AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2008 (1) TMI 630
X X X X Extracts X X X X
X X X X Extracts X X X X
....ide the deed of mortgage/memorandum of entry, the petitioner had created the security of the loan as mentioned hereinafter : "Factory building built on land measuring 0B-18B-4B (2723-1/3 sq. yards) comprised in Khata No. 175/330, Khasra No. 397, Khata No. 254/478, 479, Khasra No. 396, Khata No. 251/473, Khasra No. 109, situated in village Jugiana, Tehsil and District Ludhiana together with building constructed thereon and machinery installed thereon." 2. The petitioner defaulted in repayment of the above said loans of the respondents and approximately a sum of Rs. 71.20 lakhs was due towards both the respondents. As per the case of the petitioner, with the intention to pay the above said dues to respondent-Corporation, the petitioner-company vide separate letters dated June 20, 2003 and June 25, 2003, had approached both the respondents for one-time settlement for a sum of Rs. 65 lakhs which constitutes 91 per cent, of the aggregate outstanding principal sum of Rs. 71.20 lakhs towards both the respondents. Further, it is the case of the petitioner that respondent No. 2 vide its letter dated July 1, 2003, insisted upon the proposal for 100 per cent, of the said outstanding amount ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cy and the matter before the BIFR is still pending. The petitioner has also placed on record a copy of the letter dated September 12, 2006, annexure P7, whereby it had requested respondent No. 1 for rehabilitation of the unit. Vide annexure P9 dated December 27, 2006, the petitioner also requested respondent No. 1 to accept the one-time settlement proposal. The petitioner has further stated that respondent No. 1 issued a demand notice dated January 9, 2007, under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (hereinafter referred to as "the Securitisation Act"), requiring him to discharge his liabilities towards the respondents and advised him to pay the entire outstanding dues to respondent No. 1 amounting to Rs. 257.33 lakhs with further interest from July 31, 2006 and Rs. 146.25 lakhs with further interest from July 31, 2006, to PSIDC within 60 days from the date of the notice. Through this notice, it was also stated that in case the petitioner failed to repay the entire outstanding dues, the Corporation shall be entitled to exercise its rights as provided under section 13(4) of the Securitisation Act. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate the reasons for non-acceptance of the objections filed by the petitioner within a period of one week on the receipt of objection and, therefore, the respondents are further precluded from taking any action against the petitioner under section 13(4) of the Securitisation Act. 7. In support of his contention, learned counsel for the petitioner has relied upon the judgment cited as Rishabh Agro Industries Ltd. v. P. N. B. Capital Services Ltd. [2000] 101 Comp Cas 284 (SC) ; [2001] (Banking) J 81 and Harminder Singh v. State Bank of India [2007] 4 PLR 746. 8. On the other hand, counsel for the respondents has argued that section 35 of the Securitisation Act has an overriding effect over all the other laws if such other laws are inconsistent with the provisions of this Act and moreover in view of the proviso to section 15(1) of the SICA, the proceedings before the BIFR would abate as the total amount of loan due to the secured creditors represents 100 per cent, of the value of the amount outstanding against the financial assets disbursed to the petitioner. It has been further argued that the writ petition for quashing the notice under section 13(2) of the Securitisation Act is not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... also that on or after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where a reference is pending before the Board for Industrial and Financial Reconstruction, such reference shall abate if the secured creditors, representing not less than three-fourths in value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors, have taken any measures to recover their secured debt under sub-section (4) of section 13 of that Act. (2) Without prejudice to the provisions of sub-section (1), the Central Government or the Reserve Bank or a State Government or a public financial institution or a State level institution or a scheduled bank may, if it has sufficient reasons to believe that any industrial company has become, for the purposes of this Act, a sick industrial company, make a reference in respect of such company to the Board for determination of the measures which may be adopted with respect to such company : Provided that a reference shall not be made under this sub-section in respect of any industrial company by- (a)the Government of any State unless all ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be specified by the Board : Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate. (4) Any declaration made under sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decre....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... shall be amended in the manner specified therein." 13. In view of the amendment carried out in section 15 of the SICA and the overriding effect of the provisions of the Securitisation Act, the contention of counsel for the petitioner to the effect that all the proceedings of recovery of dues are to remain stayed in pursuance of provisions of section 22(1) of the SICA is liable to be rejected. It is also relevant to note that the total amount of loan represents 100 per cent, of the value of the amount outstanding against the financial assets disbursed to the petitioner by the respondent-Corporations and once the respondents have initiated action under the provisions of the Securitisation Act, the proceedings before the BIFR are deemed to have abated. The reliance of Shri I. S. Ratta, counsel for the petitioner on Rishabh Agro Industries Ltd. v. P. N. B. Capital Services Ltd. [2000] 101 Comp Cas 284 (SC) ; [2001] (Banking) J 81, is misplaced. The said judgment is not applicable to the facts of the present case as in the said case the hon'ble Supreme Court has interpreted the provisions of section 22(1) of the SICA vis-a-vis the provisions of the Companies Act and the proviso to sec....