Case: Nouveaw Exports Private Limited Vs. Appellate Authority For Industrial Industrial & Financial Reconstruction Company & Others

A.M. Khanwilkar, J.1. Heard counsel for the parties.2. This Petition, under Article 226 of the Constitution of India, takes exception to the order passed by the Appellate Authority for Industrial & Financial Reconstruction, New Delhi, dated 13th January, 2010, whereby the prayer for interim relief during the pendency of Appeal preferred by the Petitioner has been rejected. The Petitioner, by the said Appeal, had questioned the correctness of the order passed by the Board For Industrial And Financial Construction (BIFR) dated 7th January, 2009.3. Briefly stated, the question that arises for our consideration is in the context of the fact that the Respondent No.5-bank claims to be the sole secured creditor of the Respondent No.3-borrower. The Reference was pending before the BIFR for revival of the Respondent No.3-company. During the pendency of the said proceedings, the Respondent No.5-bank invoked remedy under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short Securitisation Act) and proceeded with the sale of properties of Respondent No.3. Consequent thereto, the movable and immovable properties in Respondent No.3-company were sold in public auction as back as in July, 2008. That sale has been confirmed by the DRT and possession of the said property has also been made over to the Respondent No.7. These facts are not disputed. However, the Petitioner, claiming to have business conducting agreement executed by the Respondent No.3-company in its favour and also in the capacity of one of the unsecured creditor, moved the BIFR for a direction against the Respondent No.5-bank not to proceed with the further steps under the Securitisation Act; and stay the implementation of the proposed actions to be taken by the bank. Further, it was prayed that the Respondent No.5-bank and the Respondent No.3-company should allow the representatives of the Petitioner to enter the Vashi Plant and remove their stock, equipments and machinery etc. Further relief is claimed in the said application against Respondent No.3-company to disclose to BIFR and the Petitioner, the details and the status of the securitisation application that was filed by the Respondent No.3-company in the DRT, whereby the action initiated by the Respondent No.5-bank was subject matter of challenge. This application preferred by the Petitioner was rejected by the BIFR on 7th January, 2009. Even though this order is relevant, has not been annexed to the Petition. But, copy of the said order has been handed over to us across the bar. The BIFR has taken the view that since the sale has already been completed and action under Section 13(4) of the Act of 2002 has been taken to its logical end and also upheld by the DRT, the Board has lost its jurisdiction over the companys case. It is this decision of the BIFR which has been challenged in Appeal before the AIFR. During the pendency of the said Appeal, interim relief was prayed to direct the Respondents to maintain status quo with regard to the companys property till the disposal of the Appeal. This prayer has been considered by the Appellate Authority in the impugned judgment. The Appellate Authority has declined to grant any interim protection to the Petitioner for the reasons recorded in paragraphs 10 and 11 of the impugned decision. The substance of the reason is that the sale in favour of the Respondent No.7 has been concluded long back and because the action under section 13(4) has been taken to its logical end, it was not open to interdict that process and moreso because the BIFR proceedings have abated.4. The argument canvassed before us is essentially founded on the mandate of Section 22 of The Sick Industrial Companies (Special Provisions) Act, 1985. It was argued that the proceeding resorted to by the Respondent No.5-bank were covered by the sweep of Section 22 of the Act of 1985 and, therefore, the same could not have proceeded further in absence of consent of the Board. The argument, though attractive, does not commend to us.5. We make it clear that our observations in this order be treated as only, prima facie, to consider the question regarding grant of interim relief during the pendency of appeal before the Appellate Authority, to the Petitioner, as prayed.6. On analysing the provisions of Section 22 of the Act of 1985 read with Section 15 of the same Act, we have no hesitation in taking the view that the case on hand would fall within the parameters of third proviso to Section 15 (1) of the Act of 1985. The third proviso 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 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 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 or such secured creditors, have taken any measures to recover their secured debt under sub-section (4) of section 13 of that Act. [Emphasis supplied]It would be apposite to reproduce section 22(1) of the Act of 1985 which reads thus:22. Suspension of legal proceedings, contracts, etc.- (1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, the, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.7. Significantly, the third proviso has been introduced in the year 2002 by Act 54 of 2002 which corresponded with the coming into force of the Securitisation Act of 2002. The same has been inserted as per section 41 of the Securitisation Act. The third proviso to Section 15(1) of the Act of 1985 postulates two requirements so that the reference before the BIFR would abate, namely:-(i) The secured creditors must represent not less than three-fourth in value of the amount outstanding against the financial assistance disbursed to the borrower; and(ii) Such secured creditors have taken any measures to recover this secured debt under Section 13(4) of the Act of 2002.This proviso is an enabling provision which permits the specified number of secured creditors to take measures to recover their secured debt under Section 13(4) of the Act of 2002 and if action is so taken by them, then it would automatically entail in abatement of the reference proceedings before the BIFR. This proviso is in the nature of exception to the bar under Section 22 of the Act of 1985. The bar under Section 22 of the Act of 1985 is automatically lifted on fulfillment of the conditions specified in the third proviso to Section 15(1) of the same Act.8. Besides, counsel for the Respondents have relied on Section 35 of the Act of 2002 which reads thus:35. The provisions of this Act to override other laws. The provisions of this 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 any such law.9. According to the Respondents, in view of the non obstante clause in the Act of 2002, the question of taking consent of the Board in terms of Section 22 of the Act of 1985, irrespective of the strength of the secured creditors, does not arise. We are not inclined to accept this extreme argument made before us by the Respondents - that even a single secured creditor or even secured creditors representing less than three-fourth in value of the amount outstanding against the financial assistance disbursed to the borrower could invoke the provisions of the Act of 2002, without taking consent of the Board under Section 22 of the Act of 1985.10. On conjoint reading of Section 22 of the Act of 1985 along with the third proviso to Section 15(1) of that Act as also Section 35 of the Securitisation Act of 2002, the position, in our opinion, which emerges is that if the secured creditor(s), whose strength is less than three-fourth in value of the amount outstanding against financial assistance disbursed to the borrower, intends to invoke the regime under the Act of 2002, would be obliged to take consent of the Board under Section 22 of the Act of 1985. Whereas, if the secured creditor(s) representing not less than three-fourth in value of the amount outstanding against financial assistance disbursed to the borrower, by virtue of third proviso to Section 15(1) of the Act of 1985, are entitled to proceed against the borrower and the secured debt of the borrower by invoking provisions of the Act of 2002, without taking consent of the Board as per Section 22 of the Act of 1985. This appears to be the scheme of the enactment of Securitisation Act of 2002 and in particular considering the corresponding amendment introduced in Section 15 of the Act of 1985 in the year 2002.11. In the present case, the Respondent No.5-bank claims to be the only secured creditor who has had provided financial assistance to the Respondent No.3-company, at the relevant point of time. This factual position has not been challenged in the application filed by the Petitioner before the Board. This is a crucial matter which ought to have been asserted by the Petitioner only when it could have succeeded in persuading the Board that the proceeding before the BIFR has not abated in law. On the other hand, if the Respondent No.5 qualified the requirement of the secured creditors representing not less than three-fourth in value of the amount outstanding against financial assistance disbursed to the borrower, the question of taking consent of the Board would not arise and, at the same time, by operation of law, the proceeding before the BIFR would abate without requiring to