LawforAll

advocatemmmohan

My photo
since 1985 practicing as advocate in both civil & criminal laws

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - SHARE THE KNOWLEDGE

Wednesday, April 11, 2012

Recovery of Debts Due to Banks and Financial Institutions Act, 1993; Ss. 19, 20, 30, 34(1) & (2)/Sick Industrial Companies (Special Provisions) Act, 1985; s. 22: Joint Venture Company - Recovery of loan from company by Industrial Development Bank of India - Debt Recovery Tribunal passed ex-parte final order in favour of IDBI - Fixation of reserve price of property of the Company - Challenged by the company by filing appeal No.52 of 2004 - Auction of movable and immovable property - Appellant was declared highest and successful bidder - Company filing an application in the pending appeal for setting aside ex-parte final order - Auction purchaser filing an application for impleadment - DRT allowed appeal No. 52/2004 setting aside auction sale subject to fulfilling of certain conditions by the company with regard to payment of amount, interest etc. - Challenging the conditions imposed by DRT Company filing an appeal and cross appeal filed by auction purchaser - DRAT allowed the appeal of the appellant confirming the auction sale in his favour after depositing the sale price - Challenge to - Allowed by the High Court on ground that s.22 of Sick Industries Companies (Special) Provisions) Act, 1985 is a complete bar to recovery proceedings against sick companies as the Company in question was declared sick company by BIFR - Correctness of. Held: Per C.K. Thakker, J: Conclusion arrived at by High Court that the proceedings were barred under S.22 of the SICA not well-founded - S.22 of SICA has two parts which bars initiation of any proceedings for winding up of the company or execution etc. against any property of the Company/appointment of receiver and also filing of money suit for recovery of/enforcing of any security against the Company without the consent of the Board/Appellate authority - RDDB Act was enacted in 1993 when SICA 1985 was very much in force - Both the Statutes employ non-obstante clause - Applying the tests laid down by Supreme Court, the provisions of 1993 Act should be given priority over 1985 Act - It must be presumed that legislature intentionally inserted non-obstante clause in s. 34(1) of 1993 Act though it was there in the 1985 Act so as to ensure expeditious recovery of debts due to Banks/Financial institutions - Moreover, s.34(2) of 1993 Act declares that the provisions of the Act are in addition and not in derogation of other enactment - Hence, in case of conflict, RDDD Act 1993 will prevail over SICA 1985 so far as recovery of public revenue is concerned - High Court erred in applying provisions of s. 22 of SICA -Hence, the matter remitted to High Court for decisions afresh. Held: Per Altamas Kabir, J.: Sub-section(1) of s. 34 of RDDB Act, 1993 clearly provides that the provisions of the Act/Rules made thereunder would be in addition to and not in derogation of certain statutes including SICA - Thus, while the 1993 Act would have an overriding effect over other enactments - Provisions under 1993 Act would be supplemental to those of SICA - Hence, if the situation in a case is covered by the provisions of SICA then view taken by the High Court would have to be upheld else impugned judgment would have to be set aside - In the instant case, final order passed by DRT directing the company to pay dues to IDBI remained unchallenged since neither an appeal under s.20 of 1993 Act was filed nor an application for setting aside the sale under Rule 60 of the Income Tax Act, 1961 filed, thus order of DRT attained finality - Company filed second Reference before BIFR after order confirming the auction sale in favour of auction purchaser was passed by DRAT - Later, company was declared to be a sick company by BIFR - Thus, provisions under s.22 of SICA invoked by the company after recovery proceedings had been concluded in favour of auction purchaser - Steps taken by the company were far from bonafides and only armed at stalling the auction sale - Even no attempt made by the company to secure a bid higher than the auction purchaser - Hence, High Court erred in applying the provisions of s.22 of SICA when sale had already been confirmed in favour of auction purchaser and first reference rejected by BIFR - Income Tax Act,1961 - Second schedule - Rule 60 - Interpretation of Statutes. By the Court: In view of difference of opinion on interpretation of s. 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the matter referred to the Chief Justice for appropriate action in the matter. Respondent No.1 was a Joint Venture Company manufacturing cotton yarn. The company got financed a project from the Industrial Development Bank of India (IDBI) but could not repay the loan amount. IDBI filed an original application before the Debt Recovery Tribunal for recovery of the dues in terms of Recovery of Debts Due to Banks and Financial Institutions Act, 1993. DRT passed an ex-parte final order in favour of IDBI for recovery of loan amount with interest thereon. The Recovery Officer issued a composit demand notice under Rule 2 of Second Schedule of the Income Tax Act, 1961 against the company demanding certain amount and also directed the company to appear for settling terms and conditions of the proclamation of sale and for disclosure of its movable and immovable property. The Recovery Officer on the basis of valuation report fixed the reserve price of the property and also fixed the date for sale of immovable and movable property. Against the order of the Recovery Officer fixing the reserve price, the company filed an appeal before DRT. In the meantime, auction took place in which the appellant was declared as highest and successful bidder, who deposited 25% of the reserve price and later remaining 75% of the amount. However, the company did not handover the possession to receiver appointed by the Tribunal but moved an application for setting aside ex-parte final order. Appellant also filed an application to implead it in the pending appeals. The application for impleadment was allowed by DRT. In the meantime, DRT allowed the appeal of the Company setting aside the auction sale subject to certain conditions with regard to payment of interest, expenses etc. However, the Company preferred an appeal objecting the conditions as laid down in the order and the appellant filed a cross appeal. The appellate Tribunal stayed the operation of the order setting aside the ex-parte order passed by DRT. The Debt Recovery Appellate Tribunal allowed the appeal filed by the appellant and confirmed the auction sale. The company filed a Reference Petition before the Board of Industrial Finance & Reconstruction which was rejected by BIFR. The Company filed another Reference petition, in which BIFR declared the Company as Sick Company. Aggrieved by the order of DRAT, the company filed writ petitions, which were allowed by the High Court on the ground that s.22 of SICA put a complete bar to recovery proceedings against a sick company. Hence the present appeal. Appellant-Auction purchaser contended that the proceedings were neither covered by the first part nor by the second part of Section 22 of the SICA and the High Court ought to have decided the case on merits; that Section 34 of RDDB Act has an `overriding effect' and even on that ground, the matter ought to have been decided; that the appeal preferred by the Company against fixation of reserve price was not maintainable under Section 30 of the RDDB Act; that DRT granted interim relief subject to certain conditions, but even those conditions had not been complied with by the Company; that the reserve price fixed by the Recovery Officer was proper, sufficient and reasonable and DRT ought not to have set aside the order passed by the Recovery Officer; that the High Court ought to have taken into account over all conduct of the Company, particularly when the Company had invoked discretionary and equitable jurisdiction under Article 226 of the Constitution; that the Company had not come before the High Court with clean hands. It had neither repaid the loan amount nor did it appear before DRT inspite of service of summons; that the Company filed an appeal before DRT against an `order' which was not appealable; that it dispossessed the receiver appointed by the Tribunal; that the Company also removed machinery and other movable property from the disputed premises; that it created unlawful tenancy rights in favour of third party by accepting substantial amount from him; and that even if the case was covered by s.22 of SICA, the High Court, in exercise of extraordinary and special jurisdiction, ought not to have granted relief in favour of the Company. Respondents-Company submitted that no opportunity of hearing was afforded to it and the ex-parte final order passed by DRT was violative of principles of natural justice and fair play; that the appeal filed against fixation of reserve price before DRT was maintainable under Section 30 of the RDDB Act as the appeal lies against "an order of the Recovery Officer made under the Act" and an order of fixation of reserve price is also an `order' within the meaning of the Act; and that the Company was not in a position to comply with the conditions of stay granted by the Tribunal and the directions issued and hence, in accordance with law, it challenged the said order by filing an appeal before DRAT. It was the right of the Company to take such action and the appellant cannot object against such course being adopted by the Company. In view of the difference of opinion on interpretation of Section 34 of the RDDB Act, referring the matter to the Chief Justice, the Court HELD: Per C.K. Thakker, J: 1.1 The High Court had disposed of the petitions only on one ground as to applicability of Sick Industrial Companies (Special Provisions) Act and held that the proceedings were barred under Section 22 of the Act. The conclusion arrived at by the High Court is not well-founded and the decision of the High Court on that point deserves to be set aside. (Paras - 17 & 19) [726-F; 727-F] 1.2 Section 22 of SICA is a material provision which relates to suspension of legal proceedings, contracts, etc. Section 32 of SICA gives `overriding effect' to the provisions of the Act. (Paras - 21 & 22) [728-E; 729-D] 1.3 It is Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 which allows `overriding effect' to the provisions of the Act over other laws. (Para - 23) [730-D] 1.4 Section 22 of SICA has two limbs. The first part enacts that "no proceeding for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. The second part which is independent of the first part declares that 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. The two parts use two different expressions; (i) `proceeding' and (ii) `suit'. (Para - 25) [731-D,E,F & G] Kailash Nath Agarwal & Ors. v. Pradeshiya Industrial & Investment Corporation of U.P. Ltd. & Anr., (2003) 4 SCC 305; Pandurang R. Mandlik v. Shantibai R. Ghatge, 1989 Supp (2) SCC 627; Hansraj Gupta v. Dehra Dun - Mussoorie Electric Trameray Co. Ltd.; 60 IA 13 : AIR 1933 PC 63 - referred to. 1.5 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 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. (Para - 29) [732-E,F,G & H] 2.1 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) of s.34 expressly states that the provisions of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. (Paras 46) [739-G & H; 740-A & B] 2.2 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. One of the tests applied by Courts is that normally a later enactment should prevail over the former. (Paras 47) [740-B & C] 2.3 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. It is clear from the various decisions of this Court 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. (Para - 66) [749-E,F,G & H 750-A] Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. & Anr., (1993) 2 SCC 144; Deputy Commercial Tax Officer & Ors. v. Corromandal Pharmaceuticals & Ors., (1997) 10 SCC 649; Real Value Appliances Ltd. v. Canara Bank & Ors., (1998) 5 SCC 554; Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 5 SCC 515; Patheja Bros. Forgings & Stamping & Anr. v. ICICI Ltd. & Ors., (2000) 6 SCC 545; Jai Engineering Works Ltd. v. Industry Facilitation Council & Anr., (2006) 8 SCC 677; Shri Ram Narain v. Simla Banking & Industrial Co. Ltd., 1956 SCR 603; Shri Sarwan Singh & Anr. v. Shri Kasturi Lal, (1977) 1 SCC 750; Sanwarmal Kejriwal v. Vishwa Co-operative Housing Society Ltd & Ors., (1990) 2 SCC 288; Life Insurance Corporation of India v. D.J. Bahadur & Ors., (1981) 1 SCC 315; Maharashtra Tubes Ltd., ; A.P. State Financial Corporation v. Official Liquidator, (2000) 7 SCC 291; Allahabad Bank v. Canara Bank & Anr., (2000) 4 SCC 406; M/s. Transcore v. Union of India & Anr., (2008) 1 SCC 125; Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. & Ors., (2001) 3 SCC 71 and Bhoruka Steel Ltd. vs. Fairgrowth Financial Services Ltd., (1997) 89 Comp Cas 547 - referred to. 2.4 Applying the tests as laid down by this Court in the instance case, it is crystal clear that the provisions of RDDB Act should be given priority and primacy over SICA. Though, both the Acts are `special Acts' in the sense that they have been enacted for a specific purpose and object in view. But 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. Inspite 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. But it is not only on the ground that the RDDB Act is a later Act and SICA is a former Act in holding that the RDDB Act will prevail over SICA. There is an additional factor also which is of extreme importance and supports the view. It is sub-section (2) of Section 34 of the Act. Sub-section (2) of Section 34 of RDDB Act declares that the provisions of this Act 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. 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. All other laws, therefore, whether general or special, prior or subsequent, must be interpreted and applied keeping in view the above object of enacting 1993 Act. Therefore, even though both the conflicting statutes, viz., SICA of 1985 and RDDB Act of 1993 contain non-obstante clause but in case of conflict, RDDB Act, 1993 will prevail over SICA, 1985 so far as recovery of public revenue is concerned. (Paras - 67 & 68) [750-B,C,E,F,G & H; 751-A,B & C] 3. The High Court has committed an error of law in invoking and applying provisions of Section 22 of SICA and in dropping proceedings against the Company. The order of the High Court, therefore, deserves to be set aside and ordered accordingly. The matter is remitted to the High Court to decide it afresh on all points including the conduct of the Company after hearing the parties. All contentions of all parties are kept open. (Para - 69) [751-D & E] 4. It is clarified that no opinion has been expressed on other issues and as and when the matter will come up before the High Court, the same will be decided on its own merits without being inhibited by such observations. (Para - 70) [751-G] Held: Per Altamas Kabir, J. : 1.1 It may be significant to note that on 3.4.2006 the BIFR rejected the Reference made by the Company and that on 15.9.2006 another Reference was filed by the respondent-Company before BIFR. It is in the said Reference that on 22.2.2007 the BIFR declared the Company to be a "sick company" and the respondent No.5 was appointed as the Operating Agency for preparation of a rehabilitation scheme. (Para - 12) [756-A & B] 1.2 The writ petitions filed by the respondent-Company were allowed by the High Court on the sole ground that the recovery proceedings under the RDDB Act were barred under Section 22 of the SICA. Having once come to the conclusion that the proceedings were barred under Section 22 of the SICA, the High Court did not go into any other question with regard to the merits of the matter and set aside the order of the DRAT confirming the auction sale on that one ground alone. (Para - 16) [757-F & G] 1.3 The opening words of Sub-section (1) of Section 34 of the RDDB Act clearly make the provisions thereof subject to the provisions of Sub-section (2) which in unambiguous term provides that the provisions of the Act or the Rules made thereunder would be in addition to and not in derogation of, certain statutes indicated therein, including the Sick Industrial Companies (Special Provisions) Act, 1985. It is, therefore, clear that while the RDDB Act would have an over-riding effect over other enactments, its provisions would only be supplemental to those of the SICA and consequently the provisions of the SICA would prevail over the provisions of the RDDB Act. Accordingly, if it is held that the situation in this case is covered by the provisions of SICA, then the view taken by the High Court would have to be upheld. If, however, it is found that the provisions of SICA do not apply to the facts of this case, then there can be no doubt that the judgment of the High Court would have to be set aside. (Para - 20) [759-A,B,C & D] 2.1 It will be of interest to note that the proceedings taken by the Company after the passing of the final order by DRT, Chandigarh, on 15.7.2003, were directed against fixation of the reserve price by the Recovery Officer though in Appeal No.52 of 2004 an application was made by the Company for setting aside the final order passed by the DRT Chandigarh. The same was however, of no consequence as the appeal was preferred against the order of the Recovery Officer fixing the reserve price of the Company's assets and not the final order, which, in any event, could not have been challenged in the said proceedings. (Para - 29) [761-A,B & C] 2.2 In effect, the final order passed by the DRT, Chandigarh, directing the respondent-Company to pay the dues of IDBI remained unchallenged and attained finality. The two courses available to the Company for preferring an appeal under Section 20 of the RDDB Act or by way of an application for setting aside the sale under Rule 60 of the Second Schedule of the Income Tax Act, 1961, were not resorted to by the respondent-Company. Instead, it chose to adopt a path restricted to the setting aside of the auction sale on the ground that the reserve price of the Company's assets had not been correctly fixed by the Recovery Officer prior to the auction sale. Consequently, the scope of the appeal preferred by the Company was confined only to the question as to whether the reserve price had been correctly fixed by the Recovery Officer. (Paras - 29 & 30) [761-C,D,E & F] 3.1 The final order was passed by DRT, Chandigarh, at a point of time when no Reference had at all been made by the Company to the BIFR for being declared a "sick company". The auction was held and concluded on 30.10.2004, again before a Reference had been made by the Company to the BIFR. It is only on 21.12.2005 that the Company filed a Reference before the BIFR which was rejected on 3.4.2006. In between, the appeal preferred by the Company (No.52 of 2004) before the DRT under Section 30 of the RDDB Act was allowed and the auction sale was set aside, but the final order passed by DRT, Chandigarh, remained untouched. The appeal preferred by the appellant against the order of the DRT allowing Appeal No.52 of 2004 was subsequently decided in favour of the appellant on 10.2.2006 and the auction sale was confirmed in favour of the appellant with a direction upon the Recovery Officer and the other concerned authorities to complete the sale in favour of the appellant. It is only on 15.9.2006, after all the aforesaid orders had been passed that a second Reference was filed by the respondent-Company before the BIFR on 15.9.2006 and on 22.2.2007 the Company was declared to be a "sick company" by the BIFR. (Para - 32) [761-H; 762-A,B,C & D] 3.2 The final order in the recovery proceedings under Section 19 of the RDDB Act was passed and the auction sale was concluded before the first Reference was filed by the Company with the BIFR and long before the respondent-Company was declared to be a sick Company. It is, therefore, clear that the provisions of SICA, were sought to be invoked by the Company after the recovery proceedings had been concluded in favour of the appellant who had also deposited the sale price in respect of his offer which had been accepted by the Recovery Officer. (Para - 34) [762-G & H; 763-A & B] 3.3 For reasons which are obvious, the respondent-Company chose not to take recourse either to Section 20 of the RDDB Act or Rule 60 of the Second Schedule of the Income Tax Act, 1961, and took a chance of filing an appeal under Section 30 of the RDDB Act with regard to the fixation of the reserve price of the Company's assets by the Recovery Officer for the purposes of the auction sale and the scope of the appeal was limited to such issue alone. (Para - 35) [763-B,C & D] 3.4 Since the respondent-Company did not challenge the final order of the DRT, the same continued to be in force and was carried to its logical conclusion by the holding of auction sale and confirmation thereof in favour of the appellant. (Para - 36) [763-D & E] 3.5 The order passed by the DRAT on 10.2.2006 confirming the sale in favour of the appellant was made long before the respondent-Company was declared to be a "sick company" on 22.2.2007. The High Court was, therefore, in error in applying the provisions of Section 22 of the SICA when the sale had already been confirmed in favour of the appellant and the purchase price had already been deposited. Furthermore, the first Reference made by the Company was also rejected by the BIFR on 3.4.2006. (Para - 37) [763-E & F] 4. Even on merits, the conduct of the company leaves much to be desired. Without challenging the final order passed by the DRT, Chandigarh, allowing the Bank's claim of Rs.25,26,60,836/- together with interest @ 7.8% per annum, the said respondent questioned the order of the Recovery Officer, fixing the reserve price of the Company's assets for the purposes of the auction sale, under Section 30 of the RDDB Act, having full knowledge of the fact that the final order of the DRT, Chandigarh, could not be challenged in such appeal. The steps taken by the respondent No.1, Company were far from bonafide and were only aimed at stalling the auction sale. Even at the time of auction of the company's assets, no attempt was made by the Company to secure a bid higher than that of the appellant. Hence, nothing further remains to be decided by the High Court. (Paras - 38 & 39) [763-G & H; 764-A,B & C] Case Law Reference (2003) 4 SCC 305 referred to (Para - 26) 1989 Supp (2) SCC 627 referred to (Para - 28) 60 IA 13 : AIR 1933 PC 63 referred to (Para - 28) (1993) 2 SCC 144 referred to (Para - 36) (1997) 10 SCC 649 referred to (Para - 38) (1998) 5 SCC 554 referred to (Para - 40) (2000) 5 SCC 515 referred to (Para - 43) (2000) 6 SCC 545 referred to (Para - 44) (2006) 8 SCC 677 referred to (Para - 45) 1956 SCR 603, referred to (Para - 49) (1977) 1 SCC 750 referred to (Para - 51) (1990) 2 SCC 288 referred to (Para - 53) (1981) 1 SCC 315 referred to (Para - 54) (2000) 7 SCC 291 referred to (Para - 60) (2000) 4 SCC 406 referred to (Para - 61) (2008) 1 SCC 125 referred to (Para - 62) (2001) 3 SCC 71 referred to (Para - 63) (1997) 89 Comp Cas 547 referred to (Para - 64) Harish N. Salve and Shyam Diwan, Paras Kuhad, Hemant Sharma, Prateek Jalan, Gaurav Pachnanda, Ajay Kumar, Prashant V.G. and Indu Sharma for the Appellant. C.A. Sunderam, Ranjit Kumar and J.L. Gupta, Rohini Musa, Neha Tandon, B.S. Nagar, Ajay Choudhary, Punit Dutt Tyagi, Sanjeev Sharma, Rajesh K. Sharma, Shalu Sharma and Sanjay Bhatt for the Respondents. , 2008(12 )SCR702 , 2008(9 )SCC763 , 2008(12 )SCALE42 , 2008(9 )JT381


