Full Judgment Text
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CASE NO.:
Appeal (civil) 2572 of 2006
PETITIONER:
MORGAN SECURITIES AND CREDIT PVT. LTD. \005\005 APPELLANT
RESPONDENT:
MODI RUBBER LTD. \005\005 RESPONDENT
DATE OF JUDGMENT: 14/12/2006
BENCH:
P.K. BALASUBRAMANYAN
JUDGMENT:
J U D G M E N T
P.K. BALASUBRAMANYAN, J.
1. While, I agree with the conclusion of my learned
Brother on the interplay of the Sick Industrial Companies
(Special Provisions) Act, 1985 (hereinafter referred to as
’SICA’) and the Arbitration and Conciliation Act, 1996 on
the question of law formulated while issuing notice on the
Petition for Special Leave to Appeal to this Court, and his
final order, I think it necessary to express my reservation
on the propriety of the order passed by the Division Bench
of the High Court on the facts and in the circumstances of
the case. While purporting to exercise jurisdiction in a
writ petition challenging an order of the Board for
Industrial and Financial Reconstruction (hereinafter
referred to as, ’B.I.F.R.’) which was approached by the
respondent, the Division Bench of the High Court has
chosen to brush aside valid orders passed by the
Company Court in Allahabad, the order to maintain status
quo passed by the Appellate Authority for Industrial and
Financial Reconstruction (A.A.I.F.R.) and by various Debts
Recovery Tribunals and has permitted the asset of the
respondent to be sold as proposed by the respondent. It
must be noted that the orders were made by the
competent tribunals or court and that those orders were
binding on the respondent, the writ petitioner in the High
Court. If on its understanding of Section 22(3) of SICA,
the High Court was of the view that the orders of restraint
did not bar the BIFR from considering the prayer of the
respondent, there was still the order of A.A.I.F.R. to
maintain status quo regarding the assets of the
respondent-Company. Surely, that was an order under
the SICA. No reason is given by the High Court to hold
that the order of A.A.I.F.R. is also not binding on B.I.F.R.
or that B.I.F.R. could ignore it. According to me, the High
Court should have dealt with the question properly with
reference to the nature of the relevant orders and the
context in which they were made and if it was still of the
view that the power vested in B.I.F.R. under Section 22(3)
of SICA enabled it to override all those orders, it should
have normally remitted the application made by the
respondent to B.I.F.R. so as to enable it to take a decision
on the prayer of the respondent in the context of the
proceedings pending before B.I.F.R. and all elements
relevant for the purpose of such a decision. The High
Court has also not considered how far it will be
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appropriate to permit the sale of the assets of a Company
which is before B.I.F.R. for a scheme of revival.
2. Occasions are not infrequent when not so
scrupulous debtors approach B.I.F.R. to stall the
proceedings and to keep their creditors at bay. The delay
before the B.I.F.R. is sought to be taken advantage of.
The Parliament has apparently taken note of this and has
repealed SICA by the Sick Industrial Companies (Special
Provisions) Repeal Act, 2003. The vacuum, thus created
has been filled by an amendment to the Companies Act.
But, so far, the provisions of the Amending Act and the
Companies Act introduced, have not been brought into
force. It appears to be time to consider whether these
enactments should not be notified.