KSL & INDUSTRIES LTD. '\. v. MIS ARI HANT THREADS LTD. & ORS.

C.K. THAKKER, J. 1. Leave granted. A

2Copy pinpoint2. 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- 8 x · 42 of 2006. By the said judgment, the High 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 tndustrial 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 con,tai_ne.d therein. Factual Background

3Copy pinpoint3. To understand the controversy in its proper perspective, it is necessary io keep in mind the factual matrix of the case, Respondent ~o. 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 in<:lustrial area · E of Amritsar District of the State of Punjab. In 1992, Goindwal Sahib Industrial & Investment Corporation allotted Plot No. 454, Flocal Point of Goindwal Sahib Industrial Area by way of-tease

- . ~ 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 F first fiftee_n years without prior permission of the lessor. The le.ssee was to enjoy th~ right of possession so long as it continued paying instalments of the premium by due-date and abide by other terms and conditions of ttre ~ease. It was, however, stated that the lessee would be entitled to mortgage lease-hold G · rights to a Bank, Punjab Financial Corporation or Life Insurance ~--f ~ 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 H

718 SUPREME COURT REPORTS [2008] 12 S.C.R.

A ('SASF' for short), fjnariced the project undertaken by the Company by way of foreign currency loan and also working capital of Rs. 93.1 million.

4Copy pinpoint4. It was the case of the Company that due to overall recession in Textile Industry, the Company suffered huge loss 'B and. could not repay the amount of loan. Since the Company failed to pay instalments, IDBI filed Original Application No . . 1368 of 2001 on December20, 2001 in Debt Recovery Tribunal, Chandigarh ('ORT' for short) for recovery of Rs.25;26,60,836/ - under the Rec9very of Debts· Due to· Banks and Financial \ C 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 , I . ., D · ·present before the ORT thoqgh 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 ORT. '- · 5. The Tribunal in operative part· of the order stated; E "The application for recovery of a sum Rs.25,26,60,83@.00 is decreed against defendant company and the defendant/ company .is ord.ered to pay>_ i. A sum of Rs. 25,26.,60,836.00 alongwith F pendent elife and future· interest @ 7.8% per ..· anriumwith half yearly rests jointly and severally., from the date of filing of the suit till reall?:~~~on; ii. , Pay the cost of litigation; . G iii. _ Pay the s.aid amount within 30 days from the d~te of receipt .df this order.

2. In the ev§.nt of failure on the part of defendants to pay . ' the above amount within the stipulated period, the applicant bank shall be entitled to recove(the said

,I KSL & INDUSTRIES LTD. -v. fvl/S ARIHANT 719 THREADS LTD. & ORS. [C.K. THAKKER, J.]

amount from the sale of mortgaged properties of the A 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. 8

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

6Copy pinpoint6. A recovery certifica_te was issued against the Company. On September 9, 2003, the Recovery Officer issued_ a C __ composite demand notice under Rule 2 of Second Sch~gule qf 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 D 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 E 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 wherein he stated that two machines were missing. He also recor9ed F that the unit was in running condition. At the instance of SASF,' North India Technical Consultancy Association Ltd. ('NITCO'rfor 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 G 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. H

I ' 720 SUPREME COURT REPORTS . (2ooa112 s.c . R.

A Oct~ber 30, 2004. The auction was, however, adjourned. The C_ompany on. October 18, 2004, filed an, appeal against_ the . order dated September 16, 2004 fixing reserve price of Rs.. - 12.50 crores in the ORT being Appeal No. 52 of 20.⁴ under Section 30 of the RDDB Act. On October 27, 2004, ORT allowed auction sale to proceed but ordered that the sale should not be confirmed till further orders. On October 30, ?004, 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 a.n application by the appellant, ORT appointed representative of the appellant <- as a receiver to prepare inventory of auctioned property. · . 7. -On Nov~mber,. 11, 2004, th·e appellant made an application to ORT 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%). ORT dismissed the said ~pplication and the appellant-auction purchase( 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 Decemb~r 13, 2004, the receiver lodged a E First Information Report (FIR) and filed an affidavit before ORT complaining that the agent of the Company had forcibly dispossessed him by using criminal force. On December 15, 2004, the Company moved an application for setting aside ex- (,

parte final o.rder passed on July 15, 2003 by ORT, Chandigarh F W,hich 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 rVi.A. No. 103 of 2004. The ORT allowed the impleadment application· of the appellant vide order dated December 17,

G 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 H

KSL & INDUSTRIES LTD. v. M/S ARI HANT 721

" THREADS LTD. & ORS. [C.K. THAKKER, J.]

maintained by the Court. An appeal against the said order is A said to have been pending in the Hig.h Court. Meanwhile, the 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-1, Delhi allowed Appeal No. 52 · s of 2004, set aside the auction sale subject to the Company fulfilling terms and conditions with regarct_to payment of certain amount, interest, expenses etc.

