MIS MADRAS PETROCHEM LTD. & ANR v. BIFR& ORS.

462 SUPREME COURT REPORTS [2016] 11 S.C:R. •.

A . 33. A con,spectus._ofthe aforesaid decisions shows that the Sick Industrial Co~panies (Special Provisions) Act, 1985 prevails in all situations where there are earlier enaetments with 11011 obstante clauses , similar to the Sick Industrial Companies (Special Provisions) Act; i 985. ; Where thei:e are later enactments with simila~ 11011 obsta11te clauses, the Sick Industrial Companies (Special Provisions) Act, 1985 has been B held to prevail only in a sjgi~fion where the reach of th"e 11011 obsta11te clause in the later Act is limited - such as in the case of the Arbitration arid, Conciliati~n Act, 1~96 - or in the case of the later Act expressly ·xieldingto the Sick IndustrfaJ Companies (Special Provisions)Act, 1985, as in the case of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993. Where such is not the case, as in t4e case of : Special Courts Act, 1992, it is the Special ~ourts Act, 1992 which was , .held to prevail over the Sick Industrial Companies (Special Provisions) Aet, -1985. · . 34.,,..We have now to undertake an analysis of the Acts in question . .D The first thing to be noticed is the difference between Section 3 7 of the Secufitisationand ReconstructionofFinancial Assets and Enforcement . of Security Interest Act, 2002 !'Ind ·section 34 of the Recovery Of Debts · Due Tri Banks And Financial Institutions Act, 1993. ·Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 does not include the Sick Industrial E ~ompitnies (Special Provisions) Act, 1_985 un1ike Section 34(2) of the Recov¢ry,ofDebts Due To Banks and F~ncial InstitµtionsAct, 1993. Sectiop 37 of the Securities and Reconstrutf~ Of Financial Ass.ets and . Enforcsment of Security Interest Act, 2002. states that the .said Act shall be in a~diticm to and not in derogation of fotir Acts, namely, the Companies . '.F Act, tile Securitie's Contracts (Reguiation)Act, ·1956, the Securities and Exchange Board of hldia Act, 1992 am! the Recovery Of Debts'Due To .. Banks And Financial-Institutions Act, 1993. It is clear that the first three ,Acts deal with sec.urities generally and the Recovery Of Debts·Due To · Banks And Financiallnstitutions Apt, 1993 deals with recovery-of debts due to banks and financial institutions. Interestingly, Section 41 of the G Securltisationand Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 makes amendments in three Acts - the Companies Act, the Securities Contracts (Regulation) Act, 1956, and the Sick Industrial Companies (Special Provisions) Act, 1985. It is of great signifipance. that only-the first two Acts are included in Section 3 7 If and not the third i."e. the Sick Industrial Companies (Sp_ecial Provisions) : .. . . . ' .

M/S MADRAS PETROCHEM LTD.& ANR. v. BIFR & ORS. 463. [R. F. NARJMAN, JJ

Act, 1985. This is for the obvious reason that the framers of the A Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 intended. that the Sick Industrial Companies ESpecial .Prpvisions) Act, 1985 be covered by the non obstante ·clause , ·contained in Section 35, and not by the exception thereto carved ourby Section 37. Further, whereas the Recovery of Debts Due to Banks and B Finam;ial Institutions Act, 1993 is expressly mentioned in Section 37, the Sick Industrial Companies (Special Provisions) Act, 1985 is, not, making the above position further clear. And this is in stark contrast, as has been stated above, to Section 34(2) pf the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which expressly included the Sick Industrial Companies (Special Provisions) Act, 1985. The new c legislative scheme qua recovery of debts contained in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security .,

Interest Act, 2002 has therefore to be given precedence over the Sick Industrial Companies (Special Provisions) Act, 1985, unlike the old scheme for recovery of debts contained in tfte Recovery of Debts Due D to Banks and Financial Institutions Act, 1993.

