IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No. 19406 of 2006 Date of Decision: April 4, 2008 M/s PML Industries Limited ...Petitioner Versus IDBI and others …Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present: Mr. Anand Chhibbar, Advocate, and Mr. Amandeep Singh, Advocate, for the petitioner. Capt. Arun Sharma, Advocate, for respondent No. 3. Mr. Jagdish Marwaha, Advocate, for respondent No. 4. Mr. Kanwaljit Singh, Senior Advocate, with Mr. Rohit Sapra, Advocate, for respondent Nos. 6. M.M.KUMAR, J. 1. The short issue raised in the instant petition is as to whether an order passed under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity, ‘the Act’) and subsequent action initiated by the Naib Tehsildar, Dera Bassi-respondent No. 10, in accordance with the provisions of Section 14 of the Act, could be C.W.P. No. 19406 of 2006 challenged by availing the remedy of a petition under Article 226 of the Constitution. The petitioner-PML Industries Ltd. has challenged order dated 23.11.2006 (P-16), passed by the Naib Tehsildar, Dera Bassi-respondent No. 10, exercising powers under Section 14 of the Act, directing the petitioner-PML Industries Ltd. to hand over its possession to the agents of secured creditors. A further direction to the respondents has been sought requiring them to obey and abide by orders dated 15.2.2006 and 20.11.2006 (P-12 and P-13), passed by Hon’ble the Supreme Court, whereby the matter has been remanded back to the Board for Industrial and Financial Reconstruction- respondent No. 8 (for brevity, ‘BIFR’) for fresh rehabilitation of the petitioner-PML Industries Ltd. FACTS: 2. The case of the petitioner is that it is a 100% export oriented Limited Company and engaged in the business of processing and producing boneless buffalo (Male) meats. The unit of the petitioner at Dera Bassi, Punjab, was set up with the help of Research and Development Institution of New Zealand and the same is equipped with ultra modern processing plants. It has also entered into a turn-key agreement with M/s Fietchers Projects Pvt. Ltd., Australia, for supply, erection and commissioning of the plant. Initially financial assistance to the tune of Rs. 35.4 crores was provided to the petitioner by the ICICI Bank-respondent No. 2, which was later on extended to Rs. 39.68 crores. Other than this, the Asian Finance and Investment Corporation Ltd. (for brevity, ‘the AFIC’), one of the financial arm of the Asian Development Bank, Manila, also gave 2 C.W.P. No. 19406 of 2006 financial assistance/loan to the tune of US $ 1.1 million (Rs. 34 crores), which was duly approved by the Reserve Bank of India. The petitioner also secured a Bridge loan from the AFIC to the tune of Rs. 3.13 crores and another Bridge loan from the ICICI Bank-respondent No. 2 to the tune of Rs. 2.88 crores. The plant and machinery of the petitioner is spread over in about 20 acres and the unit started commercial production on 1.3.1996. 3. It is claimed that troubles for the petitioner started even before commencement of commercial production, when a news item was published in the local newspapers on 22.3.1995 that the State Cabinet of Punjab had decided on 21.3.1995 to shut down the petitioner’s unit in the wake of demonstrations by various fundamentalist groups. The petitioner then filed C.W.P. No. 4712 of 1995 in this Court and a Division Bench of this Court dismissed the said petition vide order dated 5.4.1995, by observing as under:- “ As of date, the petitioners have not file any order passed by the State of Punjab or its functionaries, which could be subject mater of scrutiny. The Petition is, therefore, dismissed as premature with a liberty to the petitioners to adopt appropriate proceedings and when occasion arises. In view of the order in the main petition, no order on the Civil Misc. No. 3860 of 1995 is called for.” 4. On 15.5.1995, the Deputy Commissioner, Patiala, passed an order directing the petitioner to close down its unit because the Punjab Government had decided not to allow operation of its factory 3 C.W.P. No. 19406 of 2006 situated at village Behra, Dera Bassi (P-2). On 10.6.1995, the Deputy Commissioner, Patiala, passed yet another order for stopping any production in the unit (P-3). The petitioner challenged the aforementioned orders in this Court by filing C.W.P. No. 8924 of 1995. Orders dated 15.5.1995 and 10.6.1995 (P-2 & P-3) were stayed by this Court at the time of issuance of notice of motion. Subsequently a Division Bench of this Court admitted C.W.P. No. 8924 of 1995, vide order dated 30.8.1995 and also ordered continuance of interim stay, which is still pending adjudication before this Court. 