8Copy pinpoint8. The Tribunal, while granting relief to the Company, o~ered; · C "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 0 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. E (ii) The appellant will pay an interest on the amount deposited by the auction purchaser @ 9% p.a. · calculated from the date of deposit of the same till · today. The interest accumulated on the FDRs of auctioned _~mount till date will be paid to the CH Fl F 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 Fl in conducting the sale. The details of G the same will be given by the CH Fl within a week and thereafter within 10 days, this amount will be deposited by the appellant with the CH Fl. Failing to comply all the above three conditions, this appeal ., will be treated as dismissed and the restraint order passed H

722 SUPREME COURT REPORTS [2008] 12 S.C.R. .... ~- ~ A by this Tribunal will stand vacated and the Ld. Recovery Officer wiff be"-at liberty to pass the necessary orders as per faw and if, the above conditions are fulfilled by the appe11ant, the Ld. Recovery Officer is directed to re-auction this property as early as possible, within 75 days as per B law a11d 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 c the Recovery Officer; ORT~ Chandigarh for necessary action and information. RC file be also sent immediately back to the ORT Chandigarh by special messenger aldng with copy of this order. File be consigned to records".

9Copy pinpoint9. The Company, objecting the conditions imposed by ORT, D 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 ORT. It also directed refund of sale E amount to the appellant. Appeals were then heard and the judgment was reserved.

10Copy pinpoint10. _Meanwhile, on December 21, 2005, the Company filed a Reference before the Board of Industrial Finance & Reconstruction ('BIFR' for short) under SICA which was F ... register-ed 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 appellant on depositing the sale price. DRAT, in the operative part of the order stated; G "In view of the detailed discussion made on the issues i-~ 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 H

KSL & INDUSTRIES LTD. v. M/S ARIHANT 723 THREADS LTD. & ORS. [C.K. THAKKER, J.] ""' ) allowed. Consequently, the appeal filed by the judgment- A debtor in Appeal 52/2004 before the Presiding Officer, ORT, Chandigarh which is renumbered on transfer to ORT- I, Delhi as Transfer Appeal No. 1/2005 shall stand dismissed. Points formulated for consideration are answered accordingly. No costs. 6 -~ Since, the appeal filed by the auction-purchaser is allowed, the Recovery Officer, ORT, 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 c authormes 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 depositthe entire amount and thereafter the Recovery Officer shall proceed to complete the other requirements according to law forthwith."

11Copy pinpoint11. 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, ORT, Delhi for confirmation of sale. Within three days, however, 1 the Company filed two Writ Petitions being C.W. Nos. 2041 F 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 G ~ ... complete bar to recovery proceedings and no order could have been passed by the Tribunal.

Subsequent development

12Copy pinpoint12. Being aggrieved by the order passed by the High H

724 SUPREME COURT REPORTS [2008) 12 S.C.R.

A Court, the appellant filed Special Leave P·etition 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 .s heard finally. For completion of record, it may be stated that on Aprit.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; ~· c 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. " D · Submissions of the appellant

13Copy pinpoint13. 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 sic.a; and DRAT was wrong in issuing directi.ons. 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 ROOS 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 RODS Act and could not have been entertained by ORT. So far as ex-parte decree passed by ORT is c<!>ncerned, the cou·nsel submitted that the Company was duly $erved and in spite of that, it failed to appear before the Trib~nal. A grievance was .. - also made that in an appeal against fixinb reserve price (which was not maintainable), ORT granted interim relief on certain terms and conditions. But even those conditions had not been complied with by the Company. Reserve pfic;e fixed was proper,

KSL & INDUSTRIES LTD. v. MIS ARIHANT 725 I THREADS LTD. & ORS. [C.K. THAKKER, J.] ...._) sufficient and reasonable and ORT ought not to have set aside the order passed by the Recovery Officer.

14Copy pinpoint14. The counsel vehemently contended that the High Court ought to have taken into account over att conduct of the party, particularly when the Company had invoked discretionary and equitable jurisdiction under Article 226 of the Constitution. In 8 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 C final order was, therefore, rightly passed against it; the 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 D ~ property, it dispossessed the receiver appointed by the Tribunal; the actiori 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 dispute.d premises; created unlawful tenancy rights in favour of E 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, F -'\ it was submitted that the appeal deserves to be allowed.

15Copy pinpoint15. The learned counsel for the supporting respondents adopted the arguments advanced by the learned counsel for the appellant. G Submissions of respondent

16Copy pinpoint16. 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 H

726 SUPREME COURT REPORTS [2008] 12 S.C.R.

A 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 B order. Nb grievance, hence, can be made against such order. As to ex-pane final order said to have been passed by ORT, it was submitted that no opportunity of hearing was afforded to the Company and the order was violative of principles of natural justice and fair play. The appeal filed by the Company against c fixation of reserve price before ORT 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 ?mount 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 f. 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. F High Cout1's order

17Copy pinpoint17. 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 G 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 ~!lowed on the very first submission of Dr. Abhishek M. Singhvi, learned senior H

KSL & INDUSTRIES LTD. v. M/S ARI HANT 727 THREADS LTD. & ORS. [C.K. THAKKER, J.]

