Full Judgment Text
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CASE NO.:
Appeal (civil) 4126 of 2006
PETITIONER:
Jay Engineering Works Ltd.
RESPONDENT:
Industry Facilitation Council and Anr.
DATE OF JUDGMENT: 14/09/2006
BENCH:
S.B. Sinha & Dalveer Bhandari
JUDGMENT:
J U D G M E N T
[Arising out of S.L.P. (C) No. 909 of 2005]
WITH
CIVIL APPEAL NO.4127 OF 2006
[Arising out of S.L.P. (C) No. 991 of 2005]
S.B. SINHA, J :
Leave granted.
The Appellant herein is a public limited company engaged in
business of manufacturing electronic fans and fuel injection equipments.
Respondent No. 2 is a small scale industry. It manufactures copper wires.
It supplied its products to the Appellant herein during the period 28th
December, 1996 and 3rd June, 2000. As the Appellant Company became
sick, its Board of Directors made a reference in terms of Section 15 of the
Sick Industrial Companies (Special Provisions) Act, 1985 (for short ’the
1985 Act’) on 8.4.1994. The Appellant Company was declared as sick
unit by the Board for Industrial and Financial Construction (for short "the
Board"). A rehabilitation scheme was framed by the Board but it was
declared to have failed by an order on 12.7.2001. By reason of the said
order, however, Industrial Development Bank of India (IDBI) was
appointed as an operating agency. A fresh report was submitted by the
said operating agency on 20th March, 2003 which was accepted by the
Board whereupon a fresh rehabilitation scheme was sanctioned on
8.4.2003.
In the meanwhile, the Respondent No. 2 herein filed a claim
petition before the Industry Facilitation Council (for short "the Council")
Respondent No. 1 herein in terms of the provisions of the Interest on
Delayed Payments to Small Scale and Ancillary Industrial Undertakings
Act, 1993 (for short "the 1993 Act"). Before the Council, the Appellant
herein raised a plea that it had been declared to be a sick company by the
Board and as such the matter should not be proceeded further. The
Council, however, opined that only because the Appellant Company has
been declared sick by the Board, it would not bind the Council to take a
decision in the matter. It passed an award directing:
"That upon the submissions made by both the
parties in the above case and in the light of
contentions raised it is prayed that the delay of
two years to four years was caused by the
respondents for making the payment to the
petitioner, which is enough. Therefore, Council
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has passed the order that an amount of Rs.
10,92,253.00 and one and half percent interest
of PLR of State Bank of India is due to the
Petitioner Messrs. Diamond Wire Industries,
Ratlam, of the Respondent Messrs. Jay
Engineering Works Limited, New Delhi."
The said award of the Council was put in execution. The bank
account of the Appellant was attached by the District Court, Ratlam. A
writ petition was filed by the Appellant herein before the Madhya
Pradesh High Court questioning the same which by reason of the
impugned judgment has been dismissed by a learned Single Judge. A
Letters Patent Appeal preferred thereagainst was dismissed by the
impugned judgment.
The High Court in its impugned judgment proceeded on the
premise that the 1993 Act could prevail over the 1985 Act.
Mr. S. Ganesh, learned senior counsel appearing on behalf of the
Appellant, at the outset, drew our attention to the fact that the award
made by the Council in favour of the Respondent had been taken into
consideration in the revised Scheme itself and as such the award of the
Council was non-executable. It was urged that both the 1985 Act and
1993 Act operate in different fields and in that view of the matter, the
question that the 1993 Act prevailing over the 1985 Act would not arise
in the instant case.
Mr. Sushil Kumar Jain, learned counsel appearing on behalf of the
Respondents, on the other hand, submitted that the Scheme approved by
the Board in 2003 is not applicable to the case of the Respondents. It was
submitted that in any event by reason of the said Scheme the liability of
the creditors could not be reduced.
It is not in dispute that the award was made by the Council in
favour of the Respondent No. 2. However, it is also not in dispute that
the Board in terms of its order dated 8.4.2003 approved the Scheme
which inter alia envisaged the following:
"(xi) Rs. 462 lakhs for Settlement of "Dormant
Trade Creditors" on the basis of 25% principal
amount,
(xii) Rs. 540 lakhs for settlement of current
overdues of suppliers to be paid over a period of
18 months."
