Gujarat High Court
Sti India Limited vs Oriental Bank Of Commerce on 20 November, 2019
Equivalent citations: AIRONLINE 2019 GUJ 518
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
C/SCA/6129/2018 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 6129 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/-
and
HONOURABLE MR.JUSTICE VIRESHKUMAR B. MAYANI Sd/-
==========================================================
1 Whether Reporters of Local Papers may be allowed to No
see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law No
as to the interpretation of the Constitution of India or any
order made thereunder ?
==========================================================
STI INDIA LIMITED
Versus
ORIENTAL BANK OF COMMERCE & 3 other(s)
==========================================================
Appearance:
MR. SAHIL M SHAH(6318) for the Petitioner(s) No. 1
MR ANIP A GANDHI(2268) for the Respondent(s) No. 4
MR CHIRAG B PATEL(3679) for the Respondent(s) No. 2
MR DEVANG VYAS(2794) for the Respondent(s) No. 3
MR RA MISHRA(481) for the Respondent(s) No. 1
MR RAJU K KOTHARI(2789) for the Respondent(s) No. 4
==========================================================
CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR.JUSTICE VIRESHKUMAR B. MAYANI
Date : 20/11/2019
Page 1 of 31
Downloaded on : Fri Nov 22 21:44:36 IST 2019
C/SCA/6129/2018 JUDGMENT
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA)
1. Rule returnable forthwith. Mr. R.A. Mishra, the learned counsel, waives service of notice of rule for and on behalf of the respondent No.1-Oriental Bank of Commerce, Mr. Chirag Patel, the learned counsel, waives service of notice of rule for and on behalf of the respondent No.2-Gujarat State Cooperative Cotton Federation Ltd., Mr. Anip Gandhi, the learned counsel, waives service of notice of rule for and on behalf of the respondent No.4-Asset (Reconstruction) Company (India) Ltd. and Mr. Devang Vyas, the learned counsel, waives service of notice of rule for and on behalf of the respondent No.3-Gujarat State Cooperative Bank Ltd.
2. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs;
"(a) For a writ of mandamus and/or any other appropriate writ, direction or order in the nature of Certiorari under Articles 226 and 227 of the Constitution of India, calling for the record of the Petitioner's case and after going through the legality thereof to quash and set aside qua the petitioner herein, the Recovery Proceeding (being R.P. No.265 of 2014), which are pending before the Recovery Officer pursuant to the Recovery Certificate granted by the learned DRT in favour of respondent No.1 in Original Application (being O.A. No.162 of 2003).
(b) For a Writ of Mandamus and/or any other appropriate writ, direction or order in the nature of Certiorari under Articles 226 and 227 of the Constitution of India, calling for the record of the Petitioner's case and after going through the legality thereof to quash and set aside qua the Petitioner herein, the impugned order and judgment dated 1st December, 2014, passed in Original Application No.162 of 2003, by the Presiding Officer of Learned DRT, Ahmedabad.Page 2 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019
C/SCA/6129/2018 JUDGMENT (c ) That pending the hearing and final disposal of the Petition, this Hon'ble Court be pleased to vacate the attachments levied, by the Recovery Officer vide the impugned order dated 31st January, 2018 passed in the Recovery Proceeding (being R.P. No.265 of 2014), over the bank Accounts of the Petitioner.
(d) That pending the hearing and final disposal of the Petition, this Hon'ble Court be pleased to stay the Recovery Proceeding (being R. P. No.265 of 2014), qua the Petitioner herein, as initiated by Respondent No.1 before the Recovery Officer, Learned Debts Recovery Tribunal No.1, Ahmedabad, (including the operation, implementation and execution of impugned Order dated 31st January, 2018, and the Impugned Attachment, both dated 31st January, 2018, over the movable and immovable properties of the Petitioner)
(e) For ad-interim reliefs in terms of Prayers (b) and (c ) above;
(f) For costs of and incidental to this petition;
(g) For such other and further reliefs as the nature and circumstances of the case may require."
3. The case of the writ applicant, in his own words, as pleaded in the writ application, is as under;
"1. The Petitioner is a Public Limited Company, incorporated under the provisions of Companies Act, 1956 (now Act of 2013). having its registered office at Plot No.1, Sonvay Bhaislay Industrial Area, Rau- Pithampur, Link Road, Rau-453332 (Indore). M.P.. The Petitioner is engaged in manufacturing/producing of quality cotton yarn and knitted fabric since 1997 with 71040 spindles and 31 circular knitting machines. At present, the Company is operating on 100% job work basis for the Bombay Rayon Fashions Limited (BRFL), the Holding Company, as from June. 2011.
2. By the present Petition, the Petitioner seeks to challenge the Recovery Proceeding, being R.P.No.265 of 2014, [Impugned Recovery Proceeding] which are pending before the Recovery Officer, Learned Debts Page 3 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT Recovery Tribunal No.1 at Ahmedabad [Recovery Officer] in execution of the Recovery Certificate No.265 of 2015 [Recovery Certificate] issued by the Presiding Officer, Learned Debts Recovery Tribunal No.1 at Ahmedabad [Learned DRT]. The said Recovery Certificate was issued against the Petitioner on the basis of Order and Judgment dated 1" December, 2014 passed in the Original Application, being O.A.No.162 of 2013, [Original Application], which was nullity as detailed hereinafter. The aforesaid challenge also includes (i) the Demand Notice dated 2nd November, 2015, (Impugned Demand Notice), (ii) the Orders dated 29th March, 2017 and 31st January, 2018, [Impugned Orders] passed by the Recovery Officer in the Impugned Recovery Officer. By the Impugned Order dated 31st January, 2018, the Recovery Officer has inter alia attached the bank accounts of the Petitioner and further passed an Order of Attachment dated 31st January, 2018, [Impugned Order of Attachment] attaching the movable and immovable properties of the Petitioner. The reference of Impugned Recovery Proceeding hereinafter shall include the above mentioned Impugned Demand Notice, Impugned Order and Order of Attachment. Consequently, the Petitioner is also seeking to set aside the order and judgment dated 1st December, 2014, passed in the CA as nullity.