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. Accordingly, in the operative part (para 36); the 1

' . High Court concluded: 1 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. D (emphasis supplied)

19Copy pinpoint19. As already adverted to, before the Court the arguments had been advanced by all the parties on co"ntinuation 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 E 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 patties, At the same time, I am of the view that the conclusion arrived at by the High Court F that the proceedings were barred under Section 22 of SICA is not weU-founded arid the decision- of the High Court on that point deserves to be set aside. SICA - Ambit and scope G

20Copy pinpoint20. 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, H

728 SUPREME COURT REPORTS [2008] 12 S.C.R.

A · 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 B 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 specified in clauses (b) and (c) of Artide 39 of the Constitution. Section 3 defines various terms used in the Act. Chapter II relates. to c establistlment 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 hav_e been dealtwithjn Chapt~r Ill. Whereas Section 15 provides for Reference to Board, Section 16 speaks of Inquiry into working of sick industrial compaRies. Section 17 empowers the Board D to make suitable order on the completion of inquiry. Sections . ·1a, 19 and 19A deal with Prep·aration of Schemes, Rehabilitation 'i- and Arrangement for' continuing operations during inquir}i. - Winding up of sick industrial-company is found in Section 20. Section 21 allows Operating Agency to prepare inventory: Under E Section 22A, directions can be issued preventing disposal of assets in certain cases. ·

21Copy pinpoint21. Section 22 is a material provision which·1elates to suspension of legal proceedings, contracts, etc. Sub-seetion F (1) ·is important and may be reproduced;

22Copy pinpoint22. 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 G a sanctioned scheme is under implementation or where _an appeal under section 25 relating to an industrial company is pending, th.en, notwithstanding anything t-- contained in the-Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial compa_ny or any other instrument having

KSL & INDUSTRIES LTD. v. MIS ARIHANT 729 THREADS LTD. & ORS. [C.K. THAKKER, J.] ....... ) effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the iike 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. c

22. Chapter IV covers potentially sick industrial Companie~; misfeasance proceedings, appeals and other miscellaneous matters with which the Court is not concerned in the present case except Section-·32 whfch gives 'overriding effect' to the D ~ 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 ofthe Foreign Exchange Regulation Act, 1973 (46of1973) .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 comp~ny, _.the provisions of section 72A of the Income-tax Act, 1961 (43 of·1961), shall, subject to the .G ... • -t 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 amalgamatlon as they apply in relation to the amalgamation of a company H '·

SUPREME. COURT REPORTS . [2008] 12 S.C.R.

;--· A owning an industrial undertaking with another company. ~

RDDB Act - Ambit and scope

23Copy pinpoint23. The RODS Act (Recovery of Debts Due to Banks and Financial lnstitutions~Act, 1993) has been enacted with a view 8 "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 r "thereto". Chapter I is Preliminary in nature·and Section 2 defines various terms. Chapter II provides for establishment of Tribunals · c and Appellate Tribunals, their composition, qualifications and term of office of the staff, salaries, allowances, etc. Jurisdiction·, powers and authority of Tribunals are found in Chapter Ill. The Tribunals are required to follow procedure laid down in Chapter IV. Chapter V relates to 'Recovery of debt determiqed by the Tribunal'. Section 29 declares that the provisions of the Sec.and and Third Schedules of the Income Tax Act, 1961 will apply to '(_ the recovery of amount due under the RODS 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 f- this Act. (2) The provisions of this Act or⁴.J:le..ruJes made thereunder shC:;lll be in addition to, and not in derogation of, the Industrial G Finance Corporation Act, 1948, the State Financial Corporations Act, 1951, the Unit Trust of India Act, 1963, t .. ~ the Industrial Reconstruction Bank of India Act,· 1984 and the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of lpdia H Act, 1989. (emphasis supplied)

KSL & INDUSTRIES LTD. v. MIS ARIHANT 731 THREADS LTD. & ORS. [C.K. THAKKER, J.]