In the said Scheme, the award made in favour of the Respondents
finds place in the category of ’Dormant Creditors’. The liabilities of the
Appellant vis-‘-vis the Respondent No. 2 was, therefore, indisputably a
subject matter of the said Scheme. The High Court, in our opinion,
committed an error in proceeding on the premise that the awarded amount
had not been included and could not be included in the sanctioned
rehabilitation scheme, the same being part of transactions which took
place after 21.11.1997 ignoring the revised scheme made in the year
2003.
The High Court furthermore opined that inclusion of the
Respondent as a deferred creditor in the fresh rehabilitation scheme dated
8.4.2003 also did not affect the situation in favour of the Appellant
presumably on the premise that the 1993 Act was a special Act.
Before we advert to the contentions raised by the learned counsel
for the parties, we may notice sub-section (2) of Section 6 of the 1993
Act which reads as under:
"(2) Notwithstanding anything contained in
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sub-section (1), any party to a dispute may
make a reference to the Industry Facilitation
Council for acting as an arbitrator or conciliator
in respect of the matters referred to in that sub-
section and the provisions of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall apply
to such disputes as the arbitration or
conciliation were pursuant to an arbitration
agreement referred to in sub-section (1) of
section 7 of that Act."
We may also notice that Section 10 thereof provides for a non-
obstante clause in the following terms:
"10. Over-riding effect.--The provisions of this
Act shall have effect notwithstanding anything
inconsistent therewith contained in any other
law for the time being in force."
The 1993 Act was enacted to provide for and regulate the payment
of interest on delayed payments to small scale and ancillary industrial
undertakings and for matters connected therewith.
The provisions of the 1993 Act, therefore, do not envisage a
situation where an industrial company becomes sick and requires framing
of a scheme for its revival.
It is no doubt true that an award in relation to a claim of a small-
scale industry if made by the Council would be governed by the
provisions of the Arbitration and Conciliation Act, 1996 (for short "the
1996 Act").
The 1985 Act is a complete code by itself. Section 22 of the 1985
Act provides for special provisions. Sub-section (1) of Section 22 was
amended in the year 1994 by Act No. 12 of 1994 which reads as under:
"22. Suspension of legal proceedings,
contracts, etc.--(1) Where in respect of an
industrial company, an inquiry under section 16
is pending or any scheme referred to under
section 17 is under preparation or consideration
or a sanctioned scheme is under implementation
or where an appeal under sections 25 relating to
an industrial company is pending, then,
notwithstanding anything contained in the
Companies Act, 1956 (1 of 1956), or any other
law or the memorandum and articles of
association of the industrial company or any
other instrument having effect under the said
Act or other law, no proceedings for the
winding up of the industrial company or for
execution, distress or the like against any of the
properties of the industrial company or for the
appointment of a receiver in respect thereof and
no suit for the recovery of money or for the
enforcement of any security against the
industrial company or of any guarantee in
respect of any loans or advance granted to the
industrial company shall lie or be proceeded
with further, except with the consent of the
Board or, as the case may be, the Appellate
Authority."
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The said provision, thus, mandates that no proceeding inter alia for
execution, distress or the like against any of the properties of the
industrial company and no suit for recovery of money or for the
enforcement of any security, shall lie or be proceeded with further, except
with the consent of the Board or as the case may be, the Appellate
Authority. The said statutory injunction will operate when an inquiry had
been initiated under Section 16 or a scheme referred to under Section 17
is under preparation and/ or inter alia a sanctioned scheme is under
implementation. It is not disputed before us that the amount awarded in
favour of the Respondent by the Council finds specific mention in the
sanctioned scheme which is under implementation.
The award of the Council being an award, deemed to have been
made under the provisions of the 1996 Act, indisputably is being
executed before a Civil Court. Execution of an award, beyond any cavil
of doubt, would attract the provisions of Section 22 of the 1985 Act.
Whereas an adjudicatory process of making an award under the 1993 Act
may not come within the purview of the 1985 Act but once an award
made is sought to be executed, it shall come into play. Once the awarded
amount has been included in the Scheme approved by the Board, in our
opinion, Section 22 of the 1985 Act would apply.
