Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (2) TMI 132 - SUPREME COURT OF INDIA

2016 (2) TMI 132 - SUPREME COURT OF INDIA - TMI - Interplay between the Sick Industrial Companies (Special Provisions) Act, 1985 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 prevails over the Sick Industrial Companies (Special Provisions) Act, 1985? - Whether the expression “where a reference is pending” in Section 15 ( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

isions of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993.

Where a secured creditor of a sick industrial company seeks to recover its debt in the manner provided by Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, such secured creditor may realise such secured debt under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to have full play.

Where, under Section 13(9) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the case of a sick industrial company having more than one secured creditor or being jointly financed by secured creditors representing 60 per cent or more in value of the amount outstandi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, any reference pending under the Sick Industrial Companies (Special Provisions) Act, 1985 cannot be proceeded with further – the proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 will abate.

In conclusion, it is held that the interim order dated 17.1.2004 by the Delhi High Court would not have the effect of reviving the reference so as t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

IFR, no matter whether such reference is at the inquiry stage, scheme stage, or winding up stage. The Orissa High Court is not correct in its conclusion on the interpretation of Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. This being so, it is clear that in any case the present reference under Section 15(1) of the Appellant No. 1 company has abated inasmuch as more than 3/4th of the secured creditors involved have taken steps under Section 13(4) of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The facts in appeals arising out of Special Leave Petition (Civil) Nos.26170-26171 of 2008 are as follows. 3. The net worth of the Appellant No.1 Company, having eroded completely, the appellant No.1 company filed a reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 before the BIFR, which was registered as BIFR Case No.115 of 1989. On 13.12.1989, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pellant No.1 company, on 17.1.1995, was directed to submit a fresh, comprehensive, revised rehabilitation scheme which was duly circulated. Objections to the said scheme were heard by the BIFR and the scheme finally sanctioned was in the form of a change of management of the appellant no.1 company subject to various modifications to be carried out. After the Appellant No.1 company s management changed hands, the second scheme, after being reviewed from time to time, was declared as failed on 16. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nder the Sick Industrial Companies (Special Provisions) Act, 1985 for the last 12 years. There being no acceptable viable rehabilitation proposal after the failure of two schemes, the appellant no.1 company was not likely to make its net worth exceed its accumulated losses, and therefore BIFR recommended to the High Court of Bombay that the said company be wound up. On 4.2.2002, appellant No.1 s challenge to the BIFR order was dismissed by the AAIFR. 4. While matters stood thus, ICICI issued a n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

AIFR order dated 4.2.2002 and the BIFR order dated 25.7.2001. On 7.1.2004, the Delhi High Court stayed both the orders, which stay continued until 24.7.2008, when, by the impugned judgment, the Writ Petition was dismissed. 5. Meanwhile, the sale notice of 8.8.2003 was challenged before the DRT by the appellants. The said challenge was unsuccessful, as a result of which an appeal was filed before the DRAT, which, by its order dated 30.6.2005, upset the DRT order and set aside the sale notice. How .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ever challenged and has attained finality. 6. Meanwhile, based on a winding up proceeding by M/s BHEL, an unsecured creditor, and another winding up proceeding based on the opinion of the BIFR under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, the Bombay High Court wound up the appellant No.1 company. 7. While matters stood thus, the Delhi High Court passed the impugned order on 24.7.2008, as has been stated hereinabove, in which it was of the view that Section 15( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nfructuous. 8. Appeals have been filed against the said order by the present appellants which appeals, as has been stated hereinabove, raise interesting questions of law on the interplay of the Sick Industrial Companies (Special Provisions) Act, 1985 with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 9. A few subsequent events also need to be stated for the sake of completion. On 20.11.2008, the Bombay High Court modified its order date .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ompany, filed an appeal challenging the sale notice of 6.4.2013. On 13.5.2013, DRT Chennai dismissed this petition. Vide an order dated 19.3.2014, the DRAT, Chennai, in an appeal made to it, directed, by way of an interim order, that appellant No.2 pay a sum of ₹ 53.77 crores within the time stated therein. This DRAT order was challenged before the Madras High Court which, by its order dated 21.4.2014, refused to interfere with the said order dated 19.3.2014, and granted some additional ti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h Court is that the reference made by the appellant No.1 company gets revived. He further submitted that no winding up order could be made in view of such revival, and that such orders are therefore non est, and the present appeals cannot be regarded as infructuous. He added that Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 would automatically come into play to protect the assets of the appellant No.1 company. He also submitted before us, that in any case, regard .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1993. The said Act, being a predecessor to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and dealing with the same subject matter as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - namely, recovery of debts due to banks and financial institutions, would lead to the conclusion that the 2002 Act is also overridden. He further contended that Section 37 of the Securitisation and Re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

