Calcutta High Court
State Bank Of India vs S.M. Oil Extraction Pvt. Ltd. And Ors. on 6 April, 1999
Equivalent citations: [2002]108COMPCAS85(CAL)
JUDGMENT Ronojit Kumar Mitra, J.
1. In order to adjudicate the disputes between the parties in this application, the court was to consider whether the non obstante clauses as contained in the Companies Act, 1956, and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, were conflicting, and if so then which was to prevail. For the sake of brevity, I shall in this order refer to the two enactments as the "Companies Act" and the "Debt Recovery Act", respectively.
2. It was contended by the advocate on behalf of the petitioner, that the suit which was now pending before this court, ought to be transferred to the Debt Recovery Tribunal, in accordance with the provisions contained in Section 31(1) of the Debt Recovery Act. The Debt Recovery Tribunal, in this order shall in short be referred to as "the Tribunal". It was argued on behalf of the petitioner that the Debt Recovery Act was a later enactment and the non obstante clause contained in it would be applicable in preference to the non obstante clause in the Companies Act, which in point of time was an earlier legislation. In support of his submissions he cited and relied on the decision in Sarwan Singh v. Kasturi Lal, . According to him, the Legislature at the time of making the new enactment, was fully aware of the non obstante clause contained in the Companies Act, and therefore, the insertion of the non obstante clause in the Debt Recovery Act was a clear intention of the legislators that this non obstante clause would prevail over the non obstante clause contained in the Companies Act and hence the laws under the Debt Recovery Act would be given full effect. He further cited and relied on the decisions in Chandavarkar Sita Ratna Rao v. Ashalata S. Guram, , Sanwarmal Kejriwal v. Vishiva Co-operative Housing Society Ltd., and Srikant Kashinath Jituri v. Corporation of the City of Belgaum, .
3. The Companies Act was a composite legislation, contended the advocate for the official liquidator, and any other enactment would not affect the provisions contained in this legislation. According to him, since there was no specific provision in either of the two enactments as to which of the non obstante clauses would prevail, over the other, it would not be correct to arrive at a conclusion by seeking to interpret the minds of the legislators at the time when this legislation had been enacted. He submitted that such conclusions would prejudice the interest of the creditors in liquidation proceedings, under the Companies Act. He argued that the Tribunal had no power to wind up a company or to entertain proceedings instituted by a creditor under the provisions of the Companies Act and therefore while the non obstante clause contained in the Debt Recovery Act could be applicable to other proceedings, it had no application as regards proceedings under, nor could be regarded to have any effect on the provisions of the Companies Act. He emphasised that it would be especially so, because such proceedings could not be instituted in any other court but the court taking up company matters. He submitted that winding up proceedings were representative in nature, and if the suit was to be transferred to the Tribunal then the interest of the creditors would suffer, as there was no indication in the Debt Recovery Act, that the Tribunal would continue with the suit while the winding up proceedings continued before the company court. According to him the suit should not be transferred to the Tribunal. He submitted that it was the considered view of the Supreme Court that, where there was a conflict in the interpretation of a statute, courts would attempt to give a harmonious interpretation, favouring any special protection which may have been sought to be reserved by the Legislature in any of the conflicting enactments. He argued that in Section 31(1) of the Debt Recovery Act, the words "... before any court..." should be taken to mean, before any original court, which would be the court where the suit had been originally instituted and not the court where the suit had come by way of operation of law, and was pending before that court on the date when the Debt Recovery Act came into force. Upon instruction he submitted that all formalities including publication of notice inviting and filing of claims had been completed in the present matter and settlement of claims in respect of the workers was near completion and the petitioner could receive its portion of claim as and when this court would direct. In support of his submissions he cited and relied on the decisions in [1996] 1 C.L.J. 380 (sic) and Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies [1996] 86 Comp Cas 255 (SC).
4. It would be pertinent to commence deliberation on the disputes between the parties, by quoting a passage from the decision of the Supreme Court in Sarwan Singh v. Kasturi Lal, , which was cited by advocate for the petitioner, as mentioned by me earlier in this order. This Lordships were of the view that (headnote) :
"When two or more laws operate in the same field and each contains a non obstante clause stating that its provisions will override those of any other law, cases of such conflict have to be decided by reference to the object and purpose of the laws under consideration."