. 24. According to the Company, there is a bar against A initiation or· conti~uatiQn of proceedings under Section 22 of SICA against sick compa.ni.es°' "Ihe High Court was, therefore, right.in allowing the petitions filed by the C'ompany. The case of · the appellant and supp9rting respondents, on the other hand, is that Section 22 of SICA has no application to the case on hand B i 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 extendin_g benefit of the said provision to the Company. The appeHant alternatively contended that even if the proceedings pending against the Company are covered by c 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 9f statutes

25Copy pinpoint25. ·The question,. therefore, ~s whether the Hi.gh Court D was right in holding that the proceedings ~ere barred under Section 22 of SICA. I have extracted the relevant part of the said section. 1t 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 Ii~ or be proceeded with further, except with the c.onsent of the Board or, as the case may be, the 1 Appellate Authority.' The se,cond 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 in.d1,1strial company shall lie or be proceeded with further, except wit~· the consent of the Board or, as the case may be, th~ AppeU~te Authority." The two parts use two different G e.xpressions; (i) 1 'p_~oceeding' and_ (ii) 'suit'. · Case law.

26.- In Kci'ilash Nath Agarwal & Ors. v. Pradeshiya Industrial & Investment Corporation of UP Ltd. &Anr., (2003) H

732 SUPREME COURT REPORTS [2008] '12 S.C.R.

A 4 sec 305, this Court had an occasion to consider the meaning of these two expressions. The Court noted thatsQ.metime$. two different words are used in one and the same statute to convey the same meaning, but "that is exceptionirath$r than the rule". The general rule is that when two differentwords are used-by B a statute, prima facie _one has to construe different words as carrying different meanings.

27Copy pinpoint27. The Court stated; "The word "suit" and "proceeding" have not been. used c interchangeably in SICA.'' ·

28Copy pinpoint28. Referring to Pandurang R. Mandlik v. Shantibai R Ghatge, 1989 Supp (2) SCC 627, the Court observeo that in its comprehensive setisej the wor~ ·suit' is understood to apply to any proceeding in a Court of Justice by which an individual D pursues a remedy Which the la.w affords. The modes 6f proceedings may be various, bu.t if a right is litigated between parties in a Court of J1,Jstice, the proce~dirigs by which the decision of. the Court is sought may be a St.Jit. The WOJO 'suit' ordinarily means and, apart from somecontext, must be taken ... E to mean a civil. proceeding instituted by the presentation of a plaint". (vide Hansraj Gupta v. Dehra Dun- Mussoorief5/ectric Trameray Co. Ltd.; 60 IA 13 : AIR 1933 RC: 6~).. ,•.. ·

29Copy pinpoint29. In the instant case, proceedings had been initiated by the Bank not before a Civil Court by invoking Section 9 of the F Code of Civil Procedure, 1908, but before D.RT by taking recourse to jurisdiction under RDDB Act. l,t is, therefore, contended that the proceedings could not be said to be-a "suH" falling within the mischi~f of Section 22. of SICA. In any case, according to the learned cqunsel for the appellant, ex parle )

G final order was passed by DRT as b'ack ·as on July 15, 4003 ' and hence even if it is assurned·that the c;onnotation "suif sh0uld t-~·

be construed liberally so a~ to take within its sweHp a!I proceedings including an application before DRT, in vh-::w of final order passed by DRT in Z003, bar: envisaged. by .Section H 22 of SICA cannot operate.

KSL & INDUSTRIES LTD. v. MIS ARIHANT 733 THREADS LTD. & ORS. [C.K. THAKKER, J.] ..... ~

30Copy pinpoint30. So far as "proceedings" are concerned, it was A submitted by the appellant that the final order had been passed by ORT under RODS 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 Sched.ules to the Income Tax Act, 1961 had been followed. Reserve price was S i 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 fe.lt aggrieved by auction sale, it ought to have proceeded in accordance with c Rules 60 to 62 of the Rules in the Second Schedule. Rule 60 - permits a person adversely affected by the sale to apply to the Tax Recovery Officer within thirty days from the date of sale to set aside such sale on his depositing the entire amount with interest thereon and penalty. Admittedly, the Company did not ~ D avail the said remedy. Rule 61 allows an application to set aside sale of immovable property on the ground of non-service of notice or material irregularity in publishing or conducting the sale. The said rule also provides for deposit of amount .recoverable under the Certificate. The Company failed to do so. Under Rule 62, sale can be set aside when defaulter has no saleable interest. No such case had been put forward by the Company by applying under Rule 62. The Company, therefore, could not make grievance against the auction sale. ... _.. 31. Strong reliance was placed on behalf of the appellant on Rule 63 which states that where no application is made for setting aside the sale or where such application is made and is dismissed, the Tax Recovery Officer shall make an order confirming the sale a!ld thereupon the sale· shall become absolute. It was submitted that none of the Rules had been G "--t 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 RODS Act before ORT against the order of Tiix Recovery Officer fixing H -..·,:.....