                                            REPORTABLE


           IN THE SUPREME COURT OF INDIA
           CIVIL APPELLATE JURISDICTION

  CIVIL APPEAL NO.     5225           OF 2008
                ARISING OUT OF
SPECIAL LEAVE PETITION (CIVIL) NO. 5041 OF 2006


KSL & INDUSTRIES LTD.                                ...
APPELLANT

VERSUS

M/S ARIHANT THREADS LTD. & ORS.        ... RESPONDENTS


             J U D G M E N T
C.K. THAKKER, J.

1.              Leave granted.


2.              The     present   appeal    raises         a

question of great public importance having far-

reaching consequences.      The appeal is filed by

KSL & Industries Ltd. (`appellant' for short)

against final judgment and order passed by the

Division   Bench   of   High   Court   of   Delhi     on

February 23, 2006 in Writ Petition (Civil) Nos.

2041-42 of 2006. By the said judgment, the High
                                                                          2

Court, set aside the order passed by the Debt

Recovery Appellate Tribunal, Delhi (`DRAT' for

short) and held that in view of the provisions

of Section 22 of the Sick Industrial Companies

(Special       Provisions)           Act,     1985          (hereafter

referred to as `SICA'), no recovery proceedings

could be effected against the first respondent-

Company       in    the     light    of     the    bar       contained

therein.

Factual Background

3.                       To understand the controversy in

its proper perspective, it is necessary to keep

in     mind    the       factual     matrix        of       the   case.

Respondent No. 1 (M/s. Arihant Threads Ltd.)