clude a reference to the Sick Industrial Companies (Special Provisions) Act, 1985. His further contention is that on a true construction of Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985, the Orissa High Court is correct and that since the expression reference would only include the initial stage of filing and registration of a reference before the BIFR, such stage having gone long ago, the proceedings before BIFR are very much alive and have not abated. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onstruction of Financial Assets and Enforcement of Security Interest Act, 2002 would override the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, so that even if the stay order dated 7.1.2004 had the effect of reviving the reference, that in itself would not restrain the secured creditors from proceeding under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, nor would it render the winding up order passed by Bom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

icer and Ors., reported in AIR 2013 Madras 229. He also argued that since the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 expressly named the Sick Industrial Companies (Special Provisions) Act, 1985 in Section 34(2), the Sick Industrial Companies (Special Provisions) Act, 1985 obviously overrode that Act. What is significant is that the corresponding section, namely, Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Intere .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d that at the end of the day, since the movable property of the appellant No.1 company had been sold off, and since various High Courts - including Bombay and Madras - have passed a number of orders, both winding up the company and dismissing petitions challenging the action of his client in proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, all that remains is sale of the immovable property of the appellant No.1 Company an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

industrial company has become a sick industrial company, the Board of Directors of the company, shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company: Provided that if the Board of Directors had sufficient reasons even before such finalisation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rest 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-four .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

anding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company; b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board. (3) wher .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 adoptions and in such manner as may be specified by the Board. Provided that such declaration shall not be made for a period exceeding two yea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urt, 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 liabi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

thereof remains suspended under this section shall be excluded. Section 32. Effect of the Act on other laws (1) The provisions of this Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Board without any recommendation by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company. The Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 Section 17. Jurisdiction, powers and authority of Tribunals. (1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and dec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17. 34. Act to have over-riding effect.- (1) Save as provided under sub- section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. (2) The prov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 Section 13. Enforcement of security interest (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secure .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such represe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

section 17A. (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:- (a) take possession of the secured assets of the borrower including the right to 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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) Any payment made by any person referred to in clause (d) of sub .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sale. (5B) Where the secured creditor, referred to in sub-section (5A), is declared to be the purchaser of the immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, under sub-section (4) of section 13. (5C) The provisions of section 9 of the Banking Regulation Act, 1949(10 of 1949) shall, as far as may be, appl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nancing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than sixty per cent in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors: PROVIDED that i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of section 529A of that Act: PROVIDED ALSO that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen's dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the liquidator shall inti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed creditor with the liquidator: PROVIDED ALSO that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any. Explanation: For the purposes of this sub-section,- (a) "record date" means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date; (b) "amount outstanding" shall include principal, interest and any other dues payable by the bo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act. (12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed. (13) No borrower shall, after receipt o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

any such law. Section 37. Application of other laws not barred The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force. Section 41. Amendments of certai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f Security Interest Act 2002". 1956 42 The Securities Contracts (Regulation) Act 1956 In section 2 in clause (h) after sub-clause (ib) insert the following:- " (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002". 1986 1 The Sick Industrial Companies (Special Provisions) Act 1985 In section 15 in sub-section (1) after the proviso insert the following:- "PROVIDED .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f 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 secured debt under sub-section (4) of section 13 of that Act." 13. It is important at this stage to refer to the genesis of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

