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SUPREME COURT OF INDIA
H.L. DATTU, CJI., S.A. BOBDE, ABHAY MANOHAR SAPRE, JJ.
KSL & INDUSTRIES LTD. - APPELLANT
VERSUS
M/S ARIHANT THREADS LTD. & ORS. - RESPONDENTS
CIVIL APPEAL No. 5225 OF 2008
Decided on : 27.10.2014
(b) Sick Industrial Companies (Special Provisions) Act, 1985 – The Act was enacted for timely determination of a body of experts for providing preventive, ameliorative, remedial and other measures – The Act aims to revive and rehabilitate, not all sick companies but those in the schedule to Industries (Development and Regulation) Act, 1951 (IDRA). (Para 19, 23)
(c) Sick Industrial Companies (Special Provisions) Act, 1985 – Section 22 and 32 – Section 22 prohibiting proceedings for winding up, execution or distress against sick company – Also prohibits suits for recovery of money, or enforcement of any security or guarantee ‘except with the consent of the Board or Appellate Authority – ‘Proceedings’ – Instantly, “application for recovery” being a proceeding resulting in execution and distress against the property of the Company, should be construed as proceeding for the execution, distress or the like against any of the properties of the industrial company – It cannot be construed that proceedings, not specifically coming under section 22 shall not be prohibited but only its execution will be prohibited. (Para 32, 33)
(2003) 4 SCC 305 – Distinguished
(d) Interpretation of statue – Expression ‘provisions shall be in addition to and not in derogation of another law or laws’ – Means that such enactment shall co-exist along with the other Acts – Legislative intent is not to annul or detract from the provisions of other laws (Para 37)
(e) Recovery of Debts Due to Banks and Financial Institutions Act, 1993 – Section 34(1) and (2) – sub-section (1) gives overriding effect to the RDDB Act – Sub-section (2) – RDDB Act shall be in addition to and not in abrogation of, certain including SICA – Sub-section (2) preserves powers of the authorities under SICA and saves the proceedings from being overridden by RDDB Act. (Para 37, 38)
(f) Interpretation of statute – SICA and RDDB Act – Which will prevail – Generalia specialibus non derogant (general provisions will not abrogate special provisions) – The two Acts having different purpose – Both are ‘special’ in their respective spheres – RDDB Act is special law for recovery of debts and the SICA is special law for reconstruction of sick industrial units – In view of section 22 of SICA and section 34(2) of RDDB Act, proceedings under SICA for reconstruction of a sick company shall go on and all other proceedings against the company and its properties shall be stayed pending the process of reconstruction – Held, section 22 covers proceedings under the RDDB Act and provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act – Contextual construction. (Para 49, 50, 52, 54)
AIR 1956 SC 614 : 1956 SCR 603; (1981) 1 SCC 315; (1993) 2 SCC 144; (2000) 4 SCC 406; (1987)1 SCC 424; AIR 1964 SC 669 – Relied upon
Facts of the case:
The matter was earlier heard by a two Judge Bench.
Both the learned Judges held, for different reasons, that the appeal deserves to be allowed and the Judgment and Order of the High Court is liable to be set aside.
However, since, there was a difference of opinion on the question of law, a reference was made to a larger Bench.
One of the learned Judges held that the provisions of RDDB Act should be given priority and primacy over SICA by virtue of Section 34 of the RDDB Act as it is a subsequent enactment. Therefore it may be presumed even in the absence of any specific provision, that Parliament was aware of all the statutes enacted prior thereto; that the non-obstante clause had been inserted to ensure expeditious adjudication and recovery of debts due to banks and financial institutions. He also held that in view of sub-section (2) of Section 34 of the RDDB Act, which provides that the provisions of the Act are “in addition to and not in derogation of” inter alia SICA, which is an additional factor why the RDDB Act shall prevail.