SUPREME COURT REPORTS - [2008] ·12 S.C.R. " 734

~ ,,. A reserve price was ill-conceived and not maintainable as ther~ was no 'order' within the meaning of RDDB A.ct· which wa.s appealable. Attention of the Court in this connection was invite_d by the learned counsel to Rule 53 [Contents of proclamation]. It provides that a proclamation of sale shall speeify, inter a/if#, B "the reserve price, if any, below Which the property may not be sold" [Clause (cc)]. It was submitted that fixation of 'reserve y price' is not mandatory, condition precedent or sine qua non L "~

and if reserve price is not fixed, the order cannot be said to be non est, contrary to law or unlawful. In any case, when reserve c 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. t- The appeal before ORT was thus totally misconceived and ought not to have been entertained by the Tribunal. ..

32Copy pinpoint32. 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 r_eserve price was also an 'order' within the meaning of the Act. To buttress the submission, the counsel relied upon a decision of this Court in Union of India & Anr. v. Delhi High Court Bar Association & Ors., (2002) 4 SCC 275. In Delhi High Court Bar Association, while upholding the validity of RDDB Act, this · Court considered various safeguards and remedies available to the aggrieved party. In paragraph 30 of the decision, it was inter alia observed; .,,e.._ ~ Furthermore, Section 30, after amendment by the Amendment Act, 2000, gives a right to any person aggriev_ed by an order of the Recovery Officer, to prefer an appeal to the Tribunal. Thus now an .appellate f-0rum G has been provided against any orders of the Recover/: t--~ 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 Sectipns H 25 and 28 are, therefore, not bad in law

KSL & INDUSTRIES LTD. v. M/S ARIHANT 735 THREADS LTD. & ORS. [C.K. THAKKER, J.] ...,,. -..)

33Copy pinpoint33. I express no opinion one way or the other on the A 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 bac~ to the High Court for deciding all points not dealt and B ..._ decided .

34Copy pinpoint34. 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 c 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 RDPI? Act is a subsequent legislation which also contains a D t similar non-obstante clause and that Act should prevail over SICA.

35Copy pinpoint35. The learned counsel for the parties, in support of their respective submission~. referred to several decisions. Let us consider few of them~ E

36Copy pinpoint36. In Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. & Anr., (1993) 2 SCC 144, this Court was called upon to consider the provisions ofSICA and State Financial Corporation Act, 1951. Observing F -+ that the word 'proceeqings' 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.

3 7. Keeping in view the-underlying object of enacting SICA, G ""- ... 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 H

736 $UPREME COURT REPORTS [2008] 12 S.C.R.

A far as such creditors are concerned, .different consideratio.ns may come into play but the High Court · with respect faiied to appreciate that the 1985 Act was enacted primarily to assist sick industrial undertakings which inter alia failed to meet their financial o~ligations. It B is, therefore, difficult to accept'the view of the High Court that where the creditors of a sick industrial concern happen to be Banks or State Financial Corporations different considerations would come into play. It must .be realised that in the modern industrial environment large industries c 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 safd provisions would be rendered nugatory by the time the BIFR is able to evolve D a scheme of revival or rehabilitation of the sick industrial concern by : device of the Financial Corporation resQ.rting 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 E 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 Secti'on 22(1), therefore, F cannot be confined to legal proceedings understood in the narrow sense of proceedings in a Court of law or a lagal tribunal for attachment and sale of the debtor's property. ·

38Copy pinpoint38. In Deputy Commercial Tax Offiqer & Ors. v. Corromandal Phacmaceuticals & Ors., (1997) 10 SCC 649, this Court held that the embargo under Section 22(1) would not app!y to payment of tax collected by the sick industrial company after the date of the sanctioned schern.e and legitimately .H belonged to the Revenue. "Any other _construction will be

KSL & INDUSTRIES LTD. v. MIS ARI HANT 737 THREADS LTD. & ORS. [C.K. THAKKER, J.] ...,. -) unrea$onable and unfair and will lead to a state of affairs A enabling the sick industrial unit to collect amo~nts due to the Revenue ahd withhold it indefinitely and unreasonably. Such a construction which is unfair, unreasonable and agalnst the. spirit of the statute in a business sense, .should be. avoided. " (emphasis supplied) B

39Copy pinpoint39. Justice Jeevan Reddy was much more ~mphatic. 1.n a · concurrent judgment, His Lordship stated; Looking at the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 [the Act], I was wondering c how out of tune the Act has become with the economic policies being pursued now in this country. Since 1991- 92, we are launqhed 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 disposat. [They are me'rfily 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 F '1 • 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 i~ no longer thought advisable to keep alive inefficient G and uneconomic industries by injecting public funds or in "'-~ the name of ~afeguarding the employment ·of the workers . .And here is this Act, a product of the era of protectionism, seeking to keep alive "sick" companies by p_umping in funds - mostly public funds - and by providing various H ·!