do anything further.12. That, however, does not mean that the BIFR would have no jurisdiction to examine the factual position as to whether the secured creditors who intend to or have invoked the provisions of the Act of 2002 would constitute the requisite strength of not less than three-fourth in value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors at the relevant point of time. That is a matter which ought to be examined by the Board, if called upon to do so. If the Board were to hold that the secured creditors who have invoked provisions of the Act of 2002 do not qualify the said requirement, in that situation, the provisions of Section 22 of the Act of 1985 would operate and any steps taken by such secured creditors albeit under the provision of Act of 2002, would be of no avail and will have to be treated as non-est in the eyes of law, considering the purport of Section 22 of the Act of 1985. Only this interpretation would sub-serve the legislative intent behind the two enactments.13. In our opinion, since the Petitioner has nowhere asserted that the strength of Respondent No.5-bank was less than three-fourth in value of the amount outstanding against financial assistance disbursed to the borrower or such secured creditor at the relevant point of time, therefore, the question of the Petitioner succeeding in their application does not arise.14. The contention that the scheme to be formulated by the BIFR would bind all the secured creditors by virtue of Section 18 of the Act of 1985 does not take the matter further, having regard to the sweep of third proviso to Section 15(1) of the Act of 1985 r/w Section 35 of the Act of 2002.15. The criticism of the Petitioner before this court is that the authority has, instead of examining the question in the context of the effect of Section 22 of the Act, straight away opined that since action under Section 13(4) of the Act of 2002 has been taken to its logical end, nothing survives for consideration before the Board. This argument does not commend to us for the reasons already recorded in the earlier part of this order.16. Counsel appearing for the Petitioner, relying on the decision of the Orissa High Court in the case of Noble Aqua Pvt.Ltd. & Ors. V/s. State Bank of India & Ors. reported in (2009) 148 Com.Cases 817, contended that the crucial words in the third proviso to Section 15(1) of the Act of the 1985 are ..... where a reference is pending........ such reference shall abate ..... According to the Petitioner, a reference under section 15(1) of the Act of 1985 is made to BIFR .... for determination of the measures which shall be adopted with respect to the company. Once the measures have been determined, the reference is exhausted and it can no longer be said that the Reference is pending. In that situation, the third proviso to Section 15(1) of the Act of 1985 will have no application. It was argued that in the present case, the BIFR has not only declared the Respondent No.3 as a sick company, as back as on 25th August, 1999, within the meaning of Section 3(1)(o) of the Act of 1985, but has also framed and sanctioned the scheme for revival of the Respondent No.3 Company to which the Respondent No.5 Bank was party-being the Secured Creditor. In such a situation, the third proviso to Section 15(1) of the Act of 1985 cannot be invoked by the Secured Creditor such as Respondent No.5 Bank. To buttress this submission, emphasis is placed on the opinion of the Orissa High Court in the above decision, which reads thus: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 Securitisation Act.In the instant case, admittedly the notice under Sub-section (4) of Section 15 of the Securitisation Act has been issued on 7.4.2007. But long before that, the company has been declared a sick industrial company by an order o 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 therefrom 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.17. It was vehementally argued that the opinion so recorded by the Orissa High Court applies on all fours to the case on hand. Our attention was invited to the fact that the Orissa High Court had occasion to consider Section 37 of the Securities Act which clarifies that the provisions of that Act are not in derogation of laws referred to therein. Besides, since the scheme has been prepared by virtue of Section 18(8) of the Act, 1985, the same will be binding on the Respondent No.5 being the secured creditor and the Respondent No.5 in turn, would be bound to provide financial assistance to the Respondent No.3 sick company, as per section 19 of the Act of 1985.18. We shall now analyse the decision of the Orissa High Court in some detail. In that case, BIFR proceedings were pending against the Company. In the said proceedings, the opposite party Bank opposed the plea of the Company for declaring it a sick company. Nevertheless, the company was declared as a sick company as on 31st March, 2005. Thereafter, the BIFR appointed the Bank as operating agency with direction to prepare revival scheme for it, if feasible. Further, the opposite party-bank had applied for permission under Section 22(1) of the Act of 1985, which was opposed for and on behalf of the Company on the ground that such permission would delay the revival of the company. The permission asked by the opposite party-bank under section 22(1) was refused by order dated 14th November, 2006. That order had become final. In the mean time, the Company had filed Petition before the DRT on 10th July, 2006 for suspension of further proceedings before DRT. What is relevant to notice is that the opposite party-Bank vide letter dated 26th December, 2006 emphasised about the DRT proceedings and stated that the DRT will take measures for seizure of the factory premises and other fixed assets of the company for sale through public auction for recovery of the decreetal dues of the bank. Thereafter, notice under section 13(4) of the Securitisation Act was issued to the Company. In this background, the Company rushed to the High Court by way of Writ Petition challenging the said notice under section 13(4) of the Securitisation Act received by it being in contravention of provisions of section 22 of the Act of 1985. The bank, on the other hand, asserted that on invocation of action under Section 13 of the Securitisation Act, the proceedings before the BIFR abates and the protection which the Company claims under Section 22 of the Act of 1985 is no longer available. The Orissa High Court, after considering the provisions contained in proviso to Section 15(1) of the Act of 1985 read with Section 22 of the Act of 1985, negatived the stand of the Bank. Instead, held that the third proviso will come into force where reference is pending before BIFR. It held that the notice under section 13(4) of the Securitisation Act was issued on 7th April, 2007. But long before that the Company was already declared sick company by order dated 14th November, 2006, therefore, the proceedings before the BIFR were not at the stage of reference, as such. But the same had proceeded far ahead and culminated with the order of company being declared sick on 14th November, 2006. Moreover, the said order was passed by the BIFR after hearing the Bank and the Bank was appointed as operating agency with direction to prepare the revival scheme.19. In substance, the Orissa High Court proceeded on the finding that no reference was pending before the BIFR at the relevant time, when the bank invoked action under section 13 of the Securitisation Act. It however, held that the Bank can still take recourse to remedy under section 13 of the Securitisation Act after taking consent of the BIFR under Section 22 (1) of the Act of 1985. For taking this view, the Court has relied upon the reported decisions which essentially deal with the purport of section 22 of the Act of 1985. It has relied on the decisions of the Apex Court in Real Value Appliances Ltd. Vs. Canara Bank (1998) 93 Com. Cases 26 (SC); NGEF Ltd. Vs. Chandra Developers P.Ltd.(2005) 127 Com. Cases 822(SC); Jay Engineering Works Ltd. Vs. Industry Facilitation Council (2006) 133 Com. Cases 670; Morgan Securities and Credit P.Ltd. Vs. Modi Rubber Ltd.(2007) 136 Com. Cases 113; and lastly, decision of the Division Bench of its own Court in the case of Bireswar Das Mohapatra vs. State Bank of India (2006) 2 OLR 423. 20. Insofar as the decision of the Apex Court in the case of Real Value Appliances(Supra), it will be of no avail to examine the purport of third proviso to section 15(1) of the Act of 1985, which was inserted in the year 2002. Insofar as the decision in the case of NGEF Ltd.(Supra), the principal question considered by the Apex Court was whether the Company Judge had jurisdiction to issue any direction to the Company to execute a deed of sale, which amounted to grant of a decree for specific performance of a contract. That issue was considered essentially keeping in mind the efficacy of section 22 of the Act of 1985. Even this decision will be of no avail to examine the purport of third proviso to section 15(1) of the Act of 1985, which, in our view, is an exception to carve out or remove the special cases from the general proceedings or actions covered under section 22 of the Act of 1985.21. Similarly in the case of Jay Engineering Works Ltd.