State Bank Of Travancore vs B.S.T. And P.S.P.Workers Union (Citu) on 17 January, 2022

[Cites 25, Cited by 1]

Kerala High Court

State Bank Of Travancore vs B.S.T. And P.S.P.Workers Union (Citu) on 17 January, 2022

These appeals are directed against the order dated 03.08.2009 in C.A.No.522 of 2008 in C.P.No.23 of 2006. The appellants are respondents 4 to 8 in C.A.No.522 of 2008. The parties are referred to in this judgement, as they appear in C.A.No.522 of 2008.

2. The applicant is a trade union of the workers of the company under liquidation. During 2003, when the Company became sick, the Board of Directors of the Company made a reference to the Board for Industrial and Financial Reconstruction (the BIFR) under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (the SICA) Company Appeal No.22 of 2009 and con. cases 14 for appropriate measures to be taken for revival of the Company. On 29.09.2005, the BIFR, after making necessary inquiries and after affording an opportunity of hearing to all concerned, formed an opinion that the Company is not likely to become viable and that it is only just and equitable to wind up the Company, and forwarded the said opinion to this Court in terms of Section 20(1) of the SICA to order winding up of the Company in accordance with the provisions of the Companies Act, 1956 (the Companies Act). C.P.No.23 of 2006 is the company petition registered on the basis of the said opinion of the BIFR. Notice was ordered in C.P.No.23 of 2006 on 02.08.2006 and on 02.11.2007, after hearing all the parties concerned, this Court ordered winding up of the Company.

3. A consortium of Banks led by the fourth respondent was extending financial assistance to the Company on the security of two major assets of the Company. While the proceedings before the BIFR was pending, the fourth respondent, on behalf of the consortium of Banks, initiated proceedings against the secured assets of the Company under Company Appeal No.22 of 2009 and con. cases 15 the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the SARFAESI Act) and the Authorised Officer appointed by the fourth respondent took possession of one of the secured assets on 15.10.2005 and the other on 13.02.2006 as provided for under Section 13(4) of the SARFAESI Act. Later, on 29.06.2006, one of the secured assets was sold by the Authorised Officer of the fourth respondent in accordance with the provisions of the SARFAESI Act and the sale proceeds were appropriated by the fourth respondent and their consortium partners.

4. In the meanwhile, 74 workmen of the Company preferred a claim petition against the Company before the Labour Court, Kozhikode as C.P.No.21 of 2005 and obtained an order directing the Company to disburse a sum of Rs.56,16,987/- towards the benefits due to them. The Company did not comply with the said order. C.A.No.522 of 2008 was filed by the applicant, in the above circumstances, seeking a direction to the fourth respondent to deposit the proceeds of the sale of the secured asset effected by them with the official Company Appeal No.22 of 2009 and con. cases 16 liquidator. The case set out in the said application is that the Company being a company which is being wound up, in terms of the second proviso to Section 13(9) of the SARFAESI Act, the fourth respondent is entitled to retain the proceeds of the sale of the assets of the Company only after depositing the workmen's dues with the liquidator.

5. A counter affidavit has been filed by the fourth respondent in C.A.No.522 of 2008 contending, among others, that the reference before the BIFR has abated in terms of the third proviso to Section 15(1) of the SICA when they took possession of one of the secured assets on 15.10.2005; that the Company cannot be treated thereafter as a company which is being wound up and the second proviso to Section 13(9) of the SARFAESI Act does not therefore apply to the sale effected by them later on 29.6.2006. It was also contended by the fourth respondent that at any rate, the Company cannot be treated as a company which is being wound up in order to apply the second proviso to Section 13(9) of the SARFAESI Act before it was ordered to be wound up by this Court on 02.11.2007 and Company Appeal No.22 of 2009 and con. cases 17 the said provision does not therefore apply to the sale of the secured asset effected by them on 29.06.2006 on that ground as well.