If the liabilities of the Appellant are covered by the Scheme framed
under Section 22 of the 1985 Act, the High Court was clearly in error in
coming to the conclusion that the provisions thereof are not attracted only
because the debt had been incurred after the Company was declared to be
a sick one.
The 1985 Act also contains a non-obstante clause in sub-section (1)
of Section 32 which reads as under:
"32. Effect of the Act on other laws.--(1) The
provisions of this Act and of any rules or
schemes made thereunder shall have effect
notwithstanding anything inconsistent therewith
contained in any other law except the provisions
of the Foreign Exchange Regulation Act, 1973
(46 of 1973) and the Urban Land (Ceiling and
Regulation) Act, 1976 (33 of 1976) for the time
being in force or in the Memorandum or
Articles of Association of an industrial
company or in any other instrument having
effect by virtue of any law other than this Act."
The 1985 Act was enacted in public interest. It contains special
provisions. The said special provisions had been made with a view to
secure the timely detection of sick and potentially sick companies owning
industrial undertakings, the speedy determination by a Board of experts
for preventive, ameliorative, remedial and other measures which need to
be taken with respect to such companies and the expeditious enforcement
of the measures so determined and for matters connected therewith or
incidental thereto.
The High Court has placed strong reliance on Deputy Commercial
Tax Officer and Others v. Corromandal Pharmaceuticals and Others
[(1997) 10 SCC 649] wherein this Court was considering an exceptional
situation by reason of the fact that the liability of the sick company for the
first time arose after the date of sanctioned scheme and the sick industrial
unit was enabled to collect tax due to the Revenue from the exporters
thereafter but declined to pay it over to the Revenue wherefor recovery
proceedings had to be taken. This Court categorically opined that there
cannot be any impediment in the enforcement of the Scheme. Section 22
of the 1985 Act provides for a safeguard against impediment that is likely
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to be caused in the implementation of the Scheme. Section 22 was also
held to be of wide import as regards suspension of legal proceedings from
the moment, the inquiry is started till after the implementation of the
scheme or disposal of the scheme under Section 25 of the 1985 Act. It
was categorically held:
"\005it will be reasonable to hold that the bar or
embargo envisaged in Section 22(1) of the Act
can apply only to such of those dues reckoned
or included in the sanctioned scheme\005."
The ratio laid down in the said decision, therefore, instead of
assisting the Respondent assists the Appellant.
In Maharashtra Tubes Ltd. v. State Industrial & Investment
Corporation of Maharashtra Ltd. and Another [(1993) 2 SCC 144] this
Court held:
"On the other hand, the 1985 Act was enacted,
as its preamble manifests, with a view to timely
detection of sick or potentially sick companies
owning industrial undertakings, the
identification of the nature of sickness through
experts in relevant fields with a view to
devising suitable remedial measures through
appropriate schemes and their expeditious
implementation. Here the emphasis is to prevent
sickness and in cases of sick undertakings to
prepare schemes for their rehabilitation by
providing financial assistance by way of loans,
advances or guarantees or by providing reliefs,
concessions or sacrifices from Central or State
Governments, scheduled banks, etc. The basic
idea is to revive sick units, if necessary, by
extending further financial assistance after a
thorough examination of the units by experts
and only when the unit is found to be no more
capable of rehabilitation, that the option of
winding up may be resorted to\005"
Both the Acts operate in different fields. If the 1985 Act is
attracted, the question of its giving way of the 1993 Act would not arise.
In Allahabad Bank v. Canara Bank and Another [(2000) 4 SCC
406], this Court held :
"There can be a situation in law where the same
statute is treated as a special statute vis-‘-vis
one legislation and again as a general statute
vis-‘-vis yet another legislation\005"
In that case, it was further opined that although both the
Companies Act, 1956 and the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 are special laws, normally the latter shall
prevail.
We have noticed hereinbefore that the 1985 Act was amended in
1994. The 1994 Amending Act was enacted after the coming into force
of the 1993 Act.
Both the Acts contain non-obstante clauses. Ordinary rule of
construction is that where there are two non-obstante clauses, the latter
shall prevail. But it is equally well-settled that ultimate conclusion
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thereupon would depend upon the limited context of the statute. [See
Allahabad Bank (supra) \026 para 34].