3. Respondent No.1 is a public sector bank having its Regional Office and concerned dealing Branch Office at the address mentioned in the cause title. Respondent No.1 is the applicant of the impugned Recovery Proceeding on the basis of the Recovery Certificate granted by the Learned DRT in favour of Respondent No.1 and against Respondent No.2 and the Petitioner herein in the Original Application filed by Respondent No.1. Respondent No.2 is a registered co-operative society having its registered office at the address mentioned in the cause title.
4. Respondent No.3 is a cooperative bank having its Registered Office at the address mentioned in the cause title. Respondent No.4 is Securitization Company having its Registered Office at the address mentioned in the cause title. Respondent Nos.3 and 4 are not concerned with the present Petition. However, these Respondents have been impleaded in the present Petition, since they are Respondents in the lmpugned Recovery Proceeding.Page 4 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019
C/SCA/6129/2018 JUDGMENT FACTS OF THE CASE
5. The brief facts relevant and material leading to the filing of the present Writ Petition are enumerated as under:
5.1 The Petitioner on 30th October, 2002 filed a Reference under Section 15(1) of the Sick & Industrial Companies (Special Provision) Act, 1985 (since repealed) [SICA] before The Board for Industrial and Financial Reconstruction [BIFR]. The said Reference was registered as Case No.743 of 2002 [Reference]. Hereto annexed and marked at Exhibit "A" hereto is a copy of the letter dated 30th December, 2002 addressed by BIFR inter alia confirming the filing of the Reference by the Petitioner.
5.2 Meanwhile, the erstwhile Global Trust Bank Limited ("GTB") raised certain purported claims against the Petitioner on the basis of certain purported Undertaking and Bills/ Hundies allegedly executed by the Petitioner in favour of GTB to clear dues of GTB on account of Respondent No.2. On the basis of these purported claims, GTB filed Company Petition No.2 of 2003 against the Petitioner before the Hon'ble Madhya Pradesh High Court seeking to wind-up the Petitioner. It is pertinent to note that the said Company Petition was filed by GTB without obtaining necessary leave from the BIFR. The Petitioner craves leave to refer and rely upon the papers and proceedings of the Company Petition, when produced.
The Petitioner therefore by its letter dated 13th January, 2003, intimated GTB about the pendency of Reference of the Petitioner before the BIFR. Hereto annexed and marked at Exhibit "B" is a copy of the Petitioner's letter dated 13th January, 2003.
5.3 On 22nd July, 2003, GTB filed Original Application inter alia against Respondent No.2 (Defendant No.1 to the Original Application) before the Learned DRT for recovery of dues of Rs.26,12,78,787 with further interest @12% p.a. ["Purported Claim"]. It is pertinent to note that despite of knowledge of pending Reference, GTB chose to recover its purported Claim against the Petitioner by impleading the Petitioner as Defendant No.2 to the Original Application without obtaining necessary leave from the BIFR. The Petitioner craves leave to refer Page 5 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT and rely upon the papers and proceedings of the Original Application. Hereto annexed marked at Exhibit "C" is a copy of the Original Application No.162 of 2003 (without annexures).
5.4 On 23rd December, 2003, the Petitioner filed an application before the Learned DRT seeking stay of the Original Application in view of bar under Section 22 of SICA. Hereto annexed and marked at Exhibit "D" is a copy of the stay application of the petitioner 5.5 Meanwhile, pursuant to the notification dated 13th August, 2004, issued by the Reserve Bank of India (RBI), the Scheme of Amalgamation of GTB with Oriental Bank of Commerce (Respondent No.1 herein) under Section 45 of the Banking Regulation Act, 1949, was sanctioned and the said Scheme came into force with effect from 14th August, 2004. In view of the said amalgamation, Respondent No.1 was brought on record in place of GTB in the said Original Application. The reference of Respondent No.1 hereinafter will include both GTB and the Oriental Bank of Commerce.
5.6 Meanwhile, the BIFR by its order dated 23rd January, 2006, declared the Petitioner as sick company and State Bank of India as the Operating Agency under Section 17(3) of SICA to submit Draft Rehabilitation Scheme (DRS) of the Petitioner. Hereto annexed and marked at Exhibit "E" is a copy of the order dated 23rd January, 2006, passed by BIFR.
5.7 In view of the Reference and absence of leave obtained on part of Respondent No.1, the above Company Petition was dismissed by the Hon'ble Madhya Pradesh High Court by its order dated 7th May, 2014. Hereto annexed and marked at Exhibit "F" is a copy of the order dated 7TH May, 2014, passed by the Hon'ble Madhya Pradesh High Court.
5.8 It is pertinent to note that, from year 2004 to 2014 on one pretext or the other, the Application seeking stay of Original Application was never heard. It is further pertinent to note that the Petitioner had also good case on merits to prove that the purported claim of Respondent No.1 against the Petitioner in the Original Application was false and untenable and that no amounts Page 6 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT were due and payable by the Petitioner to Respondent No.1 as alleged in the said Original Application. Thereafter, without dealing with the issue of bar to file the Original Application under Section 22 of SICA and deciding the application of the Petitioner seeking stay of the Original Application, the Learned DRT by its Order and Judgment dated 1st December. 2014. ["impugned Order and Judgment) allowed the Original Application inter alia against the Petitioner. Being aggrieved by the above impugned Order and Judgment dated 1st December, 2014, the Petitioner preferred an Appeal (being Appeal No.102 of 2015) before the Learned Chairperson of Debts Recovery Appellate Tribunal at Mumbai (DRAT). Hereto annexed and marked Exhibit "G" is a copy of Memo of Appeal filed by the Petitioner before the Learned DRAT Mumbai, which includes copy of the Impugned Order and Judgment dated 1st December, 2014, of the Learned DRT Ahmedabad.