6. The Company Court took the view that in the absence of any challenge against the proceedings of the BIFR in terms of which its opinion to wind up the Company was forwarded to this Court or against the order of this Court in terms of which the Company was ordered to be wound up, the fourth respondent cannot be heard to contend that the reference before the BIFR has abated. The Company Court also took the view that the winding up of the Company pursuant to the opinion forwarded in terms of Section 20(1) of the SICA shall be deemed to have been commenced on the date on which the BIFR forwarded its opinion to this Court and the sale of the secured asset effected after the said date would therefore fall within the scope of the second proviso to Section 13(9) of the SARFAESI Act. In the light of the said findings, the Company Court allowed C.A.No.522 of 2008 and the fourth respondent and their consortium partners were directed to Company Appeal No.22 of 2009 and con. cases 18 deposit the workers' dues as assessed by the Official Liquidator with the Official Liquidator as provided for in the second proviso to Section 13(9). The fourth respondent and their consortium partners are aggrieved by the said order of the Company Court and hence these appeals.

7. Heard the learned counsel for the parties on either side.

8. Adv.Sri.S.Easwaran who led the arguments on behalf of the consortium of banks elaborated the contentions taken by the fourth respondent in C.A.No.522 of 2008 pointing out that Section 13(9) of the SARFAESI Act would apply only to a company which is being wound up and a company can be considered to be a company which is being wound up only when a reference under Section 15(1) of SICA in respect of the company abates. It was argued by the learned counsel that the reference in respect of the Company under Section 15(1) did not abate when the BIFR forwarded its opinion to this Court that the Company is one to be wound up. According to the learned counsel, the said reference stood abated only when the fourth Company Appeal No.22 of 2009 and con. cases 19 respondent took measures as provided for under Section 13(4) of the SARFAESI Act in respect of one of the secured assets of the Company on 15.10.2005 by the operation of the third proviso to Section 15(1) of the SICA. It was argued by the learned counsel that all proceedings pursuant to the opinion forwarded by the BIFR under Section 20(1) of the SICA after the abatement of the reference under Section 15(1) are void and therefore, the Company cannot be treated as a company in liquidation thereafter. Since the sale of one of the secured assets was effected by the fourth respondent after the reference under Section 15(1) has abated, the second proviso to Section 13(9) of the SARFAESI Act does not apply to the said sale, argues the learned counsel. To bring home the point that the reference under Section 15(1) would be pending even if the BIFR forwards its opinion that the Company is one to be wound up in terms of Section 20(1), the learned counsel has placed reliance on the provisions contained in Section 20(4) which empowers the BIFR to deal with the assets of the sick companies notwithstanding the provisions contained in Section Company Appeal No.22 of 2009 and con. cases 20 20(1). The learned counsel has also relied on the decision of the Full Bench of the Madras High Court in Salem Textiles Limited v. Authorized Officer, Phoenix ARC Private Ltd., AIR 2013 Mad 229 and the decision of the Apex Court in Madras Petrochem Ltd. and another v. Board for Industrial and Financial Reconstruction and others, (2016) 4 SCC 1, in support of the said proposition. Alternatively, it was argued by the learned counsel that even assuming that all further proceedings pursuant to the opinion forwarded to this Court under Section 20(1) including the winding up order passed by this Court are valid, at any rate, the Company cannot be treated as a company which is being wound up before the date of the winding up order or at least before the date on which the Company Court applied its mind on the opinion of the BIFR and ordered notice to the parties on the same. According to the learned counsel, the second proviso to Section 13(9) of the SARFAESI Act does not apply to the sale effected by the Authorised Officer of the fourth respondent before the Company Court applied its mind on the opinion of the BIFR. Company Appeal No.22 of 2009 and con. cases 21

9. Per contra, Adv.B.Deepak, the learned counsel for the applicant submitted that if the BIFR forwards its opinion that the company is one to be wound up in terms of Section 20(1) of the SICA, the Company Court is bound to order winding up of the company and the company shall therefore be treated as a company which is being wound up from the date on which the BIFR has formed its opinion. It was argued by the learned counsel that since measures under Section 13(4) of the SARFAESI Act have been taken by the fourth respondent in respect of the secured assets of the Company only much thereafter, the second proviso to Section 13(9) of the SARFAESI Act would certainly apply to the sale of the secured asset effected after the said date.

