Important Points
The SICA, being a special statute and later in point of time to the Companies Act, shall prevail upon it.
High Court does not exercise concurrent jurisdiction with BIFR.

Headnote:(a)Interpretation of Statutes – Sick Industrial Companies (Special provisions) Act, 1984 (SICA) vis-à-vis the Companies Act, 1956 – The provisions of a special Act will override the provisions of a general Act – A later of it will override an earlier Act – Companies Act is a general Act whereas SICA is a special Act and it is prior in point of time to SICA – Therefore, wherever any inconstancy is seen in the provisions of the two Acts, SICA would prevail – SICA furthermore being a complete code, the jurisdiction of the Company Judge in a case where reference had been made to BIFR would be subject to the provisions of SICA. (Paras 19 and 20)
       (2005) 8 SCC 219: 2005(7) Supreme 409 – Relied upon.
       (b)Sick Industrial Companies (Special provisions) Act, 1984 – Section 20(4) and 32 – High Court does not exercise concurrent jurisdiction with BIFR. (Para 21)
       (2005) 8 SCC 219: 2005(7) Supreme 409; AIR 2007 SC 683; (2006) 3 SCC 434 – Relied upon.
       (c)Sick Industrial Companies (Special provisions) Act, 1984 – Section 26 – Jurisdiction of civil court is barred in respect of any matter for which the appellate authority or the Board is empowered – Jurisdiction of High Court, though it may not be a civil court, in cases of this nature is limited. (Para 23)
       (d)Sick Industrial Companies (Special provisions) Act, 1984 – Section 26 – Section 26 dos not oust the jurisdiction of the Company Court in totality, the special statute shall prevail over the general rule – At the same time it is also not possible to harmonize the provisions of Sections 391 to 394 of the 1956 Act with the provisions of SICA. (Para 26)
       (1962) Supp 1 SCR 73; (1965)2 SCR 665; (2003) 6 SCC 220: 2003(4) Supreme 497 – Relied upon.
       (e)Sick Industrial Companies (Special provisions) Act, 1984 – Section 15 – Scheme under BIFR has to be framed by the operating agency, and the BIFR has to apply its mind in approving a scheme – None of the conditions having been satisfied, the impugned judgments cannot be sustained – Matter remitted back to BIFR. (Paras 28 and 31)
       Facts of the case :
       1.First respondent is a company registered and incorporated under the 1956 Act. It took loan from Tata Finance Ltd, predecessor-in-interest of the appellant on interest @ 18% per annum. Disputes and differences arose between the parties, which were referred to arbitral tribunal. An award was passed on 30th July, 2002 in the Arbitration proceedings for a sum of Rs.1,51,36,795/- together with interest @ 18% per annum till payment and/or realization. It is stated that the total amount due to the appellant from the respondent would be near about 5.7 crores of rupees. There were other secured and unsecured creditors also.
       2.Respondent being unable to pay the dues made a reference in terms of Section 15 of SICA before the Board for Industrial and Financial Reconstruction (BIFR). The BIFR appointed Industrial Development Bank of India (IDBI) as an operating agency. It purported to have considered various schemes. However, as Unit Trust of India (UTI) raised an objection for giving up any of its dues and there were six secured creditors and large number of unsecured creditors, BIFR on or about 27th October, 2004 passed an order recommending winding up of the respondent.
       3.On appeal, the AAIFR granted stay of operation of the order of BIFR dated 27th October, 2004 by an order dated 13th September, 2005. Before the AAIFR two separate Schemes were framed, one of them related to an arrangement between the respondent and M/s. Wanbury Ltd.
       4.Appellant was kept outside the said Scheme. The scheme involved some selective secured creditors and some selective unsecured creditors.
       5.Respondent, however, filed an application before the High Court during the pendency of the said appeal wherein a Scheme was presented before the Company Judge purported to be involving about 80 percent of the creditors, most of them being banks, financial institutions. Allegedly, even at that stage, it was not disclosed before the Company Court that unsecured creditors listed in the Scheme were only a selected few creditors, as a result whereof a large number of creditors had been excluded.
       6.Before the Company Judge, the appellant filed an application for intervention. UTI also filed an objection.
       7.The contentions of the appellant, however, were rejected by a learned Single Judge of the High Court and the Scheme was approved.
       8.In view of the aforementioned order of the High Court, AAIFR also approved the said Scheme.
       9.By reason of the impugned judgment the said Letters Patent Appeal has been dismissed.
       Findings of the Court :
       The SICA, being a special statute and later in point of time to the Companies Act, shall prevail upon it.
       Result : Appeal allowed, matter remitted back to BIFR.