5.9 By an order dated 14th December, 2015, the Learned DRAT adjourned the Appeal proceedings on the ground that the matter was seized up by BIFR. The Petitioner craves leave to refer and rely upon the papers and proceedings of the Appeal, including interim applications taken out by the Petitioner therein. Meanwhile. on the basis of its Order and Judgment dated 1dy December, 2014, the Learned DRT granted in favour of Respondent No.1, a Recovery Certificate against Respondent No.2 and the Petitioner. Hereto annexed and marked at Exhibit "H" is a copy of the Order dated 1st December, 2015, of the Learned DRAT Mumbai.
5.10 On the basis of the Recovery Certificate, the Recovery Officer at the instance of Respondent No.1 proceeded inter alia against the Petitioner by issuing Demand Notice dated 2nd November, 2015 in the Impugned Recovery Proceeding. The Petitioner then filed an Affidavit dated 30th December, 2015 before the Recovery Officer inter alia raising objections to the Impugned Recovery Proceeding and seeking withdrawal of these proceedings on the ground that the Petitioner was before BIFR under the provisions of SICA. In reply to the said objections of the Petitioner, Respondent No.1 filed its reply dated 9th December, 2016, inter alia raising false and frivolous contentions. The Recovery Officer by its order dated 29th March, 2017, inter alia rejected the Page 7 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT said Affidavit of the Petitioner and proceeded with the impugned Recovery Proceeding. Hereto annexed and marked at Exhibit "I" is a copy of the Impugned Demand Notice dated 2nd November, 2015 issued by the Recovery Officer, Learned DRT Ahmedabad. Hereto annexed and marked at Exhibit "J" is a copy of the Affidavit dated 30th December, 2015, filed by the Petitioner seeking withdrawal of Impugned Recovery Proceeding. Hereto annexed and marked at Exhibit "K" is a copy of the reply dated 9th December, 2016, of Respondent No.1. Hereto annexed and marked at Exhibit "L" is a copy of the Impugned Order dated 29th March, 2017 passed by the Recovery Officer.
5.11 The Petitioner then filed Affidavit Disclosing Assets to place on record that the assets of the Petitioner were encumbered with charge/mortgage created by the Petitioner in favour of its Lenders. However, the Recovery Officer then by Impugned Order dated 31st January, 2018, attached the Bank Accounts of the Petitioner and issued Impugned Attachment over the movable and immovable properties of the Petitioner. Hereto annexed and marked at Exhibit "M" is a copy of the Affidavit of Disclosure of Assets filed by the Petitioner. Hereto annexed and marked at Exhibit "N" is a copy of the Impugned Order dated 31st January, 2018, of the Recovery Officer, Learned DRT Ahmedabad and Exhibit "0" is a copy of Impugned Order of Attachment dated 31st January, 2018, issued by the Recovery Officer, Learned DRT Ahmedabad.
5-12 The Recovery Officer has adjourned the Impugned Recovery Proceeding to 24th April, 2018, for taking steps to sale the assets of the Petitioner in furtherance of the Impugned Order of Attachment."
4. Thus, it appears from the pleadings, referred to above, and the materials on record that the writ applicant had availed of loan facility from the respondent No.1-Bank. As the writ applicant defaulted in the repayment of the loan amount, the first step that the respondent No.1 took was to prefer a Company Petition No.2 of 2003 in the High Court of Madhya Pradesh for winding up of the writ applicant-Company. The said Page 8 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT Company Petition No.2 of 2003 came to be rejected by the High Court of Madhya Pradesh vide order dated 7th May, 2014. The order reads thus;
"This company Petition has been filed by the petitioner for winding up of the respondent company on the ground of its inability to pay the debts. The respondent has filed M(C)P No.1985/2003 and IA No.614/2007 u/s. 22 of the Sick Industrial Companies (Special Provisions) Act (for short "SICA Act") for passing appropriate orders keeping in view the fact that the reference of the respondents has been registered before the BIFR and no permission has been obtained by the petitioner from the BIFR. Along with IA No.4097/2014, the respondent has filed the BIFR proceedings dated 22.1.2014 in support of the plea that the matter is still pending before the BIFR.
(2) Having heard the learned counsel for parties, it is found that the reference at the instance of the respondent is registered by the BIFR as Case No.743/2002. The said fact was initially confirmed by the BIFR vide letter dated 30.11.2002 filed along with M(C)P No.1985/2003. The present petition for winding up has been filed on 8.1.2003 i.e. after registration of the reference by the BIFR. The record of proceedings of hearing dated 22..1.2014 before the BIFR reveals that the reference is still pending before the BIFR.
(3) Section 22 of the SICA Act provides for suspension of legal proceedings where in respect of an industrial company, an enquiry u/s.16 is pending or any scheme referred to u/s.17 is under preparation or consideration or a sanctioned scheme is under implementation.
(4) The Supreme Court in the matter of Rishabh Agro Industries Altd. vs. P.N.B Capital Services Ltd, reported in (2000)101 Company Cases 284 has held that bar relating to suspension of legal proceedings under SICA Act operates immediately upon receipt of reference by the BIFR and the bar operates even in respect of the proceedings where winding up order is already passed.
The Bombay High Court in the matter of C.J. Gelatine Products Ltd. In re. reported in (1994) 81 Company Cases 890 has taken the view that the petition for winding up Page 9 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT filed after commencement of the enquiry before the BIFR without the consent of the BIFR is void ab initio and the court has no jurisdiction to entertain the same. The Delhi High Court also in the matter of S.M. Singhvi vs. Bestavising Electronics Ltd. vs. reported in (2004) 118 Company Cases 742 has held that the winding up petition will not be maintainable when Section 22 of the SICA Act is attracted. Similarly the Allahabad High Court also in the matte of U.P. Stock Exchange Association Ltd. vs. Vegeopro Foods and Feeds Ltd., reported in (2006) 131 Company Cases 385 has held that if during the pendency of reference before the BIFR no sanction is obtained and the winding up petition is filed such a petition cannot be proceeded with. Similar is the view taken by this Court in the matter of Raymond Ltd. vs. Steel Tubes of India Ltd. In Company Petition No.27/2000 by the order dated 11th March, 2003.