10. Section 15(1) of the SICA which is relevant in the context of dealing with the arguments advanced by the learned counsel for the fourth respondent reads thus:

"15. Reference to Board - (1) When an industrial company has become a sick industrial company, the Board of Directors of the company, shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the Company Appeal No.22 of 2009 and con. cases 22 end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company:

Provided that if the Board of Directors had sufficient reasons even before such finalisation to form the opinion that the company had become a sick industrial company, the Board of Directors shall, within sixty days after it has formed such opinion, make a reference to the Board for the determination of the measures which shall be adopted with respect to the company:

Provided further that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where financial assets have been acquired by any securitisation company or reconstruction company under sub-section (1) of section 5 of that Act:

Provided also that on or after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where a reference is pending before the Board for Industrial and Financial Reconstruction, such reference shall abate if the secured creditors, representing not less than three-fourth in value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors, have taken any measures to recover their secured debt under sub-section (4) of section 13 of that Act."

Company Appeal No.22 of 2009 and con. cases 23 As noted, the third proviso to Section 15(1) is categoric in its terms that a reference under the said provision pending before the BIFR on or after the commencement of the SARFAESI Act shall abate if the secured creditors, representing not less than three-fourth in value of the amount outstanding against the financial assistance disbursed to the borrower, have taken any of the measures under Section 13(4) of the SARFAESI Act to recover their secured debt. There is no dispute in this case to the fact that a reference under Section 15(1) in respect of the Company was pending after the commencement of the SARFAESI Act. Similarly, there is also no dispute in this case to the fact that the fourth respondent and their consortium partners are representing not less than three-fourth in value of the amount outstanding against the financial assistance disbursed to the Company. Similarly, there cannot be any dispute to the fact that the conduct of the Authorised Officer of the fourth respondent in taking possession of one of the secured assets of the Company on 15.10.2005 is a measure in terms of Section 13(4) of the SARFAESI Act. In other words, if Company Appeal No.22 of 2009 and con. cases 24 the reference under Section 15(1) was pending before the BIFR as on 15.10.2005, the same would have certainly abated on that day. As noted, the specific contention of the fourth respondent is that the reference under Section 15(1) does not abate merely for the reason that the BIFR has forwarded its opinion that the Company is one to be wound up in terms of Section 20(1). It was on that premise, it was argued on behalf of the fourth respondent that the reference under Section 15(1) was abated by the operation of the third proviso to the said provision only later when the Authorised Officer of the fourth respondent took measures in respect of the secured assets of the Company as provided for under Section 13(4) of the SARFAESI Act. The first and the foremost question to be considered therefore is as to whether the reference under Section 15(1) was pending after the BIFR has forwarded its opinion that the Company is one to be wound up in terms of Section 20(1).

11. SICA was a statute introduced with a view to secure the timely detection of sick and potentially sick Company Appeal No.22 of 2009 and con. cases 25 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. The scheme of the SICA was that when a reference is made under Section 15(1) of the SICA, the BIFR would inquire into the question as to whether the industrial company has become sick and if it is found so, the BIFR would consider whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. If the BIFR finds that it is practicable for the sick industrial company to do so, the BIFR would facilitate the company to make its net worth exceed the accumulated losses by taking appropriate measures. On the other hand, if the BIFR finds that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the sick industrial company as a result Company Appeal No.22 of 2009 and con. cases 26 therefore is not likely to become viable in future, and that it is just and equitable that the sick industrial company should be wound up, it may record the said opinion and forward the same to the concerned High Court for winding up of the company. It is thus clear from the scheme of the SICA that once the BIFR forms an opinion that the company is not likely to become viable and that it is only to be wound up and forwards the said opinion to the concerned court for winding up of the sick industrial company, the reference under Section 15(1) gets abated, for the BIFR has nothing more to do with the company thereafter in terms of the provisions of the SICA.