35. Another interesting pointer to the same conclusion is the fact that Section 35 of the Securitisation and Reconstruction.of Financial Assets and Enforcement of Security Interest Act, 2002 is not made subjecHo Section 37 of the said Act. This statutory scheme is at complete variance with· the statutory scheme contained in Section· 34 of the E Recovery of Debts Due to Banks and Finarn;ial Institutions Act, 1993 in which sub-section (l)ofS~ction 34 containing the non obstante clause is expressly made subjectto sub-section (2) (containing the Sick Industrial Companies (Special Provisions) Act, 1985) by the expression "save as provided under sub-section (2)". F ' 36. This. is what then brings us to the d<;>ctrine of harmonious construction, whieli is one of the parambuiitdoctrines that is applied in Interpreting all statutes. Since neither Section 3-5 nor Section 37 of the Securitisation and Reconstruction of Financial As5ets' ~nd Enforcement of Security Interest Act, 2002 is subject tci the other, w~ think it .is G necessary to interpret the expression "or any· other law for the time · being in force" in Section 3 7. If a literal meaniH§ is given to the said ·expression, Section 35 will become completely otiose as all other laws will then be in addition to and not in derogation of the Securitisation and Reconstru.ction of Financial Assets and Enforcement of:Security H

464 SUPREME COURT REPORTS [2016] 11 S.C.R.

A Interest Act, 2002. Obviously this could not have been the Parliamentary intendment, after prov/ding in Section 35 that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 will prevail over all other laws that are inconsistent therewith. A middle ground has therefore necessarily to be taken. According to us, the two apparently conflicting Sections can best be B harmonized by giving meaning to both. This can only be done by limiting the scope of the expression "or any other law for the time being in force" contained in Section 3 7. This expression will therefore have to be held to mean other laws having relation to the securities market only, as the Recovery of Debts Due to Banks and Financial Institutions Act, c 1993 is the only other ~pecial law, apart from the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, dealing with recovery of debts due to banks and financial institutions. On this interpretation also, the Sick Industrial Companies (Special Provisions) Act, 1985 will not be included for the obvious reason that its primary objective is to rehabilitate sick industrial companies and not to deal with the securities market.

37. An interesting pointer to the direction Parliament has taken after enactment of the Securitisation and Re.construction of Financial Assets and Enforcement of Security Interest Act, 2002 is also of some relevance in this context. The Eradi Committee Report relating to insolvency and winding up of companies dated 31. 7 .2000, observed that out of 3068 cases referred to the BIFR from 1987 to 2000 all but I 062 cases have been disposed of. Out of the cases disposed of, 264 cases wete revived, 3 7 5 cases were under negotiation for revival pr9cess, 741 cases were recommended for winding up, and 626 cases were dismissed as not maintainable. These facts and figures speak for themselves and place a big question mark on the utility of the Sick Industrial Companies (Special Provisions) Act, 1985. The Committee further pointed out that effectiveness of the Sick Industrial Companies (Special Provisions) Act, 1985 as .has been pointed out earlier, has been severely undermined.by reason of the enornwus delays involved in the disposal of cases' by the BIFR: (See paragraphs 5.8, 5.9 and 5.15 of the Report). Consequently, the Committee recommended that the Sick Industrial Companies (Special Provisions) Act, 1985 be repealed and the provisions thereunder for revival a1id rehabilitation should be telescoped into the structure of the Companies Act, 1956 itself. H

MIS MADRAS PETROCHEM LTD.& ANR. v. BIFR & ORS. 465 [R. F. NARIMAN, J.]

38. Pursuant to the Eradi Committee report, the Companies Act·· A was amended in 2002 by providing for the constitution of a National Company Law Tribunal as a substitute for the Company Law Board, the High Court, the BIFR and the AAlFR. The Eradi Committee Report was further given effect to by inserting Sections 424A to 424H into the Companies Act, I 956 which, with a few changes, mirrored the provisions B of Sections I 5 to 2 I of the Sick Industrial Companies (Special Provisions) Act, 1985. Interestingly, the Companies Amendment Act of2002 omitted a provision similar to Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Consequently, creditors were given liberty to file suits or initiate other proceedings for recovery of dues despite pendency of proceedings for the revival or rehabilitation of sick companies c before the National Company Law Tribunal.

39. This Amendment Act came under challenge, which challenge culminated in the Constitution Bench decision in Union oflndia v. R, Gandhi, President, Madras Bar Association, (20 I 0) 11 SCC I 0 by which the amendments were upheld, with certain changes recommended by the Constitution Bench of this Court.

