Mukul Mudgal, J.
1. This writ petition challenges the order dated 4th February 2002 passed by the Appellate Authority for Industrial and Financial Reconstruction (hereinafter referred to as 'the AAIFR') wherein while dismissing the appeal filed by the petitioner M/s. Madras Petrochem Ltd. and Anr. it was held that the Board for Industrial and Financial Reconstruction (hereinafter referred to as 'the BIFR') had made all efforts to secure the rehabilitation of the petitioner company and the scheme sanctioned in 1991 and 1996 had failed. It was concluded by the AAIFR that the petitioner is heavily indebted and there was no possibility of rehabilitating it. It was held that prolonged proceedings in SICA would no further serve any purpose and would serve the private interests of the guarantors. It is this order which is challenged in this writ petition.
2. Learned Counsel for the appellant has challenged the divesting of the jurisdiction of the BIFR and the AAIFR in these proceedings. The respondent's stand is that on 26th April, 2004 the following order was passed by this Court:
26-04-2004
Present Ms. Manisha Dhir for the petitioner.
Mr. Rajiv Shakdar for respondent/ICICI.
Mr. Kamal Mehta for respondent No. 9.
+WP (C) 48-49/2004 & CM 86/2004
*
Counsel for the respondent/ICICI Bank says that the petitioner itself mentioned in the petitioner that notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act was issued by the ICICI Bank to the petitioner company and pursuant to the said notice, ICICI Bank took over the possession of the plant including office premises at the plant of the petitioner company. It has been contended by Mr. Shakdar that in that eventuality the proceedings under SICA abates and, therefore, this petition will not be maintainable. Mr. Shakdar prays for some time to file reply. Let the same be filed within six weeks. Rejoinder within four weeks thereafter.
Renotify on 26.7.2004.
Interim order to continue.
3. Reliance has been placed by the respondents on the third proviso to Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as SICA), which reads as under:
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 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 also that on or after the commencement of the Securitisation and Reconstruction of Financial 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.
4. It has been contended that taking of possession of the assets of the Company including its property amounts to having taken measures to recover their secured debts under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 'SARFAESI Act') It is, therefore, contended that since indisputably possession has been taken by the ICICI Bank, one of the original debtors, the BIFR no longer has jurisdiction. The learned Counsel for the petitioner has very fairly handed over a copy of the judgment of this Court in the case of Punjab National Bank and Ors. v. AAIFR and Ors. in W.P.(C) No. 12097-12100/2006 and CM No. 9262/2006 decided on 26th May, 2008 where the issue involved in the phrase 'has taken measures' has been determined by this Court. The learned Counsel also pointed out that there appears to be an error in reference of 2nd proviso to Section 15(1) of SICA in the above judgment. The submission of the learned Counsel is correct and it is thus clarified that the reference to the second proviso made in the judgment of Punjab National Bank (supra) is actually in respect of the third proviso. The relevant portion of the said judgment reads as under:
10. The learned Counsel for the respondent No. 2 submitted that the action taken on the petitioner under Section 13(4) of the SARFAESI Act has become infructuous in the light of Section 13(8) of the SARFAESI Act which reads as follows:
If the dues of the secured creditors together with all costs, charges and expenses incurred by him are tendered to the secured creditors at any time before the date fixed for sale or transfer, the secured assets shall not be sold or transferred by the secured creditors, and no further steps shall be taken by him for transfer or sale of that secured asset.In our view, even if the above submission is accepted the divesting of the jurisdiction of the BIFR and AAIFR cannot be based upon the above provision which only stipulates the conditions precedent for the operation of the SARFAESI Act. Such pleas can indeed be raised in the proceedings under the SARFAESI Act but are not the pleas which can arise and be raised in proceedings under the SICA. The learned Counsel for the respondent No. 2 has also submitted that the Appellate power under Section 25 gave all jurisdiction to the AAIFR to make such enquiries as it deems fit which included the power to confirm, modify or set aside the order appealed against and this certainly stipulated that the subsequent events could be taken into account while deciding the appeal. We have no doubt that the subsequent events indeed can be taken into account by the appellate forum. However, that has nothing to do with the basic existence of the jurisdiction in the BIFR and appellate forum of the AAIFR pursuant to the mandate of second proviso to Section 14(1) of the SICA. The reliance on the judgment of the Hon'ble Supreme Court in the case of Transcore v. Union of India 135 (2006) DLT 151 (SC) is of no avail to the petitioner because it only deals with the jurisdiction of the SARFAESI Act as stipulated by Section 13(8) and cannot have any bearing on the interpretation of SICA. Reliance has also been placed on the judgment of the Orissa High Court in the case of Noble Aqua Pvt. Ltd. and Ors. v. State Bank of India and Ors. WP(C) 4815/2007, decided on 21st February 2008. The above judgment has dealt with the impact of Section 22 of the of the SICA vis-a-vis Section 13(b) of the Securitisation Act. This plea has been dealt with by the Orissa High Court in the following terms:
19. In support of such contention learned Counsel relied on amendment to Securitization Act under Section 41 thereof to certain enactments, and one of such enactment is SICA. Such amendments have been given in the Schedule to Section 41 of SICA. From a perusal of the said Schedule it appears that to Section 15 of SICA the following amendments have been introduced in Section 41 of the Securitization Act. The said amendment is as follows:
In Section 15, in Sub section (1), after the proviso, insert the following:
Provided further that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitization 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 Securitization 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 fourths 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.