12. The view aforesaid has been expressed by the Apex Court also in Madras Petrochem Ltd., while examining the scope of the expression 'where a reference is pending' contained in the third proviso to Section 15(1) of the SICA holding that a reference under Section 15(1) cannot be said to be pending once the BIFR gives its opinion to wind up the company. It was also clarified by the Apex Court in the said case that a reference under Section 15(1) would get abated Company Appeal No.22 of 2009 and con. cases 27 when the BIFR forms the opinion that the company is one to be wound up. Paragraphs 51 and 53 of the judgment in the said case read thus:

"51. What has to be examined is whether this purely literal rendering of the expression "where a reference is pending" is correct or not. First and foremost, it is important to note that the third proviso to Section 15(1) uses the words "is pending". A reference has been held to be pending the moment it is received by the Board. In Real Value Appliances Ltd. v. Canara Bank [Real Value Appliances Ltd. v. Canara Bank, (1998) 5 SCC 554] , this Court had to decide whether the mere registration of a reference by BIFR would result in the automatic cessation of all proceedings which are pending in civil courts and the company court against its assets. It was argued that in order that Section 22 of the Act can come into operation, BIFR must, subsequent to the registration of the reference under Section 15, apply its mind and consider whether it is necessary under Section 16 to make an inquiry. Unless an inquiry is pending, the provisions of Section 22 of the Act do not get attracted. It was held that once the reference is registered after a preliminary scrutiny, it is mandatory for BIFR to conduct an inquiry. This being so, it is in furtherance of the legislative intention to see that no proceedings against the assets are taken before BIFR decides, after the inquiry, to continue with the reference. It was thus held, having particular regard to Section 16(3) Explanation, that an inquiry shall be deemed to have commenced Company Appeal No.22 of 2009 and con. cases 28 upon the receipt by the Board of any reference or information or upon its knowledge reduced to writing by the Board. This being the case, this Court held that once the reference is registered and once it is mandatory to simultaneously call for information/documents from the informant, then an inquiry under Section 16 must be deemed to have commenced. In that view of the matter, Section 22 would immediately come into play. It is clear, therefore, that if a literal meaning were to be applied to the expression "where a reference is pending", the third proviso to Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 would be rendered otiose and the purpose for which it was inserted would completely fail. On a literal reading of the provision, such reference shall abate on steps being taken by the secured creditors to recover their secured debts under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the moment a reference is registered. And this Court has held that the moment the reference is registered, an inquiry as contemplated by Section 16 shall be deemed to commence. If that is so, then a reference can never be said to be pending after an inquiry commences, if the learned counsel for the appellants is correct. This can never be the case. It is clear, therefore, that the expression "where a reference is pending" would necessarily include the inquiry stage before the Board under Section 16 of the Act. If this be the case, then the reference can be said to be pending not only when an inquiry is instituted, but also after preparation and sanction of a scheme right till the stage Company Appeal No.22 of 2009 and con. cases 29 the scheme has worked out successfully or till BIFR gives its opinion to wind up the company.(underline supplied) xxxxxxx