(`Company'         for     short)    was    incorporated          as   a

joint     venture         with   Punjab      State          Industrial

Development Corporation.                  It set up an export

oriented spinning unit for manufacturing cotton

yarn     in    the        industrial        area       of     Amritsar

District       of    the     State    of     Punjab.         In   1992,

Goindwal           Sahib      Industrial           &        Investment
                                                            3

Corporation allotted Plot No. 454, Flocal Point

of Goindwal Sahib Industrial Area by way of

lease to the Company for a period of 99 years

with a specific condition that the lessee will

not transfer the interest in the property for

first fifteen years without prior permission of

the lessor. The lessee was to enjoy the right

of possession so long as it continued paying

instalments    of    the   premium    by   due-date    and

abide   by   other   terms   and     conditions   of   the

lease. It was, however, stated that the lessee

would be entitled to mortgage lease-hold rights

to a Bank, Punjab Financial Corporation or Life

Insurance Corporation of India as security for

a loan to be raised for construction of factory

building, purchase of raw materials, etc. The

Industrial Development Bank of India (`IDBI'

for short) which was the predecessor of the

Stressed Assets Stabilisation Fund (`SASF' for

short), financed the project undertaken by the

Company by way of foreign currency loan and

also working capital of Rs. 93.1 million.
                                                                   4

4.                   It was the case of the Company

that    due    to     overall    recession         in    Textile

Industry, the Company suffered huge loss and

could not repay the amount of loan. Since the

Company failed to pay instalments, IDBI filed

Original      Application       No.    1368     of      2001   on

December 20, 2001 in Debt Recovery Tribunal,

Chandigarh (`DRT' for short) for recovery of

Rs.25,26,60,836/- under the Recovery of Debts

Due to Banks and Financial Institutions Act,

1993    (hereinafter        referred    to    as   the    `RDDB'

Act).    On   June    10,    2002,     M/s   Roland      Exports

(successor of Goindwal Industrial & Investment

Corporation) cancelled the lease agreement on

account of non-payment of lease money amounting

to Rs.3,19,94,149/-. The Company did not remain

present before the DRT though duly served.                     On

July    15,   2003,    therefore,       an   ex-parte      final

order in favour of IDBI (SAFS) for recovery of

Rs.25,26,60,836/- along with interest @ 7.8%

p.a. was passed by DRT.
                                                5

5.              The Tribunal in operative part

of the order stated;

         "The application for recovery of a
     sum   Rs.25,26,60,836.00   is   decreed
     against defendant company and the
     defendant company is ordered to pay:-

         i.       A      sum       of      Rs.
                  25,26,60,836.00 alongwith
                  pendent elite and future
                  interest @ 7.8% per annum
                  with half yearly rests
                  jointly    and     severally
                  from the date of filing
                  of     the     suit     till
                  realization;
         ii.      Pay the cost of litigation;
         iii.     Pay    the   said     amount
                  within 30 days from the
                  date of receipt of this
                  order.

2.   In the event of failure on the part of
     defendants to pay the above amount
     within the stipulated period, the
     applicant bank shall be entitled to
     recover the said amount from the sale
     of   mortgaged   properties   of   the
     defendants.   Even if the said amount
     is not so realized, it shall be
     recovered from the sale of personal
     properties of the defendants.

3.   Copy of the judgment be sent to the
     defendants     and     the     recovery
     certificate be issued accordingly.

4.   Parties to appear before the Recovery
     Officer,    DRT,     Chandigarh    on
     22.8.2003."
                                                                   6




6.                   A     recovery        certificate        was

issued    against        the    Company.    On    September    9,

2003, the Recovery Officer issued a composite

demand notice under Rule 2 of Second Schedule

of the Income Tax Act, 1961 against the Company

demanding payment of Rs.28,60,87,384/-. He also

directed the Company to appear on October 23,

2003 for settling terms and conditions of the

proclamation of sale and for disclosure of its

movable       and   immovable      assets.       Harnek    Singh,

Security Guard who was present at the Company

premises was served and he signed the summons

in token of acceptance of notice on behalf of

the Company. Service Report was filed by one

Rajesh Mahajan, Advocate for certificate holder

affirming Dasti service on the Company. Another

service       report      was    also    filed     along     with

affidavit by the same advocate on October 6,

2003.    On    January     3,    2004,     Mr.    Vivek    Verma,

Local Commissioner appointed by the Recovery

Officer, visited the site and filed his report
                                                                  7

wherein    he     stated    that       two   machines       were

missing. He also recorded that the unit was in

running   condition.       At    the    instance      of   SASF,

North India Technical Consultancy Association

Ltd.   (`NITCO'     for    short)       filed   a   valuation

report    in    January,   2004      assessing      the    fixed

assets at Rs.17.51 crores. It is alleged that

on July 1, 2004, the Company created illegal

tenancy in favour of M/s Roland Exports. On

September 16, 2004, the Recovery Officer fixed

the reserve price of the property at Rs.12.50

crores (Rs.4.50 crores for movables and Rs.8.00

crores for immovables). He also fixed the date

for sale of immovable property as October 27,

2004 and for movable property as October 30,

2004. The auction was, however, adjourned. The

Company on October 18, 2004, filed an appeal

against    the    order    dated       September    16,     2004

fixing reserve price of Rs. 12.50 crores in the

DRT being Appeal No. 52 of 2004 under Section

30 of the RDDB Act. On October 27, 2004, DRT

allowed   auction    sale       to   proceed    but    ordered
                                                                               8

that   the      sale    should          not   be    confirmed           till

further orders. On October 30, 2004, auction

was    concluded       and        the    appellant        herein          was

declared the highest and successful bidder at

Rs.12.52        crores.          It     deposited        25%       of    the

reserve price.              On November 2, 2004, on an

application       by     the          appellant,     DRT       appointed

representative of the appellant as a receiver

to prepare inventory of auctioned property.

7.                     On        November,         11,     2004,         the

appellant made an application to DRT praying

for acceptance of the bank guarantee in lieu of

payment of the remaining amount of 75% and also

by refunding the amount deposited (25%).                                 DRT

dismissed        the        said         application           and       the

appellant-auction purchaser, on the same day,

i.e. November 11, 2004 deposited the balance

amount     of    75%        of     the    purchase        money         i.e.

Rs.9,39,00,000/- by a Bank draft. On December

13,    2004,       the           receiver      lodged          a        First

Information Report (FIR) and filed an affidavit

before DRT complaining that the agent of the
                                                                      9

Company had forcibly dispossessed him by using

criminal       force.       On     December     15,     2004,    the

Company moved an application for setting aside

ex-parte final order passed on July 15, 2003 by

DRT, Chandigarh which was registered as M.A.

No.     103     of    2004.        The    appellant     filed    an

application objecting the prayer of the Company

with an added prayer to implead it in Appeal

No. 52 of 2004 as also in M.A. No. 103 of 2004.

The DRT allowed the impleadment application of

the    appellant          vide    order   dated    December      17,

2004. On March 28, 2005, the appellant filed an

application for hearing preliminary issue as to

maintainability of appeal filed by the Company

(Appeal No. 52 of 2004).                  On April 8, 2005, a

suit    for     permanent          injunction     was    filed    by

Roland Exports against the Company in the Civil

Court      at        Tarantaran,          District       Amritsar.

Status        quo    with        regard   to    possession       was

ordered       to     be    maintained      by   the     Court.   An

appeal against the said order is said to have

been pending in the High Court. Meanwhile, the
                                                                10

Company    got   the    property   valued       by   Himachal

Consultancy      Organisation      Ltd.        (`HIMCO'    for

short), according to which the realizable value

of the property had been increased to Rs.20.22

crores. On July 26, 2005, DRT-I, Delhi allowed

Appeal No. 52 of 2004, set aside the auction

sale subject to the Company fulfilling terms

and   conditions       with   regard      to     payment   of

certain amount, interest, expenses etc.

8.                The     Tribunal,       while      granting

relief to the Company, ordered;

          "In my humble opinion, natural
      justice requires that the appeal be
      allowed but with some conditions so
      that further progress of recovery be
      not stalled by the appellant.     In
      these circumstances, this appeal is
      allowed, subject to the following
      conditions:-

          (i)      That the appellant will
                   pay   5%  of    the  amount
                   deposited by the auction
                   purchaser within 10 days
                   as a penalty as per rule
                   60 of the Second Schedule
                   of Income Tax Act.
          (ii)     The appellant will pay an
                   interest   on   the  amount
                   deposited by the auction
                   purchaser     @   9%   p.a.
                   calculated from the date
                                           11

            of deposit of the same
            till today.      The interest
            accumulated on the FDRs of
            auctioned amount till date
            will be paid to the CH Fl
            who    will     adjust   this
            amount        against     the
            outstanding dues of the
            appellant.
   (iii)    The appellant will also
            bear all the expenditure
            incurred by the CH FI in
            conducting the sale.      The
            details of the same will
            be given by the CH FI
            within      a     week    and
            thereafter within 10 days,
            this    amount      will   be
            deposited by the appellant
            with the CH FI.

        Failing to comply all the above
three conditions, this appeal will be
treated as dismissed and the restraint
order passed by this Tribunal will
stand vacated and the Ld. Recovery
Officer will be at liberty to pass the
necessary orders as per law and if,
the above conditions are fulfilled by
the   appellant,    the   Ld.    Recovery
Officer is directed to re-auction this
property as early as possible, within
75 days as per law and release the
amount   deposited    by   the    auction
purchaser immediately.      The present
appeal bearing Transfer Appeal No.
1/2005   (Appeal   NO.   52/04)    stands
disposed off accordingly.      A copy of
this order be given dasti to all the
parties. A copy of this order be also
sent to the Recovery Officer, DRT
Chandigarh for necessary action and
information.    RC file be also sent
                                                                  12

      immediately back to the DRT Chandigarh
      by special messenger along with copy
      of this order.   File be consigned to
      records".


9.                The     Company,        objecting          the

conditions     imposed    by   DRT,    filed      an    appeal

against the said order to the DRAT, Delhi being

Appeal   No.   167   of   2005.    The    appellant         also

filed an appeal being aggrieved by the setting

aside the sale. DRAT stayed operation of the

order dated July 26, 2005 which had set aside

ex-parte order passed by DRT.            It also directed

refund of sale amount to the appellant. Appeals

were then heard and the judgment was reserved.

10.               Meanwhile, on December 21, 2005,

the Company filed a Reference before the Board

of Industrial Finance & Reconstruction (`BIFR'

for short) under SICA which was registered as

BIFR Case No. 4 of 2006. On February 10, 2006,

DRAT dismissed the appeal filed by the Company

and allowed the appeal of the appellant and

confirmed      auction-sale       in     favour        of    the
                                                 13

appellant on depositing the sale price. DRAT,

in the operative part of the order stated;

        "In view of the detailed discussion
    made on the issues which are relevant
    for the purpose deciding these appeals,
    the Miscellaneous Appeal 167/2005 filed
    by the judgment-debtor shall stand
    dismissed.    The Miscellaneous Appeal
    173/2005 filed by the auction purchaser
    shall stand allowed. Consequently, the
    appeal filed by the judgment-debtor in
    Appeal 52/2004 before the Presiding
    Officer,   DRT,  Chandigarh   which  is
    renumbered on transfer to DRT-I, Delhi
    as Transfer Appeal No. 1/2005 shall
    stand dismissed. Points formulated for
    consideration are answered accordingly.
    No costs.