opment and Regulation) Act, 1951) and whether such debtors having become sick , are to be rehabilitated. The question, therefore, is whether the public interest in recovering debts due to banks and financial institutions is to give way to the public interest in rehabilitation of sick industrial companies, regard being had to the present economic scenario in the country, as reflected in Parliamentary Legislation. 14. We begin, first, with the Sick Industrial Companies (Special Provisions) Act, 19 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arming increase in the incidence of sickness in industrial companies. It has been recognized that in order to fully utilize the productive industrial assets, afford maximum protection of employment and optimize the use of the funds of the banks and financial institutions, it would be imperative to revive and rehabilitate the potentially viable sick industrial companies as quickly as possible. It would also be equally imperative to salvage the productive assets and realize the amounts due to the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fore, been felt to enact in public interest a legislation to provide for timely determination by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable despatch. The salient features of the Bill are- (i) application of the legislation to the industries specified in the First Schedule to the Industries (Development and Regulation) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

year; (iii) the onus of reporting sickness and impending sickness at the stage of erosion of fifty per cent. or more of the net worth of an industrial company is being laid on the Board of Directors of such company; where the Central Government or the Reserve Bank is satisfied that an industrial company has become sick, it may make a reference to the Board, likewise if any State Government, scheduled bank or public financial institution having an interest in an industrial company is satisfied th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ourt Judges and Secretaries to the Government of India, etc., for hearing appeals against the order of the Board. 15. A cursory reading of the Act shows that a Board for Industrial and Financial Reconstruction is set up by the Act, before which references are made. Such references can be made under Section 15 of the Act, not only by an industrial company as defined, which, as has been stated above, is a company which runs any of the industries specified in the first schedule to the Industries (D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ccumulated losses equal to or exceeding its entire net worth. An inquiry into the working of such sick industrial company is to be made by the said Board on receipt of a reference or upon application or suo motu. If the Board is satisfied that the Company has indeed become a sick industrial company, the Board shall decide as to whether it is practicable for the Company to make its net worth positive within a reasonable time. This it may do under Section 17 of the Act, by order under sub-section .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on of a new scheme. If, at the end of the day, the first scheme or any successive schemes ultimately fail, the Board has then to be of the opinion that such Company is not likely to make its net worth positive, and that therefore it is to forward its opinion under Section 20 of the Act to the concerned High Court to proceed with the winding up of the said company. Section 22, which is of crucial importance in the working of the Act, suspends various legal proceedings, contracts etc., while a ref .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpany or any other instrument having effect by virtue of any other law, except the Foreign Exchange Regulation Act of 1973 and The Urban Land (Ceiling and Regulation) Act, 1976. 16. While this Act had worked for a period of about 7 years, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was brought into force, pursuant to various Committee reports. The Statement of Objects and Reasons for this Act reads as follows:- STATEMENT OF OBJECTS AND REASONS OF THE RECOVERY OF DEBTS .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the banks and financial institutions could be realized without delay. In 1981, a Committee under the Chairmanship of Shri T. Tiwari had examined the legal and other difficulties faced by banks and financial inst .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nks and about 304 cases filed by the financial institutions were pending in various courts, recovery of debts involved more than ₹ 5622 crores in dues of Public Sector Banks and about ₹ 391 crores of dues of the financial institutions. The locking up of such huge amount of public money in litigation prevents proper utilisation and recycling of the funds for the development of the country. The Bill seeks to provide for the establishment of Tribunal and Appellate Tribunals for expediti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er of all suits or other proceedings pending before any court to tribunals set up under the Act. The Act contained a non obstante clause in Section 34 stating that its provisions will have effect notwithstanding anything inconsistent contained in any other law for the time being in force or in any instrument having effect by virtue of any other law. In the year 2000, this Act was amended so as to incorporate a new sub-section (2) in Section 34 together with a saving provision in sub-section (1). .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nancial Institutions Act, 1993, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was brought into force in the year 2002. The statement of objects and reasons for this Act reads as under:- STATEMENT OF OBJECTS AND REASONS OF THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

itutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed on the 21st June, 2002 to regulate securitisition 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 nonperforming assets by adopting measures for recove .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or reconstruction company to acquire financial assets of banks and financial institutions by issue of debentures or bonds or any other security in the nature of a debenture; (d) empowering securitisation companies' or reconstruction companies to raise funds by issue of security receipts to qualified institutional buyers; (e) facilitating reconstruction of financial assets acquired by exercising powers of enforcement of securities or change of management or other powers which are proposed to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

financial institutions to take possession of securities given for financial assistance and sell or lease the same or take over management in the event of default, i.e. classification of the borrower's account as non-performing asset in accordance with the directions given or under guidelines issued by the Reserve Bank of India from time to time; (i) the rights of a secured creditor to be exercised by one or more of its officers authorised in this behalf in accordance with the rules made by t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s and empowerment of the Central Government to extend the application of the proposed legislation to non-banking financial companies and other entities; (m) non-application of the proposed legislation to security interests in agricultural lands, loans not exceeding rupees one lakh and cases where eighty per cent, of the loans are repaid by the borrower. 3. The Bill seeks to achieve the above objects. 19. This Act was brought into force as a result of two committee reports which opined that recov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s Court went into the circumstances under which the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was enacted, as follows:- Some facts which need to be taken note of are that the banks and the financial institutions have heavily financed the petitioners and other industries. It is also a fact that a large sum of amount remains unrecovered. Normal process of recovery of debts through courts is lengthy and time taken is not suited for recovery .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Though it is submitted on behalf of the petitioners that it so happened due to inaction on the part of the Governments in creating Debts Recovery Tribunals and appointing presiding officers, for a long time. Even after leaving that margin, it is to be noted that things in the spheres concerned are desired to move faster. In the present-day global economy it may be difficult to stick to old and conventional methods of financing and recovery of dues. Hence, in our view, it cannot be said that a s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ded for such a legislation keeping in view the changing times and economic situation whereafter yet another Expert Committee was constituted, then alone the impugned law was enacted. Liquidity of finances and flow of money is essential for any healthy and growth-oriented economy. But certainly, what must be kept in mind is that the law should not be in derogation of the rights which are guaranteed to the people under the Constitution. The procedure should also be fair, reasonable and valid, thou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es is a sine qua non for efficient trade and commerce, especially for financial intermediation. In our system, the evolution of the legal framework has not kept pace with changing commercial practice and with the financial sector reforms. As a result, the economy has not been able to reap the full benefits of the reforms process. As an illustration, we could look at the scheme of mortgage in the Transfer of Property Act, which is critical to the work of financial intermediaries…. One of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e prevalent situation where the amounts of dues are huge and hope of early recovery is less, it cannot be said that a more effective legislation for the purpose was uncalled for or that it could not be resorted to. It is again to be noted that after the Report of the Narasimham Committee, yet another Committee was constituted headed by Mr. Andhyarujina for bringing about the needed steps within the legal framework. We are therefore, unable to find much substance in the submission made on behalf .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

such a measure relating to financial policy. We may now consider the main enforcing provision which is pivotal to the whole controversy, namely, Section 13 in Chapter III of the Act. It provides that a secured creditor may enforce any security interest without intervention of the court or tribunal irrespective of Section 69 or Section 69-A of the Transfer of Property Act where according to sub-section (2) of Section 13, the borrower is a defaulter in repayment of the secured debt or any instalme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ction 13. It may also be noted that as per sub-section (3) of Section 13 a notice given to the borrower must contain the details of the amounts payable and the secured assets against which the secured creditor proposes to proceed in the event of non-compliance with the notice given under sub-section (2) of Section 13. [at para 34,36 and 38] 21. The pivotal provision namely Section 13 of the said Act makes it clear that banks and financial institutions would now no longer have to wait for a Tribu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at any time by notice in writing to any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due from the borrower, to pay the secured creditor so much of the money as is sufficient to pay the secured debt. 22. In order to further the objects of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Act contains a non obstante clause in Section 35 and also contains various Acts in S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