(5) In the present case also the record reveals that the petitioner had filed the present company petition, reference was pending before the BIFR but the petition was filed without obtaining permission of the BIFR. The said reference is still pending, therefore, in view of the provisions of Sec. 22 of the SICA Act, the present petition cannot be proceeded with. The Company Petition without the leave of the BIFR would not lie, therefore, M(C) P No.1985/2003, IA No.614/2007 and IA No.4079/2014 are allowed and the company petition is dismissed with liberty to the petitioner to participate in the enquiry proceedings before the BIFR in Reference Case No.743/2002 or to approach this Court at a subsequent stage in accordance with law if the need so arises.
(6) The company petition is accordingly dismissed."
5. Thereafter, the respondent No.1-Bank instituted proceedings before the DRT at Ahmedabad under the provisions of the Recovery of Debts & Bankruptcy Act,,1993 (for short "the Act, 1993"). It is pertinent to state, at this stage, that while the respondent No.1 instituted the proceedings before the DRT, the writ applicant-Company was already before the BIFR. It is also pertinent to note that the original Page 10 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT application came to be filed by the respondent No.1 in the DRT on 22nd July, 2003. Much prior to the same, an intimation was given by the writ applicant to the respondent No.1-Bank dated 13th January, 2003 as regards the writ applicant being registered with the BIFR. The reference before the BIFR is dated 30th October, 2002.
6. It appears from the materials on record that the writ applicant preferred an application in the Original Application No.162 of 2003 to suspend the further proceedings of the original application on the ground that the reference was pending with the BIFR under the provisions of the SICA.
7. Unfortunately, it appears that the DRT failed to pass appropriate order on the said application.
8. Ultimately, the DRT took up the original application filed by the Bank for hearing and proceeded to pass the impugned order dated 1st December, 2014. The operative part of the impugned order reads thus;
"1. Application No.162 of 2003 is allowed and the debt is determined with cost against the defendants 1 and 2 and it is hereby ordered that the applicant bank is entitled to recover from the said defendants the debt amount to the tune of Rs.75,17,782.00 with further interest @ 12% per annum for the period of pendente lite and future, i.e, till realization of the total due amount of the applicant bank.
2. Let the certificate of Recovery be drawn up forthwith in Form No.31 and put up the signature in terms of the provision contained in Section 19(22) of the RDDB Act for issuance.
3. The Recovery Officer shall realize the amount as per the Recovery Certificate from the defendant No.1 and Page 11 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT 2 according to the law and shall report compliance with remittance of recovery proceeding file for final withdrawal of the certificate by the bank and for consideration of return of documents by the Registry. Since the defendants Nos.3 and 4 have had first charge on the hypothecated property available in their favour, the Ld. Recovery Officer is directed to take care of this issue in the Recovery Proceedings.
4. Original Application stands disposed of against the defendants Nos.3 and 4."
9. We take notice of the fact that the contention with regard to the applicability of the provisions of SICA and its legal effect on the proceedings before the DRT was specifically raised and the same has also been recorded in para-6 of the impugned order. Para-6 reads thus "6. Defendant No.2 has filed written submission at Exh.R/53. Defendant No.2 has stated that it has been wrongly impleaded as party defendant. In fact he has simply undertaken to pay the dues of the defendant No.1. However, the said undertaking was not a registered one and therefore the said document does not have any legal binding. It is further submitted that defendant No.2 has filed a Reference No.743 of 2002 before the BIFR which is still pending. It is further submitted that defendant No.1 has also filed Lawad Suit being No.214 of 2003 before the Ld. Board of Nominees. Similarly, Gujarat State Cooperative Bank Limited has also filed Lawad Suit No.997 of 2003 before the Ld. Board of Nominees. It is, therefore, prayed that in view of the above mentioned facts, the defendant No.2 be ordered to be deleted holding that the said defendant No.2 is not a necessary and proper party."
10. After the impugned order came to be passed by the DRT, the writ applicant preferred an Appeal No.102 of 2015 before the Debts Recovery Appellate Tribunal at Mumbai. On 14 th December, 2015, the Appellate Tribunal passed the following order;
Page 12 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019C/SCA/6129/2018 JUDGMENT "Since the matter has been seized up by the BIFR, therefore, stand over to 07.04.2016 for hearing on waiver application."
11. Thus, it appears that the Appellate Tribunal declined to proceed with the hearing of the appeal taking cognizance of the fact that the proceedings were pending before the BIFR.
12. In the meantime, the recovery certificate came to be issued, and pursuant to the same, the Recovery Officer passed an order of attachment dated 31st January, 2018. The order of attachment of movable and immovable property reads thus;
"ORDER OF ATTACHMENT OF MOVALE AND IMMOVALE PROPERTY.
R.C. No.265/2014 O.A. No.162/2003 ORIENTAL BANK OF COMMERCE, NAVRANGPURA, Certificate Holder A'BAD V/S.
M/s. Gujarat State Co-operative Cotton Federation Ltd. & Certificate Debtor Ors.
To, CD No.2 M/s. SIT India Ltd., A Public Interest Company incorporated under the Companies Act, 1956 represented by its Director Shri Ramesh Baheti, Plot No.1, Sonvay Bhaistay Industrial Area, Rau-Pithampur, Link Road, Tehsil-Mhow, Dist. Indore (M.P.)453332.