40. Close on the heels of the amendment made to the Companies Act came The Sick Industrial Companies (Special Provisions) Repeal Act, 2003. This particular Act was meant to repeal the Sick Industrial Companies (Special Provisions) Act, 1985 consequent to some of its provisions being telescoped into the Companies Act ... Thus, the Companies Amendment 1'ct of 2002 and the SICA Repeal Act formed part of one legislative scheme, and neither has yet been brought into force. In' fact, even the Companies Act, 2013, which repeals the Companies Act, 1956, contains Chapter 19 consisting of Sections 253 to 269 dealing with revival and rehabilitation of sick companies along the lines of Sections 424A to 424H of the amended Companies Act, 1956. Conspicuous by its absence is a provision akin to Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 in the 2013 Act. However, this Chapter is also yet to be brought into force. These statutory pr.ovisions, though not yet brought into force, are also an important pointer to the fact that Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 has been statutorily sought to be excluded, Parliament veering around from wanting to protect sick industrial companies and rehabilitate then1 to giving credence to the public . interest contained iri the recovery of public monies owing to banks and H

466 SUPREME COURT REPORTS [2016] 11 S.C.R.

A financial institutions. These p10 vis ions also show th.at the aforesaid construction of the provisions of the Securitisation and Reconstruction ofFinan1.;ial Assets and Enforcement of Security Interest Act; 2002 vis- a-vis the Sick Industrial Companies (Special Provisions) Act, 1985,'ieans . in favour of creditors being able to realize their debts outside the court process over sick industrial companies being revived or rehabilitated. In· B fact, another interesting document is the Report on Trend and Progress of Banking in India 20 l 1-2012 for the year ended 30.6.2012 submitted by the Reserve Bank of India to the Central Government in terms of Section ~6(2) ofthe Banking Regulation Act, 1949. In table IV.14 the report provides statistics-regarding trends in Non-performin'gAssets· bank- c wise, group-wise. As per the said table, the opening balance of Non- performing Assets in public sector banks for the year 2011-2012 was Rs.746-bii"lion but the closing balance for201 I-2012 was Rs.1,172 billi~n only. The total amount recovered through. the Securitisation and Reconstruction ofFinancial Assets and Enforcement of Security Interest· Act, 2002 during 2011-2012 registered a decline compared to the previous year, but, even then·, the amounts recovered under the said Act constituted 70 pc;rcent ofthetotal amount recovered. The amounts recovered under the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 constituted only 28 per cent. All this ~ould go to show that the amounts that public sector banks and financiafinstitutions have to recover __ E are in staggering figures and at long last at least one statutory measure has prov~d to be of some efficacy. This Court would be loathe to give such an interpretation as would thwart the recovery process under the Securitisation'lind Reconstruction of Financial A.ssets and Enforcement of Security Interest Act, 2002 which Act alone seems to have worked to some extent at least. F .41. It will thus be seen that notwithstanding the 11011 obstante clauses in Section 22( I) and (4 ), read with Section 32, Seetion 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will have to give way to t4e measures taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest G Act, 2002 more particularly reforred to in Section 13 of the said Act, and that this being the case, the sale notices issued both in 2003 and 2013 could continue without in any manner being thwarted by Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

42. It remains to consider one argument ofShri C.N. Sreekumar. H

MIS MADRAS PETROCHEM LTD.& ANR. v. BIFR & ORS. 467 [R. F. NARJMAN, J.]

Learned counsel argued that Section 37 of the Securitisation and A Reconstruction ofFinancial.Assets and Enforcement of Security Interest Act, 2002 refers to the Recovery of Debts Due t0. Banks and Financial Institutions Act, 1993 which in tum contains Section 34(2) which makes the Sick Industrial Companies (Special Provisions) Act; 1985"prevail over the Recqvery of Debts Due to Banks and Financial Institutions B Act, 1993. It was therefore argued that since Section 37 refers to the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and since Section 34(2) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 refers to the Sick Ind~strial Companies (Special Provisions) Act, l 985;Section 3 7 should also be construed so as to include a reference to the Sick Industrial Companies (Special c Provisions) Act, 1985. Quite apart from driving a coach-and-four through . the object sought to be achieved by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, this" argument does not commend itself to us for the obvious reason that Section 34(2) refers to the Sick Industrial Companies (Special Provisions) D Act, 1985 only for the purpose of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 and for no other purpose. This is qujte apart from the fact that; as has been noted hereinabove, the non- reference to the Sick Industrial Companies (Special Provisio~s) Act, 1985 in Sect-ion 3 7 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was deliberate, as has been held ·by us hereinabove.

