Case: Ksl &amp; Industries Ltd Vs. M/S. Arihant Threads Ltd.

that the provisions of the said Act were to prevail even over the provisions of the Sick Companies Act...... .... ...... .....It is a settled rule of interpretation that if one constructions leads to a conflict, whereas on another construction, two Acts can be harmoniously constructed then the latter must be adopted. If an interpretation is given that the Sick Industrial Companies (Special Provisions) Act, 1985, is to prevail then there would be a clear conflict. However, there would be no conflict if it is held that the 1992 Act is to prevail. On such an interpretation the objects of both would be fulfilled and there would be no conflict. It is clear that the Legislature intended that public monies should be recovered first even from sick companies. Provided the sick company was in a position to first pay back the public money, there would be no difficulty in reconstruction. The Board for Industrial and Financial Reconstruction considering a scheme for reconstruction has to keep in mind the fact that it is to be paid off or directed by the Special Court. The Special Court can, if it is convinced, grant time or instalments." 65. Approving the above observations, this Court stated: "We are in agreement with the aforesaid decision of the case, more so when we find that whenever the legislature wishes to do so it makes appropriate provisions in the Act in that behalf. Mr. Shiraz Rustomjee has drawn our attention to Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 wherein after giving an overriding effect to the 1993 Act it is specifically provided that the said Act will be in addition to and not in derogation of a number of other Acts including the 1985 Act. Similarly under Section 32 of the 1985 Act the applicability of the Foreign Exchange Regulation Act and the Urban Land Ceiling Act is not excluded." Legal position 66. From the above discussion, in my judgment, the law is fairly well settled. A provision beginning with non-obstante clause ("notwithstanding anything inconsistent contained therein in any other law for the time being in force") must be enforced and implemented by giving effect to the provisions of the Act and by limiting the provisions of other laws. But, it cannot be gainsaid that sometimes one may come across two or more enactments containing similar non-obstante clause operating in the same or similar direction. Obviously, in such cases, the Court must attempt to find out the intention of the Legislature by examining the nature of controversy, object of the Act, proceedings initiated, relief sought and several other relevant considerations. From the case-law referred to above, it is clear that Courts have applied several workable tests. They, inter alia, include to keep in view whether the Act is ‘general or ‘special, whether the Act is a subsequent legislation, whether there is reference to the former law and the non-obstante clause therein. The above tests are merely illustrative and by no means they should be considered as exhaustive. It is for the Court when it is called upon to resolve such conflict by harmoniously interpreting the provision of both the competing statutes and by giving effect to one over the other. Primacy of RDDB Act 67. Applying the above tests in the instance case, to me, it is crystal clear that the provisions of RDDB Act should be given priority and primacy over SICA. I may concede that both the Acts are ‘special Acts in the sense that they have been enacted for a specific purpose and object in view. Whereas SICA has been enacted in the public interest with a view to securing the timely detection of sick or potentially sick companies owning industrial undertakings, the speedy determination by a Board of Experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto, RDDB Act has been enacted to secure and protect public revenue and for expeditious adjudication and recovery of debts due to banks and financial institutions. RDDB Act is subsequent Act in the point of time being 1993 Act. It must, therefore, be presumed even in absence of any specific provision in the 1993 Act that Parliament was aware of all statutes which had been enacted prior to 1993 including SICA of 1985. In spite of that, in sub-section (1) of Section 34 of RDDB Act, non-obstante clause has been inserted so as to ensure expeditious adjudication and recovery of debts due to banks and financial institutions. 68. But it is not only on the ground that the RDDB Act is a later Act and SICA is a former Act that I am holding that the RDDB Act will prevail over SICA. There is an additional factor also which is of extreme importance and supports the view which I am inclined to take. It is sub-section (2) of Section 34. To recall, sub-section (2) of Section 34 of RDDB Act declares that the provisions of this Act (RDDB Act of 1993) are "in addition to and not in derogation of", certain enactments referred to in the said sub-section. SICA has been expressly mentioned in the said sub-section. As already adverted to earlier, RDDB Act, 1993 has been enacted with a view "to provide for the establishment of the Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions" (Preamble of the Act). All other laws, therefore, whether general or special, prior or subsequent, must, in my considered view, be interpreted and applied keeping in view the above object of enacting 1993 Act. I have, therefore, no hesitation in holding that even though both the conflicting statutes, (SICA of 1985 and RDDB Act of 1993) contain non-obstante clause, in case of conflict, RDDB Act, 1993 will prevail over SICA, 1985 so far as recovery of public revenue is concerned.