intergrated Rubian Exports Ltd. Vs. Industrial Finance Corporation of India Ltd. ors. - Court Judgment

Excerpt:
- code of civil procedure, 1908.[c.a. no. 5/1908]. section 100-a [as substituted by c.p.c. amendment act, 2002]: [v.k. bali, cj, kurian joseph & k. balakrishnan nair, jj] applicability held, section is not retrospective. all appeals filed prior to 1.7.2002 are competent. but subsequent to 1.7.2002 intro court appeals against judgment of single judge is not maintainable. provisions of section 100-a, c.p.c., will prevail over the provisions contained in the kerala high court act, 1959. - 5. learned senior counsel appearing for the contesting secured creditors argued that the materials on record should deter the writ court exercising its discretionary power in favour of the petitioner since it is clearly demonstrated that assets of the company have just been permitted to wither.....orderthottathil b. radhakrishnan, j.1. the petitioner availed different financial assistance from different creditors, including respondents 1, 6 and 7. in 2005, the bifr issued an order under the provisions of the sick industrial companies (special provisions) act, 1985 hereinafter, the sica, for short in pursuance to a reference made to it under section 15 of sica. in spite of those guidelines issued as per ext. p2, nothing worked out and going by ext. r3(g), the indian bank addressed bifr, requesting to take suitable misfeasance proceedings against the company under the provisions of the sica. it brought to the notice of bifr that the movable assets of the company have already been stolen; the premises of the factory are under the control of anti-social elements; due to militant labour.....

Judgment:
ORDER

Thottathil B. Radhakrishnan, J.

1. The petitioner availed different financial assistance from different creditors, including respondents 1, 6 and 7. In 2005, the BIFR issued an order under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 hereinafter, the SICA, for short in pursuance to a reference made to it under Section 15 of SICA. In spite of those guidelines issued as per Ext. P2, nothing worked out and going by Ext. R3(g), the Indian Bank addressed BIFR, requesting to take suitable misfeasance proceedings against the company under the provisions of the SICA. It brought to the notice of BIFR that the movable assets of the company have already been stolen; the premises of the factory are under the control of anti-social elements; due to militant labour present in front of the factory, it is very difficult to enter into the factory and no workers have got their settlements ever since the factory closed; no security is available in the factory even to look after the remaining machines and that the factory is completely rusted and highly dilapidated and it is very difficult for anybody to restructure.

2. With the aforesaid scenario, the secured creditors invoked provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, hereinafter, the SARFAESI Act, for short. This writ petition is filed challenging the said provisions on the fundamental ground that in view of Section 22(1) of SICA, proceedings under the SARFAESI Act are barred and that those proceedings have to be quashed.

3. The secured creditors have come on record to contest stating that all of them stand by the securitisation proceedings under the SARFAESI Act in terms of the third proviso inserted to Section 15(1) of SICA, by the operation of Section 41 of the SARFAESI Act and that the proceedings pending before BIFR have abated since the secured creditors before this Court, represent more than 3/4th of the value of the amount outstanding against financial assistance disbursed to the writ petitioner by those secured creditors.

4. Learned Counsel for the petitioner, with the support of the decision reported in Noble Aqua Pvt. Ltd. and Ors. v. State Bank of India and Ors. : AIR2008Ori103 , contended for the position that Section 22(1) of SICA would apply to the facts of the case in hand in as much as the proceedings before BIFR are not at the stage of reference and they, essentially, are much beyond the stage of enquiries and schemes, because, following the reference and consideration of the petitioners case, BIFR conducted enquiries and certain schemes were formulated and operating agencies were also brought on record. This status of the BIFR proceedings, according to the learned Counsel for the petitioner, takes it out of and beyond the scope of 'reference' for the purpose of the third proviso to Sub-section (1) of Section 15 of SICA, as it now stands. It was accordingly contended that there is no question of abatement of reference because the case before BIFR is itself not at the stage of reference and hence, the concept of abatement by the force of the third proviso to Section 15(1) of SICA does not apply.

5. Learned senior counsel appearing for the contesting secured creditors argued that the materials on record should deter the writ Court exercising its discretionary power in favour of the petitioner since it is clearly demonstrated that assets of the company have just been permitted to wither away, even reducing the value of the securities. It is also pointed out that by virtue of the provisions of the SIC (Special Provisions) Act, 2003, Act 1 of 2004, to which assent of the President was received on 1-1-2004 and which enactment was published in the gazette on 2-1-2004, SICA itself stands repealed.

6. For the purpose of deciding this case, it is not necessary to consider whether SICA stands repealed by the enactment of 2004 or whether that repealing enactment stands enforced as noticed by the Division Bench of this Court in Aluminium Industries Ltd. v. State of Kerala : 2005(1)KLT889 . Still further, it is also not necessary to consider the question whether it was at the stage of 'reference' that the case was pending before BIFR and whether the third proviso to Sub-section (1) of Section 15 of SICA would nullify the plea of the petitioner. This is because proviso under consideration, only enjoins that the reference shall abate. Whatever be the scope of the term 'reference' and status of proceedings before BIFR, the case in hand can be decided without holding that the BIFR proceedings have abated. This is because, Section 35 of the SARFAESI Act, a later enactment, categorically lays down that the provisions of that Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect, by virtue of that law. That provision overrides Section 22 of the SICA, which is a previous enactment, having come into being in 1985. Therefore, notwithstanding the abatement provided by the third proviso to Section 15(1) of SICA, introduced by virtue of Section 41 read with the Schedule to the SARFAESI Act, the effect of Section 22 of SICA no more survives Section 35 of the SARFAESI Act.

7. In this context, learned Counsel for the petitioner argued that SICA could be treated as a special enactment occupying a very peculiar field and in that sense, could be treated as one which would not fall within the purview of Section 35 of the SARFAESI Act. The SARFAESI Act is an enactment to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The SICA is an Act to make special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, with the ultimate goal of taking preventive, ameliorative, remedial or other measures and the expeditious enforcement of the measures so determined. Both enactments essentially focus on the measures which are needed for asset management, either of the company or of the security company. Not only that, Section 37 of the SARFAESI Act enumerates different statutes and provides that the provisions of SARFAESI Act shall be in addition to and not in derogation of the legislations referred to therein. On a reading of Sections 35 and 37 of the SARFAESI Act, in conjunction, it has to be held that all enactments and laws in force, including those enumerated in Section 37, would also be available to a secured creditor notwithstanding the other provisions of the SARFAESI Act and the overriding effect of the SARFAESI Act, by virtue of Section 35 thereof, is in no manner abridged by any other provisions in that Act or in SICA.

8. It is also pointed out by the petitioner that the recovery order issued by the DRT contained a command that the recovery officer should enforce it only with the sanction of the BIFR. This is of no consequence because that would have effect only as regards the proceedings under the RDB Act and the same would have no impact on SARFAESI Act proceedings.

With the aforesaid, this writ petition fails. The same is accordingly dismissed. No costs.