institutions. Significantly, under Section 41 of this Act, three Acts are, by the schedule to this Act, amended. We are concerned with the third of such Acts, namely, the Sick Industrial Companies (Special Provisions) Act, 1985, in Section 15(1) of which two provisos have been added. It is the correct interpretation of the second of these provisos on which the fate of these appeals ultimately hangs. 23. It is in this background that we need to embark on the next step, namely, to consider the fol .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e. 24. The occasion for answering question no. 1 is Shri Sreekumar s argument that the effect of the Delhi High Court s stay order dated 7.1.2004 is that the reference before the BIFR springs back into life, and with it Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. It is also occasioned by a further argument that the winding up order passed by the Bombay High Court dated 30.8.2007 being in the teeth of the stay order and Section 22 of the Sick Industrial Companie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

because of the bar contained in Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Hence, we have first to determine whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 overrides Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 as such overriding is only to the extent of the inconsistency between the two enactments. Such inconsistency is found in Section 22(1) of the Sick Industrial .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enactments. In an early judgment, namely, Maharashtra Tubes Ltd. v. State Industrial And Investment, (1993) 2 SCC 144, this Court had to deal with the Sick Industrial Companies (Special Provisions) Act, 1985, vis-à-vis the State Financial Corporations Act, 1951. In paragraph 9 of the judgment it was held that both Acts were special Acts, the 1951 Act dealing with the recovery of debts of a company pre-sickness and the 1985 Act dealing with such recovery post-sickness. Since both the Acts .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ourt noted that both Acts were special Acts. In a significant extract from a Special Court judgment, which was approved by this Court, it was stated that The Special Courts Act, 1992, being a later enactment and also containing a non obstante clause, would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. Had the legislature wanted to exclude the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, from the ambit of the said Act, the legislature wo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of such property of a notified party. The legislature expressly overrode Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and permitted the custodian to give directions under Section 11 of the Special Courts Act, 1979, notwithstanding Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. 27. In Jay Engineering Works Ltd. v. Industry Facilitation Council and Anr., (2006) 8 SCC 677, this time this Court had to deal with the Interest on Delayed Paymen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and Credit Pvt. Ltd. v. Modi Rubber Ltd., (2006) 12 SCC 642, the Arbitration and Conciliation Act, 1996 contained a non obstante clause in Section 5 thereof. Despite this being a later Act, vis-à-vis the Sick Industrial Companies (Special Provisions) Act, 1985, this Court held that the Sick Industrial Companies (Special Provisions) Act, 1985 would prevail, inasmuch as the non obstante clause contained in the Arbitration and Conciliation Act, 1996 had only a limited application - it applie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Industrial Companies (Special Provisions) Repeal Act, 2003. The vacuum, thus created has been filled by an amendment to the Companies Act. But, so far, the provisions of the Amending Act and the Companies Act introduced, have not been brought into force. It appears to be time to consider whether these enactments should not be notified. 30. Similarly, in Tata Motors Ltd. v. Pharmaceutical Products of India Ltd. and Anr., (2008) 7 SCC 619, it was held, following the judgment in NFEF Ltd. v. Chandr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cial Provisions) Act, 1985 which was a special Act, together with a reading of the non obstante clause contained in the Sick Industrial Companies (Special Provisions) Act, 1985 (see paragraphs 91 to 93). 32. In KSL & Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166, it was the turn of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 vis-à-vis the Sick Industrial Companies (Special Provisions) Act, 1985. This Court in resolving the controversy in favour .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the provisions of other laws. The term in derogation of means in abrogation or repeal of . The Black's Law Dictionary sets forth the following meaning for derogation : derogation.-The partial repeal or abrogation of a law by a later Act that limits its scope or impairs its utility and force. It is clear that sub-section (1) contains a non obstante clause, which gives the overriding effect to the RDDB Act. Sub-section (2) acts in the nature of an exception to such an overriding effect. It st .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