        Since, the appeal filed by the
    auction-purchaser      is    allowed,   the
    Recovery Officer, DRT, Chandigarh shall
    confirm the sale and shall take all
    steps immediately for handling over the
    possession of properties in question,
    to the auction purchaser, if necessary,
    by    taking     assistance      from   all
    authorities concerned.         The auction
    purchaser,    who     was    permitted   to
    withdraw the auction amount deposited
    towards sale price without prejudice to
    its rights during pending of these
    appeals, shall forthwith deposit the
    entire   amount     and   thereafter    the
    Recovery   Officer     shall    proceed  to
    complete     the     other     requirements
    according to law forthwith."
                                                                            14

11.                   By    a    separate         order         of   even

date,    DRAT     ordered           the        Recovery         Officer,

Chandigarh       to        act     upon        and     execute         the

directions       issued          by        it.       The    appellant

deposited Rs.12.50 crores on the same day.                             But

the    sale    could       not     be      confirmed        since      the

Presiding Officer was on leave. The appellant

moved     an     application                 before        DRAT       for

appointment of Recovery Officer, DRT, Delhi for

confirmation      of        sale.            Within    three         days,

however, the Company filed two Writ Petitions

being C.W. Nos. 2041 and 2042 of 2006 in the

High    Court    of        Delhi      on      February      13,      2006

against an order of DRAT dated February 10,

2006.    The    High       Court        of    Delhi,       as    already

mentioned earlier, allowed the writ petitions

on    February    23,       2006,        set     aside      the      order

passed by DRAT on the ground that Section 22 of

SICA operated as a complete bar to recovery

proceedings and no order could have been passed

by the Tribunal.

Subsequent development
                                                                 15

12.               Being   aggrieved         by    the     order

passed by the High Court, the appellant filed

Special Leave Petition in this Court on March

6, 2006. Notice was issued on March 27, 2006 by

this Court and the appellant was allowed to

withdraw sale price without prejudice to its

rights     and   contentions.         The     matter       was,

thereafter, adjourned from time to time. It was

ordered to be heard finally. For completion of

record, it may be stated that on April 3, 2006,

the BIFR rejected the Reference of the Company.

The    Company   preferred     an    appeal      against    the

said     order   which    is        pending      before     the

Appellate Authority for Industrial & Financial

Reconstruction (AAIFR).         On September 15, 2006,

second Reference was filed by the Company which

has been registered as BIFR Case No. 18 of

2006. On February 22, 2007, the BIFR declared

the Company as a `sick Company' and appointed

LSAS, respondent No. 5 as the Operating Agency

to prepare Rehabilitation Scheme.

Submissions of the appellant
                                                            16

13.                The Court has heard the learned

counsel for the parties. Learned counsel for

the appellant raised several contentions. He

urged    that   the   High   Court   has   committed   an

error of law in holding that the proceedings

were barred by Section 22 of the SICA and DRAT

was     wrong   in     issuing     directions.         The

proceedings were neither covered by the first

part nor by the second part of Section 22 and

the High Court ought to have decided the case

on merits. It was also submitted that Section

34 of RDDB Act has an `overriding effect' and

even on that ground, the matter ought to have

been decided.      It was contended that the appeal

preferred by the Company against fixation of

reserve    price      was    not   maintainable   under

Section 30 of the RDDB Act and could not have

been entertained by DRT. So far as ex-parte

decree passed by DRT is concerned, the counsel

submitted that the Company was duly served and

in spite of that, it failed to appear before

the Tribunal. A grievance was also made that in
                                                                   17

an appeal against fixing reserve price (which

was     not   maintainable),        DRT    granted      interim

relief on certain terms and conditions.                      But

even    those   conditions        had    not    been    complied

with by the Company. Reserve price fixed was

proper, sufficient and reasonable and DRT ought

not to have set aside the order passed by the

Recovery Officer.

14.                  The counsel vehemently contended

that the High Court ought to have taken into

account       over    all    conduct       of     the     party,

particularly         when   the    Company       had    invoked

discretionary and equitable jurisdiction under

Article 226 of the Constitution.                In exercising

writ jurisdiction, submitted the counsel, the

conduct of the petitioner is indeed a relevant

and extremely important consideration. In the

instant case, the Company had not come with

clean    hands.        It   had    not    repaid       the   loan

amount; did not appear before DRT in spite of

service of summons; an ex parte final order

was, therefore, rightly passed against it; the
                                                                        18

Company filed an appeal before DRT against an

`order'       which      was    not    appealable;        failed    to

comply with even the interim order under which

protection         was    obtained      and    no    payment       was

made;        by    committing         criminal      trespass       and

unlawfully            entering         the         property,        it

dispossessed          the      receiver      appointed      by     the

Tribunal; the action of taking over possession

of the property by act of highhandedness could

not     be    approved;         the    Company      also    removed

machinery and other movable property from the

disputed          premises;      created      unlawful      tenancy

rights in favour of third party by accepting

substantial amount from him, etc. The counsel,

therefore,         urged       that   even    if    the    case    was

covered by SICA and Section 22 got attracted,

the High Court, in exercise of extraordinary

and   special        jurisdiction,         ought     not    to    have

granted relief in favour of the Company. On all

these grounds, it was submitted that the appeal

deserves to be allowed.
                                                                        19

15.                   The    learned        counsel        for     the

supporting      respondents        adopted          the    arguments

advanced       by     the    learned        counsel        for     the

appellant.

Submissions of respondent

16.                   The    learned        counsel        for     the

Company, on the other hand, supported the order

passed by the High Court. According to him, no

doubt    the    High       Court   was      exercising          powers

under Article 226 of the Constitution.                          But in

exercising          constitutional       powers,          the    Court

would     undoubtedly         keep     in      mind        statutory

provisions of SICA and precisely that has been

done by the Court. If the proceedings could not

have been initiated or continued in view of bar

of Section 22 of SICA, it cannot be said that

the     High    Court       was    wrong       in    passing       the

impugned order.             No grievance, hence, can be

made against such order. As to ex-parte final

order said to have been passed by DRT, it was

submitted that no opportunity of hearing was

afforded       to    the    Company      and    the       order    was
                                                                     20

violative of principles of natural justice and

fair   play.    The   appeal       filed     by     the   Company

against fixation of reserve price before DRT

was maintainable under Section 30 of the RDDB

Act as the appeal lies against "an order of the

Recovery Officer made under the Act" and an

order of fixation of reserve price is also an

`order'     within     the       meaning      of      the      Act.

Regarding      non-depositing         of     amount       as   per

interim     order,    it     was     submitted        that     the

Company was not in a position to comply with

the    conditions     of     stay     and     the    directions

issued and hence, in accordance with law, it

challenged the said order by filing an appeal

before DRAT. It was the right of the Company to

take    such   action      and      the     appellant       cannot

object against such course being adopted by the

Company. It was, therefore, submitted that the

High Court was wholly justified in allowing the

petitions filed by the Company and no case has

been made out by the appellant for interference

against the said order by this Court.
                                                                  21


High Court's order

17.                At the outset, it may be noted

that    the   High        Court    had    disposed      of   the

petitions      only        on      one    ground        as    to

applicability        of     SICA    and    held       that   the

proceedings were barred under Section 22 of the

said Act. This is amply clear from paragraph 13

of the order which reads as under:

           Several    arguments     have   been
       advanced before us by learned counsel
       for the parties, but we are of the
       opinion that this petition deserves to
       be   allowed    on    the   very   first
       submission of Dr. Abhishek M. Singhvi,
       learned   senior    counsel    for   the
       petitioner,      namely     that     the
       proceedings are barred by Section 22
       read with Section 32 of the SICA.
                               (emphasis
       supplied)


18.                Referring         to        the     relevant

provisions    of     SICA    and    keeping     in    view   the

ratio laid down in the decisions cited before

it, the Court ruled that the petition filed by

the     Company    was      required      to     be    allowed.
                                                         22

Accordingly, in the operative part (para 36),

the High Court concluded:

          For the reasons given above, the
      petition is allowed and the impugned
      order dated 10.2.2006 passed by the
      DRAT is set aside and it is held that
      no recovery can take place against the
      petitioner in view of the bar of
      Section 22 of the SICA.
                        (emphasis supplied)


19.             As already adverted to, before

the Court the arguments had been advanced by

all the parties on continuation or otherwise of

proceedings   and   also   on   the   merits   of   the

matter. In view of the fact, however, that the

High Court has not entered into merits of the

case and disposed of petitions holding that the

proceedings could not be continued because of

the bar of Section 22 of SICA, I do not wish to

enter into allegations and counter allegations

levelled by the parties. At the same time, I am

of the view that the conclusion arrived at by

the High Court that the proceedings were barred

under Section 22 of SICA is not well-founded
                                                                   23

and the decision of the High Court on that

point deserves to be set aside.

SICA - Ambit and scope

20.              So far as SICA is concerned, it

has been stated in the Preamble that the Act

has been enacted in public interest "with a

view to securing the timely detection of sick

and    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".

While interpreting various provisions of the

Act, the said object has to be kept in mind by

Courts.     Section      2     is    in    the      form      of

`declaration'    and   declares       that    the    Act      has

been enacted for giving effect to the policy of

the   State    towards       securing     the      principles
                                                                         24

specified in clauses (b) and (c) of Article 39

of the Constitution. Section 3 defines various

terms used in the Act. Chapter II relates to

establishment of Board and Appellate Authority,

term     of     office,       conditions         of     service      of

officials        and   working        of     the           Board    and

Appellate Authority. References, Inquiries and

Schemes have been dealt with in Chapter III.

Whereas Section 15 provides for Reference to

Board,     Section       16    speaks       of        Inquiry      into

working of sick industrial companies. Section

17 empowers the Board to make suitable order on

the completion of inquiry. Sections 18, 19 and

19A      deal     with        Preparation             of     Schemes,

Rehabilitation and Arrangement for continuing

operations during inquiry. Winding up of sick

industrial       company       is   found    in        Section      20.

Section 21 allows Operating Agency to prepare

inventory. Under Section 22A, directions can be

issued preventing disposal of assets in certain

cases.
                                                     25

21.              Section   22    is   a    material

provision which relates to suspension of legal

proceedings, contracts, etc.       Sub-section (1)

is important and may be reproduced;


      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, then,
      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 industrial
      company or for execution, distress or
      the like against any 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.
                                                                26

       .....                    .....                 .....
       ......



22.                   Chapter     IV    covers     potentially

sick            industrial      Companies,         misfeasance

proceedings,         appeals    and     other    miscellaneous

matters with which the Court is not concerned

in the present case except Section 32 which

gives `overriding effect' to the provisions of

the Act. It reads as under:



       32. Effect of the Act on other laws.--
       (1) The provisions of this Act and of
       any rules or schemes made thereunder
       shall   have   effect   notwithstanding
       anything     inconsistent     therewith
       contained in any other law except the
       provisions of the Foreign Exchange
       Regulation Act, 1973 (46 of 1973) and
       the    Urban    Land    (Ceiling    and
       Regulation) Act, 1976 (33 of 1976) for
       the time being in force or in the
       Memorandum or Articles of Association
       of an industrial company or in any
       other instrument having effect by
       virtue of any law other than this Act.