738 SUPREME COURT REPORTS [200~] 12 S.C.R. <· , .....

A concessions. In the process,. QO.t>ody jnquir~s. w~y a particular industrial corrmariy ba~" beq6rne sick, viz., whether it is an induced one or whethe~ iri~on ·account of factors beyond their. c9nfrof, Th~ obj~ft of the· Act fs undoubtedly laudatory 'but it must' alsc;)_ provide for B appropriate measures against persons resp'on'sible 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'th'at the' ~ro·ceedings before the Board of Industrial and Financicil ~Reconstruction take a c long time to conclude ·and au 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 soughtto be taken of.the provisions of 0

Section 22 by certain ind.ustrial companies - ·and th~ wide language employed in· the section, is pr0Midi11g· them a D cover. We are sure Section 22, was .not;.imeant 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,Jhat the Government E is fully alive to the situation and are equaUy certain that they must be thinking of necessary modifications in the Act. These few observations are meant me;e/y to record ·the need for changes in the Act. (emphasis .supplied)

40Copy pinpoint40. In Real Value Appliances Ltd .v. ·:Canara Bank & Ors., ( 1998) 5 sec 554, acontention was advanced on behalf of the creditors that the conduct of the Company was far from satisfactory and highly objectionable. it suppre.ssed several facts from the Court. Contradictory and inconsistent pleas were taken G and fraud was practised on the'-~durC. _ . '. ·· .. ··_ '4 L This Court agreed .with· what was submitted and observed.; -.· ihis conduct of the appelJant,,in our_vie'N, was''certainly very unfair to the High GoLirt.. and, ther~fQr.e. . the High- Court H . ' '

KSL & INDUSTRIES LTD. v~ M/S ARI HANT 739 THREADS LTD. & ORS. [G.K. THAKKER, J.] .....,, ~ had rightly depreciated the same ..Jn ourview, there was A a clear attempt to keep the Court in the dark"

42Copy pinpoint42. 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 ~-o the.benefit of SICA, it could not be denied the said benefit. B' "'!

43Copy pinpoint43. In Rishabh Agro Industries Ltd. v. PN.~. Capital. Services Ltd., (2000) 5 SCC 515, this Court held that where conditions precedent for applicability of SICA were satisfied, then notwithstanding that the order for winding up of the c. Company had been passed, the bar would get attracted.

44Copy pinpoint44. In Patheja Bros. Forgings & Stamping & Anr. v. !CIC/ Ltd. & Ors., (2000) 6 SCC 545, this Court held that without requisite sanction under Section 22 of SICA, no suit can be proceeded with. D· )'

45Copy pinpoint45. In Jai Engineering Works Ltd. v. lndustryFacilitation 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; E The 1985 Act was enacted in public interest. It contains I

special provisions. The said special provis,ions 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 F 'I' experts for preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto. G ~-~

46Copy pinpoint46. 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 H

740 SUPREME COURr REPORTS (2008) 12 S.C.R.

A was enacted in 1993, SICAwas·very much in force since it was enacted in 1985. In spite of that, Pa.rliament was pleased to give 'overriding effect' _to .RDDB Act by using non-obstante clause in Section 34. Sub-section (1) e.xpressly stated that the provisions of.the, Act "shall have.~ffect notwithstanding anything inconsistent therewith contained in any other law for the time being in force" . . 47. I am thus at a point where two statutes employ non- obsfafJfe clause having 'o.verriding effect'. Such a conflict, as laid down in several cases, may' be. resol~ed by judiciary on various considerations; such as the policy underlying the enactments, the language used, the object intended to be achieved; or mischief sought fo 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-~pplying them. in their respective fi~lds so that both may operate ~ithout 9oming into conflict with each-other. In resolving the clash, the Court may further examine. whether one of th.e two en.actments is 'special' and the other one is 'general'. there car1 also.be.a E situation in law where one and the same statute may be held to be a ''special' statute vis-a-vis one legislation and 'general' st~tute· vis-a-vis another legislation. on·· the basis of one or more tests, the Court will try·to salvage the situation by giving effect to' non obstante clause in both the legislations.

48Copy pinpoint48. Let 1)1e .consider some of the decisions of this Court on this vexed issue.

49Copy pinpoint49. In Shri Ram Narain v. Simla Banking & Industrial Co. Ltd.; 1956 SCR 603; two competing statutes came up for G consideration before this Court being the Banking Companies , Act1 1.949 (as amended byAct 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 1~53) and Section ·13 of the Displaced Persons Act, 1951 bt?th contained a non-obstante clause stating that certain provisions H

KSL & INDUSTRIES LTD. v. M/S ARI HANT 741 THREADS LTD. & ORS. [C.K. THAKKER, J.] --.. -j of the Act shall have effect "notwithstanding anything inconsistent therewith in any other law forthe time being.in force';. This Court resolved the conflict by considering the object and purpose of the two laws and giving primacy to the Banking Companies Act. The Court indicated that when two Acts contain provisions giving overriding effect, it would be a difficult question as to which Act should prevail. . ~

50Copy pinpoint50. The Court stated- "It is, therefore, desirable to determine the overriding eff~ct of one or the other of the relevant provisions in these two c 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".

