TaxTMI 
TaxTMI 
2017 (1) TMI 1113
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....tiated by fraud and hence it is liable to be declared null and void. 2. According to the petitioner, it is a public limited company with equity participation of Kerala State Industrial Development Corporation; it was registered under the Companies Act and it was engaged in the manufacture of cotton textiles and ready made garments; its project was financed by the Federal Bank-the 4th respondent; but the project failed since the Government refused to provide supply of power; since the unit could not be functioned, the orders secured by it got cancelled; on account of the financial crisis, the company could not repay the loan and the bank initiated coercive steps; even though its obligation for repayment arose only after regular commercial production was started, the 4th respondent Bank initiated proceedings for recovery well before that. It is also alleged that the financial crisis of the petitioner's industrial company is contribution of the bank, apart from that of KSEB, Government, etc. 3. The Bank filed O.A. 46 of 1999 before the Debt Recovery Tribunal, Ernakulam ('DRT' for short)on 14.1.1999. When the O.A was pending, the petitioner approached the BIFR with an app....
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....ed on the cover enclosing the notice sent to the petitioner from the BIFR, would reveal that the notice informing the date of hearing scheduled on 17.7.2007 was dispatched only on 25.07.2007. The petitioner submits that the Bank managed to obtain an ex-parte order by playing fraud. It is alleged that the respondent/bank managed to obtain the impugned order of de-registration by manipulation with the connivance of the staff of the BIFR and playing fraud by ensuring that notice of hearing was dispatched to it only after the hearing of the case was over. Accordingly it was only after the hearing was held and order was passed on 17.7.2007, that the notice of hearing was posted on 25.07.2007 to the address of the petitioner in Ernakulam; it was returned to the office of the BIFR as the petitioner was out of station at the relevant time. According to the petitioner, when it came to know about it on 1.1.2009, its Managing Director flew from Switzerland to Delhi on 31.12.2008 and obtained copies of the orders relating to the case of the petitioner, he got the certified copies of the proceedings for communication and from those certified copies, it is clear that it was dispatched only after....
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....irectors, on account of which there were several litigations also. The request of the bank to the directors to sort out a viable plan to settle the liabilities did not evoke any positive result. The petitioner had filed application before the BIFR only on 24.12.1999. On 13.2.2002, when the Board had, by Ext.P1, declared the company as sick, the Board had noticed that the absence of the petitioner despite the service of notice, indicated its unwillingness to revive the company. However it appointed the bank as the coordinating agency. According to the bank, the Managing Director Sri Varghese Mundackal himself had in Ext.R4(a) letter on 28.09.2001 sought for a one time settlement of this loan by remitting a sum of Rs. 3 crores, in which he stated that the bank was kind enough to bear with him in his effort to revive the unit. He had also stated that the petitioner was not interested in a revival package as it would take several years for finalisation; on the basis of his request the Bank had taken a decision to accept a sum of Rs. 3,05,00,000/- in full settlement in case it was remitted before 31.03.2002 and Ext.R4(b) letter was sent to the Managing Director. Further it is stated tha....
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.... produced the copy of the dispatch record also as Ext.R2(d). The dispatch record of the summary of proceedings of 17.7.2007, sent to the petitioner on 25.7.2007 and returned undelivered is also produced as Ext.R2(e). It is stated that the article sent to the petitioner on 25.7.2007 was the summary of proceedings of 17.7.2007 and not that of the hearing. It is stated that the petitioner could have taken up the matter in appeal. 11. The petitioner has filed reply affidavits disputing the statements of both the respondents and reiterating the contention that the notice was sent to it after the hearing was over. 12. Relying on the judgments in Noble Acqua Pvt. Ltd. & Ors. v. State Bank of India and Ors : 2008 KHC 7984, Jay Engineering Works Ltd. v. Industry Facilitation Council and Anr. (2006) 8 SCC 677, Meghamala & Ors. v. V.G.Narasimha Reddy and Ors : (2008) 3 SCC 383. Raheja Universal Limited v. NRC Ltd. and Ors ::(2012) 4 SCC 148, and KSL & Industries Ltd. v. Arihant Threads Ltd. : (2015) 1 SCC 166, etc. the petitioner argued that Ext.P6 order is liable to be set aside and the Bank should not have been permitted to enforce the proceedings of DRT in the light of the specific bar i....
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....e decisions when there is an order under the SARFAESI Act, the proceedings under the SARFAESI Act will prevail over the proceedings under the SICA. 15. The learned counsel appearing for the BIFR argued that the writ petition was filed 2 years after the de-registration was ordered. Moreover, it was pointed out that there are disputed questions of facts alone in this writ petition and therefore this is not a matter to be adjudicated under Article 226 of the Constitution of India. As against orders passed by the BIFR there is a provision for appeal under Section 25 of SICA. However, there cannot be an adjudication of questions of fact. Even under the provisions of SICA there is no provision to reopen the proceedings before the BIFR. The learned Standing Counsel relied on the judgment of the apex court in Central Bank of India V Rooplal Bansal [(1999) 9 SCC 254], Orissa Agro Industries Corporation Ltd & others V Bharati Industries [(2005) 12 SCC 725] and State of Kerala & others V M.K. Jose [(2015) 9 SCC 433]. 16. I have carefully considered the contentions raised by Sri. Varghese Mundakkal, who himself is the Managing Director and who appeared in person on behalf of the petitioner c....
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....not feasible coupled with the non-co-operation of the petitioner also. It was in those circumstances that the BIFR found that it was no longer necessary to keep in abeyance the recovery proceedings initiated by the Bank. Such an order, passed 5 years after the order in Ext.P1, was perfectly in tune with the provisions contained in Section 22 of the SICA, which read as follows: 22. Suspension of legal proceedings, contracts, etc.-(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or 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 th....
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....able 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. 22-A. Direction not to dispose of assetsof opinion that any direction is necessary in the interest of the sick industrial company or creditors or shareholders or in the public interest, by order in writing, direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets - (a) during the period of preparation or consideration of the scheme under Section 18; and (b) during the period beginning with the recording of opinion by the Board for winding up of the company under sub-section (1) of Section 20 and up to commencement of the proceedings relating to the winding up before the concerned High Court." 19. At the same time the provisions contained in ....
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....The petitioner argued that the issue is covered by the judgment in KSL & Industries Ltd. v. Arihant Threads Ltd., [(2015) 1 SCC 166]In that case a 3 judges bench of the apex court, after considering a reference as to the overriding effect of the provisions in both the Acts, i.e SICA 1985 and RDDB Act, held that there is nothing contrary in the intention of SICA to exclude a recovery application from the purview of Section 22 and there could be no reason for such exclusion since the purpose of the provision is to protect the properties of a sick company. It was also held that provisions of SICA would prevail over the provisions in RDDB Act. 22. But the provisions in SARFAESI Act, are not similar to those in RDDB Act. Under Section 35, SARFAESI Act is having overriding effect over all other laws inconsistent with it. It reads as follows: 35.The provisions of this Act to override other laws.-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. It further provides in Section 37 that the provisions in it shall be in addition and no....
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....at significance that only the first two Acts are included in Section 37 and not the third i.e. the Sick Industrial Companies (Special Provisions) Act, 1985. This is for the obvious reason that the framers of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 intended that the Sick Industrial Companies (Special Provisions) Act, 1985 be covered by the non obstante clause contained in Section 35, 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 S....