In Maruti Udyog Ltd. v. Ram Lal and Others (2005) 2 SCC 638],
it was observed :
"The interpretation of Section 25-J of the 1947 Act
as propounded by Mr Das also cannot also be accepted
inasmuch as in terms thereof only the provisions of the
said chapter shall have effect notwithstanding anything
inconsistent therewith contained in any other law
including the Standing Orders made under the Industrial
Employment (Standing Orders) Act, but it will have no
application in a case where something different is
envisaged in terms of the statutory scheme. A beneficial
statute, as is well known, may receive liberal
construction but the same cannot be extended beyond
the statutory scheme\005"
In Shri Sarwan Singh and Another v. Shri Kasturi Lal [(1977) 1
SCC 750], this Court opined :
"\005When two or more laws operate in the same field
and each contains a non-obstante clause stating that its
provisions will override those of any other law,
stimulating and incisive problems of interpretation
arise. Since statutory interpretation has no
conventional protocol, cases of such conflict have to
be decided in reference to the object and purpose of
the laws under consideration\005"
The endeavour of the court would, however, always be to adopt a
rule of harmonious construction.
In NGEF Ltd. v. Chandra Developers (P) Ltd. and Another
[(2005) 8 SCC 219], interpreting sub-section (4) of Section 20 of SICA,
it was held :
"It is difficult to accept the submission of the
learned counsel appearing on behalf of the
respondents that both the Company Court and BIFR
exercise concurrent jurisdiction. If such a construction
is upheld, there shall be chaos and confusion. A
company declared to be sick in terms of the provisions
of SICA, continues to be sick unless it is directed to be
wound up. Till the company remains a sick company
having regard to the provisions of sub-section (4) of
Section 20, BIFR alone shall have jurisdiction as
regards sale of its assets till an order of winding up is
passed by a Company Court."
It was further held :
"Section 32 of SICA contains a non obstante
clause stating that provisions thereof shall prevail
notwithstanding anything inconsistent with the
provisions of the said Act and of any rules or schemes
made thereunder contained in any other law for the
time being in force. It would bear repetition to state
that in the ordinary course although the Company
Judge may have the jurisdiction to pass an interim
order in exercise of its inherent jurisdiction or
otherwise directing execution of a deed of sale in
favour of an applicant by the Company sought to be
wound up, but keeping in view the express provisions
contained in sub-section (4) of Section 20 of SICA
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such a power, in our opinion, in the Company Judge is
not available. (See BPL Ltd.)
We may, however, observe that the opinion of the
Division Bench in BPL Ltd. to the effect that the
winding-up proceeding in relation to a matter arising
out of the recommendations of BIFR shall commence
only on passing of an order of winding up of the
Company may not be correct. It may be true that no
formal application is required to be filed for initiating
a proceeding under Section 433 of the Companies Act
as the recommendations therefor are made by BIFR or
AAIFR, as the case may be, and, thus, the date on
which such recommendations are made, the Company
Judge applies its mind to initiate a proceeding relying
on or on the basis thereof, the proceeding for winding
up would be deemed to have been started; but there
cannot be any doubt whatsoever that having regard to
the phraseology used in Section 20 of SICA that BIFR
is the authority proprio vigore which continues to
remain as custodian of the assets of the Company till a
winding-up order is passed by the High Court."
In ICICI Bank Ltd. v. Sidco Leathers Ltd. and Others [2006) 5
SCALE 27] the law is stated in the following terms :
"The non-obstante nature of a provision
although may be of wide amplitude, the interpretative
process thereof must be kept confined to the
legislative policy. Only because the dues of the
workmen and the debt due to the secured creditors are
treated pari passu with each other, the same by itself,
in our considered view, would not lead to the
conclusion that the concept of inter se priorities
amongst the secured creditors had thereby been
intended to be given a total go-by.
A non-obstante clause must be given effect to,
to the extent the Parliament intended and not beyond
the same."
For the reasons aforementioned, the impugned judgment cannot be
sustained. Before parting with this case, however, we may observe that
we have not adverted to the question raised by the learned counsel for the
Respondents as to whether the Board while implementing the scheme
could reduce the quantum of the liability of creditors, as we are of the
opinion that such a contention need not be gone into at this stage. It will,
therefore, further be open to the Respondent No. 2 to approach the Board,
if any occasion arises therefor.
The impugned judgments are set aside. The appeals are allowed.
No costs.