Judgment

S.B. Sinha, J. —

1.Leave granted.

Introduction

2.Interpretation/application of the provisions of the Sick Industrial Companies (Special provisions) Act, 1984 (SICA) vis-‘-vis the Companies Act, 1956 (1956 Act) is in question in this appeal which arises out of a Judgment and Order dated 16th October, 2006 passed by a Division Bench of the High Court of Judicature at Bombay in Appeal No.725 of 2006 arising out of a Judgment and Order dated 13th February, 2006 passed by a learned Single Judge of the Bombay High Court approving a Scheme filed by the respondent herein in Company Petition No.470 of 2005 which was under Section 391 of the 1956 Act.

Background Facts :

3.First respondent is a company registered and incorporated under the 1956 Act. It took loan from Tata Finance Ltd, predecessor-in-interest of the appellant on interest @ 18% per annum. Disputes and differences arose between the parties, which were referred to arbitral tribunal. An award was passed on 30th July, 2002 in the Arbitration proceedings for a sum of Rs.1,51,36,795/- together with interest @ 18% per annum till payment and/or realization. It is stated that the total amount due to the appellant from the respondent would be near about 5.7 crores of rupees. There were other secured and unsecured creditors also.

Proceedings under SICA

4.Respondent being unable to pay the dues made a reference in terms of Section 15 of SICA before the Board for Industrial and Financial Reconstruction (BIFR). The BIFR appointed Industrial Development Bank of India (IDBI) as an operating agency. It purported to have considered various schemes. However, as Unit Trust of India (UTI) raised an objection for giving up any of its dues and there were six secured creditors and large number of unsecured creditors, BIFR on or about 27th October, 2004 passed an Order recommending winding up of the respondent. An appeal was preferred thereagainst before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).

5.The AAIFR granted stay of operation of the Order of BIFR dated 27th October, 2004 by an Order dated 13th September, 2005. Before the AAIFR two separate Schemes were framed, one of them related to an arrangement between the respondent and M/s. Wanbury Ltd. It agreed to settle the outstanding dues of the creditors of PPIL. But before doing so, it thought it fit to settle all the large creditors being Financial Institutions and Banks. The scheme envisaged payment to a class of creditors. It was also envisaged :

“In addition, two immovable properties of the company (which were its primary and main assets) were to be sold and the unsecured creditors were to be paid a proportion of the sale proceeds. The balance of the sale proceeds were to be paid over to the secured creditors.

Upon payment of the cash consideration, Wanbury was to get complete control over the Respondent including all its assets subject to the approval of the merger before the appropriate forum.

The scheme was to become effective upon approval of overall settlement including an Order for merger or any other mode of acquisition of assets of PPIL by Wanbury or such scheme of PPIL by BIFR/AAIFR.”

Appellant was kept outside the said Scheme. The scheme involved some selective secured creditors and some selective unsecured creditors.

Company Court Proceedings

6.Respondent, however, filed an application before the High Court of Judicature at Bombay purported to be in terms of Section 391 of the 1956 Act during the pendency of the said appeal on or about 29th April, 2005. A Scheme was presented before the Company Judge purported to be involving about 80 percent of the creditors, most of them being banks, financial institutions. Allegedly, even at that stage, it was not disclosed before the Company Court that unsecured creditors listed in the Scheme were only a selected few creditors, as a result whereof a large number of creditors had been excluded.

7.Before the Company Judge, the appellant filed an application for interv

Click Here to Read the rest of this document

2008 Supreme(SC) 954

Important PointsThe SICA, being a special statute and later in point of time to the Companies Act, shall prevail upon it.High Court does not exercise concurrent jurisdiction with BIFR.

Cases Referred (4)

Important Points
The SICA, being a special statute and later in point of time to the Companies Act, shall prevail upon it.
High Court does not exercise concurrent jurisdiction with BIFR.