TMI Blog2014 (1) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... application under Section 14 of the Act, 2002 before the District Magistrate for taking physical possession on 11/3/2013 and 09/4/2013. Petitioners' case further in the writ petition is that the scheme of rehabilitation was prepared and submitted in December, 2011 before the BIFR and the matter is pending before the BIFR for taking measures for rehabilitation of the petitioners company. Reference does not comes to an end after its registration or after declaration of its sickness is granted by the Board. The Scheme of Section 15 of the Act,1985 as amended by Act No. 54 of 2002, indicates that after enforcement of the Act, 2002, no reference can be made to the BIFR, where financial assets have been acquired by any securitisation company or reconstruction company which is provided in the second proviso of Section 15 of the Act, 1985. The intent is clear that when financial assets have been acquired under sub-section (1) of Section 5 of the Act, 2002, reference to the Board is prohibited. The third proviso to Section 15 of the Act, is with regard to the reference which is pending before the BIFR and obviously which reference was made before the financial assets have been acquired u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13(4) of the Act, 2002 in accordance with the third proviso to Section 15 of the Act, 1985. Respondent no.2 is fully entitled to proceed under Section 13(4) of the Act, 2002 and reference being Case No. 53/2010 having abated on taking measures under Section 13(4) of the Act, 2002, petitioners are not entitled for the benefit under Section 22 of the Act, 1985 - proceedings initiated by the Bank under Section 13(4) of the Act, 2002 are not without jurisdiction. The reference being Case No.53/2010 stands abated. However, it is still open for the petitioners to avail their statutory remedy under Section 17 of the Act, 2002 against any of the measures taken by the Bank under Section 13(4) of the Act, 2002 - Decided against Petitioner. - WRIT - C No. - 48250 of 2013 and WRIT - C No. - 6853 of 2013 - - - Dated:- 8-1-2014 - Ashok Bhushan and Vipin Sinha, JJ. For the Petitioner :- Smt. Komal Khare, Somesh Khare, R.K. Mishra For the Respondent :- C.S.C., Rakesh Mishra JUDGEMENT Hon'ble Ashok Bhushan, J) These two writ petitions filed by the same petitioners have been heard together and are being decided by this common judgment. Counter and rejoinder affidavits ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liefs: "i) Issue, a writ, order or direction in the nature of certiorari quashing the impugned consortium notice dated 1.8.2012 under section 13(2) SARFAESI Act send by respondent no.2 and consequential recovery proceedings against the petitioner (Annexure No.3) of the writ petition. ii) Issue, a writ, order or direction in the nature of mandamus staying recovery proceedings in pursuance to the impugned notice dated 1.8.2012 during pendency of present writ petition before this Hon'ble Court. iii) issue any other writ, order or direction which this Hon'ble Court may deem fit and proper under the facts and circumstances of the case." On a request made by the learned counsel for the petitioners the above case was directed to be listed in the next cause list and no other orders were passed in the said writ petition. An application dated 26/12/2012 was filed by the Bank before the BIFR which was registered as Misc. Application No. 103/2012 praying that a direction be issued by the BIFR that proceedings before the BIFR has abated in view of the third proviso to Section 15 of the Act, 1985. An objection dated 18/3/2013 was filed by the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocate, assisted by Shri Somesh Khare for the petitioners, Shri Rakesh Mishra has appeared for the respondent no.2 and the learned Standing Counsel for the State respondents. Shri R. Venkatramani, learned Senior Advocate, appearing for the petitioners questioning the action of the Bank under Sections 13(2) and 13(4) of the Act, 2002 contended that the Bank cannot invoke the provisions of the Act, 2002 in view of the prohibition as contained under Section 22 of the Act, 1985. It is submitted that the third proviso to Section 15 of the Act, 1985 cannot be availed by the Bank since the reference which was made by the petitioners under Section 15 of the Act, 1985 can no longer be treated to be pending within the meaning of third proviso to Section 15 of the Act, 1985, since the reference has been registered and a decision has been taken by the Board on 12/12/2011 declaring the petitioners company as a sick company and the matter is pending at the stage of Section 17 of the Act, 1985 and it has crossed the stage of reference. It is submitted that once a reference is registered and proceedings have commenced under Sections 16,17,18 and 19 of the Act, 2002, reference cannot be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 13(4) of the Act, 2002. He submits that the reference under Section 15 of the Act, 1985 shall be treated to be pending even though the proceedings under Sections 16,17,18 and 19 of the Act, 1985 are going on. He submits that the proceedings initiated by the Bank under the Act, 2002 are fully in accordance with law. The bank has already taken symbolic possession of the mortgaged assets of the petitioners and the remedy of the petitioners, if any, is to file a appeal under Section 17 of the