(supra), the Apex Court was called upon to consider the sweep of section 22 of the Act of 1985 and whether the same would be applicable in respect of action initiated by the Respondent therein in terms of provisions of Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. The Supreme Court interpreted section 6(2) of the Act of 1993, which is non-obstante clause and postulates that any party to dispute may make a reference to the Industry Facilitation Council for acting as an arbitrator or conciliator in respect of matters referred to in that subsection (1) and the provisions of Arbitration and Conciliation Act, 1996 shall apply to such disputes, as the arbitration or conciliation were pursuant to an arbitration agreement referred to in sub-section (1) of Section 7 of that Act. Section 10 of the said Act of 1993 provides that the provision of that Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The Supreme Court tested the provisions of the said Act of 1993 and juxtaposed it with Section 22 of the Act of 1985. It has held that the Act of 1985 is a complete Code by itself and Section 22 of the Act provides for special provisions. Even this decision will be of no avail to the case on hand, as we are called upon to consider the efficacy of the third proviso to section 15(1) of the Act, which, as aforesaid is in the nature of exception to the general cases covered by Section 22 of the Act.22. The other decision, relied by the Orissa High Court, is of Morgan Securities and Credit Pvt.Ltd.(supra). Once again, in this decision, the principal question considered by the Apex Court was whether the provisions of the Arbitration and Conciliation Act would prevail over the provisions of the Act of 1985. There is no provision in the Arbitration and Conciliation Act, 1996, which can be compared with the class of action conceived in the third proviso to section 15(1) of the Act of 1985. For that reason, even this decision, at best, is useful only to understand the sweep of section 22 of the Act of 1985.23. The decision in the case of Bireswar Das Mohapatra(Supra), which is referred to by the Orissa High Court has not been made available to us. But from the Judgment in Noble Aquas case(Supra), it appears that the said decision construed the effect of section 32 of the Act of 1985. That provision contains a non-obstante clause and the overriding clause in SICA is only subject to Foreign Exchange Regulation Act, Urban Land Ceiling Act and Section 72(a) of the Income Tax Act subject to the amalgamation of sick industrial company with another company. While considering that aspect, the Division Bench of Orissa High Court has opined that the twin objects behind enacting SICA was to salvage productive assets and realise the amounts due to the banks and financial institutions to the extent possible from the non-viable sick industrial companies through liquidation of those companies, as is mentioned in the Statement of Objects and Reasons of the Act of 1985.24. As aforesaid, none of these decisions have any bearing on the interpretation of the third proviso to section 15(1) of the Act of 1985. With utmost respect to the Division Bench of Orissa High Court, which has decided the case of Noble Aqua(supra), we are in disagreement with their opinion that the reference does not abate because the Company has already been declared as a sick company. The fact that upon submission of reference, the Board is immediately called upon to determine the measures to be adopted with respect to the Company in question; and as a consequence of which the Board may either initiate enquiry into the working of the company by taking recourse to section 16 of the Act or make suitable order on the completion of enquiry in exercise of powers under section 17 of the Act and frames a scheme and issue direction under section 18 of the Act, does not mean that the reference is not pending before the Board. There are only two situations, which may result in disposal of the reference. Firstly, on rejection of the reference by the Board and that order attaining finality. The second situation is, when the scheme as framed is implemented in its entirety or otherwise and taken to its logical end one way or the other. So long as the scheme is being operated or implemented, the reference submitted under section 15 would continue to remain pending. Suffice it to observe that the reference envisaged in the third proviso to section 15(1) of the Act of 1985, is ascribable to reference proceedings till the same are finally terminated one way or the other. The steps- of enquiry and suitable orders to be passed on completion of enquiry or of preparation of scheme and other incidental actions- are integral part of the said reference submitted before the Board. The extreme argument of the Petitioner, if accepted, would result in a pedantic approach of construing the third proviso to Section 15(1) of the Act of 1985 and would result in rendering the same as otiose. We say so because, immediately on submission of reference under section 15(1) of the Act of 1985, the Board is obliged to pass some direction with promptitude to exercise powers under section 16 and then proceed further under Chapter III of the said Act. According to the Petitioner, on issuing initial direction upon submission of the reference, the reference comes to an end. In other words, as soon as the direction to initiate inquiry under section 16 is passed, the action on reference as per section 15 is complete and therefore it comes to an end for the purpose of that provision and cannot be treated as pending within the meaning of the third proviso to section 15(1) of the Act of 1985. Notably, the time gap between the submission of reference and passing of such initial direction/order may vary, depending on the facts of each case. We cannot countenance the interpretation that the expression reference occurring in the third proviso is only referable to the stage of determining the measures and it will cease to be a reference after passing of such initial direction/order by the Board. The fact that section 22 of the Act of 1985 uses the expression of :i) an inquiry under section 16 is pending; orii) any scheme referred to under section 17 is under preparation or consideration; oriii) a sanctioned scheme is under implementation; oriv) where an appeal under section 25 is pending - in contradistinction to the expression reference is pending used in the third proviso to section 15(1), does not mean that upon issuing direction to initiate inquiry under section 16 of the Act, the said reference comes to an end. In our view, the language of Section 22 does not further this argument as it is noticed that it includes the proceedings in appeal under section 25 of the Act of 1985 which in turn can be filed even in respect of an order of the BIFR passed at the stage of Sections 15, 16, 17 or 18 of that Act- which plainly means it is continuation of that stage and can be treated as reference is pending within the meaning of the third proviso to Section 15(1) of that Act. For, the appeal provision (Section 25) of that Act makes no distinction between the different stages under Chapter III of that Act. Moreover, Section 22 merely describes the different stages except the initial direction to be issued by the Board to determine the measures to be adopted. The expression reference used in the third proviso to section 15(1) of the Act of 1985 is a generic term, which has not been defined in that Act. It will have to be given purposive meaning and not to render the object and reason for enacting Securitisation Act of 2002 nugatory; and more importantly, to effectuate the intent behind insertion of the third proviso to Section 15(1) of the Act, 1985, which was contemporaneous with coming into force of Securitisation Act of 2002. The Objects and Reasons for introducing Securitisation Act, 2002 can be culled out from the statement of objects and reasons, which read thus:Statement of Objects and Reasons.