51Copy pinpoint51. In Shri Sarwan Singh &Anr. v. Shri KasturiLal, (1977) D .r 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 tenants could not be taken without permission of the competent authority "notwithstanding anything contained in any E 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 F .i 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 G, elsewhere in this Act or in any other law for the time being in ~ .... force". Section 25-B laid down special proced1,J.re for. enforcement of right conferred by Section 14:..A. Section 25-A stated that the provisions in Section 25-·B shall have effect "notwithstanding anything inconsistent therewith contained H, c:::_._. .,

742 SUPREME COURT REPORTS [2008] ·12 S.C.R.

,_-· ~· A elsewhere i.n. this Act or .in a.ny other law for the time being in force". . The Co.urt . held that the right to imm~diate 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 25-8 without B obtaining prior permission of the competent Authority under th~ Slum Clearance Act. ~·

52Copy pinpoint52. Speaking for the Court Chandrachud, J. (as His Lordship then was) observed: .,

c "For re~olving such intw s~ conflicts, one other test may also be applied though the pers.~asive 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 lllA having been enacted with effect from D December 1, 1975 are· later enactments in reference to i Section 19 of the Slum Clearance Act which, in its present form, was 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 E · itself was passed. The legislature gave overriding effect to Section 14A and Chapter lllA with the knowledge that Sections 19 and 39 of the Slum Clearance Act contained non obstarite clauses of equal efficacy. Therefore the later enactment must prevail oiler the former". F (emphasis supplied) • I

53Copy pinpoint53. 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 G would have primacy over the general law. r· .. 54.-ln Life lns{lrance Corporation of India v. D.J. Bahadur · & Ors .. (1981) 1$CC315, before th.is Court two Acts came up for consideration; (1) Industrial Disputes Act, 1947 (ID Act), and H (2) Life Insurance Corporation Act, 1956 (UC Act). One of the

' KSL & INDUSTRIES LTD. v. MIS ARIHANT 743 -. THREADS LTD. & ORS .. [C.K. THAKKER, J.] ~ questions before the Court was which ofthe two should be A 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 UC. It was, therefore, submitted that when a complaint is B ... made by an employee of UC, he cannot invoke the provisions of ID Act and the matter must be decided in accordance with UC Act.

55Copy pinpoint55. Krishna Iyer, J. described ·the question as 'crucial' which demanded an answer about the statute being 'general' c 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 UC Act was considered 'special', it must operate over ID Act treating ~· ID Act to be 'general' law. Noticing, however, the long title of LIC D Act 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 E 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 employ~r and employee. The principal object of the .... .. Act was nationalization of insurance business and it was a F '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, UC Act must be treated as 'general G law' vis-a-vis ID Act which should be treated as 'special law'. ···~

56Copy pinpoint56. His Lordship, therefore, made the following pertinent observations: "In determining whether a statute is a special or a general H

744 . SUPREME.COURT.REPORTS 12008] 12 S.C.R.

A -one, the focus rnustbe on the principal subject matter plus the particular perspective. For certain purposes, an Act may be genera/;alJrjfor certain other purposes it may be- special and we: cannot blur distinctions when d_ealing with finerpointsofJaw.Jn law, we have a cosmos of relativity B. not absolutes,..sd;foo;in life". (emphasis s'u.pplied) ,. •' ' ..

57 .. lt was, therefore, concluded that ID Act was a special statute devoted onlytoJnvestigation and settlement of industrial c dispu.tes and sinhe:ucAc(was a general statute, in cases of disputes between an :.employer '.and employee, ID Act would have primacy overtfCA~~: ·

58Copy pinpoint58. In Maharashtta Tubes· Ltd., a conflict between provisions oft~o. special statutes, viz. (1) .th~ State Financial D Corporation: Aqt, -1951 ·and (2) the ·sick Industrial Companies (SpecialProvisions) Act, 1985 (SICA) was highlighted. Both contained non::-Ob$tante c_lause. _The conflict was resolved. by this Court by giving overriding effect to SICA on the ground that· SICA was a:SLJbs,equent enactment (1985) and non-obstante E . clause_ therein: would prevail over the non-obstante clause in · the State Financial Corporation Act (1951 ). 59~. The G_ourt, speaking through Ahmadi, J. (as His Lordshi~ t.he_hwas), ~bserved: ·

F •iHa\ling ·,reached the· conclusion that both the 1'951 Act and.the.1 ~85:Actare-special statutes dealing with di.fferent . situation~"'"'-tf1e'fdrmer providing for the grant offinancial · assistan:ce Jt> industrial concerns with a view to boost up industrialisation .and the latter providing for revival and G reh~bilitatiqn . 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 industriatd:mcerns than the 1951 Act and, therefore, -the latter wouldprevail over the former in the event of conflict. H

