TaxTMI 
TaxTMI 
2016 (2) TMI 132
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Companies (Special Provisions) Act, 1985, the Appellant company was declared sick and ICICI was appointed as the Operating Agency to formulate a rehabilitation scheme. On 3.7.1991, the first rehabilitation scheme prepared by the Operating Agency was sanctioned, which envisaged the takeover of the appellant company by one Mahavir Plantation Limited - i.e. appellant No.2. The first scheme was finally declared a failure, and the Appellant No.1 company, on 17.1.1995, was directed to submit a fresh, comprehensive, revised rehabilitation scheme which was duly circulated. Objections to the said scheme were heard by the BIFR and the scheme finally sanctioned was in the form of a change of management of the appellant no.1 company subject to various modifications to be carried out. After the Appellant No.1 company's management changed hands, the second scheme, after being reviewed from time to time, was declared as failed on 16.5.2000. Despite efforts by the Operating Agency to attempt to revive the company, all such efforts failed, and ultimately, on 30.4.2001, BIFR, on the basis of the recommendation of the Operating Agency, formed a prima facie opinion that the appellant No.1 company s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the opinion of the BIFR under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, the Bombay High Court wound up the appellant No.1 company. 7. While matters stood thus, the Delhi High Court passed the impugned order on 24.7.2008, as has been stated hereinabove, in which it was of the view that Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985, when construed to include all proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, would make the present proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, abate on the facts of this case. Ultimately, in this view of the matter, and differing with a judgment of the Orissa High Court, the Delhi High Court disposed of the appellants' writ petition as having become infructuous. 8. Appeals have been filed against the said order by the present appellants which appeals, as has been stated hereinabove, raise interesting questions of law on the interplay of the Sick Industrial Companies (Special Provisions) Act, 1985 with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt in KSL & Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166, which held that the Sick Industrial Companies (Special Provisions) Act, 1985 has overridden the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993. The said Act, being a predecessor to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and dealing with the same subject matter as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - namely, recovery of debts due to banks and financial institutions, would lead to the conclusion that the 2002 Act is also overridden. He further contended that Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 expressly refers to the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993, and since Section 34(2) of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993, refers to the Sick Industrial Companies (Special Provisions) Act, 1985, Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 should ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orresponding section, namely, Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, expressly omits any reference to the Sick Industrial Companies (Special Provisions) Act, 1985, making it clear that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. That being the case, he argued that this Court's judgment in KSL & Industries Ltd. Vs. Arihant Threads Ltd., (2015) 1 SCC 166, is, therefore, clearly distinguishable. He also argued that at the end of the day, since the movable property of the appellant No.1 company had been sold off, and since various High Courts - including Bombay and Madras - have passed a number of orders, both winding up the company and dismissing petitions challenging the action of his client in proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, all that remains is sale of the immovable property of the appellant No.1 Company and that, therefore, nothing really remains in these appeals, which ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding, anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. (2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned under section 18 notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....maining suspended or modified shall become revived and enforceable as if the declaration had never been made; and (ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded. Section 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, 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 indu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Interest Act, 2002 Section 13. Enforcement of security interest (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub- section (4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3A) If,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5A) Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the secured creditor, if so authorised by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale. (5B) Where the secured creditor, referred to in sub-section (5A), is declared to be the purchaser of the immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, under sub-section (4) of section 13. (5C) The provisions of section 9 of the Banking Regulation Act, 1949(10 of 1949) shall, as far as may be, apply to the immovable property acquired by secured creditor under sub-section (5A).] (6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... PROVIDED ALSO that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen's dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen's dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator: PROVIDED ALSO that in case the secured creditor deposits the estimated amount of workmen's dues, such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator: PROVIDED ALSO that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any. Explanation: For the purposes of this sub-section,-- (a) "record date" means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsert the following:-- "(vii) the securitisation company or the reconstruction company which has obtained a certificate of registration under sub-section (4) of section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002". 