- The financial sector has been one of the key drivers in Indias efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the Court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on 21st June, 2002 to regulate securitisation and reconstructionn of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. (emphasis supplied)A priori, we find it difficult to agree with the opinion of the Orissa High Court in Noble Aquas case, that there is clear statutory bar under section 22 of the Act of 1985. We are conscious of the fact that the Orissa High Court has adverted to Section 37 of the Securitisation of 2002. The purport of section 37 is to make it clear that the provisions of the Act of 2002 will not be in derogation of any other Law for the time being in force. Relying on this provision, it has been held by the Orissa High Court that the protection which has been given to a sick industrial company under the provisions of special statute, namely, Act of 1985, has not been taken away by section 37 of the Securitisation Act. It is on that premiss the Division Bench of the Orissa High Court opined that the proceedings under the Act of 1985 cannot abate once the company has been declared a sick industrial company and therefore, it was not open to the Bank to proceed with the action under section 13 of the Securitisation Act without taking consent of the Board, as required by section 22 of the Act of 1985.25. In our opinion, what is significant to consider is to examine the efficacy of the third proviso to Section 15(1) of the Act of 1985. On bare perusal of the said provision, it is seen that it is in the nature of carving out exception to the general category of cases referred to in Section 22 of the Act of 1985. The fact that company has already been declared as sick company or that the Board has propounded a scheme and which is being implemented, does not take the matter any further and will have no impact on the exception provided in the third proviso to section 15(1) of the Act. The reference even at the stage of implementation of the scheme, for all purposes, will have to be treated as pending before the Board and more particularly in the context of the third proviso to section 15(1) of the Act of 1985. Ordinarily, if the scheme is framed under the provisions of Act of 1985, that would bind all the creditors in terms of Section 18(8) of that Act. But, once the secured creditors representing not less than three fourth in value of the amount outstanding against the financial assistance disbursed take measures to recover their secured debt, under Section 13(4) of the Securitisation Act, the reference would abate. With abatement of the reference, the scheme will have no legal effect whatsoever and thus, cannot continue to bind the specified class of secured creditors, who have invoked the provisions of the Securitisation Act. In absence of provision, such as the third proviso to section 15(1) of the Act of 1985, it would have been possible to contend that upon framing of the scheme under section 18 of the Act of 1985, the secured creditor would be bound by the same and cannot resort to any other action without the consent of the Board. But the third proviso under section 15(1) of the Act of 1985 relieves the specified strength of secured creditors from that shackle and permits them to pursue their remedy under the provisions of Securitisation Act, which have been introduced as a special enactment to further the cause of financial sector and the financial institutions to which the same is applicable. Suffice it to observe that the above position is reinforced from the provisions and in particular the third proviso to Section15(1) read with Section 22 of the Act of 1985 itself. Thus, Section 37 of the Securitisation Act cannot be pressed into service to whittle down the sweep of the third proviso to section 15(1) of the Act of 1985.26. The Respondents have justly pressed into service four decisions of different High Courts. The Punjab and Haryana High Court in the case of Nabha Industries Ltd. v/s.Punjab State Industrial Development Corporation reported in (2010) 154 Comp. Cases 646(P & H) dealt with the case where the Company was already declared sick on 23rd June, 1997. After preparing rehabilitation scheme, eventually recommended winding up of the Company. Against that decision, the Company preferred the appeal. During pendency of that appeal, the financial institution resorted to action under provisions of the Securitisation Act. The company accordingly, preferred Writ Petition before the High Court, in which it was contended that the company had paid dues as per the one time settlement scheme. As a result, the proceedings under the Securitisation Act cannot be resorted to. The Court on examining the relevant provisions of the Act of 1985, including Section 22 thereof, rejected the stand of the Company that during the pendency of the appeal, which was in continuation of reference, it was not open to the financial institution to invoke the provisions of Securitisation Act. In support of this view, it has relied on the earlier decision of the same Court in the case of Triveni Yarns Ltd. v/s. Punjab Financial Corporation (2010) 154 Com.Cases 635(P & H). It preferred to rely on the said decision instead of the opinion of the Orissa High Court in the case of Noble Aqua(Supra). Insofar as Noble Aqua(Supra) is concerned, the Punjab and Haryana High Court commented that it does not make reference to section 35 of the Securitisation Act, although reference has been made to Sections 37 and 41 of the Securitisation Act. Failure to refer to Section 35 of the Securitisation Act renders the Judgment per in cuarium. It conclusively held that the Securitisation Act overrides the Act of 1985 and mere pendency of a reference will not be a bar to proceed under Securitisation Act. Relying on the observation in the third last paragraph of this decision, that in certain exceptional situation, where the scheme is already approved, the issue can be gone into in writ jurisdiction, it was contended that the argument now canvassed before us on behalf of the Petitioner that the reference does not remain pending after issuance of initial direction/order is still open to debate. We find no merits in this contention. The said observation is in the context of maintainability of the Writ Petition. This judgment of the Punjab and Haryana High Court, if read as a whole unambiguously holds that the Securitisation Act will prevail and the reference before BIFR will abate, in the event, the secured creditors representing not less than three fourth in the value of the amount outstanding against the company have taken measures under section 13(4) of the Securitisation Act.27. Even the decision in the case of Imperial Tubes (P) Ltd Vs. BIFR AIR 2008 Calcutta 15, proceeds on similar lines. The Division Bench of the Calcutta High Court was examining the question as to whether the reference under section 15 of the Act of 1985 had abated, as found by the Board. Even in that case, the BIFR proceedings commenced in anterior point of time, whereunder the bank was appointed as the operating agency of the company. During the progress of the said BIFR proceedings , the Bank resorted to action under section 13 of the Securitisation Act. The Court went on to hold that proviso to section 15(1) has been specifically incorporated, which permits the secured creditor to invoke section 13(4) of the Securitisation Act. It is held that the fact that the Bank has been appointed as operating agency does not denude it of the right to take recourse to remedy under section 13 of the Securitisation Act when it is a sole secured creditor. On invocation of action under section 13 of the Securitisation Act, the reference would abate by virtue of the third proviso to section 15(1) of the Act.28. In the case of Madras Petrochem Ltd. and Anr. vs. BIFR & ors.(2009) 149 Com. Cases 402(Delhi), the challenge was once again to divesting of jurisdiction of the BIFR, due to invocation of action under section 13 of the Securitisation Act by the Financial Institution. This Judgment has also referred to the decision in Noble Aquas case(Supra) and has understood that Judgment as having dealt with only the impact of section 22 of the Act of 1985 vis--vis Section 13(4) of the Securitisation Act. It has been noticed that, the said Judgment in Noble Aquas case has proceeded on the basis of distinction drawn on the basis of pendency of the reference and existence of the scheme. The Delhi High Court however, took the view that the third proviso to section 15(1) of the Act of 1985 stipulates that the pendency of the reference, the reference would include even preparation of revival scheme pursuant to the reference. In other words, taking of any action by BIFR including preparation of a scheme pursuant to the reference is pendency of reference. Significantly, in the case before the Delhi High Court, no scheme was framed. The Delhi High Court proceeded to observe that even if a scheme had been framed, that would make no difference to the purport of third proviso to section 15(1) of the Act of 1987. The Delhi High Court has disagreed with the opinion of the Orissa High Court on the above reasoning. We are in agreement with the opinion of the Delhi High Court in Madras Petrochem Ltd.s case(Supra). The Delhi High Court opined that the jurisdiction of BIFR would be divested by the mandatory impact of the third proviso to section 15(1) of the Act of 1985. The Delhi High Court has also analysed the expression have taken measures. Suffice it to observe that the conclusion reached by the Delhi High Court is that the action under the provisions of the Securitisation Act would prevail. In this decision, Delhi High Court has relied upon its another decision in the case of Punjab National Bank and ors. V/s. AAIFR & ors. (2009) 149 Com.Cases 390(Delhi). Even in this case, the controversy was in the context of proviso to section 15(1) of the Act of 1985. The question arose in the context of action resorted to by the financial institution under Section 13 of the Securitisation Act during the pendency of reference before the BIFR. In the said reference, enquiry under section 16 of the Act of 1985 was ordered and at that stage, the financial institution instituted action under section 13 of the Securitisation Act and then contended that the reference has abated. While accepting the stand of the bank in this Judgment, the Delhi High Court has placed reliance also on the exposition in the case of Triveni Alloys Ltd. vs. BIFR of the Madras High Court reported in (2006) 132 Comp. Cases 190(Mad.) and has disagreed with the opinion of the Orissa High