Act, 2002. Learned counsel for the parties have referred to and relied on various judgments of the Apex Court as well as of different High Court's in support of their respective submissions which shall be referred to while considering their submissions in detail. Shri R. Venkatramani, learned Senior Advocate, appearing for the petitioners replying the preliminary objection raised by the learned counsel for the Bank submitted that the petitioners cannot be relegated to avail the statutory remedy of filing an appeal since the petitioners are challenging the jurisdiction of the Bank and the proceedings initiated under the Act, 2002. He submits that when the entire proceedings are without jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid case held that the High Court committed error in ignoring the availability of statutory remedy under the Act, 2002. Following was laid down by the apex court in paragraphs 43,44 and 45 which are quoted below: "43.Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which is that if any effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case law on this point but to cut down this circle of forensic whirlpool, we would rely or some old decisions of the evolutionary era of the constitutional law as they still hold the field. 16. Rashid Ahmad vs. Municipal Board, Kairana, AIR 1950 SC 163, laid down that existence of an adequate legal remedy was a factor to be taken into consideration in the matter of granting writs. This was followed by another Rashid case, namely, K.S.Rashid Son Vs. Income Tax Investigation Commissioner, AIR 1954 SC 207 which reiterated the above proposition and held that where alternative remedy existed, it would be a sound exercise of discr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts will issue appropriate orders or directions to prevent such consequences. Writ of certiorari and prohibition can issue against Income Tax Officer acting without jurisdiction under Section 34, Income Tax Act". 20. Much water has since flown under the bridge, but there has been no corrosive effect on these decisions which though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation." One of the grounds on which the High Court can entertain a writ petition under Article 226 of the Constitution of India despite availability of alternative remedy is the ground of lack of jurisdiction in the authority whose action has been challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the company. (2) Without prejudice to the provisions of sub-section (1), the Central Government or the Reserve Bank or a State Government or a public financial institution or a State level institution or a scheduled bank may, if it has sufficient reasons to believe that any industrial company has become, for the purposes of this Act, a sick industrial company, make a reference in respect of such company to the Board for determination of the measures which may be adopted with respect to such company: Provided that a reference shall not be made under this sub-section in respect of any industrial company by - (a) the Government of any State unless all or any of the industrial undertakings belonging to such company are situated in such State; (b) a public financial institution or a State level institution or a scheduled bank unless it has, by reason of any financial assistance or obligation rendered by it, or undertaken by it, with respect to, such company, an interest in such company. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igations 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 (1 of 1956) or any other 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 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer by way of lease, assignment or sale for realising the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: PROVIDED that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: PROVIDED FURTHER that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt. (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. (5) ........... (6) ........... (7) ........... (8) ........... (9) In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor." Section 35 of the SARFAESI Act, 2002 gives overriding effect to the provisions of the said Act. Section 35 of the SARFAESI Act, 2002 is quoted below:- "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." Section 41 of the SARFAESI Act, 2002 provides for amendment in certain enactments as specified in the schedule. Section 41 read with schedule inserts two proviso (second and third proviso) in Section 15 of the 1985 Act. Relevant part of the schedule is as follows:- THE SCHEDULE (See Section 41) Year Act No. Short title Amendment 1986 1 The Sick Industrial Companies (Special Provisions) Act 1985. In section 15 in sub-section (1) after the proviso insert the following:-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was prepared and submitted in December, 2011 before the BIFR and the matter is pending before the BIFR for taking measures for rehabilitation of the petitioners company. Third proviso to Section 15 of the Act, 1985 which has been inserted in the Act, 1985 by Act No. 54 of 2002 is a subject matter of consideration in the present writ petitions. Whether the third proviso to Section 15 of the Act, 1985 is applicable in the facts of the present case, and whether the Bank can take measures under Section 13(4) of the Act, 2002 resulting in abatement of proceedings before the BIFR are the questions to be answered. Third proviso to Section 15 of the Act, 1985 reads as under: "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-fourth in value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors, have taken any measures to recover their s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arate proceedings. Regulation 19 provides for procedure for making references under Section 15. Regulation 19 is quoted below: "19.