53. Another important aspect as to the construction of the third proviso to Section 15(1) is the meaning of the expression "such reference shall abate". One of the meanings of the expression "abate" is "to put an end to; to curtail; to come to naught". (See Ramanatha Aiyar's Law Lexicon). A reference can be said to abate in one or several ways. One obvious way that a reference abates is where the Board, after inquiry, rejects the reference for the reason that the Board is satisfied that the Company is not a sick industrial company as defined under the Act. Another way in which a reference can abate is where a scheme is implemented successfully, and the sick industrial company is taken out of the woods successfully. A third manner in which a reference can abate is when a scheme or schemes have failed in respect of the sick industrial company, and in the opinion of BIFR, the said Company ought to be wound up. A fourth instance of abatement is provided by the third proviso to Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. And that is that a reference which is pending in the sense understood hereinabove shall abate if the secured creditors of not less than 3/4th in value of the amount outstanding against the financial assistance disbursed to the borrower, have taken measures to recover secured debts under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Company Appeal No.22 of 2009 and con. cases 30 Security Interest Act, 2002. It is clear that the third proviso to Section 15(1) seeks to strike a balance between getting a sick industrial company out of the woods and secured creditors being able to recover the debt owed to them by such company. The legislature has thought it fit to annul all proceedings before BIFR only when at least 3/4th of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors have taken the measures listed in Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The balance is, therefore, struck by the figure of "not less than 3/4th". The legislature has inserted this provision so that, if 3/4th or more of the secured creditors get together to take measures under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, they will not be thwarted by the provisions of Section 22 of Sick Industrial Companies (Special Provisions) Act, 1985, and it will not be necessary for them to obtain BIFR permission before taking any such measures. This construction of the third proviso to Section 15(1) is in keeping with the march of events post 2002, when the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 came to be enacted pursuant to various committee reports, and for the reasons outlined hereinabove."(underline supplied) Going by the scheme of the SICA and the decision of the Apex Company Appeal No.22 of 2009 and con. cases 31 Court in Madras Petrochem Ltd., we are inclined to hold that a reference under Section 15(1) would get abated once the BIFR forms an opinion that the company is not likely to become viable and that it is only to be wound up, and forwards the same to the concerned court in terms of Section 20(1).

13. Section 20 of the SICA dealing with winding up of sick industrial companies reads thus:

"20. Winding up of sick industrial company.-- (1) Where the Board, after making inquiry under section 16 and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court.

(2) The High Court shall, on the basis of the opinion of the Board, order winding up of the sick industrial company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956 (1 of 1956).

(3) For the purpose of winding up of the sick Company Appeal No.22 of 2009 and con. cases 32 industrial company, the High Court may appoint any officer of the operating agency, if the operating agency gives its consent, as the liquidator of the sick industrial company and the officer so appointed shall for the purposes of the winding up of the sick industrial company be deemed to be, and have all the powers of, the official liquidator under the Companies Act, 1956 (1 of 1956).

(4) Notwithstanding anything contained in sub-

section (2) or sub-section (3), the Board may cause to be sold the assets of the sick industrial company in such manner as it may deem fit and forward the sale proceeds to the High Court for orders for distribution in accordance with the provisions of section 529A, and other provisions of the Companies Act, 1956 (1 of 1956)."

The provision in Section 20(2) extracted above would indicate that once the BIFR forwards its opinion that the sick industrial company is not likely to become viable and that it is only to be wound up, it is obligatory for the High Court to order winding up of the sick industrial company in accordance with the provisions of the Companies Act. Of course, Section 20(4) provides that notwithstanding anything contained in Section 20(2), the BIFR may cause to be sold the assets of the sick industrial company in such manner as it may deem fit and forward the sale Company Appeal No.22 of 2009 and con. cases 33 proceeds to the High Court for orders for distribution in accordance with the provisions of Section 529A and other provisions of the Companies Act. As indicated, the SICA was a special enactment dealing with sick industrial companies. The scheme of the SICA was that as far as sick industrial companies are concerned, unless they are ordered to be wound up, the BIFR alone will have the jurisdiction to sell the assets of the company [See NGEF Ltd. v. Chandra Developers (P) Ltd., (2005) 8 SCC 219]. Section 20(4) is a special provision conferring power on the BIFR to sell the assets of a company in respect of which the BIFR has formed its opinion that the sick industrial company is one to be wound up to enable the Company Court to expedite the proceedings for winding up of the company to protect the interests of its creditors [See M/s.Shri Maruthi Textiles Ltd. v. The Board for Industrial and Financial Reconstruction, New Delhi, 2014 SCC Online AP 231]. The said provision cannot be relied on to contend that the reference under Section 15(1) would be pending even after the BIFR forwards its opinion that the company is not likely to Company Appeal No.22 of 2009 and con. cases 34 become viable and that it is only one to be wound up to the concerned court for winding up of the company. The argument advanced by the learned counsel for the fourth respondent placing reliance on Section 20(4) of the SICA is therefore only to be rejected.