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]27. The Courtword "suit" and "proceeding" have not been used interchangeably in SICA.Referring to Pandurang R. Mandlik v. Shantibai R. Ghatge, 1989 Supp (2) SCC 627, the Court observed that in its comprehensive sense, the word ‘suit is understood to apply to any proceeding in a Court of Justice by which an individual pursues a remedy which the law affords. The modes of proceedings may be various, but if a right is litigated between parties in a Court of Justice, the proceedings by which the decision of the Court is sought may be a suit. The word ‘suit ordinarily means and, apart from some context, must be taken to mean a civil proceeding instituted by the presentation of a plaint". (vide Hansraj Gupta v. Dehra Dun - Mussoorie Electric Trameray Co. Ltd.; 60 IA 13 : AIR 1933 PC 63 ).29. In the instant case, proceedings had been initiated by the Bank not before a Civil Court by invoking Section 9 of the Code of Civil Procedure, 1908, but before DRT by taking recourse to jurisdiction under RDDB Act. It is, therefore, contended that the proceedings could not be said to be a "suit" falling within the mischief of Section 22 of SICA. In any case, according to the learned counsel for the appellant, ex parte final order was passed by DRT as back as on July 15, 2003 and hence even if it is assumed that the connotation "suit" should be construed liberally so as to take within its sweep all proceedings including an application before DRT, in view of final order passed by DRT in 2003, bar envisaged by Section 22 of SICA cannot operate.30. So far as "proceedings" are concerned, it was submitted by the appellant that the final order had been passed by DRT under RDDB Act. A Certificate had been issued under Section 19 and in accordance with Section 29 of the Act, procedure laid down in Second and Third Schedules to the Income Tax Act, 1961 had been followed. Reserve price was fixed. Sale-proclamation was published. Auction was held. The appellant was found to be the highest bidder and its bid was accepted. Necessary amount was deposited. All actions were thus in conformity with law. If the Company felt aggrieved by auction sale, it ought to have proceeded in accordance with Rules 60 to 62 of the Rules in the Second Schedule. Rule 60 permits a person adversely affected by the sale to apply to the Tax Recovery Officer within thirty days from the date of sale to set aside such sale on his depositing the entire amount with interest thereon and penalty. Admittedly, the Company did not avail the said remedy. Rule 61 allows an application to set aside sale of immovable property on the ground of non-service of notice or material irregularity in publishing or conducting the sale. The said rule also provides for deposit of amount recoverable under the Certificate. The Company failed to do so. Under Rule 62, sale can be set aside when defaulter has no saleable interest. No such case had been put forward by the Company by applying under Rule 62. The Company, therefore, could not make grievance against the auction sale.31. Strong reliance was placed on behalf of the appellant on Rule 63 which states that where no application is made for setting aside the sale or where such application is made and is dismissed, the Tax Recovery Officer shall make an order confirming the sale and thereupon the sale shall become absolute. It was submitted that none of the Rules had been invoked by the Company by applying to the Tax Recovery Officer and by depositing the amount. The Tax Recovery Officer, hence, was enjoined to confirm sale as per the mandate of Rule 63. An appeal filed by the Company under Section 30 of RDDB Act before DRT against the order of Tax Recovery Officer fixing reserve price was ill-conceived and not maintainable as there was no ‘order within the meaning of RDDB Act which was appealable. Attention of the Court in this connection was invited by the learned counsel to Rule 53 [Contents of proclamation]. It provides that a proclamation of sale shall specify, inter alia, "the reserve price, if any, below which the property may not be sold" [Clause (cc)]. It was submitted that fixation of ‘reserve price is not mandatory, condition precedent or sine qua non and if reserve price is not fixed, the order cannot be said to be non est, contrary to law or unlawful. In any case, when reserve price was fixed and property was sold not below such price, the only remedy available to the Company or any person whose interest was affected was to apply under Rule 60 or 61 or 62. The appeal before DRT was thus totally misconceived and ought not to have been entertained by the Tribunal.32. According to the Company, reserve price was grossly inadequate. The Company was aggrieved and preferred an appeal under Section 30 of RDDB Act as the order fixing reserve price was also an ‘order within the meaning of the Act. To buttress the submission, the counsel relied upon a decision of this Court in Union of India & Anr. v. Delhi High Court Bar Association & Ors., (2002) 4 SCC 275. In Delhi High Court Bar Association, while upholding the validity of RDDB Act, this Court considered various safeguards and remedies available to the aggrieved party. In paragraph 30 of the decision, it was inter alia observed;Furthermore, Section 30, after amendment by the Amendment Act, 2000, gives a right to any person aggrieved by an order of the Recovery Officer, to prefer an appeal to the Tribunal. Thus now an appellate forum has been provided against any orders of the Recovery Officer which may not be in accordance with law. There is, therefore, sufficient safeguard which has been provided in the event of the Recovery Officer acting in an arbitrary or an unreasonable manner. The provisions of Sections 