           (2) Where there has been under any
       scheme under this Act an amalgamation
       of a sick industrial company with
       another company, the provisions of
       section 72A of the Income-tax Act,
                                                             27

      1961 (43 of 1961), shall, subject to
      the modifications that the power of
      the Central Government under that
      section may be exercised by the Board
      without any recommendation by the
      specified authority referred to in
      that section, apply in relation to
      such amalgamation as they apply in
      relation to the amalgamation of a
      company     owning    an     industrial
      undertaking with another company.


RDDB Act - Ambit and scope



23.                The RDDB Act (Recovery of Debts

Due to Banks and Financial Institutions Act,

1993) has been enacted with a view "to provide

for    the     establishment    of        Tribunals    for

expeditious adjudication and recovery of debts

due to banks and financial institutions and for

matters      connected   therewith        or     incidental

thereto". Chapter I is Preliminary in nature

and Section 2 defines various terms. Chapter II

provides     for   establishment     of    Tribunals   and

Appellate       Tribunals,     their           composition,

qualifications and term of office of the staff,

salaries, allowances, etc. Jurisdiction, powers
                                                                   28

and authority of Tribunals are found in Chapter

III.    The     Tribunals     are    required     to    follow

procedure laid down in Chapter IV. Chapter V

relates to `Recovery of debt determined by the

Tribunal'.         Section    29    declares       that       the

provisions of the Second and Third Schedules of

the Income Tax Act, 1961 will apply to the

recovery      of   amount    due    under   the    RDDB   Act.

Chapter    VI      is    Miscellaneous.      One       section,

however,      is    of    extreme   importance.          It   is

Section 34 which allows `overriding effect' to

the provisions of the Act over other laws.                    It

is a crucial provision and may be quoted in

extenso;



       34. Act to have overriding effect.--(1)
       Save as provided under sub-section
       (2), the provisions of this Act shall
       have effect notwithstanding anything
       inconsistent therewith contained in
       any other law for the time being in
       force or in any instrument having
       effect by virtue of any law other than
       this Act.


           (2) The provisions of this Act or
       the rules made thereunder shall be in
                                                               29

      addition to, and not in derogation of,
      the   Industrial   Finance   Corporation
      Act,    1948,   the   State    Financial
      Corporations Act, 1951, the Unit Trust
      of India Act, 1963, the Industrial
      Reconstruction Bank of India Act, 1984
      and the Sick Industrial Companies
      (Special Provisions) Act, 1985 and the
      Small Industries Development Bank of
      India Act, 1989.    (emphasis supplied)



24.                 According to the Company, there

is a bar against initiation or continuation of

proceedings under Section 22 of SICA against

sick companies. The High Court was, therefore,

right in allowing the petitions filed by the

Company.      The    case   of      the    appellant      and

supporting respondents, on the other hand, is

that Section 22 of SICA has no application to

the case on hand and the High Court was in

error in invoking the said section and denying

relief   to   the    auction     purchaser    as   well   as

other creditors by wrongly extending benefit of

the    said    provision       to    the    Company.      The

appellant alternatively contended that even if

the proceedings pending against the Company are
                                                                      30

covered    by    Section       22   of    SICA,       non-obstante

clause in Section 34 of RDDB Act, which is a

subsequent         legislation           will     operate        and

recovery could not have been suspended, stalled

or arrested.



Interpretation of statutes



25.                 The        question,        therefore,        is

whether the High Court was right in holding

that the proceedings were barred under Section

22 of SICA.        I have extracted the relevant part

of the said section. It has two limbs.                           The

first part enacts that "no proceeding for the

winding up of the industrial company or for

execution, distress or the like against any of

the properties of the industrial company or for

the   appointment         of    a     receiver        in     respect

thereof    ...   shall    lie       or    be    proceeded       with

further, except with the consent of the Board

or,   as     the     case       may      be,    the        Appellate

Authority."           The       second         part     which     is
                                                                     31

independent of the first part declares that "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."        The two parts use two different

expressions; (i) `proceeding' and (ii) `suit'.



Case law



26.                 In Kailash Nath Agarwal & Ors.

v.     Pradeshiya         Industrial           &     Investment

Corporation of U.P. Ltd. & Anr., (2003) 4 SCC

305, this Court had an occasion to consider the

meaning of these two expressions.                        The Court

noted that sometimes two different words are

used in one and the same statute to convey the

same   meaning,     but    "that    is    exception         rather

than the rule".         The general rule is that when
                                                                               32

two   different     words    are     used         by    a    statute,

prima facie one has to construe different words

as carrying different meanings.



27.                 The Court stated;


      "The word "suit" and "proceeding" have
      not   been  used   interchangeably  in
      SICA."



28.                 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
                                                                   33

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
                                                                           34

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
                                                                   35

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
                                                             36

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
                                                                           37

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
                                                            38

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.
                                                                    39

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
                                                             40

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.



36.                  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
                                                 41

      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 debtor's property.



38.            In Deputy Commercial Tax Officer

& Ors. v. Corromandal Pharmaceuticals & Ors.,

(1997) 10 SCC 649, this Court held that the
                                                                   42

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
                                               43

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
                                                              44

      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.
                                                              45

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
                                                         46

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
                                                           47

      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".
                                                                            48

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-`-vis one legislation and

`general'           statute           vis-`-vis               another
                                                                      49

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
                                                                  50

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.



50.                   The Court stated--


       "It    is,    therefore,   desirable   to
       determine the overriding effect of one
       or    the    other    of   the   relevant
       provisions in these two Acts, in a
       given     case,     on    much    broader
       considerations of the purpose and
       policy underlying the two Acts and the
       clear    intendment    conveyed  by   the
       language of the relevant provisions
       therein".



51.                   In Shri Sarwan Singh & Anr. v.

Shri    Kasturi       Lal,   (1977)    1     SCC    750,    two

provisions were before this Court. Section 19

of the Slum Areas (Improvement and Clearance)

Act,    1956    (as    amended    by   Act    43    of     1964)

provided       that    proceedings     for     eviction      of
                                                                        51

tenants could not be taken without permission

of    the   competent         authority       "notwithstanding

anything contained in any other law for the

time being in force". Section 39 of the Act

further declared that the provisions of the Act

shall     take    effect       "notwithstanding            anything

inconsistent therewith contained in any other

law".    The     other    statute      was     the    Delhi       Rent

Control Act, 1958 (as amended by Act 18 of

1976).      Section       14-A    as        inserted        by     the

amendment Act conferred a right on a landlord

to recover immediate possession of any premises

let   out   by    him    in    case    he     was    required      to

vacate any residential premises allotted to him

by    the   Central       Government          or     by    a     local

Authority.       The     conferment      of    the        right    was

"notwithstanding          anything     contained          elsewhere

in this Act or in any other law for the time

being in force". Section 25-B laid down special

procedure for enforcement of right conferred by

Section     14-A.      Section    25-A       stated        that    the

provisions in Section 25-B shall have effect
                                                                  52

"notwithstanding             anything          inconsistent

therewith contained elsewhere in this Act or in

any other law for the time being in force".

The   Court   held    that    the    right     to    immediate

possession    conferred      by     Section    14-A    of    the

Delhi Rent Act was not controlled by the Slum

Clearance Act and the right could be enforced

in the manner provided in Section 25-B                 without

obtaining     prior   permission       of     the    competent

Authority under the Slum Clearance Act.



52.               Speaking           for       the         Court

Chandrachud,     J.   (as     His    Lordship       then    was)

observed:



          "For   resolving  such   inter  se
      conflicts, one other test may also be
      applied though the persuasive force of
      such a test is but one of the factors
      which combine to give a fair meaning
      to the language of the law. That test
      is that the later enactment must
      prevail over the earlier one. Section
      14A and Chapter IIIA having been
      enacted with effect from December 1,
      1975 are later enactments in reference
      to Section 19 of the Slum Clearance
      Act which, in its present form, was
                                                                 53

       placed on the statute book with effect
       from   February   28,   1965  and   in
       reference to Section 39 of the same
       Act, which came into force in 1956
       when the Act itself was passed. The
       legislature gave overriding effect to
       Section 14A and Chapter IIIA with the
       knowledge that Sections 19 and 39 of
       the Slum Clearance Act contained non
       obstante clauses of equal efficacy.
       Therefore the later enactment must
       prevail over the former".


                              (emphasis supplied)



53.                  In Sanwarmal Kejriwal v. Vishwa

Co-operative Housing Society Ltd & Ors., (1990)

2 SCC 288, this Court applied the test as to

`general'      and    `special'      Act    and    held    that

special law would have primacy over the general

law.



54.                  In Life Insurance Corporation of

India v. D.J. Bahadur & Ors., (1981) 1 SCC 315,

before    this       Court    two    Acts     came    up   for

consideration;        (1)     Industrial     Disputes      Act,

1947     (ID     Act),       and    (2)     Life     Insurance

Corporation Act, 1956 (LIC Act). One of the
                                                                   54

questions before the Court was which of the two

should be considered as `special law'. It was

urged that the Industrial Disputes Act should

be    regarded    as      `general    law'        relating     to

workmen    and    Life     Insurance      Corporation         Act

should    be     considered     as    `special        law'     in

relation to employees engaged by LIC. It was,

therefore, submitted that when a complaint is

made by an employee of LIC, he cannot invoke

the provisions of ID Act and the matter must be

decided in accordance with LIC Act.



55.                Krishna Iyer, J. described the

question as `crucial' which demanded an answer

about the statute being `general' or `special'.

The      well     known      doctrine        of      generalia

specialibus      non    derogant     (general       provisions

will not abrogate special provisions) was also

noted and it was observed that if LIC Act was

considered `special', it must operate over ID

Act   treating     ID     Act   to   be   `general'          law.

Noticing, however, the long title of LIC Act
                                                             55

and its object for providing nationalization of

life insurance business in the country and the

matters connected therewith, the Court observed

that the primary purpose of the Act was to

nationalize     private     insurance     business       by

establishing     Life     Insurance    Corporation       of

India. Incidentally, the said Act provided for

transfer of service of existing employees of

the   insurers     to     the   Corporation,          their

conditions of service, etc. But it was `plain

and beyond doubt' that it was not concerned

with disputes between employer and employee.

The   principal     object      of      the     Act     was

nationalization of insurance business and it

was a `special' legislation so far as business

purpose   was     concerned.         Disputes     between

employer and employee had been dealt with by ID

Act which was a `special' law covering that

field and if there is dispute between employer

and employee in Life Insurance Corporation, LIC

Act must be treated as `general law' vis-`-vis
                                                                  56

ID    Act   which   should    be    treated       as   `special

law'.



56.                 His     Lordship,      therefore,       made

the following pertinent observations:



          "In determining whether a statute
      is a special or a general one, the
      focus must be on the principal subject
      matter      plus     the     particular
      perspective. For certain purposes, an
      Act may be general and for certain
      other purposes it may be special and
      we   cannot   blur  distinctions   when
      dealing with finer points of law. In
      law, we have a cosmos of relativity
      not absolutes-so too in life".


                             (emphasis supplied)



57.                 It    was,      therefore,         concluded

that ID Act was a special statute devoted only

to investigation and settlement of industrial

disputes     and    since     LIC    Act    was    a    general

statute,     in     cases    of     disputes      between     an

employer     and    employee,       ID     Act    would     have

primacy over LIC Act.
                                                                  57

58.                 In    Maharashtra      Tubes       Ltd.,   a

conflict    between       provisions      of     two     special

statutes,        viz.     (1)     the     State        Financial

Corporation       Act,     1951     and    (2)      the     Sick

Industrial Companies (Special Provisions) Act,

1985    (SICA)    was     highlighted.      Both       contained

non-obstante clause. The conflict was resolved

by this Court by giving overriding effect to

SICA on the ground that SICA was a subsequent

enactment        (1985)     and    non-obstante           clause

therein    would    prevail       over    the    non-obstante

clause in the State Financial Corporation Act

(1951).