1956 42 The Securities Contracts (Regulation) Act 1956 In section 2 in clause (h) after sub-clause (ib) insert the following:-- " (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002". 1986 1 The Sick Industrial Companies (Special Provisions) Act 1985 In section 15 in sub-section (1) after the proviso insert the following:-- "PROVIDED FURTHER that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 where financial assets have been acquired by any securitisation company or reconstruction company under sub-section (1) of section 5 of that Act: PROVIDED ALSO that on or after the commencement of the Securitisation a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rehabilitate the potentially viable sick industrial companies as quickly as possible. It would also be equally imperative to salvage the productive assets and realize the amounts due to the banks and financial institutions, to the extent possible, from the non-viable sick industrial companies through liquidation of those companies. It has been the experience that the existing institutional arrangements and procedures for revival and rehabilitation of potentially viable sick industrial companies are both inadequate and time-consuming. A multiplicity of laws and agencies makes the adoption of coordinated approach for dealing with sick industrial companies difficult. A need has, therefore, been felt to enact in public interest a legislation to provide for timely determination by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable despatch. The salient features of the Bill are- (i) application of the legislation to the industries specified in the First Schedule to the Industries (Development and Regulation) A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act, 1951, and must be a company registered for not less than 5 years, which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth. An inquiry into the working of such "sick industrial company" is to be made by the said Board on receipt of a reference or upon application or suo motu. If the Board is satisfied that the Company has indeed become a sick industrial company, the Board shall decide as to whether it is practicable for the Company to make its net worth positive within a reasonable time. This it may do under Section 17 of the Act, by order under sub-section (2) of Section 17. If this is not possible, then the Board may appoint an Operating Agency who will prepare a scheme for rehabilitation mentioned in Section 18 which the Board may then sanction. The scheme may provide for all or any of the things mentioned in the said Section, and finally, the scheme may work successfully, resulting in the Company's net worth turning positive, or may be unsuccessful. In the event of it being unsuccessful, the Board may modify such scheme or ask for the preparation of a new scheme. If, at the end of the day, the first scheme or any successive s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by banks and financial institutions and suggested remedial measures including changes in law. The Tiwari Committee had also suggested setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The setting up of Special Tribunals will not only fulfill a long-felt need, but also will be an important step in the implementation of the Report of Narasimham Committee. Whereas on 30th September, 1990 more than fifteen lakhs of cases filed by the public sector banks and about 304 cases filed by the financial institutions were pending in various courts, recovery of debts involved more than Rs. 5622 crores in dues of Public Sector Banks and about Rs. 391 crores of dues of the financial institutions. The locking up of such huge amount of public money in litigation prevents proper utilisation and recycling of the funds for the development of the country. The Bill seeks to provide for the establishment of Tribunal and Appellate Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. Notes on clauses explain in detail the provisions of the Bill." 17. The Recovery Of Debts Due T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisition and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institution....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al and a second appeal to the Appellate Debts Recovery Tribunal; (k) setting up or causing to be set up a Central Registry by the Central Government for the purpose of registration of transactions relating to securitisation, asset reconstruction and creation of security interest; (l) application of the proposed legislation initially to banks and financial institutions and empowerment of the Central Government to extend the application of the proposed legislation to non-banking financial companies and other entities; (m) non-application of the proposed legislation to security interests in agricultural lands, loans not exceeding rupees one lakh and cases where eighty per cent, of the loans are repaid by the borrower. 3. The Bill seeks to achieve the above objects." 