Case: M/S Madras Petrochem Ltd Vs. Bifr

3. The net worth of the Appellant No.1 Company, having eroded completely, the appellant No.1 company filed a reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 before the BIFR, which was registered as BIFR Case No.115 of 1989. On 13.12.1989, after making an inquiry under Section 16(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, the Appellant company was declared sick and ICICI was appointed as the Operating Agency to formulate a rehabilitation scheme. On 3.7.1991, the first rehabilitation scheme prepared by the Operating Agency was sanctioned, which envisaged the takeover of the appellant company by one Mahavir Plantation Limited - i.e. appellant No.2. The first scheme was finally declared a failure, and the Appellant No.1 company, on 17.1.1995, was directed to submit a fresh, comprehensive, revised rehabilitation scheme which was duly circulated. Objections to the said scheme were heard by the BIFR and the scheme finally sanctioned was in the form of a change of management of the appellant no.1 company subject to various modifications to be carried out. After the Appellant No.1 companys management changed hands, the second scheme, after being reviewed from time to time, was declared as failed on 16.5.2000. Despite efforts by the Operating Agency to attempt to revive the company, all such efforts failed, and ultimately, on 30.4.2001, BIFR, on the basis of the recommendation of the Operating Agency, formed a prima facie opinion that the appellant No.1 company should be wound up under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. On 27.7.2001, the BIFR confirmed its prima facie opinion after noting that the appellant No.1 company had been enjoying protection under the Sick Industrial Companies (Special Provisions) Act, 1985 for the last 12 years. There being no acceptable viable rehabilitation proposal after the failure of two schemes, the appellant no.1 company was not likely to make its net worth exceed its accumulated losses, and therefore BIFR recommended to the High Court of Bombay that the said company be wound up. On 4.2.2002, appellant No.1s challenge to the BIFR order was dismissed by the AAIFR.4. While matters stood thus, ICICI issued a notice dated 20.11.2002 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to the appellant No.1 company and followed it up with a possession notice dated 9.5.2003. On 8.8.2003, ICICI issued a sale notice for and on behalf of all the secured creditors of the appellant No.1 company. Meanwhile, appellant Nos. 1 & 2 filed a writ petition before the Delhi High Court being Writ Petition Nos.48-49 of 2004 challenging the AAIFR order dated 4.2.2002 and the BIFR order dated 25.7.2001. On 7.1.2004, the Delhi High Court stayed both the orders, which stay continued until 24.7.2008, when, by the impugned judgment, the Writ Petition was dismissed.5. Meanwhile, the sale notice of 8.8.2003 was challenged before the DRT by the appellants. The said challenge was unsuccessful, as a result of which an appeal was filed before the DRAT, which, by its order dated 30.6.2005, upset the DRT order and set aside the sale notice. However, by a judgment of the Madras High Court, in a challenge to the aforesaid order dated 30.6.2005, the Madras High Court set aside the DRAT order. The sale of movable assets for a sum of L4.65 crores was also confirmed by the Madras High Court in favour of one M/s Rahamath Steel. Vide the said order the Madras High Court also permitted the creditors of the Company to proceed with the sale of its immovable property subject to a minimum reserve price of L25 crores. This order was never challenged and has attained finality.6. Meanwhile, based on a winding up proceeding by M/s BHEL, an unsecured creditor, and another winding up proceeding based on the opinion of the BIFR under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, the Bombay High Court wound up the appellant No.1 company.7. While matters stood thus, the Delhi High Court passed the impugned order on 24.7.2008, as has been stated hereinabove, in which it was of the view that Section 15(1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985, when construed to include all proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, would make the present proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, abate on the facts of this case. Ultimately, in this view of the matter, and differing with a judgment of the Orissa High Court, the Delhi High Court disposed of the appellants writ petition as having become infructuous.8. Appeals have been filed against the said order by the present appellants which appeals, as has been stated hereinabove, raise interesting questions of law on the interplay of the Sick Industrial Companies (Special Provisions) Act, 1985 with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.9. A few subsequent events also need to be stated for the sake of completion. On 20.11.2008, the Bombay High Court modified its order dated 30.8.2007 and restrained the Official Liquidator from taking possession of the secured assets of the company, and permitted the creditors to pursue their remedies under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. M/s. Alchemist ARC Ltd. issued a sale notice on behalf of all the creditors of the appellant No.1 company for a sum of L222.59 crores on 6.4.2013. Appellant No.2, being the corporate guarantor of the appellant no.1 company, filed an appeal challenging the sale notice of 6.4.2013. On 13.5.2013, DRT Chennai dismissed this petition. Vide an order dated 19.3.2014, the DRAT, Chennai, in an appeal made to it, directed, by way of an interim order, that appellant No.2 pay a sum of L53.77 crores within the time stated therein.This DRAT order was challenged before the Madras High Court which, by its order dated 21.4.2014, refused to interfere with the said order dated 19.3.2014, and granted some additional time to appellant No.2 to pay the said amount of L53.77 crores. We have been informed that the said amount has not been paid till date. The appellant No.2 has challenged this order of 21.4.2014 before this Court. However, the said SLP is lying in defect as on date despite the expiry of more than one and a half years.

Reasoning:
24. The occasion for answering question no. 1 is Shri Sreekumars argument that the effect of the Delhi High Courts stay order dated 7.1.2004 is that the reference before the BIFR springs back into life, and with it Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. It is also occasioned by a further argument that the winding up order passed by the Bombay High Court dated 30.8.2007 being in the teeth of the stay order and Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, is non est and therefore the appeals before this Court have not become infructuous. If Shri C.N. Sreekumar is right, then after enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, because of the presence of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, none of the measures taken by the secured creditors under Section 13 of Securitisation Act can be proceeded with because of the bar contained in Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Hence, we have first to determine whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 overrides Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 as such overriding is only to the extent of the inconsistency between the two enactments. Such inconsistency is found in Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, by which any action taken to realize debts owing to the secured creditors of sick industrial companies cannot be proceeded with under the 2002 Act unless the BIFR accords permission under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act,find that, the purpose of the two enactments is entirely different. As observed earlier, the purpose of one is to provide ameliorative measures for reconstruction of sick companies, and the purpose of the other is to provide for speedy recovery of debts of banks and financial institutions. Both the Acts are "special" in this sense. However, with reference to the specific purpose of reconstruction of sick companies, SICA must be held to be a special law, though it may be considered to be a general law in relation to the recovery of debts. Whereas, the RDDB Act may be considered to be a special law in relation to the recovery of debts and SICA may be considered to be a general law in this regard.It will thus be seen that notwithstanding the non obstante clauses in Section 22(1) and (4), read with Section 32, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will have to give way to the measures taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 more particularly referred to in Section 13 of the said Act, and that this being the case, the sale notices issued both in 2003 and 2013 could continue without in any manner being thwarted by Section 22 of the Sick Industrial Companies (Special Provisions) Act,are many situations in which Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will not apply. One such situation is a situation where an eviction petition is filed under a State Rent Act for eviction on the ground of non-payment of rent. Such eviction petitions have been held not to be suits for recovery of money. Consequently, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 has been held not to apply