Court with regard to the interpretation of third proviso to section 15(1) of the Act of 1985.29. A priori, even if we were to accept the contention of the Petitioners that the scheme for revival of the Respondent No.3 company has already been sanctioned by the Board and was being implemented, during which the Respondent No.5 bank resorted to action under section 13 of the Securitisation Act. The fact remains that the Respondent No.5 bank claims that it was the sole secured creditor of the Respondent No.3 Company when it invoked action under section 13(4) of the Securitisation Act. Thus, Respondent No.5 constituted requisite strength of not less than three fourth in value of the amount outstanding against the Respondent No.3 Company at the relevant time. It is not the case of the Petitioner that the strength of the Respondent No.5 was less than three fourth in value of the amount outstanding against the Respondent No.3 Company. Only if the said plea was to be specifically taken in the application filed before the Board, the Board would have been obliged to examine that limited question. If that question was to be answered in favour of the Petitioner, it would necessarily follow that the action resorted to by such secured creditor being less than three fourth in value, would not be protected by the third proviso to section 15(1) of the Act.30. For the time being, we may observe that there is no question of finding fault with the action taken by the Respondent No.5 Bank of invoking remedy under section 13 of the Securitisation Act and taking the same to its logical end, which action is protected by the sweep of the third proviso to Section 15(1) of the Act of 1985 qua the Respondent No.5 Bank being the sole secured creditor at the relevant point of time.

Decision reasoning: 0[ds]4. The argument canvassed before us is essentially founded on the mandate of Section 22 of The Sick Industrial Companies (Special Provisions) Act, 1985. It was argued that the proceeding resorted to by the Respondentwere covered by the sweep of Section 22 of the Act of 1985 and, therefore, the same could not have proceeded further in absence of consent of the Board. The argument, though attractive, does not commend to us.5. We make it clear that our observations in this order be treated as only, prima facie, to consider the question regarding grant of interim relief during the pendency of appeal before the Appellate Authority, to the Petitioner, as prayed.6. On analysing the provisions of Section 22 of the Act of 1985 read with Section 15 of the same Act, we have no hesitation in taking the view that the case on hand would fall within the parameters of third proviso to Section 15 (1) of the Act of 1985. The third proviso 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 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 thealso 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 thanin value of the amount outstanding against financial assistance disbursed to the borrower or such secured creditors, have taken any measures to recover their secured debt under(4) of section 13 of that Act. [Emphasis supplied]It would be apposite to reproduce section 22(1) of the Act of 1985 which reads thus:22. Suspension of legal proceedings, contracts, etc.(1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, the, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.7. Significantly, the third proviso has been introduced in the year 2002 by Act 54 of 2002 which corresponded with the coming into force of the Securitisation Act of 2002. The same has been inserted as per section 41 of the Securitisation Act. The third proviso to Section 15(1) of the Act of 1985 postulates two requirements so that the reference before the BIFR would abate,The secured creditors must represent not less thanin value of the amount outstanding against the financial assistance disbursed to the borrower; and(ii) Such secured creditors have taken any measures to recover this secured debt under Section 13(4) of the Act of 2002.This proviso is an enabling provision which permits the specified number of secured creditors to take measures to recover their secured debt under Section 13(4) of the Act of 2002 and if action is so taken by them, then it would automatically entail in abatement of the reference proceedings before the BIFR. This proviso is in the nature of exception to the bar under Section 22 of the Act of 1985. The bar under Section 22 of the Act of 1985 is automatically lifted on fulfillment of the conditions specified in the third proviso to Section 15(1) of the same Act.8. Besides, counsel for the Respondents have relied on Section 35 of the Act of 2002 which reads thus:35. The provisions of this Act to override other laws.The provisions of this 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 any such law.9. According to the Respondents, in view of the non obstante clause in the Act of 2002, the question of taking consent of the Board in terms of Section 22 of the Act of 1985, irrespective of the strength of the secured creditors, does not arise. We are not inclined to accept this extreme argument made before us by the Respondentsthat even a single secured creditor or even secured creditors representing less thanin value of the amount outstanding against the financial assistance disbursed to the borrower could invoke the provisions of the Act of 2002, without taking consent of the Board under Section 22 of the Act of 1985.10. On conjoint reading of Section 22 of the Act of 1985 along with the third proviso to Section 15(1) of that Act as also Section 35 of the Securitisation Act of 2002, the position, in our opinion, which emerges is that if the secured creditor(s), whose strength is less thanin value of the amount outstanding against financial assistance disbursed to the borrower, intends to invoke the regime under the Act of 2002, would be obliged to take consent of the Board under Section 22 of the Act of 1985. Whereas, if the secured creditor(s) representing not less thanin value of the amount outstanding against financial assistance disbursed to the borrower, by virtue of third proviso to Section 15(1) of the Act of 1985, are entitled to proceed against the borrower and the secured debt of the borrower by invoking provisions of the Act of 2002, without taking consent of the Board as per Section 22 of the Act of 1985. This appears to be the scheme of the enactment of Securitisation Act of 2002 and in particular considering the corresponding amendment introduced in Section 15 of the Act of 1985 in the year 2002.11. In the present case, the Respondentclaims to be the only secured creditor who has had provided financial assistance to the Respondentat the relevant point of time. This factual position has not been challenged in the application filed by the Petitioner before the Board. This is a crucial matter which ought to have been asserted by the Petitioner only when it could have succeeded in persuading the Board that the proceeding before the BIFR has not abated in law. On the other hand, if the Respondent No.5 qualified the requirement of the secured creditors representing not less thanin value of the amount outstanding against financial assistance disbursed to the borrower, the question of taking consent of the Board would not arise and, at the same time, by operation of law, the proceeding before the BIFR would abate without requiring to do anything further.12. That, however, does not mean that the BIFR would have no jurisdiction to examine the factual position as to whether the secured creditors who intend to or have invoked the provisions of the Act of 2002 would constitute the requisite strength of not less thanin value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors at the relevant point of time. That is a matter which ought to be examined by the Board, if called upon to do so. If the Board were to hold that the secured creditors who have invoked provisions of the Act of 2002 do not qualify the said requirement, in that situation, the provisions of Section 22 of the Act of 1985 would operate and any steps taken by such secured creditors albeit under the provision of Act of 2002, would be of no avail and will have to be treated asin the eyes of law, considering the purport of Section 22 of the Act of 1985. Only this interpretation wouldthe legislative intent behind the two enactments.13. In our opinion, since the Petitioner has nowhere asserted that the strength of Respondentwas less thanin value of the amount outstanding against financial assistance disbursed to the borrower or such secured creditor at the relevant point of time, therefore, the question of the Petitioner succeeding in their application does not arise.14. The contention that the scheme to be formulated by the BIFR would bind all the secured creditors by virtue of Section 18 of the Act of 1985 does not take the matter further, having regard to the sweep of third proviso to Section 15(1) of the Act of 1985 r/w Section 35 of the Act of 2002.15. The criticism of the Petitioner before this court is that the authority has, instead of examining the question in the context of the effect of Section 22 of the Act, straight away opined that since action under Section 13(4) of the Act of 2002 has been taken to its logical end, nothing survives for consideration before the Board. This argument does not commend to us for the reasons already recorded in the earlier part of this order.16. Counsel appearing for the Petitioner, relying on the decision of the Orissa High Court in the case of Noble Aqua Pvt.Ltd.Ors. V/s. State Bank of IndiaOrs. reported in (2009) 148 Com.Cases 817, contended that the crucial words in the third proviso to Section 15(1) of the Act of the 1985 are ..... where a reference is pending........ such reference shall abate ..... According to the Petitioner, a reference under section 15(1) of the Act of 1985 is made to BIFR .... for determination of the measures which shall be adopted with respect to the company. Once the measures have been determined, the reference is exhausted and it can no longer be said that the Reference is pending. In that situation, the third proviso to Section 15(1) of the Act of 1985 will have no application. It was argued that in the present case, the BIFR has not only declared the Respondent No.3 as a sick company, as back as on 25th August, 1999, within the meaning of Section 3(1)(o) of the Act of 1985, but has also framed and sanctioned the scheme for revival of the Respondent No.3 Company to which the Respondent No.5 Bank wasthe Secured Creditor. In such a situation, the third proviso to Section 15(1) of the Act of 1985 cannot be invoked by the Secured Creditor such as Respondent No.5 Bank. To buttress this submission, emphasis is placed on the opinion of the Orissa High Court in the above decision, which reads thus: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 thanin value of the amount outstanding against financial assistance disbursed to the borrower, have taken any measures to recover their secured debt under(4) of Section 13 of the Securitisation Act.In the instant case, admittedly the notice under(4) of Section 15 of the Securitisation Act has been issued on 7.4.2007. But long before that, the company has been declared a sick industrial company by an order o 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 therefrom 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.17. It was vehementally argued that the opinion so recorded by the Orissa High Court applies on all fours to the case on hand. Our attention was invited to the fact that the Orissa High Court had occasion to consider Section 37 of the Securities Act which clarifies that the provisions of that Act are not in derogation of laws referred to therein. Besides, since the scheme has been prepared by virtue of Section 18(8) of the Act, 1985, the same will be binding on the Respondent No.5 being the secured creditorand the RespondentNo.5 in turn, would be bound to provide financial assistance to the Respondent No.3 sick company, as per section 19 of the Act of 1985.18. We shall now analyse the decision of the Orissa High Court in some detail. In that case, BIFR proceedings were pending against the Company. In the said proceedings, the opposite party Bank opposed the plea of the Company for declaring it a sick company. Nevertheless, the company was declared as a sick company as on 31st March, 2005. Thereafter, the BIFR appointed the Bank as operating agency with direction to prepare revival scheme for it, if feasible. Further, the oppositehad applied for permission under Section 22(1) of the Act of 1985, which was opposed for and on behalf of the Company on the ground that such permission would delay the revival of the company. The permission asked by the oppositeunder section 22(1) was refused by order dated 14th November, 2006. That order had become final. In the mean time, the Company had filed Petition before the DRT on 10th July, 2006 for suspension of further proceedings before DRT. What is relevant to notice is that the oppositevide letter dated 26th December, 2006 emphasised about the DRT proceedings and stated that the DRT will take measures for seizure of the factory premises and other fixed assets of the company for sale through public auction for recovery of the decreetal dues of the bank. Thereafter, notice under section 13(4) of the Securitisation Act was issued to the Company. In this background, the Company rushed to the High Court by way of Writ Petition challenging the said notice under section 13(4) of the Securitisation Act received by it being in contravention of provisions of section 22 of the Act of 1985. The bank, on the other hand, asserted that on invocation of action under Section 13 of the Securitisation Act, the proceedings before the BIFR abates and the protection which the Company claims under Section 22 of the Act of 1985 is no longer available. The Orissa High Court, after considering the provisions contained in proviso to Section 15(1) of the Act of 1985 read with Section 22 of the Act of 1985, negatived the stand of the Bank. Instead, held that the third proviso will come into force where reference is pending before BIFR. It held that the notice under section 13(4) of the Securitisation Act was issued on 7th April, 2007. But long before that the Company was already declared sick company by order dated 14th November, 2006, therefore, the proceedings before the BIFR were not at the stage of reference, as such. But the same had proceeded far ahead and culminated with the order of company being declared sick on 14th November, 2006. Moreover, the said order was passed by the BIFR after hearing the Bank and the Bank was appointed as operating agency with direction to prepare the revival scheme.19. In substance, the Orissa High Court proceeded on the finding that no reference was pending before the BIFR at the relevant time, when the bank invoked action under section 13 of the Securitisation Act. It however, held that the Bank can still take recourse to remedy under section 13 of the Securitisation Act after taking consent of the BIFR under Section 22 (1) of the Act of 1985. For taking this view, the Court has relied upon the reported decisions which essentially deal with the purport of section 22 of the Act of 1985. It has relied on the decisions of the Apex Court in Real Value Appliances Ltd. Vs. Canara Bank (1998) 93 Com. Cases 26 (SC); NGEF Ltd. Vs. Chandra Developers P.Ltd.(2005) 127 Com. Cases 822(SC); Jay Engineering Works Ltd. Vs. Industry Facilitation Council (2006) 133 Com. Cases 670; Morgan Securities and Credit P.Ltd. Vs. Modi Rubber Ltd.(2007) 136 Com. Cases 113; and lastly, decision of the Division Bench of its own Court in the case of Bireswar Das Mohapatra vs. State Bank of India (2006) 2 OLR 423.  20. Insofar as the decision of the Apex Court in the case of Real Value Appliances(Supra), it will be of no avail to examine the purport of third proviso to section 15(1) of the Act of 1985, which was inserted in the year 2002. Insofar as the decision in the case of NGEF Ltd.(Supra), the principal question considered by the Apex Court was whether the Company Judge had jurisdiction to issue any direction to the Company to execute a deed of sale, which amounted to grant of a decree for specific performance of a contract. That issue was considered essentially keeping in mind the efficacy of section 22 of the Act of 1985. Even this decision will be of no avail to examine the purport of third proviso to section 15(1) of the Act of 1985, which, in our view, is an exception to carve out or remove the special cases from the general proceedings or actions covered under section 22 of the Act of 1985.21. Similarly in the case of Jay Engineering Works Ltd.(supra), the Apex Court was called upon to consider the sweep of section 22 of the Act of 1985 and whether the same would be applicable in respect of action initiated by the Respondent therein in terms of provisions of Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. The Supreme Court interpreted section 6(2) of the Act of 1993, which isclause and postulates that any party to dispute may make a reference to the Industry Facilitation Council for acting as an arbitrator or conciliator in respect of matters referred to in that subsection (1) and the provisions of Arbitration and Conciliation Act, 1996 shall apply to such disputes, as the arbitration or conciliation were pursuant to an arbitration agreement referred to in(1) of Section 7 of that Act. Section 10 of the said Act of 1993 provides that the provision of that Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The Supreme Court tested the provisions of the said Act of 1993 and juxtaposed it with Section 22 of the Act of 1985. It has held that the Act of 1985 is a complete Code by itself and Section 22 of the Act provides for special provisions. Even this decision will be of no avail to the case on hand, as we are called upon to consider the efficacy of the third proviso to section 15(1) of the Act, which, as aforesaid is in the nature of exception to the general cases covered by Section 22 of the Act.22. The other decision, relied by the Orissa High Court, is of Morgan Securities and Credit Pvt.Ltd.