financial institutions, through a special procedure, though it may be general as regards other matters such as the reconstruction of sick companies which it does not even specifically deal with. Thus the purpose of the two laws is different. Parliament must be deemed to have had knowledge of the earlier law i.e. SICA, enacted in 1985, while enacting the RDDB Act, 1993. It is with a view to prevent a clash of procedure, and the possibility of contradictory orders in regard to the same entity and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ith all persons, who may have taken a loan from a bank or a financial institution in cash or otherwise, whether secured or unsecured, etc. In view of the observations of this Court in the decisions referred to and relied on by the learned counsel for the parties we find that, 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 speed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

decision in LIC v. Vijay Bahadur [(1981) 1 SCC 315 : 1981 SCC (L&S) 111] . 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 thereof .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e are later enactments with similar non obstante clauses, the Sick Industrial Companies (Special Provisions) Act, 1985 has been held to prevail only in a situation where the reach of the non obstante clause in the later Act is limited - such as in the case of the Arbitration and Conciliation Act, 1996 - or in the case of the later Act expressly yielding to the Sick Industrial Companies (Special Provisions) Act, 1985, as in the case of the Recovery Of Debts Due To Banks And Financial Institutions .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Banks And Financial Institutions Act, 1993. Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 does not include the Sick Industrial Companies (Special Provisions) Act, 1985 unlike Section 34(2) of the Recovery of Debts Due To Banks and Financial Institutions Act, 1993. Section 37 of the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 states that the said Act shall be in addition t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 makes amendments in three Acts - the Companies Act, the Securities Contracts (Regulation) Act, 1956, and the Sick Industrial Companies (Special Provisions) Act, 1985. It is of great 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 a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion 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 Sick Industrial Companies (Spec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in which sub-section (1) of Section 34 containing the non obstante clause is expressly made subject to sub-section (2) (containing the Sick Industrial Companies (Special Provisions) Act, 1985) by the expression save as provided under sub-section (2) . 36. This is what then brings us to the doctrine of harmonious construction, which is one of the paramount doctrines that is applied in interpreting all statutes. Since neither Se .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

forcement of Security Interest Act, 2002. Obviously this could not have been the Parliamentary intendment, after providing in Section 35 that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 will prevail over all other laws that are inconsistent therewith. A middle ground has therefore necessarily to be taken. According to us, the two apparently conflicting Sections can best be harmonized by giving meaning to both. This can only be done by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

institutions. On this interpretation also, the Sick Industrial Companies (Special Provisions) Act, 1985 will not be included for the obvious reason that its primary objective is to rehabilitate sick industrial companies and not to deal with the securities market. 37. An interesting pointer to the direction Parliament has taken after enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is also of some relevance in this context. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Sick Industrial Companies (Special Provisions) Act, 1985. The Committee further pointed out that effectiveness of the Sick Industrial Companies (Special Provisions) Act, 1985 as has been pointed out earlier, has been severely undermined by reason of the enormous delays involved in the disposal of cases by the BIFR. (See paragraphs 5.8, 5.9 and 5.15 of the Report). Consequently, the Committee recommended that the Sick Industrial Companies (Special Provisions) Act, 1985 be repealed and the prov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es, mirrored the provisions of Sections 15 to 21 of the Sick Industrial Companies (Special Provisions) Act, 1985. Interestingly, the Companies Amendment Act of 2002 omitted a provision similar to Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Consequently, creditors were given liberty to file suits or initiate other proceedings for recovery of dues despite pendency of proceedings for the revival or rehabilitation of sick companies before the National Company Law T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Industrial Companies (Special Provisions) Act, 1985 consequent to some of its provisions being telescoped into the Companies Act. Thus, the Companies Amendment Act of 2002 and the SICA Repeal Act formed part of one legislative scheme, and neither has yet been brought into force. In fact, even the Companies Act, 2013, which repeals the Companies Act, 1956, contains Chapter 19 consisting of Sections 253 to 269 dealing with revival and rehabilitation of sick companies along the lines of Sections 42 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng around from wanting to protect sick industrial companies and rehabilitate them to giving credence to the public interest contained in the recovery of public monies owing to banks and financial institutions. These provisions also show that the aforesaid construction of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 vis-à-vis the Sick Industrial Companies (Special Provisions) Act, 1985, leans in favour of credito .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

