Securities and Credit Pvt. Ltd. Vs. Modi Rubber Ltd.  Insc 959 (14 December 2006)
Balasubramanyan P.K. Balasubramanyan, J.
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 appropriate to permit the sale of the assets of a
Company which is before B.I.F.R. for a scheme of revival.
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.
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.
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.