Whereas you Gujarat State Cooperative Cotton Federation Ltd. & Ors. have failed to pay Rs.26,12,78,787=00 (Decree Amount) (Rupees: Twenty Six lacse Twelve thousand Seventy Eight Thousand Seven Hundred Eighty Seven only) and further interest thereon in respect of Recovery Certificate No.RC No.265/2014 drawn up by the Hon'ble Presiding Officer.
You are hereby prohibited and restrained until further orders from transferring, alienating, creating third party Page 13 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT interest, parting with possession, changing or dealing with the under mentioned property in any manner and that all persons be and that they are prohibited from taking any benefit under such transfer, alienation, possession or charge.
Description of Property Land and building situated at Raupithampur Link Road, Tehsi: Mhow, Dist:
Indore (M.P.), 453332, India, The admeasuring approximately area is 375298 square meter Non-Agriculture land admeasuring 18360 sq. Ft. situated at Survey No.855, Taluka: Kadi, Dist: Mahesana (Gujarat) Office situated at C.P. Ramasamy Road, Alwapret, Chennai-18.
Description of Immovable Property Movable properties Viz. Plant and Machineries Stores, Inventory
13. In such circumstances, referred to above, the writ applicant had to come before this Court with the present writ application, questioning the legality and validity of the impugned order passed by the DRT and also the issue of the recovery certificate and the order of attachment.
Submissions on behalf of the writ applicant;
14. Mr. Mihir Thakore, the learned senior counsel assisted by Mr. Sahil M. Shah, the learned counsel for the writ applicant vehemently submitted that the DRT committed a serious error in passing the impugned order.
15. According to Mr. Thakore, the impugned order is a nullity. The learned senior counsel would submit that if the impugned order passed by the DRT could be termed as a nullity, the issue of recovery certificate, and pursuant to the same, the order of attachment would also be a nullity. The principal argument of the learned senior counsel is that at the relevant Page 14 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT point of time, when the proceedings came to be instituted by the respondent No.1-Bank before the DRT, and at the point of time when the order came to be passed by the DRT, the writ applicant had got itself registered with the BIFR as a sick unit. In such circumstances, the writ applicant would be governed by the provisions of the SICA Act, 1985. Mr. Thakore invited the attention of this Court to Section 22 of the Act, 1985, which reads thus;
"22. Suspension of legal proceedings, contracts, etc.--
(1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.
(2) Where the management of the sick industrial company is taken over or changed [in pursuance of any scheme sanctioned under section 18], notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law--
(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any Page 15 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT person to be a director of the company;
(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board.
(3) Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under preparation or during the period] of consideration of any scheme under section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be specified by the Board:
Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate.
(4) Any declaration made under sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a court, tribunal, officer or other authority or of any submission, settlement or standing order and accordingly,--
(a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and Page 16 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT
(b) on the declaration ceasing to have effect--
(i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made; and
(ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed.
(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded."
16. Mr. Thakore, thereafter, invited the attention of this Court to the provisions of Sections 17 and 18 respectively of the RDDB Act, 1993. Section 17 of the Act, 1993 reads thus;
"17. Jurisdiction, powers and authority of Tribunals.-- (1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.
(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act."
17. Section 18 of the Act, 1993 reads thus;
"18. Bar of Jurisdiction.--On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17."
18. Mr. Thakore would submit that the Act, 1985 as well as Page 17 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT the Act, 1993 are special laws. He would submit that SICA is a special law which deals with the reconstruction of the sick companies and the matters incidental thereto, though it is general as regard the other matters such as recovery of the debts. Mr. Thakore would submit that the RDDB Act is also a special law which deals with the recovery of money due to the banks or the financial institutions through a special procedure, though it may be general as regards the other matters such as the reconstruction of sick companies which it does not specifically dealt with.
19. Mr. Thakore would submit that in such circumstances, as the writ applicant had got itself registered with the BIFR as a sick unit, the DRT had no jurisdiction to proceed with the hearing of the original application and pass the impugned order. The proceedings before the DRT could be said to have been automatically stayed by virtue of Section 22 of the Act, 1985. Mr. Thakore also pointed out that sometime in the year 2016, the Act, 1985 came to be repealed and the new Act called Insolvency and Bankruptcy Code, 2016 came to be enacted.
20. Mr. Thakore, in support of his principal submission, has placed reliance on two decisions of the Supreme Court viz. (I) KSL & Industries Ltd. vs. Arihand Threads Limited & Ors., (2015) 1 SCC 166 and (ii) Managing Director, Bhoruka Textiles Limited vs. Kashmiri Rice Industries, (2009) 7 SCC 521.
21. In such circumstances, referred to above, Mr. Thakore, the learned senior counsel prays that there being merit in this writ application, the same be allowed and the impugned order Page 18 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT be quashed.
22. Mr. Thakore also clarified that it would be open for the respondent No.1-Bank to institute fresh proceedings before the DRT in accordance with law.
Submissions on behalf of the respondent No.1-Bank
23. Mr. Mishra, the learned counsel appearing for the respondent No.1-Bank submitted that the loan was actually availed from the Bank by name Global Trust Bank. The Global Trust Bank came to be amalgamated with the respondent No.1-Bank. In such circumstances, the respondent No.1-Bank instituted the proceedings before the DRT for the recovery of the loan amount with interest. According to Mr. Mishra, the writ applicant ought to have persuade the application which was preferred by it before the DRT as regards the maintainability of the proceedings in view of the bar of the provisions of Section 22 of the Act, 1985. Mr. Mishra pointed out that the writ applicant failed to pursue the said application. However, at the same time, Mr. Mishra very fairly pointed out that the position of law was, in fact, pointed out to the DRT in the course of the final hearing of the original application, but though there is a reference of the same in para-6 of the impugned order, the issue has not been dealt with. Mr. Mishra, the learned counsel, with his usual fairness, submitted that the Court may pass an appropriate order.
