REPORTABLE

IN THE SUPREME COURT OF IDNIA

CIVIL APPELALTE JURISDICTION

CIVIL APPEAL NO. __3640________OF 2008

(Arising out of SLP (C) No. 20289 of 2006)

Tata Motors Ltd.

…. Appellant

Versus

Pharmaceutical Products of India Ltd. & Anr.

…. Respondents

J U D G M E N T

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-à-vis the Companies

Act, 1956 (1956 Act) is in question in this appeal which arises out of a

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judgment and order dated 16^th 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 13^th 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 30^th 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

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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 27^th 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 27^th

October, 2004 by an order dated 13^th 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.

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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 29^th April, 2005. A

Scheme was presented before the Company Judge purported to be involving

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about