2016 Supreme(SC) 91

SUPREME COURT OF INDIA
Kurian Joseph, R.F. Nariman, JJ.
M/s Madras Petrochem Ltd. & Anr. – Appellants
Versus
BIFR & Ors. – Respondents
Civil Appeal Nos. 614-615 of 2016 (Arising out of SLP(Civil) Nos. 26170-26171 of 2008)
Decided on : 29-01-2016

IMPORTANT POINTS
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 prevails over the Sick Industrial Companies (Special Provisions) Act, 1985 to the extent of inconsistency therewith.

Headnote:(a) Interpretation of statute – Sick Industrial Companies (Special Provisions) Act, 1985 – Prevails over all earlier enactments with non-obstante clauses similar to it – In case of subsequent enactments with similar non obstante clauses, Act, 1985 would prevail only where the non obstante clause in the later Act has limited reach or the later Act expressly yields to Act, 1985 – Otherwise Act, 1985 would yield to the other Act. (Para 33)

       (2015) 1 SCC 166; (2004) 4 SCC 311; (1993) 2 SCC 144; (2001) 3 SCC 71; (2006) 8 SCC 677; (2006) 12 SCC 642; (2008) 7 SCC 619; (2005) 8 SCC 219; (2012) 4 SCC 148 – Relied upon

       (b) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 35 and 37 – Section 35 containing non-obstante clause giving overriding effect on other statutes – Section 37 carving exception to application of the Act in relation to other Acts – Section 37 not including Act 1985 – Act 2002 shall prevail over Act 1985. (Para 34, 35)

       (c) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 35 and 37 – Neither provision is subject to the other – Harmonious construction – Expression “or any other law for the time being in force” in Section 37 – Means “other laws having relation to the securities market only” – Sick Industrial Companies (Special Provisions) Act, 1985 not included because its primary objective is to rehabilitate sick industrial companies and not to deal with the securities market – Overriding effect given by of section 35 of Act 2002 over all other Acts covering Act 1985 – Act 2002 shall therefore prevail over Act 1985. (Para 36)

       (d) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13 – Sick Industrial Companies (Special Provisions) Act, 1985 – Section 22 – Act 2002 prevails over Act 1985 – Hence sale notices issued u/s 13 of Act 2002 could continue – Could not be thwarted by section of Act 1985. (Para 41)

       (e) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 37 – Recovery of Debts Due to Banks and Financial Institutions Act, 1993 – Section 34(2) – Section 34(2) referring to Sick Industrial Companies (Special Provisions) Act, 1985 only for the purpose of Act 1993 and no other purpose – Such reference cannot be read into section 37 of Act 2002. (Para 42)

       (f) Section 15 – Reference to BIFR – BIFR’s opinion to wind up the Company – Stay thereof – Dismissal of appeal therefrom by AIFR – High Court upholding orders of BIFR and AIFR and dismissing writ petition challenging the same – The reference would not revive. (Para 44)

       (1992) 3 SCC 1 – Relied upon

       (1992) Supp. (2) SCC 651; (1994) Supp. (2) SCC 641; (2004) 7 SCC 219 – Distinguished

       (g) Sick Industrial Companies (Special Provisions) Act, 1985 – Section 15(1), Proviso 3 – Expression “where a reference is pending” – Would necessarily include the inquiry stage before the Board under Section 16 of the Act – The reference would be pending not only when an inquiry is instituted, but also after preparation and sanction of a scheme right till the stage the scheme has worked out successfully or till the BIFR gives its opinion to wind up the company – ‘Reference’ u/s 15 and ‘Proceeding’ u/s 22 – Distinction – Use of ‘reference’ instead of ‘proceeding’ in section 15 – Import of – Abatement of reference on action u/s 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (Para 46, 48, 49, 50)

       (1998) 5 SCC 554; Civil Appeal No. 3646 of 2011; (1999) 8 SCC 11; (2003) 4 SCC 305 – Relied upon

       AIR 2013 Madras 229 – Approved

       AIR 2008 Orissa 103 – Not correct law

       Facts of the case:

       The present appeals raise interesting questions on the 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.

       The net worth of the Appellant No.1 Company, having eroded completely, it filed a reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 before the BIFR.

       The Appellant company was declared sick. The rehabilitation schemes failed and ultimately BIFR recommended to the High Court of Bombay that the said company be wound up. AAppellant No.1’s challenge to the BIFR order was dismissed by the AAIFR.

       ICICI, the operating agency, issued a notice dated 20.11.2002 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to the appellant No.1 company and followed it up with a possession notice dated 9.5.2003. On 8.8.2003, ICICI issued a sale notice for and on behalf of all the secured creditors of the appellant No.1 company.

       Meanwhile, appellant Nos. 1 & 2 filed a writ petition before the Delhi High Court being Writ Petition Nos.48-49 of 2004 challenging the AAIFR 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 and ultimately the Writ Petition was dismissed.

       Meanwhile, the sale notice of 8.8.2003 was challenged before the DRT by the appellants which was unsuccessful. The DRAT, in appeal, upset the DRT order and set aside the sale notice. However, the Madras High Court set aside the DRAT order. The sale of movable assets for a sum of Rs.4.65 crores was also confirmed in favour of one M/s Rahamath Steel. Madras High Court also permitted the creditors of the Company to proceed with the sale of its immovable property subject to a minimum reserve price of Rs.25 crores. This order was never challenged and has attained finality.

       The Bombay High Court wound up the appellant No.1 company.

       The Delhi High Court passed the impugned order on 24.7.2008, in which it was of the view that Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985, when construed to include all proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, would make the present proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, abate on the facts of this case. Ultimately the Delhi High Court disposed of the appellants’ writ petition as having become infructuous.

       Finding of the Court:

       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.

       The interim order dated 17.1.2004 by the Delhi High Court would not have the effect of reviving the reference so as to thwart taking of any steps by the respondent creditors in this case under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

       Section 15(1) proviso 3 covers all references pending before the BIFR, no matter whether such reference is at the inquiry stage, scheme stage, or winding up stage.

       Result: Appeals dismissed.