19. This Act was brought into force as a result of two committee reports which opined that recovery of debts due to banks and financial institutions was not moving as speedily as expected, and that, therefore, certain other measures would have to be put in place in order that these banks and financial institutions would better be able to recover debts owing to them. 20. In a challenge made to the Securiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... flow of money is essential for any healthy and growth-oriented economy. But certainly, what must be kept in mind is that the law should not be in derogation of the rights which are guaranteed to the people under the Constitution. The procedure should also be fair, reasonable and valid, though it may vary looking to the different situations needed to be tackled and object sought to be achieved. In its Second Report, the Narasimham Committee observed that NPAs in 1992 were uncomfortably high for most of the public sector banks. In Chapter VIII of the Second Report the Narasimham Committee deals about legal and legislative framework and observed: "8.1. A legal framework that clearly defines the rights and liabilities of parties to contracts and provides for speedy resolution of disputes is a sine qua non for efficient trade and commerce, especially for financial intermediation. In our system, the evolution of the legal framework has not kept pace with changing commercial practice and with the financial sector reforms. As a result, the economy has not been able to reap the full benefits of the reforms process. As an illustration, we could look at the scheme of mortgage in the Tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the borrower requiring him to discharge the liabilities within a period of 60 days failing which the secured creditor would be entitled to take any of the measures as provided in sub-section (4) of Section 13. It may also be noted that as per sub-section (3) of Section 13 a notice given to the borrower must contain the details of the amounts payable and the secured assets against which the secured creditor proposes to proceed in the event of non-compliance with the notice given under sub-section (2) of Section 13." [at para 34,36 and 38] 21. The "pivotal" provision namely Section 13 of the said Act makes it clear that banks and financial institutions would now no longer have to wait for a Tribunal judgment under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 to be able to recover debts owing to them. They could, by following the procedure laid down in Section 13, take direct action against the debtors by taking possession of secured assets and selling them; they could also take over the management of the business of the borrower. They could also appoint any person to manage the secured assets possession of which has been taken over by them, and could re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the Bombay High Court dated 30.8.2007 being in the teeth of the stay order and Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, is non est and therefore the appeals before this Court have not become infructuous. If Shri C.N. Sreekumar is right, then after enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, because of the presence of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, none of the measures taken by the secured creditors under Section 13 of Securitisation Act can be proceeded with because of the bar contained in Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Hence, we have first to determine whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 overrides Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 as such overriding is only to the extent of the inconsistency between the two enactments. Such inconsistency is found in Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, by which any action taken to real....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the said Act as to disposal of such property of a notified party. The legislature expressly overrode Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and permitted the custodian to give directions under Section 11 of the Special Courts Act, 1979, notwithstanding Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. 27. In Jay Engineering Works Ltd. v. Industry Facilitation Council and Anr., (2006) 8 SCC 677, this time this Court had to deal with the Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 vis-à-vis the Sick Industrial Companies (Special Provisions) Act, 1985. Both Acts contained non obstante clauses. This Court referred to the 1994 amendment to the Sick Industrial Companies (Special Provisions) Act, 1985 and stated that the amending Act being later than the 1993 Act, the Sick Industrial Companies (Special Provisions) Act, 1985 would, therefore, prevail. (See paragraph 27). 28. Similarly, in Morgan Securities and Credit Pvt. Ltd. v. Modi Rubber Ltd., (2006) 12 SCC 642, the Arbitration and Conciliation Act, 1996 contained a non obstante clause in Section 5 thereof. Despit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s) Act, 1985 held:- "Sub-section (2) was added to Section 34 of the RDDB Act w.e.f. 17-1-2000 by Act 1 of 2000. There is no doubt that when an Act provides, as here, that its provisions shall be in addition to and not in derogation of another law or laws, it means that the legislature intends that such an enactment shall coexist along with the other Acts. It is clearly not the intention of the legislature, in such a case, to annul or detract from the provisions of other laws. The term "in derogation of" means "in abrogation or repeal of". The Black's Law Dictionary sets forth the following meaning for "derogation": "derogation.