59.                 The     Court,       speaking        through

Ahmadi,     J.     (as     His    Lordship        then     was),

observed:



           "Having reached the conclusion
       that both the 1951 Act and the 1985
       Act are special statutes dealing with
       different    situations--the    former
       providing for the grant of financial
       assistance to industrial concerns with
       a view to boost up industrialisation
                                           58

and the latter providing for revival
and rehabilitation of sick industrial
undertakings, if necessary, by grant
of financial assistance, we cannot
uphold the contention urged on behalf
of the respondent that the 1985 Act is
a general statute covering a larger
number of industrial concerns than the
1951 Act and, therefore, the latter
would prevail over the former in the
event of conflict. Both the statutes
have       competing         non-obstante
provisions. Section 46B of the 1951
Act provides that the provision of the
statute and of any rule or order made
thereunder     shall      have     effect
notwithstanding anything inconsistent
therewith contained in any other law
for the time being in force whereas
Section 32(1) of the 1985 Act also
provides that the provisions of the
said Act and of any rules or schemes
made thereunder shall have effect
notwithstanding anything inconsistent
therewith contained in any other law.
Section 22(1) also carries a non-
obstante clause and says that the said
provision shall apply notwithstanding
anything contained in Companies Act,
1956 or any other law. The 1985 Act
being a subsequent enactment, the non-
obstante     clause    therein      would
ordinarily   prevail   over    the   non-
obstante clause found in Section 46B
of the 1951 Act unless it is found
that the 1985 Act is a general statute
and the 1951 Act is a special one. In
that   event    the   maxim     generalia
specialibus non derogant would apply.
But   in   the   present    case   on   a
consideration     of     the     relevant
provisions of the two statues we have
come to the conclusion that the 1951
                                                                    59

      Act     deals    with     post-sickness
      situation.    It is,   therefore,   not
      possible to agree that the 1951 Act is
      a special statute vis-a-vis the 1985
      Act which is a general statute. Both
      are special statutes dealing with
      different situations notwithstanding a
      slight overlap here and there, for
      example, both of them provide for
      grant of financial assistance though
      in different situations. We must,
      therefore, hold that in case of sick
      industrial undertakings the provisions
      contained in the 1985 Act would
      ordinarily prevail and govern".


                               (emphasis supplied)



60.                   A similar conflict came to light

between   two    statutes,         namely,     (i)   the   State

Financial Corporations Act, 1951 and (ii) the

Companies Act, 1956           in    A.P. State       Financial

Corporation v. Official Liquidator, (2000) 7

SCC   291.   The      Court   treated        1951    Act   as    a

`special Act' for grant of financial assistance

to the industrial concerns with a view to boost

up    industrialization        and      also     recovery       of

financial    assistance            if   it     becomes      bad.

Likewise,       the     Companies       Act      dealt      with
                                                                            60

Companies         including       winding           up      of        such

Companies. The Court, however, held that the

proviso to sub-section (1) of Section 529 and

Section 529-A being a subsequent enactment, the

non-obstante         clause      in     Section          529-A       would

prevail      over     Section      29       of     the    1951        Act.

Highlighting        the    underlying            object        of    non-

obstante      clause       in     Section          529-A       of      the

Companies Act and a social purpose underlying

therein      to     ensure      payment       of     dues       to     the

workmen in priority over all other debts, the

Court   concluded         that    "if    conditions            are     not

imposed to protect the right of the workmen,

there   is    every       possibility        that        the     secured

creditor     may     frustrate        the    above        pari       passu

right of the workmen".



61.                  In Allahabad Bank v. Canara Bank

& Anr., (2000) 4 SCC 406, a similar question

was raised before this Court. There the Court

considered two Acts, (i) RDDB Act, 1993 and

Companies     Act,     1956.      It    was      held      that       even
                                                                61

where a winding up petition was pending or a

winding    up    order    had   been    passed    against   a

Company for debt payable to banks and financial

institutions, governing law was RDDB Act. No

leave of Company Court as envisaged under the

Company    Act,    therefore,      was    necessary.       The

Court held that though both the laws could be

treated    as     `special      laws'    in      respect    of

recovery    of     dues    by    banks     and     financial

institutions, it was 1993 Act which should be

considered as `special' vis-`-vis Company Law.



62.                I may refer to a recent decision

of this Court in M/s. Transcore v. Union of

India & Anr., (2008) 1 SCC 125, wherein this

Court considered the provisions of RDDB Act,

1993 and Securitization and Reconstruction of

Financial Assets and Enforcement of Security

Interest Act, 2002. Considering the scheme of

both the laws, the Court held that 1993 Act was

a `complete Code' by itself as far as recovery

of debt is concerned. It was a `special law' in
                                                                      62

the    matters      of     recovery       of    dues       and   the

provisions of the said Act would prevail over

other laws.



63.                 It     may    also    be     profitable       to

refer to a three Judge Bench decision of this

Court in      Solidaire India            Ltd.    v.    Fairgrowth

Financial Services Ltd. & Ors., (2001) 3 SCC

71. In that case, S took loan of Rs. one crore

from    F.    The        amount    was     not        repaid.    F,

therefore,     instituted         proceedings          under     the

Special Court (Trial of Offences Relating to

Transactions in Securities) Act, 1992 for the

recovery of the amount. The Special Court came

to the conclusion that S had not repaid the

loan   and    accordingly         ordered       S     to   pay   the

amount with interest. During the pendency of

the appeal before this Court, S became sick and

proceedings were initiated under SICA. One of

the contentions raised before this Court by S

was    that    in        view     of     special       provisions

contained in SICA, no proceedings could have
                                                              63

been initiated or continued under the Special

Court Act. This Court admitted that SICA was a

`special' Act. The Court was also aware of the

non-obstante clause in Section 32 of SICA. It

noted that the effect of the said provision was

that    SICA   will    have   effect      "notwithstanding

anything    inconsistent      therewith      contained    in

any other law for the time being in force".

But it noted that there was a similar non-

obstante clause in Section 13 of the Special

Court Act which was as under:


               "13. Act to have overriding
       effect.--The provisions of this Act
       shall    have   effect   notwithstanding
       anything      inconsistent     therewith
       contained in any other law for the
       time   being   in   force   or  in   any
       instrument having effect by virtue of
       any law, other than, this Act, or in
       any decree or order of any court,
       tribunal or other authority."


64.                  The   Court   then    stated;    "This

Court has laid down in no uncertain terms that

in such an event it is the later Act which must

prevail".      The    Court   referred     to   a   decision
                                              64

rendered by a Special Court in Bhoruka Steel

Ltd. vs. Fairgrowth Financial Services Ltd.,

[(1997) 89 Comp Cas 547] wherein the Special

Court stated:



            "Where there are two special
    statues   which   contain   non-obstante
    clauses    the   later    statute   must
    prevail. This is because at the time
    of enactment of the later statute, the
    Legislature was aware of the earlier
    legislation    and   its    non-obstante
    clause.   If   the   Legislature   still
    confers the later enactment with a
    non-obstante clause it means that the
    Legislature wanted that enactment to
    prevail. If the Legislature does not
    want the later enactment to prevail
    then it could and would provide in the
    later enactment that the provisions of
    the earlier enactment continue to
    apply.


           The Special Court (Trial of
    Offences Relating to Transactions in
    Securities) Act, 1992, provides in
    Section 13, that its provisions are to
    prevail over any other Act. Being a
    later enactment, it would prevail over
    the Sick Industrial Companies (Special
    Provisions)   Act,    1985.   Had  the
    Legislature wanted to exclude the
    provisions of the Sick Companies Act
    from the ambit of the said Act, the
    Legislature would have specifically so
    provided.    The    fact    that   the
    Legislature did not specifically so
                                            65

provide necessarily means that the
Legislature    intended  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."
                                                            66

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
                                                                      67

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
                                                                          68

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
                                                              69

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.
                                                                    70

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
                                                                 71

over SICA, 1985 so far as recovery of public

revenue is concerned.



Final Order



69.                For    the    aforesaid      reasons,     I

hold that the High Court has committed an error

of law in invoking and applying provisions of

Section 22 of SICA and in dropping proceedings

against   the   Company.        The   order    of   the   High

Court, therefore, deserves to be set aside and

I do accordingly. The matter is remitted to the

High Court to decide it afresh on all points

including    the      conduct    of   the     Company     after

hearing the parties.            All contentions of all

parties are kept open.



70.                Before parting with the matter,

I may clarify that any observation on merits

which might have been made in this judgment is

only   for      the      purpose      of      deciding      the

preliminary question as to maintainability of
                                                                             72

proceedings against the Company since the High

Court has allowed the petitions filed by the

Company only on that ground. I make it clear

that I may not be understood to have expressed

any opinion on other issues and as and when the

matter will come up before the High Court, the

same will be decided on its own merits without

being inhibited by such observations.



71.           The     appeal         is           accordingly

allowed with costs.



                          .........................................................J.
New Delhi;                                                    (C.K. THAKKER)
August 25, 2008.
                                                                                 73


              IN THE SUPREME COURT OF INDIA

               CIVIL APPELLATE JURISDICTION

           CIVIL APPEAL No. 5225                          of 2008

     (Arising out of SLP(C) No.5041 of 2006)



KSL & Industries Limited                                                    ...

Appellant

                                      Vs.

M/s Arihant Threads Limited & Ors ...Respondents




                           J U D G M E N T


ALTAMAS KABIR,J.


1.   I have had the benefit of going through the draft judgment prepared by my
     learned Brother and while I agree with the conclusion arrived at by His
     Lordship, that the High Court erred in applying the provisions of Section 22 of
     the Sick Industrial Companies (Special Provisions) Act, 1985, and dropping
     the proceedings against the Company, with utmost respect I find myself
     unable to accept the legal reasoning on which His Lordship's conclusion is
     based. I would like to traverse a different route in arriving at the same
     conclusion as arrived at by my learned brother.


2.   Since my learned Brother has set out the facts involved in detail, I shall only
     highlight some of the facts which compel me to pen my views in a separate
     judgment.
                                                                                  74

3.   The respondent No.1-Company, M/s Arihant Threads Limited, was
     incorporated as a Joint Venture Company with Punjab State Industrial
     Development Corporation. In 1992 the said Company was granted lease of
     Plot No.454 for 99 years by Goindwal Sahib Industrial and Investment
     Corporation in the Goindwal Sahib Industrial Area. The lease contained a
     specific provision disentitling the lessee from transferring its interest in the
     demised property for the first 15 years of the lease without the prior
     permission of the lessor. However, it was also provided that the lessee
     would be entitled to mortgage its leasehold rights to a Bank, the Punjab
     Financial Corporation or the Life Insurance Corporation of India as security
     for development of the demised premises by constructing factory buildings
     and for purchase of raw-material etc. In view of the said provision, the
     Industrial Development Bank of India (hereinafter referred to as `IDBI'),
     which was the predecessor of the Stressed Assets Stabilisation Fund
     (hereinafter referred to as `SASF'), financed the project undertaken by the
     Company.


