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2014 (12) TMI 1023 - SC - Companies LawRecovery of Debts - Whether provisions of SICA would prevail over the RDDB Act – Company failed to repay loan installments - Difference of opinion regarding - Decision of larger bench of Apex Court - The High Court set aside the Order passed by the Debt Recovery Appellate Tribunal, Delhi (DRAT) and held that in view of the bar contained in Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) no recovery proceedings could be effected against M/s. Arihant Threads Ltd. - Held that:- sub-section (1) of Section 22 may be divided into two parts. In one part, it provides that "no proceedings" be instituted for the winding up of the industrial company or for execution, distress or the like against any of the properties of such industrial company, and in the second part it provides that "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 advances 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." “Application for recovery" cannot specifically be described as proceedings for execution, distress or the like against any of the properties, but it is certainly a proceeding which results in and in fact had resulted in the execution and distress against the property of the Company and is therefore liable to be construed as a proceeding for the execution, distress or the like against any of the properties of the industrial company - such a construction would be within the intendment of Parliament wherever the proceedings for recovery of a debt which has been secured by a mortgage or pledge of the property of the borrower are instituted - Surely, there is no purpose in construing that Parliament intended that such an application for recovery by summary procedure should lie or be proceeded with, but only its execution be interdicted or inhibited especially - the proceedings by way of an application for recovery according to a summary procedure as provided under the RDDB Act are not referred to in Section 22 simply because the RDDB Act had not then been enacted. The Court found a harmonious scheme in relation to the proceedings for reconstruction of the company under the SICA, which includes the reconstruction of debts and even the sale or lease of the sick company's properties for the purpose, which may or may not be a part of the security executed by the sick company in favour of a bank or a financial institution on the one hand, and the provisions of the RDDB Act, which deal with recovery of debts due to banks or financial institutions, if necessary by enforcing the security charged with the bank or financial institution, on the other. The purpose of the two enactments is entirely different. As observed earlier, the purpose of one is to provide ameliorative measures for reconstruction of sick companies, and the purpose of the other is to provide for speedy recovery of debts of banks and financial institutions. Both the Acts are "special" in this sense. However, with reference to the specific purpose of reconstruction of sick companies, the SICA must be held to be a special law, though it may be considered to be a general law in relation to the recovery of debts. Whereas, the RDDB Act may be considered to be a special law in relation to the recovery of debts and the SICA may be considered to be a general law in this regard. For this purpose we rely on the decision in LIC v. D.J. Bahadur [1980 (11) TMI 157 - SUPREME COURT OF INDIA]. - Normally the latter of the two would prevail on the 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 specifically provides that the provisions of the Act or the rules thereunder shall be in addition to, and not in derogation of, the other laws mentioned therein including SICA. The term "not in derogation" clearly expresses the intention of Parliament not to detract from or abrogate the provisions of SICA in any way. This, in effect must mean that Parliament intended the proceedings under SICA for reconstruction of a sick company to go on and for that purpose further intended that all other proceedings against the company and its properties should be stayed pending the process of reconstruction. While the term "proceedings" under Section 22 did not originally include the RDDB Act, which was not there in existence. Section 22 covers proceedings under the RDDB Act. The provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act.
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