-The partial repeal or abrogation of a law by a later Act that limits its scope or impairs its utility and force." It is clear that sub-section (1) contains a non obstante clause, which gives the overriding effect to the RDDB Act. Sub-section (2) acts in the nature of an exception to such an overriding effect. It states that this overriding effect is in relation to certain laws and that the RDDB Act shall be in addition to and not in abrogation of, such laws. SICA is undoubtedly one such law. There is no doubt that both are special laws. SICA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he principle that the legislature was aware that it had enacted the earlier Act and yet chose to enact the subsequent Act with a non obstante clause. In this case, however, the express intendment of Parliament in the non obstante clause of the RDDB Act does not permit us to take that view. Though the RDDB Act is the later enactment, sub-section (2) of Section 34 thereof specifically provides that the provisions of the Act or the Rules made thereunder shall be in addition to, and not in derogation of, the other laws mentioned therein including SICA." [at paras 36, 39, 40, and 48] 33. A conspectus of the aforesaid decisions shows that the Sick Industrial Companies (Special Provisions) Act, 1985 prevails in all situations where there are earlier enactments with non obstante clauses similar to the Sick Industrial Companies (Special Provisions) Act, 1985. Where there are later enactments with similar non obstante clauses, the Sick Industrial Companies (Special Provisions) Act, 1985 has been held to prevail only in a situation where the reach of the non obstante clause in the later Act is limited - such as in the case of the Arbitration and Conciliation Act, 1996 - or in the case of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., and not by the exception thereto carved out by Section 37. Further, whereas the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is expressly mentioned in Section 37, the Sick Industrial Companies (Special Provisions) Act, 1985 is not, making the above position further clear. And this is in stark contrast, as has been stated above, to Section 34(2) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which expressly included the Sick Industrial Companies (Special Provisions) Act, 1985. The new legislative scheme qua recovery of debts contained in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has therefore to be given precedence over the Sick Industrial Companies (Special Provisions) Act, 1985, unlike the old scheme for recovery of debts contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. 35. Another interesting pointer to the same conclusion is the fact that Section 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is not made subject to Section 37 of the said Act. This statutory sche....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Parliament has taken after enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is also of some relevance in this context. The Eradi Committee Report relating to insolvency and winding up of companies dated 31.7.2000, observed that out of 3068 cases referred to the BIFR from 1987 to 2000 all but 1062 cases have been disposed of. Out of the cases disposed of, 264 cases were revived, 375 cases were under negotiation for revival process, 741 cases were recommended for winding up, and 626 cases were dismissed as not maintainable. These facts and figures speak for themselves and place a big question mark on the utility of the Sick Industrial Companies (Special Provisions) Act, 1985. The Committee further pointed out that effectiveness of the Sick Industrial Companies (Special Provisions) Act, 1985 as has been pointed out earlier, has been severely undermined by reason of the enormous delays involved in the disposal of cases by the BIFR. (See paragraphs 5.8, 5.9 and 5.15 of the Report). Consequently, the Committee recommended that the Sick Industrial Companies (Special Provisions) Act, 1985 be repealed and the provisions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Companies (Special Provisions) Act, 1985 has been statutorily sought to be excluded, Parliament veering around from wanting to protect sick industrial companies and rehabilitate them to giving credence to the public interest contained in the recovery of public monies owing to banks and financial institutions. These provisions also show that the aforesaid construction of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 vis-à-vis the Sick Industrial Companies (Special Provisions) Act, 1985, leans in favour of creditors being able to realize their debts outside the court process over sick industrial companies being revived or rehabilitated. In fact, another interesting document is the Report on Trend and Progress of Banking in India 2011-2012 for the year ended 30.6.2012 submitted by the Reserve Bank of India to the Central Government in terms of Section 36(2) of the Banking Regulation Act, 1949. In table IV.14 the report provides statistics regarding trends in Non-performing Assets bank-wise, group-wise. As per the said table, the opening balance of Non-performing Assets in public sector banks for the y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....strial Companies (Special Provisions) Act, 1985, Section 37 should also be construed so as to include a reference to the Sick Industrial Companies (Special Provisions) Act, 1985. Quite apart from driving a coach-and-four through the object sought to be achieved by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, this argument does not commend itself to us for the obvious reason that Section 34(2) refers to the Sick Industrial Companies (Special Provisions) Act, 1985 only for the purpose of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 and for no other purpose. This is quite apart from the fact that, as has been noted hereinabove, the non-reference to the Sick Industrial Companies (Special Provisions) Act, 1985 in Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was deliberate, as has been held by us hereinabove. 