(supra). Once again, in this decision, the principal question considered by the Apex Court was whether the provisions of the Arbitration and Conciliation Act would prevail over the provisions of the Act of 1985. There is no provision in the Arbitration and Conciliation Act, 1996, which can be compared with the class of action conceived in the third proviso to section 15(1) of the Act of 1985. For that reason, even this decision, at best, is useful only to understand the sweep of section 22 of the Act of 1985.23. The decision in the case of Bireswar Das Mohapatra(Supra), which is referred to by the Orissa High Court has not been made available to us. But from the Judgment in Noble Aquas case(Supra), it appears that the said decision construed the effect of section 32 of the Act of 1985. That provision contains aclause and the overriding clause in SICA is only subject to Foreign Exchange Regulation Act, Urban Land Ceiling Act and Section 72(a) of the Income Tax Act subject to the amalgamation of sick industrial company with another company. While considering that aspect, the Division Bench of Orissa High Court has opined that the twin objects behind enacting SICA was to salvage productive assets and realise the amounts due to the banks and financial institutions to the extent possible from thesick industrial companies through liquidation of those companies, as is mentioned in the Statement of Objects and Reasons of the Act of 1985.24. As aforesaid, none of these decisions have any bearing on the interpretation of the third proviso to section 15(1) of the Act of 1985. With utmost respect to the Division Bench of Orissa High Court, which has decided the case of Noble Aqua(supra), we are in disagreement with their opinion that the reference does not abate because the Company has already been declared as a sick company. The fact that upon submission of reference, the Board is immediately called upon to determine the measures to be adopted with respect to the Company in question; and as a consequence of which the Board may either initiate enquiry into the working of the company by taking recourse to section 16 of the Act or make suitable order on the completion of enquiry in exercise of powers under section 17 of the Act and frames a scheme and issue direction under section 18 of the Act, does not mean that the reference is not pending before the Board. There are only two situations, which may result in disposal of the reference. Firstly, on rejection of the reference by the Board and that order attaining finality. The second situation is, when the scheme as framed is implemented in its entirety or otherwise and taken to its logical end one way or the other. So long as the scheme is being operated or implemented, the reference submitted under section 15 would continue to remain pending. Suffice it to observe that the reference envisaged in the third proviso to section 15(1) of the Act of 1985, is ascribable to reference proceedings till the same are finally terminated one way or the other. The stepsof enquiry and suitable orders to be passed on completion of enquiry or of preparation of scheme and other incidental actionsare integral part of the said reference submitted before the Board. The extreme argument of the Petitioner, if accepted, would result in a pedantic approach of construing the third proviso to Section 15(1) of the Act of 1985 and would result in rendering the same as otiose. We say so because, immediately on submission of reference under section 15(1) of the Act of 1985, the Board is obliged to pass some direction with promptitude to exercise powers under section 16 and then proceed further under Chapter III of the said Act. According to the Petitioner, on issuing initial direction upon submission of the reference, the reference comes to an end. In other words, as soon as the direction to initiate inquiry under section 16 is passed, the action on reference as per section 15 is complete and therefore it comes to an end for the purpose of that provision and cannot be treated as pending within the meaning of the third proviso to section 15(1) of the Act of 1985. Notably, the time gap between the submission of reference and passing of such initial direction/order may vary, depending on the facts of each case. We cannot countenance the interpretation that the expression reference occurring in the third proviso is only referable to the stage of determining the measures and it will cease to be a reference after passing of such initial direction/order by the Board. The fact that section 22 of the Act of 1985 uses the expression of :i) an inquiry under section 16 is pending; orii) any scheme referred to under section 17 is under preparation or consideration; oriii) a sanctioned scheme is under implementation; oriv) where an appeal under section 25 is pendingin contradistinction to the expression reference is pending used in the third proviso to section 15(1), does not mean that upon issuing direction to initiate inquiry under section 16 of the Act, the said reference comes to an end. In our view, the language of Section 22 does not further this argument as it is noticed that it includes the proceedings in appeal under section 25 of the Act of 1985which in turn can be filed even in respect of an order of the BIFR passed at the stage of Sections 15, 16, 17 or 18 of that Actwhich plainly means it is continuation of that stage and can be treated as reference is pending within the meaning of the third proviso to Section 15(1) of that Act. For, the appeal provision (Section 25) of that Act makes no distinction between the different stages under Chapter III of that Act. Moreover, Section 22 merely describes the different stages except the initial direction to be issued by the Board to determine the measures to be adopted. The expression reference used in the third proviso to section 15(1) of the Act of 1985 is a generic term, which has not been defined in that Act. It will have to be given purposive meaning and not to render the object and reason for enacting Securitisation Act of 2002 nugatory; and more importantly, to effectuate the intent behind insertion of the third proviso to Section 15(1) of the Act, 1985, which was contemporaneous with coming into force of Securitisation Act of 2002. The Objects and Reasons for introducing Securitisation Act, 2002 can be culled out from the statement of objects and reasons, which read thus:Statement of Objects and Reasons.The financial sector has been one of the key drivers in Indias efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels ofassets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the Court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on 21st June, 2002 to regulate securitisation and reconstructionn of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realiseassets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduceassets by adopting measures for recovery or reconstruction. (emphasis supplied)A priori, we find it difficult to agree with the opinion of the Orissa High Court in Noble Aquas case, that there is clear statutory bar under section 22 of the Act of 1985. We are conscious of the fact that the Orissa High Court has adverted to Section 37 of the Securitisation of 2002. The purport of section 37 is to make it clear that the provisions of the Act of 2002 will not be in derogation of any other Law for the time being in force. Relying on this provision, it has been held by the Orissa High Court that the protection which has been given to a sick industrial company under the provisions of special statute, namely, Act of 1985, has not been taken away by section 37 of the Securitisation Act. It is on that premiss the Division Bench of the Orissa High Court opined that the proceedings under the Act of 1985 cannot abate once the company has been declared a sick industrial company and therefore, it was not open to the Bank to proceed with the action under section 13 of the Securitisation Act without taking consent of the Board, as required by section 22 of the Act of 1985.25. In our opinion, what is significant to consider is to examine the efficacy of the third proviso to Section 15(1) of the Act of 1985. On bare perusal of the said provision, it is seen that it is in the nature of carving out exception to the general category of cases referred to in Section 22 of the Act of 1985. The fact that company has already been declared as sick company or that the Board has propounded a scheme and which is being implemented, does not take the matter any further and will have no impact on the exception provided in the third proviso to section 15(1) of the Act. The reference even at the stage of implementation of the scheme, for all purposes, will have to be treated as pending before the Board and more particularly in the context of the third proviso to section 15(1) of the Act of 1985. Ordinarily, if the scheme is framed under the provisions of Act of 1985, that would bind all the creditors in terms of Section 18(8) of that Act. But, once the secured creditors representing not less than three fourth in value of the amount outstanding against the financial assistance disbursed take measures to recover their secured debt, under Section 13(4) of the Securitisation Act, the reference would abate. With abatement of the reference, the scheme will have no legal effect whatsoever and thus, cannot continue to bind the specified class of secured creditors, who have invoked the provisions of the Securitisation Act. In absence of provision, such as the third proviso to section 15(1) of the Act of 1985, it would have been possible to contend that upon framing of the scheme under section 18 of the Act of 1985, the secured creditor would be bound by the same and