5. The resultant effect of the decision of the State Cabinet of Punjab to shut down the unit of the petitioner was that some of orders for supply of meat were cancelled and the financial institutions refused to give loans to the petitioner due to which a financial crisis is claimed to have arisen. Faced with this situation, the petitioner approached the BIFR by filing Reference No. 346/1998, under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for brevity, ‘the SICA Act’) on 18.12.1998 (P-4). On 14.5.1999, BIFR declared the petitioner as a sick industrial company in terms of Section 3(1)(O) of the SICA Act. BIFR further formed an opinion that the petitioner could revive on its own and keeping in view the public interest, ordered for initiating of measures in terms of Section 18 of the SICA Act. BIFR also ordered appointment of Industrial Development Bank of India-respondent No. 1 (for brevity, ‘the IDBI’) as the Operating Agency (OA) under Section 17(3) of the SICA Act to examine the viability of the petitioner and for 4 C.W.P. No. 19406 of 2006 formulation of rehabilitation scheme for its revival. Certain guidelines were set out for the purpose of examining the viability and preparation of rehabilitation scheme for the petitioner (P-5). Subsequently, proceedings before BIFR continued from time to time and the rehabilitation process was undertaken. All the secured creditors were also represented before BIFR. 6. On 30.4.2001, BIFR passed an order, which was served on the petitioner on 2.5.2001, directing the IDBI to prepare a draft rehabilitation scheme within a period of two weeks and make available the same to the intending bidders including the petitioner. The IDBI was also directed to issue an advertisement for the change of Management of the Company within a period of 15 days from the receipt of order inviting offers for takeover/leasing/amalgamation/ merger for rehabilitation with or without One Time Settlement (OTS) of the dues of the financial institutions/Banks giving four weeks’ time for submission of offers. It was further ordered that in case no concrete rehabilitation proposal was received, BIFR would consider passing further appropriate orders including issuance of show cause notice for winding up of the petitioner (P-6). 7. Feeling aggrieved against the order dated 30.4.2001, passed by the BIFR, the petitioner preferred a statutory appeal under Section 25 of the SICA Act before the Appellate Authority for Industrial and Financial Reconstruction, New Delhi (for brevity, ‘the AAIFR’), on 8.5.2001. The appeal was accompanied by an application for interim stay. On 9.5.2001, the AAIFR rejected the appeal in limine (P-7). Thereafter, the petitioner filed C.W.P. No. 5 C.W.P. No. 19406 of 2006 7157 of 2001 in this Court impugning orders dated 30.4.2001 and 9.5.2001, passed by the BIFR and AAIFR respectively. The writ petition was also dismissed by a Division Bench of this Court, vide order dated 17.5.2001 (P-8). The petitioner still further filed S.L.P. (Civil) No. 10197 of 2001. On 9.7.2001, Hon’ble the Supreme Court issued notice and stayed order dated 30.4.2001, passed by BIFR (P- 9). The S.L.P. was granted and in Civil Appeal No. 6397 of 2002 on 6.12.2005 (P-10), their Lordships’ of Hon’ble the Supreme Court, passed the following order:- “ Pursuant to the previous order of this Court dated 22nd of November 2005, counsel for the appellants has produced the balance-sheet, income-tax returns, assessment orders and One Time Settlement Scheme (OTS) along with other documents. He has placed on record letter No. ARG-IV MK/FY 06/3601 dated 28th November, 2005 addressed by Shri S.V. Venkatakrishnan, Vice President and Group Head of Asset Reconstruction Company (India) Limited (Areil) to the Managing Director of the appellant-company wherein it has been stated that the fnal settlement can be arrived at if the appellant agrees to pay the sum of Rs. 12.50 crores in three instalments within six months, as stated therein, towards the full and final settlement in respect of the secured creditors. Out of the secured creditors, the Indusind Bank has not accepted the proposal so far. This offer of OTS has to be accepted by the 31st of December, 6 C.W.P. No. 19406 of 2006 2005. Adjourned to 12th January, 2006 as Ist item subject to over night part heard, if any. This adjournment is being granted subject to the appellants’ depositing a sum of Rs. one crore with the Registrar General of this Court on or before the 2nd of January, 2006. In case the afore- stated sum of Rs. one crore is not deposited, as directed above, the stay granted by this Court shall stand vacated. In the event the OTS does not come through, then the sum of Rs. one crore, if deposited, shall be returned to the appellants.” 