25 and 28 are, therefore, not bad in law.33. I express no opinion one way or the other on the controversy. As noted earlier, the High Court allowed the petitions filed by the Company only on the ground of bar of Section 22 of SICA. Since I am of the view that the High Court was not right in coming to that conclusion, the matter must go back to the High Court for deciding all points not dealt and decided.34. The learned counsel for the Company emphatically argued that Section 32 of SICA is explicitly clear and uses non-obstante clause ("Notwithstanding anything inconsistent therewith contained in any other law"). It was urged that SICA is a ‘self-contained Code and makes detailed and exhaustive provisions in respect of sick companies. It is also a ‘special law and effect must be given to the provisions of the Act. The argument of the appellant on the other hand is that Section 34 of RDDB Act is a subsequent legislation which also contains a similar non-obstante clause and that Act should prevail over SICA.35. The learned counsel for the parties, in support of their respective submissions, referred to several decisions. Let us consider few of them.36. In Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. & Anr., (1993) 2 SCC 144 , this Court was called upon to consider the provisions of SICA and State Financial Corporation Act, 1951. Observing that the word ‘proceedings in sub-section (1) of Section 22 of SICA could not be given narrow or restricted meaning to limit the legal proceedings, the Court held that if Section 22(1) is attracted, the proceedings must be held to be barred.37. Keeping in view the underlying object of enacting SICA, the Court stated;Now we come to the impugned decision. The High Court was considerably influenced by the fact that the appellant-company owed crores of rupees to banks and felt that so far as such creditors are concerned, different considerations may come into play but the High Court with respect failed to appreciate that the 1985 Act was enacted primarily to assist sick industrial undertakings which inter alia failed to meet their financial obligations. It is, therefore, difficult to accept the view of the High Court that where the creditors of a sick industrial concern happen to be Banks or State Financial Corporations different considerations would come into play. It must be realised that in the modern industrial environment large industries are generally financed by banks and statutory corporations created specially for that purpose and if they are permitted to resort to independent action in total disregard of the pending inquiry under Sections 15 to 19 of the 1985 Act the entire exercise under the said provisions would be rendered nugatory by the time the BIFR is able to evolve a scheme of revival or rehabilitation of the sick industrial concern by : device of the Financial Corporation resorting to Section 29 of the 1951 Act. We are, therefore, of the opinion that where an inquiry is pending under Section 16/17 or an appeal is pending under Section 25 of the 1985 Act there should be cessation of the coercive activities of the type mentioned in Section 22 (1) to permit the BIFR to consider what remedial measures it should take with respect to the sick industrial company. The expression proceedings in Section 22(1), therefore, cannot be confined to legal proceedings understood in the narrow sense of proceedings in a Court of law or a legal tribunal for attachment and sale of the debtors property.38. In Deputy Commercial Tax Officer & Ors. v. Corromandal Pharmaceuticals & Ors., (1997) 10 SCC 649 , this Court held that the embargo under Section 22(1) would not apply to payment of tax collected by the sick industrial company after the date of the sanctioned scheme and legitimately belonged to the Revenue. "Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the Revenue and withhold it indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against the spirit of the statute in a business sense, should be avoided." (emphasis supplied)39. Justice Jeevan Reddy was much more emphatic. In a concurrent judgment, His Lordship stated;Looking at the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 [the Act], I was wondering how out of tune the Act has become with the economic policies being pursued now in this country. Since 1991-92, we are launched upon, what is being called, liberalisation of our economy. We have given up the policy of protecting our industries against foreign competition on the ground that it has given rise to an inefficient and outdated industrial system in our country. Our industries are suddenly being asked to compete with foreign companies, many of whom being giant multi-nationals have vast resources at their disposal. [They are merrily gobbling up our poor native companies. Many local industries, unable to stand the said competition are joining the foreign giants in one form of venture or other. Several hundreds of small-scale and medium scale units in telecom sector, for example have suffered enormously because of our love for foreign companies and their capital. The state of several public sector companies is no better. I am not saying that we have totally embraced, what may be called "Reaganism" or "Thatcherism". The fact, however, remains that it is no longer thought advisable to keep alive inefficient and uneconomic industries by injecting public funds or in the name of safeguarding the employment of the workers. And here is this Act, a product of the era of protectionism, seeking to keep alive "sick" companies by pumping in funds - mostly public funds - and by providing various concessions. In the process, nobody inquires why a particular industrial company has become sick, viz., whether