14. Paragraph 58 of the judgment of the Apex Court in Madras Petrochem Ltd. reads thus:

"58. In conclusion, it is held that the interim order dated 17-1-2004 passed 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. This is because the 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. Section 15(1) proviso 3 covers all references pending before BIFR, no matter whether such reference is at the inquiry stage, scheme stage, or winding-up stage. The Orissa High Court [Noble Aqua (P) Ltd. v. SBI, 2008 SCC OnLine Ori 7 : AIR 2008 Ori 103] is not correct in its conclusion on the interpretation of Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. This being so, it is clear that in any case the present Company Appeal No.22 of 2009 and con. cases 35 reference under Section 15(1) of Appellant 1 Company has abated inasmuch as more than 3/4th of the secured creditors involved have taken steps under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The appeals are accordingly dismissed."(underline supplied) It is placing reliance on the underlined sentence in the extracted paragraph that the learned counsel for the fourth respondent argued that a reference under Section 15(1) of the SICA would be pending even after the BIFR forwards its opinion under Section 20(1) to the concerned court for winding up of the company. Paragraph 58 of the judgment extracted above is the concluding paragraph of the judgment in the case. It is seen that the question examined by the Apex Court in the said case is as to whether the expression 'where a reference is pending' in the third proviso to Section 15(1) would include all proceedings before the BIFR or only proceedings at the initial stage. If the underlined sentence in paragraph 58 is understood in the context of the question examined as also the findings made in paragraphs 51 and 53 extracted in paragraph 12 Company Appeal No.22 of 2009 and con. cases 36 above, it is clear that by the said sentence, the Apex Court has only conveyed its decision that the third proviso to Section 15(1) would cover the stages of reference upto the stage as provided for under Section 20. The said sentence, according to us, cannot be stretched to argue that the reference under Section 15(1) would be pending even after the BIFR forwards its opinion to the concerned court that the sick industrial company is not likely to become viable and that it is only to be wound up, for if the said argument is accepted, it would make the finding of the Apex Court in paragraphs 51 and 53 and the finding in paragraph 58 mutually destructive. The argument advanced by the learned counsel for the fourth respondent on the strength of the underlined sentence in paragraph 58 of the judgment in Madras Petrochem Ltd. is therefore only to be rejected.

15. One of the questions examined by the Full Bench of the Madras High Court in Salem Textiles Limited is "whether an action initiated in terms of Section 13(4) of the Securitisation Act, by the secured creditors, representing three- fourth in value of the total amount outstanding, would result in Company Appeal No.22 of 2009 and con. cases 37 the automatic abatement of the proceedings before the BIFR, in view of the third proviso to Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 inserted by way of amendment under Act 54 of 2002?" In paragraph 70(i) of the judgment in the said case, while summarising the answer to the said question, it was observed by the Court thus:

"Once an action is initiated in terms of Section 13(4) of the Securitisation Act, 2002, by the secured creditors representing three-fourths in value of the total amount outstanding, the proceedings before the BIFR would automatically abate, in view of the third proviso inserted by Act 54 of 2002 under Section 15(1) of SICA 1985. This is the position irrespective of whether the reference is at the stage of budding under Section 15 or at the stage of blossoming under Section 16 and 17 or at the stage of fruition under Sections 18 and 19 or at the stage of rotting (deserving only winding up) under Section 20. "

It was placing reliance on the statement in the extracted passage that the third proviso to Section 15(1) of the SICA would apply even at the stage of winding up of the company, the learned counsel for the fourth respondent argued that a reference under Section 15(1) of the SICA would be pending Company Appeal No.22 of 2009 and con. cases 38 even after the BIFR forwards its opinion to the concerned court under Section 20(1) that the company is not likely to become viable and that it is only to be wound up. We are unable to agree with the said argument, for such an inference cannot be made from the observations made in paragraph 70(i) of the judgment. The observations aforesaid could be understood only to mean that the third proviso to Section 15(1) would cover references upto the stage of Section 20. It is all the more so since the question as to whether the reference under Section 15(1) would be pending even after the opinion of the BIFR that the company is one which is not likely to become viable and that it is only to be wound up has been forwarded by the BIFR in terms of Section 20(1) to the concerned court for winding up of the company was not under consideration before the Madras High Court in the said case. The argument raised by the learned counsel for the fourth respondent on the strength of the observations made by the Madras High Court in paragraph 70(i) of the judgment in Salem Textiles Limited is therefore only to be rejected.