24. The other counsel appearing for the respective respondents submitted that they are formal parties and they have nothing to say in the matter.
Page 19 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019C/SCA/6129/2018 JUDGMENT ANALYSIS
25. Having heard the learned counsel appearing for the parties and having gone through materials on record, the only question that falls for our consideration is whether the DRT committed any error in passing the impugned order.
26. As a neat question of law has been raised before us, we straightway go to the decision of the Supreme Court in the case of KSL & Industries Limited (supra). KSL was in appeal before the Supreme Court by way of a reference made by a two Judge Bench, which heard the matter and held that the appeal deserved to be allowed and that the judgment and order passed by the High Court, which was impugned, was liable to be set aside. However, in view of a difference of opinion having arose on the interpretation of Section 34 of the Act, 1993, the matter came to be referred for decision to a larger Bench. We quote the relevant observations, governing the position of law;
"39. There is no doubt that both are special laws. SICA is a special law, which deals with the reconstruction of sick companies and matters incidental thereto, though it is general as regards other matters such as recovery of debts. The RDDB Act is also a special law, which deals with the recovery of money due to banks or financial institutions, through a special procedure, though it may be general as regards other matters such as the reconstruction of sick companies which it does not even specifically deal with. Thus the purpose of the two laws is different.
40. Parliament must be deemed to have had knowledge of the earlier law i.e. SICA, enacted in 1985, while enacting the RDDB Act, 1993. It is with a view to prevent a clash of procedure, and the possibility of contradictory orders in regard to the same entity and its properties, Page 20 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT and in particular, to preserve the steps already taken for reconstruction of a sick company in relation to the properties of such sick company, which may be charged as security with the banks or financial institutions, that Parliament has specifically enacted sub-section (2). The SICA had been enacted in respect of specified and limited companies i.e. those which owned industrial undertakings specified in the schedule to the IDR Act, as mentioned earlier, whereas the RDDB Act deals with all persons, who may have taken a loan from a bank or a financial institution in cash or otherwise, whether secured or unsecured etc.
41. Indeed, the question as to which Act shall prevail must be considered with respect to the purpose of the two enactments; which of the two Acts is the general or special; which is later. It must also be considered whether they can be harmoniously construed.
42. The conflict that is said to arise is between Section 22 of the SICA which purports to make untenable "proceedings" for recovery of the debt against the sick company and "suits" for recovery on the one hand and on the other hand Section 34 of the RDDB Act contains an overriding effect to its own provision, obviously including those for recovery of debts. Some of the decisions of this Court dealing with this aspect may be noticed in Ram Narain Vs. Simla Banking & Industrial Co. Ltd.[2]. Two statutes, both containing non-obstante clauses providing that the particular provisions of the Act shall have effect (notwithstanding anything inconsistent contained therein in any other law for the time being in force) fell for consideration. The two Acts were the Banking Company Act 1949 and the Displaced Persons (Debt Adjustment) Act, 1951. This Court gave primacy to the Banking Companies Act. While doing so, this Court observed:-
"7. ..... It is therefore, desirable to determine the overriding effect of one or the other of the relevant provisions in these two Acts, in a given case, on much broader considerations of the purpose and policy underlying the two Acts and the clear intendment conveyed by the language of the relevant provisions therein."
43. In a subsequent case, this Court held that the right to possession enacted by the Delhi Rent Control Act, 1958 Page 21 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT was not controlled by the Slum Clearance Act and the right could be enforced in the manner provided in Section 25-B without obtaining prior permission of the competent authority under the Slum Clearance Act. The conflict arose since the Slum Clearance Act contained a non- obstante clause, to the effect that proceedings for eviction of tenants could not be taken without prior permission of the competent authority. The Delhi Rent Control Act conferred a right under Section 14-A to recover immediate possession in case the landlord had to vacate residential premises allotted to him by the Central Government. This right was conferred with a non- obstante clause. This Court held that for resolving such conflicts, one test which may be adopted is that the later enactment must prevail over the earlier one. Having observed that the relevant provisions of the Delhi Rent Control Act had been enacted from 01.12.1975 alongwith a non-obstante clause with the knowledge that the overriding provision of the Slum Clearance Act was already in existence, the later enactment must prevail over the former.
44. In LIC Vs. D.J. Bahadur[3] this Court considered the question as to which of the two laws i.e. the Industrial Disputes Act, 1947 (the ID Act) and the Life Insurance Corporation Act, 1956 (the LIC Act), was a special law. Having regard to the doctrine of generalia specialibus non derogant (general provisions will not abrogate special provisions), it was submitted that an employee of the LIC cannot invoke the provisions of the ID Act in his complaint, and the matter would have to be decided in accordance with the LIC Act. The Court observed that the LIC Act was "special" as regards nationalization of the life insurance business. But however, the disputes between employer and employee had to be dealt with under the ID Act which was a special law for resolving such disputes and if a dispute arose between employer and employee in the Life Insurance Corporation, the LIC Act must be treated as "general law" and the ID Act should be treated as "special law." The Court thus observed:-
"52. In determining whether a statute is a special or a general one, the focus must be on the principal subject-matter plus the particular perspective. For certain purposes, an Act may be general and for certain other purposes it may be special and we cannot blur distinctions when dealing with finer Page 22 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT points of law. In law, we have a cosmos of relatively no absolutes - so too in life."
45. In Maharashtra Tubes Ltd. Vs. State Industrial & Investment Corpn. Of Maharashtra Ltd. [4], the conflict arose between two special statues i.e. the State Financial Corporations Act, 1951 and the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). This Court came to the conclusion that the 1951 Act deals with the pre- sickness situation, whereas the 1985 Act deals with the post-sickness situation, and therefore, it was not possible to agree that the 1951 Act is a special statute vis-à-vis the 1985 Act which is a general statute. The Court observed:-
"Both are special statues dealing with different situations notwithstanding a slight overlap here and there, for example, both of them provide for grant of financial assistance though in different situations. We must, therefore, hold that in cases of sick industrial undertakings the provisions contained in the 1985 Act would ordinarily prevail and govern."