[(1) Every reference to the Board under sub-section (1) of section 15 shall be made-- (i) in Form A in respect of an industrial company other than a Government company; (ii) in Form AA in respect of a Government Company,] and shall be accompanied by five further copies thereof alongwith four copies each of all the enclosures thereto. [(2) Every reference to the Board under sub-section (2) of section 15 shall be made-- (i) in Form B in respect of an industrial company other than a Government company; (ii) in Form BB in respect of a Government company,] and shall be accompanied by five further copies thereof alongwith four copies each of all the enclosures thereto. (3) A reference may be filed, either by delivering it at the office of the Board or by sending it by registered post. [(4) On receipt of a reference, the Secretary, or as the case may be, the Registrar shall cause to be endorsed on each reference, the date on which it is filed or received in the office of the Board.] (5) If on scrutiny, the reference is found to be in order, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Scheme of Section 15 of the Act,1985 as amended by Act No. 54 of 2002, indicates that after enforcement of the Act, 2002, no reference can be made to the BIFR, where financial assets have been acquired by any securitisation company or reconstruction company which is provided in the second proviso of Section 15 of the Act, 1985. The intent is clear that when financial assets have been acquired under sub-section (1) of Section 5 of the Act, 2002, reference to the Board is prohibited. The third proviso to Section 15 of the Act, is with regard to the reference which is pending before the BIFR and obviously which reference was made before the financial assets have been acquired under sub-section (1) of Section 5 of the Act, 2002. The abatement of reference pending before the Board is to take place when secured creditors not less than three-fourth 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 the Act, 2002. The intent is clear that when secured creditors not less than three-fourth in value of the amount outstanding decides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perating agency and a direction was issued to prepare a revival scheme. Notice under Section 13(2) of the Act, 2002 had already been issued on 10/9/2004. Bank issued possession notice under Section 13(4) of the Act, 2002 on 07/4/2007. Writ petition was filed challenging the notice issued under Section 13(4) of the Act, 2002 on the ground that such notice is contrary to Section 22 of the Act, 1985. The Orissa High Court took the view that before invoking Section 13(4) of the Act, 2002, reference had proceeded and was not at the stage of reference, hence protection under section 22 of the Act, 1985 was available. It is useful to quote paragraphs 18,20 and 21 which are as under: "18. In the instant case, admittedly the notice under Sub-section (4) of Section 13 of the Securitization Act has been issued on 7.4.2007. But long before that, the company has been declared a sick industrial company by an order of the BIFR dated 14.11.2006. Therefore, the proceeding under the SICA was not at the stage of reference. The proceeding has gone far ahead of that and culminated in an order by which the company was declared sick on 14.11.2006. The said order was passed by the BIFR afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to proceed against the petitioner in terms of its notice under Section 13(4) of the Securitization Act." It is also relevant to note that against the above judgment of the Orissa High Court the State Bank of India Ors, filed Special Leave to Appeal (Civil) No(s).13284/2008 in which the appeal the apex court passed the following order on 23/3/2012. "UPON hearing counsel the Court made the following ORDER IA8/11 has been filed on behalf of the respondents/applicants, praying that the Special Leave Petition be disposed of, since the matter has been settled between the parties. Having heard learned counsel for the respective parties and also having considered the contents in the order of 27th September, 2010, while disposing of the Special Leave Petition has having become infructuous, we leave the question referred to in the said order of 27th September, 2010, open for decision in a further case." The Apex Court left the questions open to be decided in a future case and the Special Leave Petition was disposed of in terms of the settlement. The judgment of the Orissa High Court which has been heavily relied on by the learned Senior Counsel appearing for the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the High Court that the company having been declared sick on 19/12/2005, the company is entitled for protection under Section 22 of the Act, 1985. The judgment of the Orissa High Court in Noble Aqua Pvt. Ltd. (supra) was relied on by the company before the Gujarat High Court. The Gujarat High Court considered the submissions of the parties and after noticing the relevant facts took the view