Company Appeal No.22 of 2009 and con. cases 39

16. If a reference under Section 15(1) of the SICA cannot be said to be pending after the BIFR forms its opinion that the sick industrial company is not likely to become viable and it is only to be wound up and forwards the same in terms of Section 20(1) to the concerned court for winding up, the third proviso to Section 15(1), providing for abatement of reference when measures are initiated by the secured creditors for recovering their secured debts, cannot have any application thereafter, since the reference is already abated when the BIFR forms and forwards its opinion to the concerned court.

17. Reverting to the facts, admittedly, measures under Section 13(4) of the SARFAESI Act have been taken by the Authorised Officer of the fourth respondent long after the opinion of the BIFR that the Company is one which is not likely to become viable and that it is only to be wound up has been forwarded in terms of Section 20(1) of the SICA to the concerned court for winding up of the Company. If that be so, the third proviso to Section 15(1) cannot have any application to the facts of the case. If the third proviso to Section 15(1) has Company Appeal No.22 of 2009 and con. cases 40 no application to the facts of the case, the contention of the fourth respondent that the proceedings in which this Court ordered winding up of the Company are void, is unsustainable.

18. The surviving question is as to the date of commencement of the winding up when the BIFR forms an opinion for winding up of a sick industrial company in terms of Section 20(1) of the SICA. More precisely, is it from the date of the opinion formed under Section 20(1) by the BIFR or from the date of the winding up order. The argument advanced by the learned counsel for the fourth respondent is that the winding up pursuant to the opinion formulated by the BIFR under Section 20(1) would commence only from the date of winding up order. Alternatively it was argued by the learned counsel that at any rate, winding up of the company cannot be said to have commenced before the date on which the Company Court applies its mind to initiate a proceedings relying on or on the basis of the opinion for winding up of the Company. The learned counsel places reliance on paragraph 50 of the judgment of the Apex Court in Chandra Developers (P) Ltd. Company Appeal No.22 of 2009 and con. cases 41 in support of the contention that winding up pursuant to the opinion in terms of Section 20(1) would commence only from the date on which the Company Court applies its mind to initiate proceedings for winding up of the company on the basis of the opinion received from the BIFR. We are unable to agree with this contention of the fourth respondent as well, for the question has been answered consistently by other High Courts, placing reliance on the decision of the Apex Court in Chandra Developers (P) Ltd. that winding up proceedings pursuant to an opinion in terms of Section 20(1) would be deemed to have commenced on the date of the opinion of the BIFR that the company is not one which is likely to become viable and that it is only to be wound up [See In Re: Board of Industrial & Financial Reconstruction, (2017) 202 Comp Cas 551 (Bom), In Re: Kapri International Pvt. Ltd., 2013 SCC Online Del 2176, Indoco Remedies Ltd. v. O.L. of Kay Packaging P. Ltd. (2009) 150 Comp Cas 770 (Guj) and Board for Industrial and Financial Reconstruction v. Coromandel Garments Ltd. (2018) 209 Comp Cas 635 (Bom)]. In the case on hand, as Company Appeal No.22 of 2009 and con. cases 42 noted, the date of opinion of the BIFR in terms of Section 20(1) of the SICA was 29.09.2005. In other words, the company is one to be treated as being wound up from 29.09.2005. If the company is treated as one being wound up from 29.09.2005, the second proviso to Section 13(9) of the SARFAESI Act would certainly apply to the sale effected by the Authorised Officer of the fourth respondent under the SARFAESI Act in respect of the secured asset of the company on 29.06.2006.

There is, therefore, no infirmity in the order impugned in the appeals. The appeals, in the circumstances, are dismissed. All the interlocutory applications in the appeals are closed.

Sd/-

P.B.SURESH KUMAR, JUDGE.

Sd/-

C.S.SUDHA, JUDGE.

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