Every scheme referred to in sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of sixty days from the date of such circulation or within such further period, not exceeding sixty days, as may be allowed by the Board, and if no consent is received within such period or further period, it shall be deemed that consent has been given. (4) Where in respect of any scheme consent under sub-section (2) is not given by any person required by the scheme to provide financial assistance, the Board may adopt such other measures, including the winding up of the sick industrial company, as it may deem fit." Sections 20, 26 and 32 of....
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....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 1961), shall subject to the modifications that the power of the Central Government under that section may be exercised by the Board without any recommendation by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company." The Companies Act, 1956 Section 391 of the Companies Act, 1956 reads as under :- "Section 391 - Power to compromise or make arrangements with creditors and members.-(1) Where a compromise or arrangement is proposed- (a)between a company and its c....
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.... (6) The Tribunal may, at any time after an application has been made to it under this section stay the commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of." Interpretation of the Statutory Provisions 19. It was conceded by Mr. Sundaram SICA being a special law vis-a-vis the 1956 Act, it shall prevail over the latter. The learned Counsel, however, qualifies his submission by contending that SICA only excludes the provisions of the Companies Act when they are inconsistent with each other. The provisions of a special Act will override the provisions of a general Act. A later of it will override an earlier Act. 1956 Act is a general Act. It consolidates and restates the law relating to companies and certain other associations. It is prior in point of time to SICA. Wherever any inconstancy is seen in the provisions of the two Acts, SICA would prevail. SICA furthermore is a complete code. It contains a non-obstante clause in Section 32. 20. SICA is a special statute. It is a self contained Code. The jurisdiction of the Company Judge in a case where reference had ....
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....c., after commencement of winding up.- (1)****** (2) In the case of a winding up by the Tribunal, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the Tribunal otherwise orders, be void." (pp. 228-230) In regard to jurisdiction of the Company Court it was held :- "39. The provisions of SICA contain non obstante clauses. It is a special statute. It is a complete code in itself. The jurisdiction of the Company Court in such matters would arise only when BIFR or AAAIFR, as the case may be, has exercised its jurisdiction under section 20 of SICA recommending winding up of the company upon arriving at a finding that there does not exist any chance of revival of the company." (p. 233) It was furthermore held :- "40. Mr. Venugopal has placed reliance upon a decision of a learned Single Judge of the Karnataka High Court in Karnataka State Industrial Investment and Development Corpn. Ltd. v. Intermodel Transport Technology Systems AIR 1998 Kar. 195 for the proposition that despite the fact BIFR retai....
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.... Despite the fact that the procedures laid down under the Companies Act would be applicable therefor but they must be read with sub-section (4) of section 20 of SICA which contains a non obstante clause and in terms thereof, BIFR is authorised to sell the assets of the sick industrial company in such a manner as it may deem fit. By reason of the said provision, BIFR is also empowered to forward the sale proceeds to the High Court for orders for distribution in accordance with section 529A and other provisions of the Companies Act which in no uncertain terms would mean that the distribution of the sale proceeds would be for the purpose of meeting the claims of the creditors in the manner laid down therein. The intention of Parliament in enacting the said provision becomes clear as in terms of section 22A of SICA, BIFR is empowered to issue any direction in the interest of the sick industrial company or its creditors or shareholders and direct the sick industrial company not to dispose of its assets except with its assent. Section 32, as noticed hereinbefore, again contains a non obstante clause. The scheme suggests that BIFR retains control over the assets of the company and in term....
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....f any provision empowering it to delegate its power in favour of any other authority had no jurisdiction to do so. 'Delegatus non potest delegare' is a well-known maxim which means unless expressly authorised a delegatee cannot sub-delegate its power. Moreover, the said observations of BIFR would only mean that the Company Court could exercise its power in accordance with law and not de hors it. If the Company Court had no jurisdiction to pass the impugned order, it could not derive any jurisdiction only because BIFR said so." (p. 241) (See also Morgan Securities & Credit (P.) Ltd. v. Modi Rubber Ltd. AIR 2007 SC 683^1. 22. The principle laid down therein has been reiterated in Bombay Dyeing & Mfg. Co. Ltd. v. Bombay Environmental Action Group [2006] 3 SCC 434^2 stating :- "13. The 1993 Act was enacted to provide for and regulate the payment of interest on delayed payments to small-scale and ancillary industrial undertakings and for matters connected therewith. 14. The provisions of the 1993 Act, therefore, do not envisage a situation where an industrial company becomes sick and requires framing of a scheme for its revival. 15. It is no doubt true that an award in re....
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....yment but on that account the real character of the jurisdiction exercised by the High Court is not altered. Nor is there any substance in the contention that the authority to order payment of a debt under section 187 is merely a power of the High Court and not its jurisdiction. By section 3 read with section 187 of the Companies Act the High Court has jurisdiction to direct payment of the amount due by a contributory : and an order passed for payment manifestly is an order passed in exercise of the jurisdiction vested in the High Court by section 3 read with section 187 of the Companies Act. " It was furthermore observed :- "The jurisdiction to deal with the claims of companies ordered to be wound up is conferred by the Indian Companies Act and to that extent the Letters Patent are modified. There is, however, no difference in the character of the original civil jurisdiction which is conferred upon the High Court by Letters Patent and the jurisdiction conferred by special Acts. When in exercise of its authority conferred by a special statute the High Court in an application presented to it as a court of first instance declares liability to pay a debt, the jurisdiction exerci....
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....te between the parties was eminently a civil dispute and not a dispute under the provisions of the Companies Act. Section 9 of the Code of Civil Procedure confers jurisdiction upon the civil courts to determine all disputes of civil nature unless the same is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be readily inferred. A provision seeking to bar jurisdiction of a civil court requires strict interpretation. The Court, it is well settled, would normally lean in favour of construction, which would uphold retention of jurisdiction of the civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is ousted. (See Sahebgouda v. Ogeppa [2003] 3 Supreme 13. Even otherwise, the civil court's jurisdiction is not completely ousted under the Companies Act, 1956." (p. 33) We are, therefore, of the opinion that the judgment of the High Court cannot be sustained. We may furthermore notice that the decision of the learned single judge has been overruled by a Division Bench of the Bombay High Court in Ashok Organic Industries Ltd. v. Dena Bank [Company Petition No.....