5. Instead of launching an enquiry or scrutiny of the contents of the two enactments to ascertain whether the laws did "operate in the same field", it would suffice, I should think, to consider "the object and purpose of the laws under consideration". The Debt Recovery Act had been enacted by the legislators upon the consideration, and on the basis of proposals forwarded by the Tiwari Committee which had been strongly recommended by the committee on financial system. The very name I would have thought, on a plain reading, should have left no scope for interpretation of the meaning and purpose of enacting the legislation. The principal concern of the legislators, in making the Act was obviously to expedite repayments of the various loans and advances which the banks and other financial institutions extended to their constituents. The Companies Act on the other hand consisted of an uniform law throughout India relating exclusively to companies. It has been referred to as a "consolidating and amending Act". It must also be remembered that a company was a legal entity just as was an individual. It was almost certainly the intention of the Legislature to afford special protection to the companies, and everything and all concerned with the companies. So there was the company court, where all matters relating to companies only were dealt with and nothing else. The Legislature clearly had in this enactment, specially reserved to the bona fide creditors of a company, a summary procedure to realise from the company expeditiously a just debt by way of enforcing it in a company court. Special protection was also reserved to the workers in Section 529A of the Act to be regarded in pari passu with other secured creditors. If the suit was allowed to be transferred to the Tribunal, in effect, it would be allowing the bank to receive preferential payment without consideration of the other secured creditors and in particular the workers. That would surely be in derogation of the special protection sought to have been reserved to the claim of the workers in Section 529A of the Act.
6. In spite of the statute, courts were averse to wind up a company ex debito justitiae. The courts in exercise of their equitable jurisdiction would generally afford the company opportunities to avoid being wound up and repay its debt. A winding up order would of course eventually be made, in the event the company failed to avail of the indulgence. With respect and humility I would think that a distinction was clearly drawn by the Supreme Court between "recovery" and "enforcement" of a debt. Their Lordships in the decision reported in Harinagar Sugar Mills Co. Ltd, v. M.W. Pradhan (now G. V. Dalvi). [1966] 36 Comp Cas 426 (SC) approved the following passage from Palmer's Company Precedents, (Part III, 1960 edition at page 25) (p. 430) :
"A winding up petition is a perfectly proper remedy for enforcing payment of a just debt. It is the mode of execution which the court gives to a creditor against a company unable to pay its debt."
7. The "just debt" which their Lordships found it proper to be enforced by way of winding up proceedings was a step, as it must be understood to be, subsequent or without recourse, in the case of an admission, to proceedings for recovery of the debt. Where the court was prima facie satisfied that there was a bona fide doubt as to the factum of the alleged debt, which was sought to be enforced, the court relegated the matter to a suit, in other words to obtain, if possible, recovery of the debt. The alleged debt when according to the court was a just debt, the inability to pay would entitle the creditor to an order for winding up. In those circumstances, I would be inclined to take the view that the laws in the two enactments did not "operate in the same field". It would be incorrect appreciation of the law, as interpreted by the Supreme Court, if the laws applicable to winding up proceedings in the Companies Act and proceedings for the recovery of a debt in the Debt Recovery Act were considered to operate in the same field, or that the legislators had so intended. In any case, there could be little doubt that such an interpretation would create an undesirable state of affairs. The company court would be making one set of orders and the Tribunal a different. Once the company was in liquidation under Section 446 of the Companies Act it was mandatory to obtain leave of the company court to institute a suit against that company, and upon obtaining such leave the suit would have to be heard by that court unless that court allowed the filing of and proceeding with the suit in a different court or forum. This was the law for the simple reason that the suit was in relation to a company, in liquidation, and concerned the company to such an extent that the official liquidator was required to be impleaded in the suit to protect the interests of all the creditors and the workers of the company. A reasonable and harmonious interpretation would surely be in the present circumstances, that the non obstante clause in the Companies Act would operate in its full force, and the suit would be heard by the company court. The provisions of the non obstante clause in the Debt Recovery Act would have no effect on the procedure as contained in the Companies Act. Consequently there would be no conflict in the operation of the two clauses. For it was on record that Section 446 of the Companies Act was not repealed and it could not be said with any certainty that there appeared any intention of the Legislature anywhere in either of the enactments, that the later enactment would in effect operate as against the earlier clause. Had the legislators so intended, indeed appropriate provisions to that extent would have been provided for in the later or in further legislation.
8. In those circumstances, I would be inclined to hold that those rights of the creditors and workers, which were protected by the legislators in the Componies Act, in the absence of any specific and categorical provision, a non obstante clause contained in a different enactment neither could nor did operate to deprive or deny such right. Any other interpretation would amount to a violation of the principles of natural justice and a wrongful denial of rights and privileges bestowed on the creditors and the workers by an existing statute. The Debt Recovery Act was concerned with the process of recovery of the debt, in other words procedure to adjudicate the debt in perhaps every other circumstances except as against a company which was in liquidation. The Companies Act was primarily for companies which was a separate legal entity, and everything that related or touched the companies. According to the Supreme Court in the decision in Industrial Credit and Investment Corporation of India Ltd, v. Srinivas Agencies [1996] 86 Comp Cas 255, it has been clearly stated that each case dealing with the question of transfer of suit to the Tribunal would depend on the facts of that case. In this case, before this court, advocate for the official liquidator had submitted that all formalities for filing and settlement of claims had been completed, and the official liquidator would be commencing disbursement soon. Taking into account the question of the banks and financial institutions receiving their dues expeditiously, it would also be just and convenient that this suit should be heard by this court and enable the official liquidator to commence and complete disbursement expeditiously.
9. For those reasons this application is dismissed. There shall be no order as to costs.