8. In terms of the aforementioned order, the petitioner deposited a sum of Rs. one crore to show its bonafides. Civil Appeal finally came up for consideration before Hon’ble the Supreme Court on 15.2.2006 and on the basis of the statement of the counsel appearing for the petitioner, the appeal was dismissed as withdrawn with liberty to approach the BIFR by disclosing the name of the investor along with details of funds to be deployed by him and the orders for supply of products of the company received so far (P-12). 9. The petitioner claims to have furnished the requisite information in terms of the order dated 15.2.2006. The directions were obviously time bound and BIFR was to take decision within eight weeks of submissions of proposals and the proposal was required to be submitted within four weeks from the date of the order dated 15.2.2006. The period came to an end on 15.5.2006. The BIFR moved an application for modification of the order dated 15.2.2006, praying that name of the strategic investor be revealed to the IDBI- 7 C.W.P. No. 19406 of 2006 respondent No. 1, which was allowed vide order dated 20.11.2006 (P- 13). Hon’ble the Supreme Court ordered that the IDBI could know name of the investor but it was not to reveal the same to any other third party so that they could examine credit-worthiness of the strategic investor brought by the petitioner. There was no extension either sought or extended in respect of the time granted by Supreme Court vide its order dated 15.2.2006. The proceedings by BIFR could not be concluded by 15.5.2006. 10. The ICICI Bank-respondent No. 2 served a notice to the petitioner, under Section 13(2) of the Act that the dues of the bank may be paid immediately otherwise proceedings under the Act would be initiated (P-14). On 1.12.2003, a reply to the notice was sent by the petitioner intimating the ICICI Bank-respondent No. 2 about pendency of Special Leave Petition before Hon’ble the Supreme Court (P-15). The petitioner has conceded that an opportunity of hearing by the ICICI Bank-respondent No. 2 was afforded to it, however, neither any decision of the objections raised by the petitioner was conveyed nor any notice under Section 13(4) of the Act was ever sent. 11. On 23.11.2006, a communication was sent by the Naib Tehsildar, Dera Bassi-respondent No. 10, which was received by the petitioner on 1.12.2006, asking the petitioner to deliver its possession to the Chief Consultant, North Indian Technical Consultancy, S.C.O. No. 131-132, First Floor, Chandigarh, on 6.12.2006. The aforementioned communication has been issued under Section 14 of the Act. Alongwith the said communication, a copy of the 8 C.W.P. No. 19406 of 2006 application filed by the Asset Reconstruction Company (India) Limited-(ARCIL) respondent No. 6, in the Court of Chief Metropolitan District Magistrate, S.A.S. Nagar, Mohali, under Section 14 of the Act, for taking possession of secured assets and various other documents were also sent to the petitioner(P-16). The petitioner sent its reply on 4.12.2006 (P-17). The stand taken in the reply is that no order under Section 13(3A) of the Act has been passed and Hon’ble the Supreme Court has issued various directions in its order dated 15.2.2006. Communication/order dated 23.11.2006, is subject matter of challenge in the instant petition. 12. In the written statement filed on behalf of ARCIL- respondent No. 6 various preliminary objections have been raised. The main stand taken is that this Court has no jurisdiction to entertain the instant petition in view of Sections 17(1) read with Sections 34 and 35 of the Act, inasmuch as, the petitioner is seeking quashing of order dated 23.112006 (wrongly mentioned as 16.11.2006 in the written statement), and if such relief is granted then it would amount to grant of injunction against respondent No. 6 to exercise its right to take action as contemplated under Section 13(4) of the Act. It has further been asserted that jurisdiction and authority to adjudicate upon the controversy, especially impugned order dated 23.11.2006, lies elsewhere i.e. with the Debts Recovery Tribunal (DRT), under Section 17 of the Act. It has further been pleaded that mere pendency of reference before the BIFR does not debar a secured creditor to exercise its right to enforce its security interest/secured assets in terms of Section 13(4) of the Act. In that regard provisions of 9 C.W.P. No. 19406 of 2006 Section 15(1) of the SICA Act, which have been inserted by the Act, have been referred to. Furthermore, the petitioner has been afforded full opportunity of hearing before initiating proceedings against it under the provisions of the Act. More than 1½ years time has been allowed to the petitioner to come forward with reasonable settlement proposal. The instant petition has been filed only with a view to delay and frustrate the recovery of lawful dues of the secured