it is an induced one or whether it is on account of factors beyond their control. The object of the Act is undoubtedly laudatory but it must also provide for appropriate measures against persons responsible where it is found that sickness is caused by factors other than circumstances beyond the control of the management. It is also a well-known fact that the proceedings before the Board of Industrial and Financial Reconstruction take a long time to conclude and all the while the protective umbrella of Section 22 is held over the company which has reported sick. We have come across cases where unfair advantage is sought to be taken of the provisions of Section 22 by certain industrial companies - and the wide language employed in the section is providing them a cover. We are sure Section 22 was not meant to breed dishonesty nor can it be so operated as to encourage unfair practices. The ultimate prejudice to public monies should not be overlooked in the process of promoting industrial progress. We are quite sure that the Government is fully alive to the situation and are equally certain that they must be thinking of necessary modifications in the Act. These few observations are meant merely to record the need for changes in the Act. (emphasis supplied)40. In Real Value Appliances Ltd. v. Canara Bank & Ors., (1998) 5 SCC 554 , a contention was advanced on behalf of the creditors that the conduct of the Company was far from satisfactory and highly objectionable. It suppressed several facts from the Court. Contradictory and inconsistent pleas were taken and fraud was practised on the Court.41. This Court agreed with what was submitted and observed;This conduct of the appellant, in our view, was certainly very unfair to the High Court and, therefore, the High Court had rightly depreciated the same. In our view, there was a clear attempt to keep the Court in the dark".42. The Court, however, proceeded to state that on that count reference-application to the BIFR would not become bad and if the Company was entitled to the benefit of SICA, it could not be denied the said benefit.43. In Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 5 SCC 515 , this Court held that where conditions precedent for applicability of SICA were satisfied, then notwithstanding that the order for winding up of the Company had been passed, the bar would get attracted.44. In Patheja Bros. Forgings & Stamping & Anr. v. ICICI Ltd. & Ors., (2000) 6 SCC 545 , this Court held that without requisite sanction under Section 22 of SICA, no suit can be proceeded with.45. In Jai Engineering Works Ltd. v. Industry Facilitation Council & Anr., (2006) 8 SCC 677 , after referring to all leading decisions on the point and describing 1985 Act as a ‘complete Code, this Court stated;The 1985 Act was enacted in public interest. It contains special provisions. The said special provisions had been made with a view to secure the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts for preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto.46. In my view, however, the learned counsel for the appellant is right in submitting that RDDB Act is a ‘special law and also a subsequent legislation, i.e. later law. It is well-settled that when any law has been enacted, the Legislature must be presumed to be aware of all existing laws. When RDDB Act was enacted in 1993, SICA was very much in force since it was enacted in 1985. In spite of that, Parliament was pleased to give ‘overriding effect to RDDB Act by using non-obstante clause in Section 34. Sub-section (1) expressly stated that the provisions of the Act "shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force".47. I am thus at a point where two statutes employ non-obstante clause having ‘overriding effect. Such a conflict, as laid down in several cases, may be resolved by judiciary on various considerations; such as the policy underlying the enactments, the language used, the object intended to be achieved; or mischief sought to be remedied, etc. One of the tests applied by Courts is that normally a later enactment should prevail over the former. The Courts would also try to reconcile both Acts by adopting harmonious interpretation and applying them in their respective fields so that both may operate without coming into conflict with each-other. In resolving the clash, the Court may further examine whether one of the two enactments is ‘special and the other one is ‘general. There can also be a situation in law where one and the same statute may be held to be a ‘special statute vis-à-vis one legislation and ‘general statute vis-à-vis another legislation. On the basis of one or more tests, the Court will try to salvage the situation by giving effect to non obstante clause in both the legislations.48. Let me consider some of the decisions of this Court on this vexed issue.49. In Shri Ram Narain v. Simla Banking & Industrial Co. Ltd., 1956 SCR 603 , two competing statutes came up for consideration before this Court being the Banking Companies Act, 1949 (as amended by Act 52 of 1953) and the Displaced Persons (Debt Adjustment) Act, 1951. Section 45-A of the Banking Companies Act (introduced by the amending Act of 1953) and Section 13 of the Displaced Persons Act, 1951 both contained a non-obstante clause stating that certain provisions of the Act shall have effect "notwithstanding anything inconsistent therewith in any other law for the time being in force". This Court resolved the conflict by considering the object and purpose of the two laws and giving primacy to the Banking Companies Act. The Court indicated that when two Acts contain provisions giving overriding effect, it would be a difficult question as to which Act should prevail.