Relying on the proviso to the said amendment, learned Counsel submitted that in the instant case since the notice under Section 13(4) of the Securitiziation Act has been issued reference before BIFR has abated.
20. This Court is unable to appreciate the aforesaid contention. The proviso makes it very clear that same will come into force where a reference is pending before the BIFR. Such reference will abate if the secured creditors representing not less than three fourths in value of the amount outstanding against financial assistance disbursed to the borrower, have taken any measures to recover their secured debt under Sub-section (4) of Section 13 of the Securitization Act.
21. In the instant case, admittedly the notice under subsection (4) of Section 13 of the Securitization Act has been issued on 7.4.2000. But long before that, the company has been declared a sick industrial company by an order of the BIFR dated 14.11.2006. Therefore, the proceeding under the SICA was not at the stage of reference. The proceeding has gone far ahead of that and culminated in an order by which the company was declared sick on 14.11.2006. The said order was passed by the BIFR after hearing the bank and by the said order the bank was appointed an operating agency with a direction to prepare the revival scheme. Therefore, in the facts of this case, the reference cannot abate since the matter under SICA is not pending in reference before the BIFR. Even though the bank is a party to the said order, it has neither filed any appeal there from nor has it asked for consent under Section 22 to proceed against the petitioner company. Therefore, this argument raised by the learned Counsel for the Bank cannot be accepted.
Relying on the above judgment it has been submitted that by issuance of the notice under Section 13(4) of the Securitization Act proceedings before the BIFR could not abate when a scheme was formulated. In our view, the judgment has proceeded on the basis of the distinction drawn between the pendency of reference and the existence of the scheme. In our view, the 2nd proviso sic (read as 3rd proviso) stipulates the pendency of the reference and the reference would include even the preparation of the revival scheme pursuant to the reference, i.e., taking of any action by the BIFR including preparation of a scheme pursuant to the reference. Furthermore, in order to avail of the principles of law laid down in the above judgment it will have to be demonstrated that a scheme had been framed in the present case. No such framing of scheme was brought to our notice by the respondent No. 2. However, even if a scheme had been framed in our view that would make no difference to the import of the 2nd proviso sic (read as 3rd proviso) to Section 15 of SICA. To this extent we are respectfully unable to concur with the view taken by the Orissa High Court.
10(a) We are also of the view that once the jurisdiction of the BIFR was divested by the mandatory impact of the 2nd proviso sic (read as 3rd proviso) to Section 15(1), the BIFR could not pass any orders under the SICA notwithstanding the subsequent developments. Orders sought by the petitioner from the BIFR could have been passed either under the SARFEASI or by a writ court exercising jurisdiction under Article 226 of the Constitution.
10(b) The phrase have taken measures obviously contemplates a measure already adopted and cannot be construed to mean that the jurisdiction of the BIFR would depend upon subsequent alteration in the composition of the consortium of the creditors once such measures are taken. The submission of the petitioner that subsequent events such as the reduction in the percentage of creditors, could enable continuance of the proceedings in the BIFR would mean that there would be a constant reshuffling of jurisdictions between the SARFAESI Act and SICA depending entirely upon the varying percentage of debtors based upon subsequent satisfaction of such debts by the debtor. Such a meaning could never have been intended by the legislature and the jurisdiction of the BIFR/AAIFR once divested by the operation of the 2nd proviso sic (read as 3rd proviso) to Section 15(1) could not resuscitate by virtue of subsequent developments. We, therefore, agree with the conclusion of the Bombay High Court but for the reasons enumerated above.
11. Ms. Maneesha Dhir also pleaded for a harmonious construction so as to harmoniously permit the operation of the two statutes in the present instance the deeming provision to Section 15(1) 2nd proviso sic (read as 3rd proviso) was inserted to the SICA itself in 2002 after the SARFAESI Act was enacted. Since the deeming proviso divesting the jurisdiction of the BIFR being incorporated in the SICA itself, the plea of harmonious construction between SICA and SARFEASI Act does not arise.
5. In this view of the matter, the issue involved in the present writ petition is squarely covered by the judgment of this Court in the case of Punjab National Bank (supra) and accordingly no further orders are called for in these proceedings. The learned Counsel for the petitioner, however, stated that in view of the fact that the property involved is about 55 acres in Manali and is situated in prime location near the Cochin Refineries in Chennai, even the sale of the part of the land would adequately meet the debts of all the creditors.
6. We are of the view that such pleas may be raised by the petitioner before the appropriate forum which has now the jurisdiction in the matter subsequent to the operation of the SARFAESI Act, in view of the effect of the 3rd proviso to Section 15 of the SICA which has been construed by us in Punjab National Bank's judgment (supra). Accordingly in view of above observations, the writ petition has become infructuous and stands disposed of.