4.   As it appears from the records, the respondent no.1- Company was unable to
     repay the loan and IDBI filed Original Application No.1368 of 2001 in the
     Debts Recovery Tribunal, Chandigarh, (hereinafter referred to as `DRT,
     Chandigarh') on 20.12.2001, for recovery of Rs.25,26,60,836/-, under the
     Recovery of Debts Due to Banks and Financial Institutions Act, 1993
     (hereinafter referred to as the `RDDB Act'). Despite service of notice of the
     said proceedings, the respondent No.1 Company remained unrepresented
     before the DRT and on 15.7.2003 an ex-parte final order was passed in favour
     of IDBI for recovery of Rs.25,26,60,836/- together with interest at the rate of
     7.8% per annum and a Recovery Certificate was also issued against the
     respondent No.1-Company.


5.   In keeping with Section 29 of the RDDB Act, the Recovery Officer issued a
     composite demand notice to the respondent No.1-Company on 9.9.2003
     under Rule 2 of the Second Schedule to the Income Tax Act, 1961, demanding
     payment of Rs. 28,60,87,384/-. A separate direction was given to the
     Company to appear before the Recovery Officer on 23.10.2003 for settling
     terms and conditions relating to the proclamation of sale and for disclosure of
     its movable and immovable assets.


6.   A Valuation Report was also obtained from the Local Commissioner,
     appointed by the Recovery Officer, who in his report indicated that two
     machines were missing from the Company's factory. A further Valuation
     Report was obtained from the North-India Technical Consultancy Association
     Limited in January 2004, wherein the assets of the Respondent No.1-Company
     was valued at Rs.17.5 crores on 16.9.2004. The reserve price of the property
     was fixed at Rs.12.50 crores by the Recovery Officer and two separate dates
                                                                              75

     were fixed for sale of the immovable and movable properties of the Company.
     The respondent No.1 - Company filed an appeal, being Appeal No.52 of
     2004, before the DRT on 18.10.2004 under Section 30 of the RDDB Act
     questioning the fixation of the reserve price by the Recovery Officer at
     Rs.12.50 crores. The proposed auction sale was, therefore, cancelled till the
     DRT by its order dated 27.10.2004 allowed the auction sale to proceed but
     restrained the Recovery Officer from confirming the same till further orders.
     Consequently, the auction was held and concluded on 30.10.2004 and the
     appellant herein was declared to be the successful bidder. Consequently, as
     per rules laid down, the appellant deposited 25% of the reserve price
     immediately. On 11.11.2004, the appellant made an application to the DRT
     for accepting bank guarantee for the remaining balance of 75% of the sale
     price. On the said application being dismissed the appellant-auction purchaser
     on the same day deposited the balance amount of 75% of the sale price by a
     bank draft. It is only after the sale had been conducted and concluded on
     30.10.2004 that an application was made by the respondent-Company on
     15.12.2004 in the pending appeal for setting aside the ex-parte final order
     passed by the DRT, Chandigarh, on 15.7.2003 and the same was registered as
     M.A.No.103/2004. The appellant herein filed an application for being added
     as a party in Appeal No.52 of 2004 and also in M.A. No.103 of 2004 to enable
     it to oppose the prayer of the Company for setting aside the final order passed
     by the DRT, Chandigarh, on 15.7.2003. Such prayer for impleadment was
     allowed by the DRT by its order dated 17.12.2004.


7.   At this juncture it may be indicated that on 10.6.2002 M/s Roland Exports,
     which had succeeded to the interests of Goindwal Sahib Industrial
     Corporation, cancelled the lease of the respondent No.1-Company on account
     of non-payment of lease dues amounting to Rs.3,19,94,149/-. On 8.4.2005
     M/s Roland Exports filed a suit for permanent injunction against the
     respondent No.1-Company in the Civil Court at Tarantaran, District Amritsar,
     wherein an order of status-quo with regard to possession was passed.


8.   On 26.7.2005, DRT-I, Delhi, allowed Appeal No.52 of 2004 and set aside the
     auction sale subject to the Company fulfilling certain terms and conditions
     laid down in the order. One of the conditions imposed by the Tribunal was
     that the Company would have to pay 5% of the amount deposited by the
     auction purchaser within 10 days as penalty in terms of Rule 60 of the Second
     Schedule of the Income Tax Act, 1961. Objecting to the said terms and
     conditions imposed by the DRT the Company filed an appeal with DRAT,
     Delhi, being Appeal No.167 of 2005. The appellant herein also filed an appeal
     against the setting aside of the auction sale. The DRAT stayed the operation of
     the order dated 26.7.2005 by which the DRT-I, Delhi, had allowed Appeal
     No.52 of 2004 and had set aside the auction sale. The DRAT also directed
     refund of the sale amount to the appellant.
                                                                                   76

9.    While the matter was pending before the DRAT, the respondent-Company
      filed a Reference before the Board for Industrial and Financial Reconstruction
      (hereinafter referred to as `BIFR'), on 21.12.2005 under the provisions of the
      Sick Industrial Companies (Special Provisions) Act, 1985, and the same was
      registered as BIFR Case No.4 of 2006.


10.   On 10.2.2006 the DRAT dismissed the appeal filed by the Company and
      allowed the appeal of the appellant and confirmed the auction sale in favour of
      the appellant, subject to its depositing the sale price. By a separate order
      passed on the same day the DRAT ordered the Recovery Officer, Chandigarh,
      to implement the directions issued by it. However, despite the appellant
      depositing the full purchase price on the very same day, the sale could not be
      confirmed as the Presiding Officer was on leave. The appellant moved the
      DRAT for appointment of a Recovery Officer for confirmation of the sale.
      While the said matters were pending, the respondent-Company filed two writ
      petitions being C.W. Nos.2041 and 2042 of 2006, in the High Court of Delhi,
      against the order dated 10.2.2006 passed by DRAT dismissing the Company's
      appeal. The Delhi High Court allowed the writ petitions filed by the
      respondent-Company and by its order dated 23.2.2006 set aside the order
      passed by the DRAT on the ground that Section 22 of the Sick Industrial
      Companies (Special Provisions) Act, 1985 operated as a complete bar for
      taking recovery proceedings and no order could therefore have been passed by
      the Tribunal confirming the sale.


11.   It is against the said order of the Delhi High Court that the Special Leave
      Petitions were filed on 26.3.2006 wherein leave has since been granted.



12.   It may be significant to note at this stage that on 3.4.2006 the BIFR rejected
      the Reference made by the Company and that on 15.9.2006 another Reference
      was filed by the respondent-Company which was registered as BIFR Case
      No.18 of 2006. It is in the said Reference that on 22.2.2007 the BIFR declared
      the Company to be a "sick company" and the respondent No.5 was appointed
      as the Operating Agency for preparation of a rehabilitation scheme.


13.   Learned counsel for the appellant submitted that the High Court had erred in
      law in holding that the recovery proceedings initiated under the provisions of
      the RDDB Act were barred by Section 22 of the SICA. It was submitted that
      Section 22 of SICA was not attracted to the proceedings and the High Court
      should have decided the matter on merits. It was also submitted on behalf of
      the appellant that Section 34 of the RDDB Act had an overriding effect over
      the provisions of SICA and that the High Court should have decided the
      matter on merits on such grounds as well. It was further contended that the
                                                                                 77

      appeal preferred by the respondent-Company under Section 30 of the RDDB
      Act, against the order of the Recovery Officer fixing the reserve price at
      Rs.12.5 crores, was not maintainable and ought not to have been entertained
      by the DRT-I,Delhi.


14.   As has been indicated by my learned Brother in his judgment, it had been
      forcefully contended on behalf of the appellant that when the respondent-
      Company had invoked the discretionary and equitable jurisdiction of the High
      Court under Article 226 of the Constitution, the High Court should have taken
      into account the overall conduct of the party as the respondent-Company had
      not come to the writ court with clean hands. Not only had it not repaid the
      loan amount, but it did not appear before the DRT inspite of service of
      summons and the ex-parte final order was, therefore, rightly passed on the
      Original Application filed by the IDBI. The respondent- Company also filed
      an appeal against the order of the Recovery Officer before the DRT-I, Delhi,
      under Section 30 of the RDDB Act, and failed to comply with the directions
      contained in the interim order under which directions for payment were made,
      but no payment was made as directed. To make matters worse, the respondent-
      Company forcibly entered the property in question and dispossessed the
      Receiver appointed by the Tribunal and removed machinery and other
      movable properties from the said premises and created an unlawful tenancy in
      favour of a third party. In such background it was submitted that even if the
      case was covered under Section 22 of SICA, the High Court, in exercise of its
      extra-ordinary jurisdiction, ought not to have allowed the writ petition filed by
      the Company.
15.   Learned counsel for the respondent No.1-company submitted that the appeal
      preferred by the Company under Section 30 of the RDDB Act against the
      order of the Recovery Officer fixing the reserve price, was maintainable since
      the same was an order passed by the Recovery Officer under the Act. It was
      contended that since such a course of action was available to the respondent-
      Company it was not incumbent upon the Company to deposit the amounts
      indicated in the order of the DRT-I, Delhi, while allowing appeal No.52 of
      2004 as a pre-condition for setting aside the auction sale. It was contended that
      the High Court was fully justified in allowing the writ petitions filed by the
      respondent-Company in keeping with the bar imposed under Section 22 of
      SICA.


16.   As has been pointed out by my learned Brother, the writ petitions filed by the
      respondent-Company were allowed by the High Court on the sole ground that
      the recovery proceedings under the RDDB Act were barred under Section 22
      of the SICA. Having once come to the conclusion that the proceedings were
      barred under Section 22 of the SICA, the High Court did not go into any other
      question with regard to the merits of the matter and set aside the order of the
      DRAT confirming the auction sale on that one ground alone.
                                                                                 78



17.   My learned brother has discussed in detail the relevant provisions of SICA and
      the RDDB Act and has observed that Section 34 of the RDDB Act is of
      extreme importance since it allows "overriding effect" to the provisions of the
      Act over other laws. Inasmuch as my learned Brother's judgment is based on
      an interpretation of Section 34 of the RDDB Act in relation to Section 22 of
      SICA, the same is reproduced hereinbelow to consider the effect thereof :


         "34. Act to have over-riding effect-(1) Save as otherwise
         provided in sub-section (2), the provisions of this Act shall
         have effect notwithstanding anything inconsistent therewith
         contained in any other law for the time being in force or in any
         instrument have effect by virtue of any law other than this Act


         (2) The provisions of this act or the rules made thereunder shall
         be in addition to, and not in derogation of, the Industrial
         Finance Corporation Act, 1948 (15 of 1948), the State
         Financial Corporations Act, 1951 (63 of 1951), the Unit Trust
         of India Act, 1963 (52 of 1963), the Industrial Reconstruction
         Bank of India Act, 1984 (62 of 1984), the Sick Industrial
         Companie (Special Provisions) Act, 1985 and the Small
         Industries Development Bank of India Act, 1989."