43. Shrj Sundaram is also correct when he refers to the judgment of this Court in·Shree Chamuridi Mopeds v. Church of South India Trust Association, (1992) 3 SCC I. In the said judgment, this Court'\ has held: F "In the instant case, the proceedings before the Board under Sections 15 and 16 of the Act had been terminated by order of the Board dated April 26, 1990 whereby the Board, upon consideration of the facts anq material before it, found.that the appellant-company had become economically and commer.ciaHy G · ·· non-viable due to its huge accumulated losses and ,liabilities and should be wound up. The appeal filed by the appeltant-company under Sect.ion 25 of the Act against said order of the Board was dismis~.ffy the Appellate Authority by order dated January 7,

1991. As a result of these orders, no proceedings under the Act H

468 SUPREME COURT REPORTS ,(· r10161 11 S.C.R.

A was pending either before the Board or before the Appellate Authority on February 21, 1991 when the Delhi High Court passed the interim order staying the operation of the Appellate Authority oated January 7, 1991. The said stay order of the High Court cannot have tlie effect of reviving the proceedings which had been disposed of by the Appellate Authority by its order dated B January 7, 1991. While considering the effect ofan interim order staying the operation of the order under-challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the -- restoration of the position as it stood on the date ofthe passing c of the order which has been quashed. The stay of operation of an order does not, however,)ead to such a result. It on.ly means that the order which has been stayed would not be operative from the date of the passing_ of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The same-cannot be said with regard to an order staying the operation 'of the· order-of_ the Appellate Authority because in spite of the said order, the order of the Appellate Authority continues to exist in law and so long as it exists, it cannot be said that the appeal which has been disposed of by the said order hjlS not been disposed of and is still pending. We are, therefore, of.the opinion that the passing of the interim order dated February 21, 1991 by the Delhi High Court staying the operation of the order of the App_ellate Authority dated January 7, 1991 does not have the effect of'l'eviving the appeal which had been dismissed by the Appellate authority by its order dated January 7, 1991 and it cannot be said that after February G 21, 1991, the said appeal stood revived and was pending before the Appellate Authority. In that view of the matt_er, it cannot be said that any proceedings under the Act were pending before the Board or the Appellate Authority on the date of the passing . of the order dated August 14, 1991 by the learned Single Judge of the Karnataka High Comi for winding up of the company or H

·MIS MADRAS PETROCHEM LTD.& ANR. v. BIFR & ORS. 469 [R. F. NARIMAN, J.]

on November 6, 1991 when the Division Bench passed the order A dismissing O.S.A.No. 16of1991 filed by the appellant company against the order of the learned Single Judge dated August 14,

1991. Section 22(1) of the Act could not, therefore, be invoked . and there was no impediment in the High Court dealing with the winding up petition filed by the.respondents ..... " [at para I OJ ·, ·- B

44. A reading of the. said judgment also shows that the order of stay of the BIFR's opinion to wind up the company and the dismissal of the appeal therefrom by the AAIFR would not in any.ml!!1ner revive the reference under Section 15 of the Appellant No. I Company. For this reason also, it. is clear that after the orders of the BIFR and AAIFR . C have been upheld by dismissal of the writ petition filed before the Delhi High Court by the impugned judgment, there can be said to be no revival of reference proceedings before the BIFR.

45. However, Shri Sreekumar referred to three judgments in support of the proposition that interim orders preserve the status quo and that, therefore, the interim order of stay has to be obeyed during the D pendency of the Writ Petition. For this purpose, he cited Kihoto Hollohan v. Zachillhu & Ors., (1992) Supp, (2) SCC 651, Ravi S. Naik v. Union oflndia & Ors., (1994) Supp. (2) SCC 641 and BPLLtd. & Ors. v. R. Sudhakar & Or~,, (2004) 7 SCC 219. E~ch of these judgments was delivered in different contexts. The first judgment of Kihoto E Hollohan was delivered in the context of landslide changes that would have taken place had a stay order not been passed in the context of the I Q1h Schedule to the Constitution oflndia, which was enacted to remedy tr1e evil of defection: The second judgment, name\)', Ravi S. Naik was also delivered in the same context and the third judgment was delivered in the context ofSection 33(2)(b) of the Industrial Disputes Act, 1947. F None of these judgments has any direct bearing on the facts before us, which can be said to be covered directly by the judgment in Shree Chamundi +"opeds Ltd. (supra) ..

