TMI Blog2011 (4) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... order of winding up could have been passed by the company court. Therefore, he submits that without going into the merits and other grounds urged in the appeal memo that the order impugned is liable to be set aside on the short ground of want of jurisdiction of the company judge to pass the order - respondent contended that the application for revival was filed after the proceedings before the BIFR stood abated. The first respondent had no notice of the appeal filed by the company. As this 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 Held that:- contention that the SARFAESI Act has a overriding effect on other provisions or other enactment has nothing to do with the power of the company court to entertain and proceed with the winding up petition when an appeal under section 25 of the Act is pending. The language employed in section 22 is absolute and mandatory and the company court is prohi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Debts Recovery Tribunal, Bangalore has passed an order dated December 22, 2009, staying all further proceedings initiated by ARCIL and the said order has been extended up to January 15, 2010 and therefore sought for time to enable the company to get a specific order setting aside the action taken by the secured creditors under section 13(4) of the SARFAESI Act. However, the said request was not acceded to by the Board. Taking note of the judgments rendered by various High Courts in the country it proceeded to hold that as the Debts Recovery Tribunal has not set aside the action taken under section 13(4) of the SARFAESI Act and by virtue of the third proviso to section 15(1) of the Act, the proceedings before the BIFR has abated, by an order dated January 5, 2010. Aggrieved by the said order of the BIFR, the company preferred an appeal under section 25 of the Act before the Appellate Authority for Industrial and Financial Reconstruction, New Delhi on January 23, 2010. On April 20, 2010, the appellate authority issued notice to the parties. In the meanwhile, the first respondent filed an application for revival of its company petition on July 15, 2010 and took out notice to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore mere pendency of an appeal would in anyway in law make any difference and therefore he submits the company court had the jurisdiction to pass the winding up order and section 22 of the Act has no application. 6. In the light of the aforesaid facts and contentions the only point that arise for our consideration is whether section 22 of the Act operated as a bar on the company court to pass an order of winding up on September 22, 2010 ? 7. Section 22 of the Act reads as under : "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 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 the industrial company or for execution, distress or the like against any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decree or order of a court, Tribunal, officer or other authority or of any submission, settlement or standing order and accordingly,- ( a ) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration and all proceedings relating thereto pending before any court, Tribunal, officer or other authority shall remain stayed or be continued subject to such declaration ; and ( b ) on the declaration ceasing to have effect- ( i ) any right, privilege, obligation or liability so remaining 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, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Financial Assets and Enforcement of Security Interest Act, 2002 to regulate the securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected thereto. The said Act enables the banks and financial institutions to realise long-term assets, manage problems of liquidity, asset liability mismatch and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. The SARFAESI Act amended the Act by inserting the third proviso as aforesaid. As it is clear from the aforesaid proviso that, after commencement of the SARFAESI Act, where a reference is pending before the Board, such reference shall abate if secured creditors, representing not less than three-fourths in the value of the amount outstanding against the 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 the Act. Relying on the said provision one of the creditors who was already before the BIFR, filed an application for an order holding that the proceedings b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 court in Mithailal Dalsangar Singh v. Annabai Devram Kini AIR 2003 SC 4244, dealing with the abatement under Order 22, rule 9 of the Code of Civil Procedure, 1908, where it has been held as under (page 4246) : "Abatement of suit for failure to move an application for bringing the legal representatives on record within the prescribed period of limitation is automatic and a specific order dismissing the suit as abated is not called for. Once the suit has abated as a matter of law, though there may not have been passed on record a specific order dismissing the suit as abated, yet the legal representatives proposing to be brought on record or any other applicant proposing to bring the legal representatives of the deceased party on record would seek the setting aside of an abatement. A prayer for bringing the legal representatives on record, if allowed, would have the effect of setting aside the abatement as the relief of setting aside abatement though not asked for in so many words is in effect being actually asked for and is necessarily implied. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. 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 operation. Though the said order was brought to the notice of the BIFR, the BIFR proceeded to pass an order. In that view of the matter, the order passed by the company court directing winding up of the company is void ab initio , one without jurisdiction, non est in the eye of law and consequently all orders passed in pursuance of the said void order, are also void and are set aside. 17. The abatement contemplated under section 15(1) of the Act, is a conditional one. The words, used are "such reference shall abate if the secured creditors", satisfy the condition mentioned therein. Therefore only on such condition mentioned in the provision being satisfied, in law abatement occurs. Whether the said condition is satisfied or not is a question of fact to be decided and a finding is to be recorded. The said exercise has to be done by the Board. Therefore the Board has to pass a considered order recording the existence of the said condition. Then the order of abatement is automatic. The order has to be passed by the Board regarding th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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