KSL & INDUSTRIES LTD. v. MIS ARIHANT 745 THREADS LTD. & ORS. [C.K. THAKKER, J.] --. .J Both the statutes have competing non-obstante provisions. A Section 468 of the 1951 Act P.rovides 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 B ... the provisions of the said Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith containeq in any other law. Section 22(1) also carries a non-obstante clause and says that the said provision shall apply notwithstanding anything c 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 speci~I 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 Act deals with post-sickness situation. It is, therefore, not possible to agree that the E 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 owirlap here and there, for example, both of them provide for ~ grant of financial assistance though in different situations. F 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) G .. ~ 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 AP 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 H

746 SUPREME COURT REPORTS [2008] 12 S.C.R.

A the industrial concerns Wi.th a ,]iew to boost up industriaiization and also recovery offinandal.assistance if it becomes bad. Likewise, the Companies Act dealt With Companies including winding up of such Companies. Toe Gou.rt, however, held that the proviso to sub:.section (1) of Section 529 and Section 529- 8 A being a subsequent e'nactment, the non-obstante clause in Section 529-A would prevaif~overSection 29 of the 1951 Act. Hig_hlighting the.underlying obj~~d-of non-obstante clause in Section- 529-A of the· Compani~·~ ·Act and a social purpose underlying therein td ensure payment Of dues to the workmen c in priority over all other d~bts; the Court concluded that "if conditions are not impos~d-tdprntect the right of the workmen, there is every po$sibility tha~ th~setured creditor may frustrate of the above paripassu right the.workmen".

61. In Atlahabad:Bank.i/'Ca;ara Bank & Anr., (2000) 4 D SCC 406, a similar questieh:was raised before this Court. There the Court considered:tWoActs, (i) RDDB Act, 1993 and Companies Act, 1956. ltw~sheld that even where a winding up a petition was pending 6r winding up order had been passed · against a Comp~r)Y for, debt payable to banks and financial institutions, goverping law.was RDDBAct. No leave of Company Court as envisaged ·under the Company Act, therefore, was necessary. The CoLJrtheld that though both the laws could be in treated as 'special laws' respect of recovery of dues by banks and financial institutions, it was 1993 Act which should be considered as·'special' _vis..,a-vis Company Law. L

62. I may referto ·a recent decision of this Court in Mis. Transcore v. Vhi6noflndla.'&Ani., (2008) 1 SCC 125, Wherein this Court considered the ·provisions of RDDB Act, 1993 and Securitization and Reconstru'ction of Financial Assets and . G Enforcement' of Security :Interest Act, 2002. Considering the scheme of·both the laWs/the Court held that 1993 Act was a 'complete Cdde' by itself a~ far as recovery of debt is concerned:·:,.· It was a 'special law' in the matters of recovery of dues and the·.·. provisions of the said Act wolild prevail over other laws. H

KSL & INDUSTRIES LTD. v. M/S ARIHANT 747 THREADS LTD. & ORS. [C.K. THAKKER, J.]

63 .. It may also be profitable to refer to a three J..~dge A 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, B 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 c this Court by S-was that in view of special provisions contained in SICA, no proceedings could have 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 0 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: '' E "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 effe_ct-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 rendered by a' Special Court in Bhoruka Steel Ltd. vs. Fairgrowth Financial G 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 H

748 SUPREME COURT REPORTS [2008] 12 S.C.R. ' ~ -

~· r A because at the time of enactment of the later statute, the Legislature was aware of th.e earlier legislation and its . l

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 B Legislature does not want the later. enactment to prev~i~ 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 c 13, that its provisions are to prevail over any other Act. Being a later ~nactment, it would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. Had the Legislature wanted to exclude the provisions of the Sick Companies ~ct from the ambit of the said Act, the D Legislature would have specifically so provided. The fact 'i that the Legislature did not specifically so provide necessar.iJy means th.at the Legislature intended that the provisions of the said Act were to prevail even over the provisions of the Sick Companies Act. ,.'i E

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 i~ given that the Sick F 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 t~at 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 H

KSL & INDUSTRIES LTD. v. M/S ARIHANT 749 ..., THREADS LTD. & ORS. [C.K. THAKKER, J.] -J considering a scheme for reconstruction has to keep in A mind the fact that it is to be paid off or directed by the Special Court. The Special Court can, if it is convinced, grant time or instalments."

65. Approving the above observations, this Court stated: B "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 c 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 ·t 0 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-obstar:ite 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 G .._ -1 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 H

750 SUPREME COURT REPORTS [2008] 12 S.C.R.

r· ~ A 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. B 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 c 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 tq securing the timely detection of sick or potentially sick companies owning industrial undertakings, the speedy determination by a Board of Experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto, RDDB Act has been enacted to secure and proiect public rev.enue 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 G .a later Act and SICA is a former Act that I am holding that the t- A