1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.358 OF 2009 ... Rama Shree Conductors Limited ..Petitioner v/s The Appellate Authority for Industrial and Financial Reconstruction and ors. ..Respondents ... Mr.A.A.Kumbhakoni i/b R.S.Tripathi for the Petitioner. Mr.V.R.Dhond i/b Prakash Punjabi & Co. for Respondent No.3. Ms.Morlyn Montero for Respondents Nos.6 & 7. ... CORAM: D.K.DESHMUKH, & K.K.TATED, JJ DATED:12th November, 2009 P.C.: 1. The Petitioner by this petition challenges the validity of the order dated 2 21st October, 2008 passed by the Appellate Authority for Industrial & Financial Reconstruction, New Delhi in Appeal No.97 of 2008. 2. The relevant facts are that the reference of the Petitioner-company under Sick Industrial Companies (Special Provisions) Act, 1985 was registered on 30th April, 2002. Notice under Section 13(2) was given by Respondent No.3-SICOM on 4-7-2002, by Respondent No.4 IDBI on 29-10-2002 and by Respondent No.6-State Bank of India on 8-2-2003. These were admittedly the secured creditors of the Petitioner-company. It appears that the Respondent No.4 IDBI gave consent letter to SICOM-Respondent No.3 on 1-7-2004 and the State Bank of India gave consent letter to the Respondent No.3 on 3-1-2005. The Respondent No.3 issued notice 3 under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 24-1-2005 and took possession of the property on 9-2-2005. Thereafter steps were taken to sell the property. In these circumstances on 4-3-2008 BIFR passed an order holding that the reference of the Petitioner-company stands abated as action under Section 13(4) of the Securitisation Act has been taken. That order was subjected to challenge in appeal before the AAIFR. In the appeal it was the contention of the Petitioner-company that as action under Section 13(4) of the Securitisation Act taken by SICOM is not valid, in asmuch as there is no consent of 3/4th secured creditors the reference of the Petitioner-company does not abate. AAIFR by order dated 21-1-2008 held that the question whether the action taken under Section 13(4) 4 of the Securitisation Act is valid or invalid can be decided by the Forum provided by the Securitisation Act and not by AAIFR. The Petitioner is challenging that order in this petition. 3. The learned Counsel appearing for the Petitioner submits that the consequence of an action taken under Section 13(4) of the Securitisation Act is abatement of the proceedings under the Sick Industrial Companies Act. Therefore, power to decide whether the proceedings have actually abated in accordance with law or not is of the authorities under the Sick Industrial Companies Act. The learned Counsel, therefore, submitted that the AAIFR has abdicated its power of deciding this controversy. It was for the AAIFR to decide the controversy. In our opinion, the 5 submission is not well founded. Perusal of the provision of the Securitisation Act shows that sub-section 4 of Section 13 authorises the secured creditors to take recourse to one or more measures which are mentioned in sub- section 4 of Section 13. One of the measure is taking possession of the secured assets and then taking steps to sell the same. Sub- section 9 of Section 13 is relevant for the present purpose, which reads as under:- 13(9) In the case of finan cing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors; Provided that in the case of a company in liquidation, the amount realised from the sale of secured 6 assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956(1 of 1956); Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen s dues with the liquidator in accordance with the provisions of section 529A of that Act; Provided also that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen s dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen s dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen s dues under that section to the secured creditor andin such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator. Provided also that in case the secured creditor deposits the estimated amount of workmen s dues, such creditor shall be liable to pay 7 the balance of the workmen s dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator; Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen s dues, if any. 4. Perusal of the above sub-section (9) of Section 13 shows that if there are more than one secured creditor, then for taking valid action under Section 13(4) more than 3/4th of the secured creditors must join. That is one of the essential conditions of valid action under Section 13(4). If valid action is taken under Section 13(4), then possession can be taken and other measures can be adopted in relation to the security. Securitisation Act also provides a remedy to the borrower for challenging the action before the Debt Recovery Tribunal. Therefore, if it is the case of the borrower that the measure under Section 13(4) has not been 8 validly adopted then the remedy provided by Securitisation Act is to file an appeal before the D.R.T. One of the consequences of a valid action taken under Section 13(4) is provided by third proviso to sub-section 1 of Section 15 of the Sick Industrial Companies Act. That proviso reads as under:- Provided also that on or after the commencement of the Securitisation and Reconsutrction of Financial Assets and Enforcement of Security Interest Act, 2002, where a reference is pending before the Boad 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. 5. Perusal of the above quoted provisions shows that if there is a valid action taken under Section 13(4), then one of 9 the consequence is that any reference pending in relation to that company before BIFR automatically abates. In our opinion, provisions of Section 15 do not contemplate any order being passed by the Board for Industrial and Financial Reconstruction in relation to the abatement. The abatement of the reference is a consequence, which occures automatically on a valid action being taken under Section 13(4). In our opinion, therefore, the AAIFR was perfectly justified in taking the view that if it is the case of the Petitioner that the action taken by Respondent No.3 under Section 13(4)is invalid for any reason, the appropriate remedy for the Petitioner was to approach the D.R.T., which is the Forum provided by the Securitisation Act for deciding such questions. If the finding is recorded by that Forum that the action taken under Section 10 13(4) is invalid as it lacks consent of 3/4th secured creditors, then the Reference of the Petitioner-company pending in the BIFR will automatically stand revived and no order will be necessary to be passed by any authority under the Sick Industrial Companies Act for that purpose. 6. In our opinion, the view taken by the AAIFR is in consonance with the scheme of the two Acts, if two authorities under two Acts are permitted to decide the validity of the same action, it may lead to conflicting decisions and may not be in the interest of administration of justice. Petition is, therefore, rejected. (D.K.DESHMUKH, J.) (K.K.TATED, J.)