per the said table, the opening balance of Non-performing Assets in public sector banks for the year 2011-2012 was ₹ 746 billion but the closing balance for 2011-2012 was ₹ 1,172 billion only. The total amount recovered through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 during 2011-2012 registered a decline compared to the previous year, but, even then, the amounts recovered under the said Act constituted 70 percent of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 which Act alone seems to have worked to some extent at least. 41. It will thus be seen that notwithstanding the non obstante clauses in Section 22(1) and (4), read with Section 32, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will have to give way to the measures taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 more pa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bts Due to Banks and Financial Institutions Act, 1993 which in turn contains Section 34(2) which makes the Sick Industrial Companies (Special Provisions) Act, 1985 prevail over the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It was therefore argued that since Section 37 refers to the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and since Section 34(2) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 refers to the Sick Indu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ecial Provisions) Act, 1985 only for the purpose of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 and for no other purpose. This is quite apart from the fact that, as has been noted hereinabove, the non-reference to the Sick Industrial Companies (Special Provisions) Act, 1985 in Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was deliberate, as has been held by us hereinabove. 43. Shri Sundaram is al .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to its huge accumulated losses and liabilities and should be wound up. The appeal filed by the appellant-company under Section 25 of the Act against said order of the Board was dismissed by the Appellate Authority by order dated January 7, 1991. As a result of these orders, no proceedings under the Act was pending either before the Board or before the Appellate Authority on February 21, 1991 when the Delhi High Court passed the interim order staying the operation of the Appellate Authority date .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appell .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s still pending. We are, therefore, of the opinion that the passing of the interim order dated February 21,1991 by the Delhi High Court staying the operation of the order of the Appellate Authority dated January 7,1991 does not have the effect of reviving the appeal which had been dismissed by the Appellate authority by its order dated January 7, 1991 and it cannot be said that after February 21, 1991, the said appeal stood revived and was pending before the Appellate Authority. In that view of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, therefore, be invoked and there was no impediment in the High Court dealing with the winding up petition filed by the respondents….. [at para 10] 44. A reading of the said judgment also shows that the order of stay of the BIFR s opinion to wind up the company and the dismissal of the appeal therefrom by the AAIFR would not in any manner revive the reference under Section 15 of the Appellant No. 1 Company. For this reason also, it is clear that after the orders of the BIFR and AAIFR have .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(2) SCC 651, Ravi S. Naik v. Union of India & Ors., (1994) Supp. (2) SCC 641 and BPL Ltd. & Ors. v. R. Sudhakar & Ors., (2004) 7 SCC 219. Each of these judgments was delivered in different contexts. The first judgment of Kihoto Hollohan was delivered in the context of landslide changes that would have taken place had a stay order not been passed in the context of the 10th Schedule to the Constitution of India, which was enacted to remedy the evil of defection. The second judgment, n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

High Courts have, in judgments differing in detail only, taken the broad view that the expression where a reference is pending under Section 15(1) proviso 3 would include all proceedings before the BIFR right till the stage of the successful culmination of a scheme for reconstruction or the recommendation for winding up of the sick industrial company. These High Courts are Madras, Delhi, Bombay, Kerala, Punjab, Gujarat and Calcutta. All these judgments are referred to in an exhaustive full benc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t has to be determined as to which of these two sets of judgments is a correct exposition of the law. 47. It is clear that a purely literal interpretation of the expression where a reference is pending can yield the result that the Orissa High Court reached. In fact, Chapter III of the Sick Industrial Companies (Special Provisions) Act, 1985 specifically refers, in the Chapter heading, to references, inquiries and schemes. While Section 15 of the Sick Industrial Companies (Special Provisions) Ac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