46. Question No.2 arises on the facts of.this case because of a conflict between the High Courts on the interpretation of Section 15( I) G proviso 3. A large number of High Courts have, in judgments differing in detail only, taken the broad view that the expression "where a reference is pending" under Section 15( I) proviso 3 would include all proceedings before .the BIFR right till the stage of.the successful culmination of a scheme for reconstruction or the recommendation for winding up of the H

470 SUPREME COURT REPORTS [2016] 11 S.C.R.

A sick industrial company. These High Courts are Madras, Delhi, Bombay, Kerala, Punjab, Gujarat and Calcutta. All these judgments are referred to in an exhaustive full bench decision of the Madras High Cburt in Mis. Salem Textiles Limit_ed v. The Authorized 'Officer and Ors., reported in AIR 2013 Madras 229. The only dissenting B voice is that of the Orissa High Court in a judgment reported in Nol>le v. Aqua Pvt. Ltd. State Bank of India,· AIR 2008 Orissa 103, which has held that the expression "reference" would only refer to the initial stage of filing a referen~ce before the ~IFR and not to subsequenr stages thereof, namely inquiry, preparation and sanction of schemes. It has to be determined as.to which of these two sets of judgments is_ a correct '- , C exposition of the law.

47. It is clear that a purely literal interpretation of the expression· "where a reference is pending" can yield the result that the OriS-sa High Court reached. In fact, Chapter III of the Sick Industrial Companies (Special Provisions) Act, 1985 specifically refers, in the Chapter heading, D to references,_ i!1quiries and schemes. While Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 deals with references, Section 16 deals;,with inquiries into the working of Sick Industrial Companies. Section 18 then deals w\th preparation and sanction of schemes.

E 48. What has to be examined is ·whether this purely literal rendering ofthe expression "where a reference is pending" is corr~ct or not. First and foremost, it is important to note that the third proviso to Section 15(1) _uses the words "is pending". A reference has been held to be pending the moment it is_ received by the Board. In Real Value Appliances Ltd. v. Canara Barik & Ors., (1998) 5 SCC 554, this F Court had to decide whether the mere registration of a reference by the BIFR would result in the automatic cessation of all proceedings which ar~ pending in civil courts and the company court against its assets. It was argued that in order that Section 22 of the Act can.come _into operation, the BIFR must, subsequent to the registration of the reference under Section 15, apply its mind and consider whether it is necessary under Section 16 to make an inquiry. Unless an inquiry is pending, the provisions of Section 22 of the Act do not get attracted. It was held that once the reference is registered after a preliminary scrutiny, it is mandatory for the BIFR to conduct an inquiry. This being so, it is in furtherance of the legislative intention to S\:e that no proceedings against the assets are taken before the BIFR decides, after the inquiry, to continue with the

M/S MJ\DRAS PETROCHEM LTD.& ANR. v. BIFR & ORS. 471 [R. F. NARlMAN, J.]

'reference. It was thus held, having particular regard to Section 16(3) A explanation, that an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon __its knowledge reduced to writing by the Board. This being the case, this · Court held t_hat once the reference is registered and once it is mandatory to simultaneously call for information/documents from the informant, B then an inquiry under Section 16 must be deemed to have commenced. In that view of the matter, Section 22 would immediately come into play. It is clear, therefore, that if a· literal mean-ing were to be applied to the . ._expression "where a reference is pending", the third proviso to Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 would be rendered otiose and the.purpose for which it was inserted C ·would completely fail. On a literal reading of the provision, such reference shall abate on steps being taken by the secured creditors to recover their secured debts under Section 13( 4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of security Interest Act, 2002, the moment a reference is registered. And this Court has held that the moment the reference is registered, an inquiry as contempfated by Section 16 shall be deemed to commence. If that is so, then a reference can never be said to be pending after an inquiry commences, if learned counsel for the Appellants is correct: This can never be the case. It is clear, therefore, that the expression."where a_ - ·reference is pending" would necessarily include the inquiry stage before the Board under Section 16 of the Act. If th is be the case,...then the reference can be ~aid to be pending not only when an inquiry is instituted, but also after preparation and sanction of a scheme right till the stage tpe scheme has worked out successfully or till the BIFR gives its opinion to wind up the company: F , 49. The expression "reference" used_ in Section 15(1) proviso 3 is used in contra distinction to the expression "proceedings" in S~ction 22. "Proceedings" under Section 22 are actions taken against the sick company, whereas "references" are actions initiated by a sick company - it is perhap? forthis !eason that the t~ird proviso to Section 15(1) uses the expression "reference" instead of the expression G "proceedings~'.