lenders. It has been pointed out that vide letter dated 6.10.2006, the petitioner was intimated that the proposal submitted by it in pursuance to the order dated 15.2.2006, passed by Hon’ble the Supreme Court, was not acceptable (R-6/1). As on 31.3.2006, a sum of Rs. 96.24 crores is due to respondent No. 6 and payable by the petitioner. Even other secured creditors also rejected the proposal submitted by the petitioner, as is evident from letters dated 11.10.2006, 25.10.2006, 2.11.2006, 6.11.2006, 2.12.2006 (R-6/2 to R-6/6 respectively). Respondent No. 6 also placed on record order dated 16/23.11.2006, passed by the District Magistrate, issuing instructions to the Tehsildar to take possession of the secured assets of the petitioner and hand over to it (R-6/10). However, on the appointed day, the Tehsildar refused to take possession on the ground that reference before BIFR was pending and in terms of Section 22 of the SICA Act, action could not be initiated by respondent No. 6. In this regard, copy of communication dated 6.12.2006, sent by the Naib Tehsildar, Dera Bassi, to the District Magistrate, S.A.S. Nagar, has been placed on record (R-6/11). Respondent No. 6 also referred to the provisions of Section 14 of the Act to contend that only the District Magistrate has 10 C.W.P. No. 19406 of 2006 jurisdiction to provide assistance. On merits while admitting the factual position similar averments, as have been noticed above, have been reiterated by respondent No. 6. 13. A separate written statement on behalf of State Bank of Hyderabad-respondent No. 3 has been filed wherein similar objections have been raised as are raised by respondent No. 6. Therefore, we do not propose to discuss the written statement in detail and it is suffice to observe that respondent No. 3 has assigned his share to respondent No. 6. 14. A counter affidavit on behalf of Indusind Bank Ltd.- respondent No. 4 has been filed highlighting the fact that the petitioner has not approached this Court with clean hands and suppressed material facts. It has been submitted that before filing the instant petition, the petitioner has also filed C.W.P. No. 19042 of 2003 seeking to restrain the respondents therein from taking any action under Section 13(2) of the Act. The aforementioned writ petition stands disposed of in terms of the order dated 25.5.2004, passed by this Court in C.W.P. No. 19657 of 2003 [M/s Gill Knitwears v. UCO Bank and another, Annexure R-1(Colly)]. It has been held that as per the judgment of Hon’ble the Supreme Court in the case of Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311, it was obligatory upon the parties to take recourse to specific statutory alternative remedy by filing an appeal under Section 17 of the Act against an order passed under Section 13(4) of the Act. Liberty, however, was granted to the parties to file appeal within a period of one month from the date of the order. Accordingly, it has 11 C.W.P. No. 19406 of 2006 been asserted by respondent No. 4 that writ petition may be dismissed with exemplary costs for concealing material facts. 15. Mr. Anand Chhibbar has argued that the petitioner had filed C.W.P. No. 7157 of 2001 against the order dated 30.4.2001, passed by the BIFR and order dated 9.5.2001, passed by the AAIFR. This Court dismissed the writ petition vide order dated 17.5.2001 (P- 8). Against the aforementioned order, the petitioner has filed Special Leave Petition before the Supreme Court and various orders were passed. He has referred to orders dated 9.7.2001 (P-9), 6.12.2005 (P- 10), 12.1.2006 (P-11), 15.2.2006 (P-12) and 20.11.2006 (P-13). According to the learned counsel, all these orders reveal that the Supreme Court has sent the parties to BIFR, as is evident from order dated 15.2.2006 (P-12). The petitioner was permitted to withdraw the appeal with liberty to approach BIFR. 16. Another submission made by the learned counsel is that ARCIL-respondent No. 6 to whom the debt has been assigned by the secured creditor was present before Hon’ble the Supreme Court and is, therefore, bound by all the aforementioned orders (Annexures P-10 to P-13) passed by the Supreme Court. He has further submitted that before resorting to action under Section 13(4) of the Act, no order in terms of Section 13(3A) of the Act by giving reasons, have been passed. Therefore, learned counsel has submitted that no order could have been passed under Section 14 of the Act. Therefore, the order dated 23.11.2006 (P-16) is liable to be set aside. 