cannot resort to any other action without the consent of the Board. But the third proviso under section 15(1) of the Act of 1985 relieves the specified strength of secured creditors from that shackle and permits them to pursue their remedy under the provisions of Securitisation Act, which have been introduced as a special enactment to further the cause of financial sector and the financial institutions to which the same is applicable. Suffice it to observe that the above position is reinforced from the provisions and in particular the third proviso to Section15(1) read with Section 22 of the Act of 1985 itself. Thus, Section 37 of the Securitisation Act cannot be pressed into service to whittle down the sweep of the third proviso to section 15(1) of the Act of 1985.26. The Respondents have justly pressed into service four decisions of different High Courts. The Punjab and Haryana High Court in the case of Nabha Industries Ltd. v/s.Punjab State Industrial Development Corporation reported in (2010) 154 Comp. Cases 646(PH) dealt with the case where the Company was already declared sick on 23rd June, 1997. After preparing rehabilitation scheme, eventually recommended winding up of the Company. Against that decision, the Company preferred the appeal. During pendency of that appeal, the financial institution resorted to action under provisions of the Securitisation Act. The company accordingly, preferred Writ Petition before the High Court, in which it was contended that the company had paid dues as per the one time settlement scheme. As a result, the proceedings under the Securitisation Act cannot be resorted to. The Court on examining the relevant provisions of the Act of 1985, including Section 22 thereof, rejected the stand of the Company that during the pendency of the appeal, which was in continuation of reference, it was not open to the financial institution to invoke the provisions of Securitisation Act. In support of this view, it has relied on the earlier decision of the same Court in the case of Triveni Yarns Ltd. v/s. Punjab Financial Corporation (2010) 154 Com.Cases 635(PH). It preferred to rely on the said decision instead of the opinion of the Orissa High Court in the case of Noble Aqua(Supra). Insofar as Noble Aqua(Supra) is concerned, the Punjab and Haryana High Court commented that it does not make reference to section 35 of the Securitisation Act, although reference has been made to Sections 37 and 41 of the Securitisation Act. Failure to refer to Section 35 of the Securitisation Act renders the Judgment per in cuarium. It conclusively held that the Securitisation Act overrides the Act of 1985 and mere pendency of a reference will not be a bar to proceed under Securitisation Act. Relying on the observation in the third last paragraph of this decision, that in certain exceptional situation, where the scheme is already approved, the issue can be gone into in writ jurisdiction, it was contended that the argument now canvassed before us on behalf of the Petitioner that the reference does not remain pending after issuance of initial direction/order is still open to debate. We find no merits in this contention. The said observation is in the context of maintainability of the Writ Petition. This judgment of the Punjab and Haryana High Court, if read as a whole unambiguously holds that the Securitisation Act will prevail and the reference before BIFR will abate, in the event, the secured creditors representing not less than three fourth in the value of the amount outstanding against the company have taken measures under section 13(4) of the Securitisation Act.27. Even the decision in the case of Imperial Tubes (P) Ltd Vs. BIFR AIR 2008 Calcutta 15, proceeds on similar lines. The Division Bench of the Calcutta High Court was examining the question as to whether the reference under section 15 of the Act of 1985 had abated, as found by the Board. Even in that case, the BIFR proceedings commenced in anterior point of time, whereunder the bank was appointed as the operating agency of the company. During the progress of the said BIFR proceedings , the Bank resorted to action under section 13 of the Securitisation Act. The Court went on to hold that proviso to section 15(1) has been specifically incorporated, which permits the secured creditor to invoke section 13(4) of the Securitisation Act. It is held that the fact that the Bank has been appointed as operating agency does not denude it of the right to take recourse to remedy under section 13 of the Securitisation Act when it is a sole secured creditor. On invocation of action under section 13 of the Securitisation Act, the reference would abate by virtue of the third proviso to section 15(1) of the Act.28. In the case of Madras Petrochem Ltd. and Anr. vs. BIFRors.(2009) 149 Com. Cases 402(Delhi), the challenge was once again to divesting of jurisdiction of the BIFR, due to invocation of action under section 13 of the Securitisation Act by the Financial Institution. This Judgment has also referred to the decision in Noble Aquas case(Supra) and has understood that Judgment as having dealt with only the impact of section 22 of the Act of 1985Section 13(4) of the Securitisation Act. It has been noticed that, the said Judgment in Noble Aquas case has proceeded on the basis of distinction drawn on the basis of pendency of the reference and existence of the scheme. The Delhi High Court however, took the view that the third proviso to section 15(1) of the Act of 1985 stipulates that the pendency of the reference, the reference would include even preparation of revival scheme pursuant to the reference. In other words, taking of any action by BIFR including preparation of a scheme pursuant to the reference is pendency of reference. Significantly, in the case before the Delhi High Court, no scheme was framed. The Delhi High Court proceeded to observe that even if a scheme had been framed, that would make no difference to the purport of third proviso to section 15(1) of the Act of 1987. The Delhi High Court has disagreed with the opinion of the Orissa High Court on the above reasoning. We are in agreement with the opinion of the Delhi High Court in Madras Petrochem Ltd.s case(Supra). The Delhi High Court opined that the jurisdiction of BIFR would be divested by the mandatory impact of the third proviso to section 15(1) of the Act of 1985. The Delhi High Court has also analysed the expression have taken measures. Suffice it to observe that the conclusion reached by the Delhi High Court is that the action under the provisions of the Securitisation Act would prevail. In this decision, Delhi High Court has relied upon its another decision in the case of Punjab National Bank and ors. V/s. AAIFRors. (2009) 149 Com.Cases 390(Delhi). Even in this case, the controversy was in the context of proviso to section 15(1) of the Act of 1985. The question arose in the context of action resorted to by the financial institution under Section 13 of the Securitisation Act during the pendency of reference before the BIFR. In the said reference, enquiry under section 16 of the Act of 1985 was ordered and at that stage, the financial institution instituted action under section 13 of the Securitisation Act and then contended that the reference has abated. While accepting the stand of the bank in this Judgment, the Delhi High Court has placed reliance also on the exposition in the case of Triveni Alloys Ltd. vs. BIFR of the Madras High Court reported in (2006) 132 Comp. Cases 190(Mad.) and has disagreed with the opinion of the Orissa High Court with regard to the interpretation of third proviso to section 15(1) of the Act of 1985.29. A priori, even if we were to accept the contention of the Petitioners that the scheme for revival of the Respondent No.3 company has already been sanctioned by the Board and was being implemented, during which the Respondent No.5 bank resorted to action under section 13 of the Securitisation Act. The fact remains that the Respondent No.5 bank claims that it was the sole secured creditor of the Respondent No.3 Company when it invoked action under section 13(4) of the Securitisation Act. Thus, Respondent No.5 constituted requisite strength of not less than three fourth in value of the amount outstanding against the Respondent No.3 Company at the relevant time. It is not the case of the Petitioner that the strength of the Respondent No.5was less thanthree fourth in value of the amount outstanding against the Respondent No.3 Company. Only if the said plea was to be specifically taken in the application filed before the Board, the Board would have been obliged to examine that limited question. If that question was to be answered in favour of the Petitioner, it would necessarily follow that the action resorted to by such secured creditor being less than three fourth in value, would not be protected by the third proviso to section 15(1) of the Act.30. For the time being, we may observe that there is no question of finding fault with the action taken by the Respondent No.5 Bank of invoking remedy under section 13 of the Securitisation Act and taking the same to its logical end, which action is protected by the sweep of the third proviso to Section 15(1) of the Act of 1985 qua the Respondent No.5 Bank being the sole secured creditor at the relevant point of time.