46. In a subsequent decision in Allahabad Bank Vs. Canara Bank[5], this Court held that with reference to the Companies Act, the RDDB Act should be considered as a "special law" though both laws could be treated as "special laws" in respect of recovery of dues by banks and financial institutions.
47. In a later case the question arose in the context of Special Court (Trial of offences Relating to Transactions in Securities) Act, 1992 and SICA. It was contended that in view of the special provisions contained in SICA no proceedings could have been initiated under the Special Court Act. The Court observed that though Section 32 of the SICA contained a non-obstante clause, there was a similar non-obstante clause in Section 13 of the Special Court Act. The Court observed:-
"9... This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail."
This Court approved the observations of the Special Court to the effect that if the legislature confers a non- obstante clause on a later enactment, it means that the legislature intends that the later enactment should prevail. Further, it is a settled rule of interpretation that if Page 23 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT one construction leads to a conflict, whereas on another construction two Acts can be harmoniously construed, then the latter must be adopted.
48. In view of the observations of this Court in the decisions referred to and relied on by the learned counsel for the parties we find that, the purpose of the two enactments is entirely different. As observed earlier, the purpose of one is to provide ameliorative measures for reconstruction of sick companies, and the purpose of the other is to provide for speedy recovery of debts of banks and financial institutions. Both the Acts are "special" in this sense. However, with reference to the specific purpose of reconstruction of sick companies, the SICA must be held to be a special law, though it may be considered to be a general law in relation to the recovery of debts. Whereas, the RDDB Act may be considered to be a special law in relation to the recovery of debts and the SICA may be considered to be a general law in this regard. For this purpose we rely on the decision in LIC Vs. Vijay Bahadur (supra). Normally the latter of the two would prevail on the principle that the Legislature was aware that it had enacted the earlier Act and yet chose to enact the subsequent Act with a non- obstante clause. In this case, however, the express intendment of Parliament in the non-obstante clause of the RDDB Act does not permit us to take that view. Though the RDDB Act is the later enactment, sub-section (2) of Section 34 specifically provides that the provisions of the Act or the rules thereunder shall be in addition to, and not in derogation of, the other laws mentioned therein including SICA.
49. The term "not in derogation" clearly expresses the intention of Parliament not to detract from or abrogate the provisions of SICA in any way. This, in effect must mean that Parliament intended the proceedings under SICA for reconstruction of a sick company to go on and for that purpose further intended that all other proceedings against the company and its properties should be stayed pending the process of reconstruction. While the term "proceedings" under Section 22 did not originally include the RDDB Act, which was not there in existence. Section 22 covers proceedings under the RDDB Act.
50. The purpose of the two Acts is entirely different and Page 24 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT where actions under the two laws may seem to be in conflict, Parliament has wisely preserved the proceedings under the SICA, by specifically providing for sub- section (2), which lays down that the later Act RDDB shall be in addition to and not in derogation of the SICA.
51. We might add that this conclusion has been guided by what is considered to be one of the most crucial principles of interpretation viz. giving effect to the intention of the Legislature. The difficulty arose in this case mainly due to the absence of specific words denoting the intention of Parliament to cover applications for recovery of debts under the RDDB Act while enacting Section 22 of the SICA. As observed earlier, the obvious reason for this absence is the fact that the SICA was enacted earlier. It is the duty of this Court to consider SICA, after the enactment of the RDDB Act to ascertain the true intent and purpose of providing that no proceedings for execution or distraints or suits shall lie or be proceeded with. Undoubtedly, in the narrower sense an application for recovery of debt can be giving a restricted meaning i.e. a proceeding which commences on filing and terminates at the judgment. However, there is no need to give such a restricted meaning, since the true purpose of an application for recovery is to proceed to the logical end of execution and recovery itself, that is by way of execution and distraint. We thus have no hesitation in coming to the conclusion that Section 22 clearly covers and interdicts such an application for recovery made under the provisions of the RDB Act. We might remind ourselves of the oft-quoted statement of the principles of contextual construction laid down by this Court in Reserve Bank of India Versus Peerless General Finance and Investment Co. Ltd. & Ors.[6], where this Court has observed:-
"33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, Page 25 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place."
52. Moreover, we have found nothing contrary in the intention of the SICA to exclude a recovery application from the purview of Section 22, indeed there could be no reason for such exclusion since the purpose of the provision is to protect the properties of a sick company, so that they may be dealt with in the best possible way for the purpose of its revival by the BIFR. In State of Punjab Vs. The Okara Grain Buyers Syndicate Ltd.[7], the Court articulated the importance of preserving the beneficent purpose of the statute and observed:-
"14. ........ We shall therefore proceed to examine the provisions of the Act on the footing that the test for determining whether the Government is bound by a statute is whether it is expressly named in the provision which it is contended binds it, or whether it "is manifest that from the terms of the statute, that it was the intention of the legislature that it shall be bound", and that the intention to bind would be clearly made out if the beneficent purpose of the statute would be wholly frustrated unless the Government were bound."
53. Having answered the reference, we hold that the provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act. In these circumstances, as already directed by the two-Judge Bench of this Court, the Judgment and Order dated 23.02.06 of the High Court of Delhi is set aside. As far as the writ petitions are concerned, whether on the ground that Section 22 of the SICA acts as a bar to the recovery proceedings under the RDDB Act or whether the protection of SICA is not available to the appellant Page 26 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT company since the recovery proceedings under the RDDB Act had been concluded, the writ petitions would have to be dismissed and are accordingly dismissed. The present appeal is allowed."