17. Mr. Kanwaljit Singh, learned Senior counsel for ARCIL- respondent No. 6 has, however, submitted that the petitioner is merely whiling away time, which was fixed by Hon’ble the Supreme Court as 12 C.W.P. No. 19406 of 2006 is explicit from order dated 15.2.2006 (P-12). According to the learned counsel, the BIFR was required to dispose of the entire matter within a period of 8 weeks from the date of submission of the proposal, which was to be done within a period of four weeks from 15.2.2006. In other words, the total period of three months was granted by Hon’ble the Supreme Court, vide its order dated 15.2.2006 (P-12). Learned counsel has further submitted that at best the period must be considered to have come to an end in December 2006 when the application filed by the BIFR, in which IDBI was appointed as operating agency and the BIFR was to disclose the name of the investor with a view to enable the operating agency-IDBI to ascertain the genuineness and viability of the proposal by studying the financial statements of the investor and verify their credit worthiness from their Bankers. Learned counsel has pointed out that the period fixed by Hon’ble the Supreme Court has expired and the petitioner has lost the right to make any submission. Learned counsel has further submitted that proceedings under Section 13(2) of the Act were initiated on 21.11.2003 and it is an admitted position that the petitioner was given personal hearing, as is evident from the averments made by the petitioner itself in para 20 of the writ petition and the letter dated 18.12.2003, which has been attached by the petitioner at page 145 of the petition. Learned counsel has submitted that Section 13(3A) of the Act was added by way of an amendment only on 11.11.2004 and, therefore, the respondents could not have any opportunity to comply with the aforementioned provision. 18. Learned counsel has further pointed out that in para 3 of 13 C.W.P. No. 19406 of 2006 the affidavit dated 23.4.2007, Dr. A.S. Bindra, Chairman-cum- Managing Director of the petitioner company, has undertaken on behalf of the petitioner that in the event of non-payment of Rs. 3,75,00,000/- by 29.6.2007, the ARCIL-respondent No. 6 would have a right to recover further amounts calculated at ICICI Bank prevailing PLR on the amount overdue in the next 90 days. In paras 4 and 5 of the said affidavit, Dr. A.S. Bindra had further undertook that in the event of non-payment of amount of Rs. 1,325 lacs, the ARCIL- respondent No. 6, Stressed Assets Stabilization Fund (SASF)- respondent No. 7 and State Bank of Hyderabad (SBH)-respondent No. 3 would be entitled to terminate the settlement and adjust payments made towards the dues of the petitioner and that they would be entitled to continue with the exercise of their rights for recovery of dues as per the provisions of law. Learned counsel has maintained that the period has expired long back and the respondents are within their rights to proceed under Sections 13(4) and 14 of the Act. 19. We have thoughtfully considered the submissions made by the learned counsel for the parties and perused the paper book with their able assistance. The petitioner has engaged the secured creditors or their assignee-respondent No. 6 in litigation for number of years. A perusal of the order dated 17.5.2001, passed by this Court in C.W.P. No. 7157 of 2001 (P-8), shows that BIFR had rejected the prayer made by the petitioner on 30.4.2001 and AAIFR has upheld that order on 9.5.2001. Against the aforementioned orders, C.W.P. No. 7157 of 2001 was filed in this Court, which was dismissed on 17.5.2001 (P-8). Hon’ble the Supreme Court disposed of the Special 14 C.W.P. No. 19406 of 2006 Leave Petition by accepting the statement made on behalf of the petitioner, vide its order dated 15.2.2006 (P-12). The petitioner had withdrawn the appeal with liberty to approach the BIFR by disclosing the name of the investor alongwith the details of funds to be deployed by it and the orders for supply of product of the Company received by that time. The proposal was required to be made in a sealed cover within four weeks from 15.2.2006 and the same was required to be considered by the BIFR by taking into account the genuineness of the investor, funds to be deployed by the petitioner and orders for supply received by it. On the satisfaction of the BIFR that the petitioner company could turn around by the present management, the BIFR was to permit the petitioner to submit a scheme for revival in accordance with law. A period of 8 weeks from the date of submission of proposal was fixed. It was made clear that in case the BIFR was not satisfied about the genuineness and viability of the proposal then the order passed by the Division Bench of this Court dismissing the writ petition was to revive and operate. The operative part of the order passed by Hon’ble the Supreme Court on 15.2.2006 (P-12) reads as under:- “ In view of the statement of the counsel appearing for the appellant, the appeal is dismissed as withdrawn reserving liberty with the