50. Another impo11ant aspect as to the construction of the third proviso to Section 15(1) i_s the meaning ofthe·expression "such reference shall abate". One of the meanings of the expression "abate" is "to put an end to; to curtail; to come to naught". (See Ramanatha Aiyar's Law H

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A Lexicon). A reference can be said to abate in one or several ways. One obvious way that a reference abates is where the Board, after inquiry, · rejects the reference for the reason that the Board is satisfied that the Company is not a sick industrial company as defined under the Act. Another way in which a reference can abate is where a scheme is implemented successfully, and the sick industrial company is taken out B of the woods successfully. A third manner in which a reference can abate is when a scheme or schemes have failed in respect of the sick industrial company, and in the opinion of the BIFR, the said Company ought to be wound up. A fourth instance of abatement is provided by the third proviso to Section 15(1) of the Sick Industrial Companies (Special c Provisions) Act, 1985. And that is that a reference which is pending in the sense understood hereinabove shall abate ifthe secured creditors of not less than 3/4th in value of the amount outstanding against the financial assistance disbursed to the borrower, have taken measures to recover secured debts under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest D Act, 2902. It is clear that the third proviso to Section 15(1) seeks to strike a balance between getting a sick industrial company out of the woods and secured creditors being able to recover the debt owed to them by such company. The legislature has thought it fit to annul all proceedings before the BIFR only when at least 3/4•h of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors have taken the measures listed in Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The balance is therefore struck by the figure of"not less than 3f4th". The legislature has inserted this provision so that, if3/4•h or more of the secured creditors get together to take measures under Section 13(4) of the Securitisat:ion arid Reconstruction ofFinancial Assets and Enforcement of Security Interest Act, 2002, they will not be thwarted by the provisions of Section 22 of Sick Industrial Companies (Special Provisions)Act, 1985, and it will not be necessary for them to obtain BIFR permission before taking any such measures. This construction of the third proviso to Section 15( 1) is in keeping with the march of events post 2002, when the Securitisation and Reconstruction of Financial Assets and Enforcementof Security Interest Act, 2002 came to be enacted p_ursuant to various cominittee -·- reports, and for the reasons outlined hereinabove.

MIS MADRAS PETROCHEM LTD.& ANR. v. BIFR & ORS. 473 [R. F. NARIMAN, J.]

51. A recent judgment of this Court in Pegasus Assets A Reconstruction P. Ltd. v. Mis. Haryana Concast Limited & Anr., (Civil Appeal No. 3646of2011), has held, agreeing with a judgment of the Delhi High Court, and disapproving a judgment of the Punjab and Haryana High Court: that a Company Court exercisingjurisdiction under the Companies Act, has no control in respect of sale of a secured asset B by a secured creditor in exercise of powers available to such creditor . under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Some of the observations made by this Court are interesting in that this Court has held that the Securitisation Act is a complete code in itself, and that earlier judgments rendered in the context of the State Financial Corporation Act, 1951 or c the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 cannot be held applicable to the Securitisation Act. Further, the very incorporafrorr of certain ..provisions of the Companies Act in the Securitisation Act themselves harmonise the latter Act with the Companies Act in respect of workers debts under Section 529A of the Companies D Act. In a significant paragraph, this Court has held: "The aforesaid view commends itself to us also because ofclear intention of the Parliament expressed in Section 13 of the . SARFAESI Act that a secured creditor has the right to enforce its security interest without the intervention of the court or E tribunal. At the same time, this Act takes care that in case of grievance, the borrower, which in the case ofa company under liquidation would mean the liquidator, will have the right of seeking redressal under Sections 17 and 18 of the SARFAESIAct." (At para25)