43. Shri Sundaram is also correct when he refers to the judgment of this Court in Shree Chamundi Mopeds v. Church of South India Trust Association, (1992) 3 SCC 1. In the said judgment, this Court has held: "In the in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d February 21,1991 by the Delhi High Court staying the operation of the order of the Appellate Authority dated January 7,1991 does not have the effect of reviving the appeal which had been dismissed by the Appellate authority by its order dated January 7, 1991 and it cannot be said that after February 21, 1991, the said appeal stood revived and was pending before the Appellate Authority. In that view of the matter, it cannot be said that any proceedings under the Act were pending before the Board or the Appellate Authority on the date of the passing of the order dated August 14, 1991 by the learned Single Judge of the Karnataka High Court for winding up of the company or on November 6, 1991 when the Division Bench passed the order dismissing O.S.A.No. 16 of 1991 filed by the appellant company against the order of the learned Single Judge dated August 14, 1991. Section 22(1) of the Act could not, therefore, be invoked and there was no impediment in the High Court dealing with the winding up petition filed by the respondents....." [at para 10] 44. A reading of the said judgment also shows that the order of stay of the BIFR's opinion to wind up the company and the dismissal of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dgment reported in Noble Aqua Pvt. Ltd. v. State Bank of India, AIR 2008 Orissa 103, which has held that the expression "reference" would only refer to the initial stage of filing a reference before the BIFR and not to subsequent stages thereof, namely inquiry, preparation and sanction of schemes. It has to be determined as to which of these two sets of judgments is a correct exposition of the law. 47. It is clear that a purely literal interpretation of the expression "where a reference is pending" can yield the result that the Orissa High Court reached. In fact, Chapter III of the Sick Industrial Companies (Special Provisions) Act, 1985 specifically refers, in the Chapter heading, to references, inquiries and schemes. While Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 deals with references, Section 16 deals with inquiries into the working of Sick Industrial Companies. Section 18 then deals with preparation and sanction of schemes. 48. What has to be examined is whether this purely literal rendering of the expression "where a reference is pending" is correct or not. First and foremost, it is important to note that the third proviso to Section 15(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eference can never be said to be pending after an inquiry commences, if learned counsel for the Appellants is correct. This can never be the case. It is clear, therefore, that the expression "where a reference is pending" would necessarily include the inquiry stage before the Board under Section 16 of the Act. If this be the case, then the reference can be said to be pending not only when an inquiry is instituted, but also after preparation and sanction of a scheme right till the stage the scheme has worked out successfully or till the BIFR gives its opinion to wind up the company. 49. The expression "reference" used in Section 15(1) proviso 3 is used in contra distinction to the expression "proceedings" in Section 22. "Proceedings" under Section 22 are actions taken against the sick company, whereas "references" are actions initiated by a sick company - it is perhaps for this reason that the third proviso to Section 15(1) uses the expression "reference" instead of the expression "proceedings". 50. Another important aspect as to the construction of the third proviso to Section 15(1) is the meaning of the expression "such reference shall abate". One of the meanings of the expr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aking any such measures. This construction of the third proviso to Section 15(1) is in keeping with the march of events post 2002, when the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 came to be enacted pursuant to various committee reports, and for the reasons outlined hereinabove. 51. A recent judgment of this Court in Pegasus Assets Reconstruction P. Ltd. v. M/s. Haryana Concast Limited & Anr., (Civil Appeal No. 3646 of 2011), has held, agreeing with a judgment of the Delhi High Court, and disapproving a judgment of the Punjab and Haryana High Court, that a Company Court exercising jurisdiction under the Companies Act, has no control in respect of sale of a secured asset by a secured creditor in exercise of powers available to such creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Some of the observations made by this Court are interesting in that this Court has held that the Securitisation Act is a complete code in itself, and that earlier judgments rendered in the context of the State Financial Corporation Act, 1951 or the Recovery Of Debts Due To ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....debt in the manner provided by Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, such secured creditor may realise such secured debt under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, notwithstanding the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. 3. In a situation where there are more than one secured creditor of a sick industrial company or it has been jointly financed by secured creditors, and at least 60 per cent of such secured creditors in value of the amount outstanding as on a record date do not agree upon exercise of the right to realise their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to have full play. 4. Where, under Section 13(9) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the case of a sick industrial company having more than one secured ....