The other Judge, on the other hand, held that the non-obstante clause in Section 34(1) contains an exception, to be found in sub-section (2). Sub-section (2) provides that the Act shall be in addition to and not in derogation of inter alia the SICA. Further, that the overriding effect of RDDB Act would have an overriding effect over other enactments but supplemental to the provisions of SICA, and therefore, the provisions of SICA would prevail over the provisions of the RDDB Act.
Present three Judge Bench was called upon to resolve the controversy.
Finding of the Court:
Section 22 of SICA covers proceedings under the RDDB Act and provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act.
Result: Reference answered by holding that provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act.
JUDGMENT :
S. A. BOBDE, J.
1. This appeal is placed before us by way of a reference, made by a two-Judge Bench of this Court, C.K. Thakker and Altamas Kabir, JJ. which heard the matter on an earlier occasion and held that the appeal deserves to be allowed and that the Judgment and Order passed by the High Court is liable to be set aside. In view of a difference of opinion having arisen on the interpretation of Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the 'RDDB' Act) the matter has been referred for decision to this Bench by the Hon’ble Chief Justice of India.
2. The present appeal is preferred by KSL & Industries Ltd. (`appellant' for short) against the final Judgment and Order dated 23.02.06 passed by the Delhi High Court in Writ Petition Nos. 2041-2042 OF 2006. The High Court set aside the Order passed by the Debt Recovery Appellate Tribunal, Delhi (`DRAT' for short) and held that in view of the bar contained in Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereafter referred to as `SICA') no recovery proceedings could be effected against Respondent No. 1 (M/s. Arihant Threads Ltd.) (‘Company' for short).
3. The Company set up an export oriented spinning unit for manufacturing cotton yarn in Amritsar District, in the State of Punjab. The Company took on lease, Plot No. 454 in 1992 for a period of 99 years from Goindwal Sahib Industrial & Investment Corporation, on a condition that it would not transfer the interest in the property for the first fifteen years without prior permission of the lessor. The Company had a right to mortgage lease-hold rights to a Bank, the Punjab Financial Corporation or the Life Insurance Corporation of India as security for a loan. It got its project financed by the Industrial Development Bank of India (`IDBI' for short) by way of foreign currency loan and a working capital of Rs. 93.1 million.
4. Since the Company failed to repay loan installments, IDBI filed Original Application No. 1368 of 2001 on December 20.12.01 in Debt Recovery Tribunal, Chandigarh (`DRT' for short) for recovery of Rs. 25,26,60,836/-under the RDDB Act. In the proceedings before the DRT the Company remained absent, although, duly served. On 15.07.03, an ex-parte final order in favour of IDBI for recovery of above mentioned sum i.e. Rs. 25,26,60,836/-along with interest @ 7.8% p.a. was passed by DRT. DRT expressly directed that in the event of failure on the part of the Company to pay the decretal amount, IDBI will be entitled to sell the mortgaged property of the company and recover the amount. If the amount remained unrecovered even then, it shall be recovered from the sale of personal properties of the defendants therein.
5. On 09.09.03, the Recovery Officer issued a composite demand notice under Rule 2 of Second Schedule of the Income Tax Act, 1961 against the Company demanding payment of Rs. 28,60,87,384/-. He directed the Company to appear for settling terms and conditions of the proclamation of sale and for disclosure of its movable and immovable assets.
6. On 16.09.04, the Recovery Officer fixed the reserve price of the movable and immovable properties at Rs. 12.50 crores. On 18.10.04, the Company filed an appeal under Section 30 of the RDDB Act against the order dated 16.09.04 fixing reserve price of the movable and immovable properties at Rs. 12.50 crores. On 30.10.04, the appellant was declared the highest bidder at Rs. 12.52 crores and was thus successful. On 15.12.04, the Company moved an application for setting aside the ex-parte final order, passed on 15.07.03 by DRT Chandigarh in favour of IDBI, directing recovery of Rs. 25,26,60,836/-along with interest @ 7.8% p.a. The appellant, who had become the auction-purchaser of the company’s properties objected to the prayer of the Company for setting aside the ex-parte order and applied for impleadment. Meanwhile, the Company got its property valued by Himachal Cons
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