52. The matter can be viewed from a slightly different angle also. F There are many situations in which Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will not apply. One such.., situation is a situation where an eviction petition is filed under a State R;nt Act for evicti1;m on the ground ofnon-payment ofrent. Such eviction petitions have been held not to be suits for recovery of money. G Consequently, Section 22 of the Sick' Industrial Companies (Special Provisions) Act, 1985 has been held not to apply - See Gujarat Steel Tube Co. Ltd. v. Virchandbhai B. Shah,(1999) 8 SCC P.11 (paragraphs 9 and JO).

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A 53. Similarly, in KailashNathAgarwal v. Pradeshiya Industrial & Investment Corpn. of U.P. Ltd., (2003) 4 SCC 305, the U.P. Act . · under which recovery proceed_ings initiate~ against guarantors at a post- decree stage were held to be outside·the purview of Section 22 of the Sick Industrial Companies "(Special Provisions) Act, 1985. (see paragraph 35). B _54. The resultant position may be stated thus: ""

1. Section 22 of the Sic"k Industrial Companies (Special ·Provisions) Act, 1985 will continue to apply in the case of unsecured creditors seeking to recover their debts from a C· sick industrial company. This is for the reason that the Sick IndustriaLCompanies (Special Provisions) Act, 1985 overrides the provisions of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993.

2. Where a secured creditor of a sick industrial company seeks D to recover its debt in the manner provided by Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, such secured creditor may realise such secured debt tinder· Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, E 2002, notwithstanding the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

3. In a situation where there are more than one secured creditor ef a sick industrial company or it has been jointly financed by secured creditors, and at least '60 per cent of F such secured creditors In value of the amourit·outstanding as on a record date do not agree upon exercise of the right to realise. their security under the. Securitisation and Recohstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section ~2 of the Sick Industri~I G Companies (Special Provisions) Act, 1985 will continue fo h_ave full play. ·

4. Where, under Section 13(9) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the case of a sick industrial company having more than one secured creditor or being H

MIS MADRAS PETROCHEM LTD.& ANR. v. BIFR & ORS. 47S [R. F. NARIMAN, J.]

' j9intly financed by secured creditors representing 60 per A cent or more in value of the amount outstanding as on a record date wish to exercise their rights to enforce their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, ' 2002, Section 22 of the Sick Industrial Companies (Special 8 , Provisions) Act, l 98S, being inconsistent with the exercise · of such rights, will have no play. S. . Where secured creditors representing not less than 7S per cent in value of the amount outstanding against financial assistance decide to enforce their security un.der the Securitisation and Reconstruction ofFi~ncial Assets and C Enforcement of S~rity InteresfAct, 2002, any reference. pending under the Sick Industrial Companies (Special P!ovisions) Act, 198S cannot be proceeded with further - the proceedings under the Sick Industrial Companies (Special Provisions) Act, l 98S will abate. D SS. In conclusioh, it is held tliatthe interim order dated 17.1.2004 by the Delhi High Court would not have the effect of reviving the referen~e so.as to thwart taking of any steps·by tlie respondent creditors in this case under Section 13 of the Securitisation and ReconstnictiOn of Financial Assets and Enforcement of Security Interest Act, 2002. This is because the· Securitisation and Reconstruction of Financial Assets E and Enfprcemerit of Security Interest Act, 2002 prevails over the Sick Industrial Companies (Special ProvisioiiS).Act, l 98S to the extent of inconsistency therewlfh-:·ffoction l S( 1) proviso 3 covers all references pending before the BIFR, no matter whether such reference is at the inquiry stage, scheme stage, or winding up stage. The O~issa High Court . F is not correct in its conclusion on the interpretation of Section l S(l) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, ? .

l.98S. This being so, it is cleat that in any case the present reference under Section lS(l) oftheAppellantNo. I company has abated inasmuch asmore than 3/4'h of the secured creditors involved have taken steps under Section 13(4) of the Securitisation and Reconstruction ofFinancial G '' Assets and Enforcement of Security Intere~t Act, 2002. The appeals are accordingly dismissed. ·

Bibhuti Bhushan Bose Appeals dismissed. H .