In Real Value Appliances Ltd. v. Canara Bank & Ors., (1998) 5 SCC 554, this Court had to decide whether the mere registration of a reference by the BIFR would result in the automatic cessation of all proceedings which are pending in civil courts and the company court against its assets. It was argued that in order that Section 22 of the Act can come into operation, the BIFR must, subsequent to the registration of the reference under Section 15, apply its mind and consider whether it is nece .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

regard to Section 16(3) explanation, that an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon its knowledge reduced to writing by the Board. This being the case, this Court held that once the reference is registered and once it is mandatory to simultaneously call for information/documents from the informant, then an inquiry under Section 16 must be deemed to have commenced. In that view of the matter, Section 22 would immediately com .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the moment a reference is registered. And this Court has held that the moment the reference is registered, an inquiry as contemplated by Section 16 shall be deemed to commence. If that is so, then a reference can never be said to be pending after an inquiry commences, if learned counsel for the Appellants is correct. This can never be the case. It is clear, therefore, that the expression where a reference .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in Section 22. Proceedings under Section 22 are actions taken against the sick company, whereas references are actions initiated by a sick company - it is perhaps for this reason that the third proviso to Section 15(1) uses the expression reference instead of the expression proceedings . 50. Another important aspect as to the construction of the third proviso to Section 15(1) is the meaning of the expression such reference shall abate . One of the meanings of the expression abate is to put an en .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essfully. A third manner in which a reference can abate is when a scheme or schemes have failed in respect of the sick industrial company, and in the opinion of the BIFR, the said Company ought to be wound up. A fourth instance of abatement is provided by the third proviso to Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. And that is that a reference which is pending in the sense understood hereinabove shall abate if the secured creditors of not less than 3/4th in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re has thought it fit to annul all proceedings before the BIFR only when at least 3/4th of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors have taken the measures listed in Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The balance is therefore struck by the figure of not less than 3/4th . The legislature has inserted this provision so that, if 3/4th or more of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hen the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 came to be enacted pursuant to various committee reports, and for the reasons outlined hereinabove. 51. A recent judgment of this Court in Pegasus Assets Reconstruction P. Ltd. v. M/s. Haryana Concast Limited & Anr., (Civil Appeal No. 3646 of 2011), has held, agreeing with a judgment of the Delhi High Court, and disapproving a judgment of the Punjab and Haryana High Court, that a Comp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tate Financial Corporation Act, 1951 or the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 cannot be held applicable to the Securitisation Act. Further, the very incorporation of certain provisions of the Companies Act in the Securitisation Act themselves harmonise the latter Act with the Companies Act in respect of workers debts under Section 529A of the Companies Act. In a significant paragraph, this Court has held: The aforesaid view commends itself to us also because of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

different angle also. There are many situations in which Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will not apply. One such situation is a situation where an eviction petition is filed under a State Rent Act for eviction on the ground of non-payment of rent. Such eviction petitions have been held not to be suits for recovery of money. Consequently, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 has been held not to apply - See Gujarat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to apply in the case of unsecured creditors seeking to recover their debts from a sick industrial company. This is for the reason that the Sick Industrial Companies (Special Provisions) Act, 1985 overrides the provisions of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993. 2. Where a secured creditor of a sick industrial company seeks to recover its debt in the manner provided by Section 13(2) of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s been jointly financed by secured creditors, and at least 60 per cent of such secured creditors in value of the amount outstanding as on a record date do not agree upon exercise of the right to realise their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to have full play. 4. Where, under Section 13(9) of the Securitisation and Recons .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version