27. The dictum of law as laid in KSL & Industries Ltd. (supra) is very clear. The provisions of SICA, in particular, Section 22 shall prevail over the provision for Recovery of Debts in the RDDB Act. If that be the position of law, then the learned senior counsel is right in his submission that the impugned order could not have been passed by the DRT.
28. In Managing Director, Bhoruka Textiles Ltd. (supra), a two Judge Bench of the Supreme Court had the occasion to deal with an identical issue. We quote the relevant observations;
"6. The Act was enacted to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto. Indisputably, thus, the appellant is an industrial undertaking.
7. Chapter III of the Act provides for reference, enquiries and schemes. Section 15 of the Act provides for reference to the Board in terms whereof the Board of Directors of the company is required to make a reference within 60 days from the date of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company. Such reference is made for determination of the measures which may be adopted with respect to the company. The proviso appended thereto, however, entitles the Board of Directors to make a reference within 60 days from the date of formation of the opinion that the company had become a sick industrial company before the audited accounts of the financial year in Page 27 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT question are finalised. Section 16 of the Act empowers the Board to make such enquiry as it may deem fit for determining whether any industrial company has become a sick industrial company, inter alia, upon receipt of a reference with respect to such company under Section
15.
8. Sub-section (1) of Section 22 of the Act reads as under:
"22. Suspension of legal proceedings, contracts, etc.--(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority."
A plain reading of the aforementioned provision would clearly go to show that a suit is barred when an enquiry under Section 16 is pending. It is also not in dispute that prior to institution of the suit, the respondent did not obtain consent of the Board.
9. The provisions of the Act and, in particular, Chapter III thereof, provides for a complete code. The Board has a wide power in terms of the provisions of the Act, although it is not a court. Sub-section (4) of Section 20 as also Section 32 of the Act provides for non obstante clauses. It envisages speedy disposal of the enquiry and preferably within the time framed provided for thereafter. Section 17 empowers the court to make suitable orders on the completion of enquiry. Preparation and sanction of the scheme is also contemplated under the Act.
Page 28 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019C/SCA/6129/2018 JUDGMENT
10. Section 22 of the Act must be interpreted giving a plain meaning to its contents. An enquiry in terms of Section 16 of the Act by the Board is permissible upon receipt of a reference. Thus, reference having been made on 27-12-2001 and the suit having been filed on 17-12- 2002, the receipt of a reference must be held to be the starting period for proceeding with the enquiry.
11. The effect of the provisions of the Act has been considered by a three-Judge Bench decision of this Court in Tata Motors Ltd. v. Pharmaceutical Products of India Ltd. 2008 7 SCC 619 wherein it, in no uncertain terms, held that SICA is a special statute and, thus, overrides other Acts like the Companies Act, 1956, stating: (SCC p. 635, paras 31-33) "31. SICA furthermore was enacted to secure the principles specified in Article 39 of the Constitution of India. It seeks to give effect to the larger public interest. It should be given primacy because of its higher public purpose. section 26 of sica bars the jurisdiction of the civil courts.
32. What scheme should be prepared by the operating agency for revival and rehabilitation of the sick industrial company is within the domain of BIFR. Section 26 not only covers orders passed under SICA but also any matter which BIFR is empowered to determine.
33. The jurisdiction of the civil court is, thus, barred in respect of any matter for which the Appellate Authority or the Board is empowered. The High Court may not be a civil court but its jurisdiction in a case of this nature is limited."
12. If the civil court's jurisdiction was ousted in terms of the provisions of Section 22 of the Act, any judgment rendered by it would be coram non judice. It is a well- settled principle of law that a judgment and decree passed by a court or tribunal lacking inherent jurisdiction would be a nullity. In Kiran Singh v. Chaman Paswan AIR 1954 SC 340 this Court held: (AIR p. 342, para 6) "6. ... It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral Page 29 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019 C/SCA/6129/2018 JUDGMENT proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties."
(See also Chief Engineer, Hydel Project v. Ravinder Nath 2008 2 SCC 350, SCC p. 361, para 26.)
13. In Mantoo Sarkar v. Oriental Insurance Co. Ltd. 2009 2 SCC 244 we must place on record, that a distinction has been made between a jurisdiction with regard to the subject-matter of the suit and that of the territorial and pecuniary jurisdiction. It was laid down that a case falling within the former category would make a judgment a nullity."
29. The decision of the Supreme Court in the case of Managing Director (supra) was in context with a civil suit filed by the respondent for recovery of a particular amount in the court of the Civil Judge. The Supreme Court looked into Section 22 of the Act, 1985 and held that a suit would be barred when an inquiry under Section 16 of the SICA is pending. The final dictum of law as laid by the Supreme Court in Managing Director (supra) is that If the civil court's jurisdiction was ousted in terms of the provisions of Section 22 of the Act, any judgment rendered by it would be coram non judice. It is a well-settled principle of law that a judgment and decree passed by a court or tribunal, lacking inherent jurisdiction, would be a nullity.
30. In the backdrop of the aforesaid discussion, we are of the view that the impugned order passed by the DRT as well as the recovery certificate and the order of attachment passed by the Recovery Officer is not sustainable in law. All these orders are liable to be quashed and set aside.
Page 30 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019C/SCA/6129/2018 JUDGMENT
31. In the result, this writ application succeeds and is hereby allowed. The impugned orders are hereby ordered to be quashed and set aside. It shall be open for the respondent No.1-Bank to institute fresh proceedings against the writ applicant before the appropriate forum in accordance with law. Rule is made absolute to the aforesaid extent.
32. It goes without saying that if any fresh proceedings are instituted by the respondent No.1-Bank, the same shall be without prejudice to the rights and contentions of either side.
33. In view of this order passed by this Court, the appeal, which is pending before the Appellate Tribunal, would not survive.
(J. B. PARDIWALA, J) (VIRESHKUMAR B. MAYANI, J) Vahid Page 31 of 31 Downloaded on : Fri Nov 22 21:44:36 IST 2019