18.   My learned Brother has relied on the non-obstante provision contained in Sub-
      section (1) of Section 34 in arriving at a finding that the Recovery of Debts
      Due to Banks and Financial Institutions Act, 1993, would have an overriding
      effect over other enactments. Since the Sick Industrial Companies (Special
      Provisions) Act, 1985, also contains a similar non-obstante clause in Section
      22, His Lordship has considered in detail the effect of the two non-obstante
      clauses in the two separate enactments governing the same field and has held
      that since the RDDB Act was a later Act it would prevail over the SICA which
      was an earlier Act.


19.   It is at this point that I am unable to travel the same path which my learned
      Brother has chosen to traverse.


20.   The opening words of Sub-section (1) of Section 34 of the RDDB Act clearly
      make the provisions thereof subject to the provisions of Sub-section (2) which
      in unambiguous term provides that the provisions of the Act or the Rules
      made thereunder would be in addition to and not in derogation of, certain
      statutes indicated therein, including the Sick Industrial Companies (Special
                                                                                79

      Provisions) Act, 1985. It is, therefore, clear that while the RDDB Act would
      have an over-riding effect over other enactments, its provisions would only be
      supplemental to those of the SICA and consequently the provisions of the
      SICA would prevail over the provisions of the RDDB Act. Accordingly, if it is
      held that the situation in this case is covered by the provisions of SICA, then
      the view taken by the High Court would have to be upheld. If, however, it is
      found that the provisions of SICA do not apply to the facts of this case, then
      there can be no doubt that the judgment of the High Court would have to be
      set aside.


21.   During the course of arguments, counsel for the parties did make submissions
      with regard to the merits of the matter, which may have to be considered in the
      light of the view which I am inclined to take in the matter. Furthermore, if it
      is found that the provisions of SICA, and consequently Section 22 thereof, are
      not attracted to the facts of this case, the discussion with regard to the RDDB
      Act being a later Act having an overriding effect over the SICA becomes
      redundant for the purposes of deciding this appeal. For the aforesaid purpose
      it would be necessary to consider a few dates which have been mentioned
      hereinbefore.


22.   The first date which is relevant for our purpose is 15.7.2003 when the ex-parte
      final order was passed by the DRT, Chandigarh, for recovery of the sum
      claimed by IDBI, along with interest @ 7.8% per annum, and a Recovery
      Officer was appointed.


23.   The second relevant date is 9.9.2003 when the Recovery Officer issued a
      demand notice under Rule 2 of the Second Schedule of the Income Tax Act,
      1961, to the respondent-Company for payment of a sum of Rs.25,26,60,836/-
      as directed by the DRT, Chandigarh, in its final order. It is only after the
      Recovery Officer fixed the reserve price for the auction sale of the Company's
      assets that the respondent-Company filed an appeal before the DRT on
      18.10.2004 under Section 30 of the RDDB Act against the said order of the
      Recovery Officer. It has also to be noted that on 27.10.2004 the DRT allowed
      the auction sale to proceed but directed that the sale should not be confirmed
      until further orders.


24.   The next relevant date is 30.10.2004 when the auction was concluded and the
      appellant was declared to be the highest bidder and the entire sale price was
      deposited by the appellant auction purchaser on 11.11.2004.


25.   It is significant to note that in the appeal, being Appeal No.52 of 2004 under
      Section 30 of the RDDB Act, an application was moved by the respondent-
                                                                                80

      Company on 15.12.2004 for setting aside the ex-parte final order passed on
      15.7.2003 and the appellant also filed an application for impleadment to
      enable it to oppose the prayer for setting aside the final order.


26.   The next date of significance is 26.7.2005 when Appeal No.52 of 2004 filed
      by the respondent-Company under Section 30 of the RDDB Act against the
      order of the Recovery Officer fixing the reserve price of the Company's assets
      was allowed by DRT-I, Delhi, subject to the Company fulfilling certain terms
      and conditions as indicated in the order.


27.   It is only thereafter on 21.12.2005 that the respondent-Company filed a
      Reference before the BIFR which was registered as BIFR case No.4 of 2006
      and the same came to be dismissed on 3.4.2006.


28.   In the meantime, the appeal preferred by the respondent-Company before the
      Debts Recovery Appellate Tribunal against the order of DRT-I, Delhi,
      allowing the Company's Appeal No.52 of 2004 was dismissed and the sale in
      favour of the appellant herein was confirmed, subject to deposit of the entire
      sale price.


29.   It will be of interest to note that the proceedings taken by the respondent-
      Company after the passing of the final order by DRT, Chandigarh, on
      15.7.2003, were directed against fixation of the reserve price by the Recovery
      Officer though in Appeal No.52 an application was made by the Company for
      setting aside the final order passed by the DRT Chandigarh. The same was
      however, of no consequence as the appeal was preferred against the order of
      the Recovery Officer fixing the reserve price of the Company's assets and not
      the final order, which, in any event, could not have been challenged in the said
      proceedings. In effect, the final order passed by the DRT, Chandigarh,
      directing the respondent-Company to pay the dues of IDBI remained
      unchallenged and attained finality. The two courses available to the
      respondent No.1-Company for preferring an appeal under Section 20 of the
      RDDB Act or by way of an application for setting aside the sale under Rule 60
      of the Second Schedule of the Income Tax Act, 1961, were not resorted to by
      the respondent-Company. Instead, it chose to adopt a path restricted to the
      setting aside of the auction sale on the ground that the reserve price of the
      Company's assets had not been correctly fixed by the Recovery Officer prior
      to the auction sale.


30.   Consequently, the scope of the appeal preferred by the respondent-Company
      was confined only to the question as to whether the reserve price had been
      correctly fixed by the Recovery Officer.
                                                                                  81



31.   This brings us to the next question regarding the applicability of Section 22 of
      SICA in the proceedings initiated by IDBI for recovery of its dues under the
      provisions of the RDDB Act, 1993.


32.   As will be seen from what has been indicated hereinabove, the final order was
      passed on 15.7.2003 by DRT, Chandigarh, at a point of time when no
      Reference had at all been made by the respondent-Company to the BIFR for
      being declared a "sick company". The auction was held and concluded on
      30.10.2004, again before a Reference had been made by the respondent-
      Company to the BIFR. It is only on 21.12.2005 that the Company filed a
      Reference before the BIFR which was rejected on 3.4.2006. In between, the
      appeal preferred by the respondent-Company (No.52 of 2004) before the DRT
      under Section 30 of the RDDB Act was allowed and the auction sale was set
      aside, but the final order passed by DRT, Chandigarh, remained untouched.
      The appeal preferred by the appellant herein against the order of the DRT
      allowing Appeal No.52 of 2004 was subsequently decided in favour of the
      appellant on 10.2.2006 and the auction sale was confirmed in favour of the
      appellant with a direction upon the Recovery Officer and the other concerned
      authorities to complete the sale in favour of the appellant herein. It is only on
      15.9.2006, after all the aforesaid orders had been passed that a second
      Reference was filed by the respondent-Company before the BIFR on
      15.9.2006 and on 22.2.2007 the Company was declared to be a "sick
      company" by the BIFR.


33.   The above dates will amply show that the proceedings had been taken by the
      IDBI under Section 19 of the RDDB Act and the final order had been passed
      therein long before the BIFR came on to the scene. Even the auction sale was
      concluded in favour of the appellant before the first Reference was made by
      the Company to the BIFR. The sale was confirmed by the DRAT before the
      writ petitions were allowed by the High Court on the ground that the recovery
      proceedings were barred under Section 22 of SICA. Ultimately, the
      Company's first Reference was rejected by the BIFR and only upon a second
      reference filed by the respondent-Company on 15.9.2006 was the Company
      declared by the BIFR to be a "sick company" on 22.2.2007.


34.   In other words, the final order in the recovery proceedings under Section 19 of
      the RDDB Act was passed and the auction sale was concluded before the first
      Reference was filed by the respondent-Company with the BIFR and long
      before the respondent-Company was declared to be a sick Company on
      22.2.2007. It is, therefore, clear that the provisions of the Sick Industrial
      Companies (Special Provisions) Act, 1985, were sought to be invoked by the
      respondent No.1-Company after the recovery proceedings had been concluded
                                                                                 82

      in favour of the appellant who had also deposited the sale price in respect of
      his offer which had been accepted by the Recovery Officer.


35.   For reasons which are obvious, the respondent-Company chose not to take
      recourse either to Section 20 of the RDDB Act or Rule 60 of the Second
      Schedule of the Income Tax Act, 1961, and took a chance of filing an appeal
      under Section 30 of the RDDB Act with regard to the fixation of the reserve
      price of the Company's assets by the Recovery Officer for the purposes of the
      auction sale and the scope of the appeal was limited to such issue alone.


36.   Since the respondent-Company did not challenge the final order of the DRT,
      Chandigarh, the same continued to be in force and was carried to its logical
      conclusion by the holding of auction sale and confirmation thereof in favour
      of the appellant herein.


37.   The order passed by the DRAT on 10.2.2006 confirming the sale in favour of
      the appellant was made long before the respondent-Company was declared to
      be a "sick company" on 22.2.2007. The High Court was, therefore, in error in
      applying the provisions of Section 22 of the SICA when the sale had already
      been confirmed in favour of the appellant and the purchase price had already
      been deposited. Furthermore, the first Reference made by the respondent-
      Company was also rejected by the BIFR on 3.4.2006.


38.   Apart from the above, even on merits, the conduct of the respondent No.1-
      company leaves much to be desired. Without challenging the final order
      passed by the DRT, Chandigarh, allowing the Bank's claim of
      Rs.25,26,60,836/- together with interest @ 7.8% per annum, the said
      respondent questioned the order of the Recovery Officer, fixing the reserve
      price of the Company's assets for the purposes of the auction sale, under
      Section 30 of the RDDB Act, having full knowledge of the fact that the final
      order of the DRT, Chandigarh, could not be challenged in such appeal. The
      steps taken by the respondent No.1, Company were far from bona fide and
      were only aimed at stalling the auction sale. Even at the time of auction of the
      company's assets, no attempt was made by the Respondent No.1-Company to
      secure a bid higher than that of the appellant.


39.   Having regard to the above, in my view nothing further remains to be decided
      by the High Court.
                                                                                        83

40.     The appeal is accordingly allowed and the order of the High Court impugned
        in the appeal is set aside with costs assessed at Rs.50,000/-.


                                                   ..........................................J.
                                                                   (ALTAMAS KABIR)
Dated : 25.08.2008
             IN THE SUPREME COURT OF INDIA
                    CIVIL APPELLATE JURISDICTION

                   CIVIL APPEAL NO.5225 OF 2008
          (Arising out of SLP (Civil) No.5041 of 2006

      KSL & Industries Ltd.                                          Appellant(s)


                                  Versu
                          s
       M/s Arihant Threads Ltd. &                                   Respondent
      Ors.                                                  (s)


                                    O R D E R


                     Although, both of us held that the

        appeal        deserves         to     be    allowed           and        the

        order        of   the     High      Court        is      to      be      set

        aside,            in    view     of    the        difference               of

        opinion on interpretation of Section 34 of

        the Recovery of Debts Due to Banks and

        Financial             Institutions          Act,         1993,           the
                                                              84


        Registry is directed to place the papers

        before the Hon'ble the Chief Justice of

        India   for   taking   appropriate   action       in

        accordance with law.


                                             ..............
...J.
                                                      [    C.K.
THAKKER ]



          .................J.
                                                   [ALTAMAS
KABIR]
         NEW DELHI,
         AUGUST 25, 2008.