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TMI Blog2011 (4) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... sick industrial unit, section 22 of the Act apply and the creditors cannot proceed against the company for recovery of money due to them or prosecute the petition for winding up of the company. Therefore the company court by its order dated December 14, 2007, in C.P. No. 75 of 2000 and other connected matters passed an order dismissing all the company petitions, but reserving liberty to them to file an application for revival of their petitions in the event of the company being revived and comes out of the BIFR. Now from the material on record, it is clear that one of the creditors of the company-ARCIL filed a miscellaneous application on December 24, 2009, before the BIFR for abatement of the reference of the company under the third proviso to section 15(1) of the Act in view of the fact that the secured creditors have taken action against the company under section 13(4) of the Seeuritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (for short hereinafter referred to as "the SARFAESI Act"). The chartered accountant appearing for the company opposed the said request contending that the Debts Recovery Tribunal, Bangalore has passed an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court has reserved the liberty to the first respondent to revive the company petition, after taking out notice to the company, the company court being satisfied with all the ingredients as contemplated under section 434, has proceeded to pass the order of winding up, which is in accordance with law and this appeal is wholly misconceived. 5. Sri Naganand, learned senior counsel appearing for the third respondent-IFCI Ltd., contended that the provisions of the SARFAESI Act overrides all other provisions including the Companies Act, 1956 and the Act. Having regard to the language employed in the third proviso to section 15(1) of the Act, once the conditions prescribed therein are fulfilled by operation of law, proceedings before the BIFR stands abated. Though the Board has recorded the rival contentions, noticed the various judgments and then recorded the proceedings as abated, in law it is not the order holding the proceedings as abated that matters but proceedings as abated by operation of law and therefore no appeal is contemplated against the abatement under section 25 of the Act to the AAIFR and therefore mere pendency of an appeal would in anyway in law make any difference and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, for due implementation of the scheme, the Board may by order 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 adaptations 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, or any other law, the memorandum and articles of association of the company or any instrument having effect unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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." 11. In this connection it is useful to refer to the fact that Parliament enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to regulate the securitisation and reconstruction of financial a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny court passed the order on September 22, 2010, firstly, the proceedings initiated by the third respondent had been set aside on March 12, 2010 and it was restored only on November 29, 2010. In other words, on September 22, 2010, there was no proceedings. The proceedings initiated by the third respondent was restored only on November 29, 2010, by allowing the appeal. It is submitted that the order passed by the Debts Recovery Tribunal has been stayed by the appellate authority. 13. From the aforesaid proceedings it is clear the correctness of the order dated January 5, 2010, was challenged in appeal and the appeal was pending. The correctness of the proceedings initiated under section 13(4) was challenged before the Debts Recovery Tribunal and the said proceedings has been set aside, the matter was in appeal where there was an interim order of stay. It is in this context, it was contended on behalf of the respondents when the abatement is by operation of law either the pendency of the appeal or the challenge to the proceedings initiated under section 13(4) and setting aside of the same is immaterial. In support of the said contention reliance was placed on a judgment of the apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law and there cannot be any dispute about it. In the case of abatement of an appeal or suit on account of death of a party, if the death of the party is not disputed, all that has to be done is to calculate 90 days from the date of his death and from then whether any order is passed or not, in law the appeal or suit abates. Nonetheless as pointed out by the apex court in the aforementioned two judgments a judicial order is required to recognise such abatement. The said principle has no application to a case of abatement where if certain conditions have to be fulfilled before the law applies. In such cases, the court has to apply its mind, find out whether such condition is complied with and if it holds that it is complied with, then the law operates and what the court does is only recording the said legal effect. 16. In the instant case, it is only when three-fourths of the secured creditors initiate proceedings under the SARFAESI Act, abatement can take place. The said initiation of proceedings could be challenged by the company. In fact in this case it is challenged and an order of stay was obtained. On the day the BIFR passed an order, there was an order of stay in operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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