that reference takes into its sweep, Sections 16,17,18 and 19 of the Act and continues and remain pending when the scheme is sanctioned, modified and reviewed. It is useful to quote paragraphs 16,17,18,22 and 26 of the judgment which are as under: "16.That, reference takes into its sweep, Sections 16,17,18 and 19 of the Act and continues and remain pending when the scheme is sanctioned, modified, reviewed, monitored and operates successfully or in case of failure, result into forwarding opinion by the Board under Section 20 to concerned High Court subject to order if any appeal under Section 25 of the Act before appellate Board. The above findings are in consonance with object and reason of the Act inasmuch as function of the Board is to inquire into sickness and suggest mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision given by the above High Court (supra) with regard to interpretation to third proviso to Section 15(1) of SIC Act, 1985 as introduced by Act 54 of 2002 and Section 41 and Schedule to SARFAESI Act, 2002 and other provisions of Sections 35, 37 etc. also of SARFAESI Act, 2002, and therefore, contention of learned Advocate for the petitioner that it is incumbent upon respondent Bank to obtain permission under Section 22 of SIC Act, 1985 fails. It is held that reference under Chapter III of SIC Act is a genus and inquiry under Section 16, orders under Section 17 and measures for revival and rehabilitation of sick industrial company under Sections 18 and 19 of the Act are species, and therefore, though order under Sections 17(1), (2) or (3) of the Act, as the case may be is passed, reference under Chapter III of the Act continues to hold field and remain pending, but once a measure under Section 13(4) of SARFAESI Act, 2002is taken, by virtue of insertion of unnumbered third proviso to Section 15(1) by Act 54 of 2002, reference stands abated, and therefore, no permission under Section 22 of SIC Act, 1985 is necessary. All other objections about validity of deed of assignment by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Sec.13(4) of the SRFAESI Act received by it being in contravention of provisions of Sec.22 of the Act of 1985. The bank, on the other hand, asserted that on invocation of action under Sec.13 of the SRFAESI Act, the proceedings before the BIFR abates and the protection which the Company claims under Sec.22 of the Act of 1985 is no longer available. The Orissa High Court, after considering the provisions contained in proviso to Sec.15(1) of the Act of 1985 read with Sec. 22 of the Act of 1985, negatived the stand of the bank. Instead, held that the third proviso will come into force where reference is pending before the BIFR. It held that the notice under Sec.13(4) of the SRFAESI Act was issued on 7th April, 2007. But long before that the Company was already declared sick company by order dated 14th November, 2006, therefore, the proceedings before the BIFR were not at the stage of reference, as such. But the same had proceeded far ahead and culminated with the order of company being declared sick on 14th November, 2006. Moreover, the said order was passed by the BIFR after hearing the bank and the bank was appointed as operating agency with direction to prepare the revival sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate inquiry under Sec. 16 is passed, the action on reference as per Sec.15 is complete and therefore it comes to an end for the purpose of that provision and cannot be treated as pending within the meaning of the third proviso to Sec. 15(1) of the Act of 1985. Notably, the time gap between the submission of reference and passing of such initial direction/order may vary, depending on the facts of each case. We cannot countenance the interpretation that the expression "reference" occurring in the third proviso is only referable to the stage of determining the measures and it will cease to be a reference after passing of such initial direction/ order by the Board. The fact that Sec. 22 of the Act of 1985 uses the expression of : (i) an inquiry under Sec. 16 is pending; or (ii) any scheme referred to under Sec. 17 is under preparation or consideration; or (iii) a sanctioned scheme is under implementation; or (iv) where an appeal under Sec. 25 is pending - in contradistinction to the expression "reference is pending" used in the third proviso to Sec. 15(1), does not mean that upon issuing direction to initiate inquiry under Sec. 16 of the Act, the said reference comes to an en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmittee 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 21st June, 2002 to regulate securitisation 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 institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches 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." (emphasis supplied) A priori, we find it difficult to agree with the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the SRFAESI Act. In absence of provision, such as the third proviso to Sec.15(1) of the Act of 1985, it would have been possible to contend that upon framing of the scheme under Sec. 18 of the Act of 1985, the secured creditor would be bound by the same and cannot resort to any other action without the consent of the Board. But the third proviso under Sec. 15(1) of the Act of 1985 relieves the specified strength of secured creditors from that shackle and permits them to pursue their remedy under the provisions of SRFAESI Act, which have been introduced as a special enactment to further the cause of financial sector and the financial institutions to which the same is applicable. Suffice it to observe that the above position is reinforced from the provisions and in particular the third proviso to Sec.15(1) read with Sec.22 of the Act of 1985 itself. Thus, Sec.37 of the SRFAESI Act cannot be pressed into service to whittle down the sweep of the third proviso to Sec.15(1) of the Act of 1985." A Full Bench of the Madras High Court in Salem Textiles Ltd. Vs. Authorised Officer, Phoenix ARC Pvt. Ltd. Ors, 2013 (2) D.R.T.C., 56, after referring to almost all relevant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e" would include (a) an enquiry under Section 16, (b) declaration of sickness under Section 17(1), (c) appointment of Operating Agency under Section 17 (3), (d) preparation and sanction of Schemes under Section 18, (e) rehabilitation under Section 19 and (f) winding up under Section 20. (iii) The divergence of views expressed by various High Courts, appears to have arisen primarily on account of two things, namely, (a) that under Section 32(1) of SICA 1985, the provisions of the Act and even the Schemes made thereunder, were given effect notwithstanding anything inconsistent with any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (now FEMA 1999) and the Urban Land (Ceiling and Regulation) Act, 1976; (b) that though the SRFAESI Act, 2002 also contained a similar provision under Section 35, a confusion was created by Section 37 of the SRFAESI Act, 2002, retaining the application of other laws. Section 37 did not merely stop by making the provisions of the SRFAESI Act, 2002 in addition and to not in derogation of the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of Act, 1992 and the RDDBFI Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, 1985 and the provisions of the Act, 2002. In the above case, an application for reference was filed by the Company under Section 15 of the BIFR on 06/4/2004. The reference was rejected by the Board on 04/9/2006, against which an appeal was filed. Second reference was again filed in the year 2006 by the petitioner Company which was rejected on 30/5/2007. Against the said order an appeal was filed which was allowed by the AAIFR on 29/11/2007, remanding the matter to the BIFR for reconsideration. The secured creditors in the meantime has issued notice dated 26/5/2009 under Section 13(2) of the Act, 2002. Writ petition was filed by the company praying for quashing the notice dated 26/5/2009 and for issuing a mandamus restraining the respondents from taking any of the measures under Section 13(4) of the Act, 2002. The submission was raised by the company that in view of the pendency of the reference no proceedings under the Act, 2002 can be issued. The Division Bench after considering the issues laid down in paragraph 20 that reference shall abate if secured creditors representing not less than three-fourth in value of the amount outstanding decides to take any measures to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the reference is a consequence, which occurs automatically on a valid action being taken under Section 13(4). In our opinion, therefore, the AAIFR was perfectly justified in taking the view that if it is the case of the Petitioner that the action taken by Respondent No.3 under Section 13(4)is invalid for any reason, the appropriate remedy for the Petitioner was to approach the D.R.T., which is the Forum provided by the Securitisation Act for deciding such questions. If the finding is recorded by that Forum that the action taken under Section 13(4) is invalid as it lacks consent of three-fourth secured creditors, then the Reference of the Petitioner-company pending in the BIFR will automatically stand revived and no order will be necessary to be passed by any authority under the Sick Industrial Companies Act for that purpose." In view of the foregoing discussion, the pre-ponderence of the authorities of different High Court including the view taken by Orissa High Court as noted above is that if a reference under Section 15 of the Act, 1985 remains pending even if it is at the stage of Sections 16, 17,18 and 19 of the Act, 1985, the reference cannot be said to be not pending afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Act, no formal order is contemplated. In view of the foregoing discussion, our answer to issue nos. 2 to 5 are as follows: (2) On taking measures under Section 13(4) of the Act, 2002 i.e. by the respondent no.2 by issuing possession notice dated 07/10/2012, the reference pending before the BIFR being Case No.53/2010 stands abated. (3) The words "reference is pending" as used in third proviso to Section 15 of the Act, 1985 shall mean the reference which is at the stage of Section 15 of the Act, 1985 or is at any stage of Sections 16,17,18 and 19 of the Act, 1985. Registration of reference or declaration of unit as a sick unit shall not amount to coming to an end of reference. (4) Even if the reference is proceeding under Section 16, 17,18 and 19 of the Act,1985 the secured creditors are fully empowered to take measures under Section 13(4) of the Act, 2002 in accordance with the third proviso to Section 15 of the Act, 1985. (5) In the facts of the present case, the respondent no.2 is fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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