Securities and Credit Pvt. Ltd. Vs. Modi Rubber Ltd  Insc 955 (14 December 2006)
Sinha S.B. Sinha, J:
principal question involved in this appeal arising out of a judgment and order
dated 08.06.2005 passed by the High Court of Delhi in Writ Petition (Civil)
No.10284 of 2005 revolves round a dispute as to whether the provisions of the
Arbitration and Conciliation Act, 1996 (for short, 'the 1996 Act') would
prevail over the provisions of the Sick Industrial Companies (Special
Provisions) Act, 1985 (for short, 'SICA').
of Rs.5,00,00,000 (Rupees five crores) by way of an Inter Corporate Deposit
(ICD) was advanced by Appellant to Respondent Company. It committed a default
in the payment thereof. The agreement contained an arbitration clause which was
invoked. The learned Arbitrator made an award on or about 06.05.2004 in favour
of the appellant for a sum of Rs.6,72,63,015/- , directing :
therefore, in the circumstances, make the following Award :
claimant is entitled to receive from the respondents and the respondents are
jointly and severally liable to pay Rs.6,72,63,015/- up to the date of
The claimant will also be entitled to interest at the contractual rate of 21%
p.a. from the date of reference i.e. 15.4.2002 till the date of Award and
thereafter i.e. from the date of Award till the date of payment with simple
interest @ 18% p.a.
if the entire amount is paid within three months from the date of the award,
the rate of interest from the date of Award till the date of payment shall
stand reduced to 12% p.a.
The claimant will also be entitled to costs of arbitration which are fixed at
course of the proceedings I had passed two interim orders restraining the
respondent no.1 from transferring or alienating their fixed as well as movable
assets. Both those orders shall continue to operate till the full payment of
the amount awarded under this Award." Appellant also filed an application
before the High Court of Allahabad for winding up of the respondent Company.
The said application was admitted and an order of winding up was passed on
from the Arbitrator, the Allahabad High Court also by order dated 13.08.2001
passed in C.P. No.92 of 2000 and 13.03.2002 in C.P. No.1 of 2002 restrained the
Respondent Company from dealing with or in any way encumbering its assets
without the permission of the court. In a proceeding before the AAIFR, that
Authority had also passed an order of restraint against the respondent company.
The respondent in the meanwhile made a reference under Section 15 of SICA to
the Board for Industrial and Financial Reconstruction (for short, 'the Board').
An appeal against the order of winding up was preferred by the respondent
before the Division Bench of the High Court. The High Court set aside the said
order of winding up by an order dated 20.05.2004 and directed to keep the
winding up proceedings in abeyance till the disposal of the said appeal under
SICA. An application for recalling of the said order is said to be pending
before the said Court.
the Board, an application was filed by the Respondent purported to be under
Section 19A read with Section 22(3) of SICA praying for permission to dispose
of the shares it held in M/s Ambuja Cement Eastern Ltd. in pursuance of a
public offer made by M/s Holcim Cements India Pvt. Ltd. to purchase 5.92% of
the shares of M/s Ambuja Cement Eastern Ltd. The Respondent Company held 23,10,000
equity shares of the said company constituting about 1.02% of its total share
capital at Rs.70/- per share. In the said application a disclosure was made as
regards the restraint order passed by the Allahabad High Court. The said
application was dismissed by the Board by an order dated 04.06.2005, holding :
injunction orders against sale of company's assets from various
Courts/Tribunals do not fall within the scheme of things envisaged u/s 22, 26,
& 32. In fact, Section 22A itself empowers the Board to give directions not
to dispose of assets. We do appreciate the circumstances regarding the offer
for ACEL shares but in view of the orders of the various Courts/Tribunals
restraining the company from disposing of its assets including AAIFR's order
dated 13.5.2005 to maintain status quo, the Board finds it difficult to agree
to the proposal to sell the shares as prayed by MRL." Questioning the
legality of the said order, a writ petition, which was marked as Writ Petition
(Civil) No.10284 of 2005, was filed by the Respondent before the Delhi High
Court. By reason of the impugned judgment, a Division Bench of the High Court
allowed the said writ petition.
not in dispute that pursuant to or in furtherance of the said judgment of the
High Court, the shares had been sold and the sale proceeds had been deposited
with the Board.
C.A. Sundaram, the learned Senior Counsel appearing on behalf of the Appellant,
inter alia, submitted that the provisions of SICA could not have been taken
recourse to as no scheme had been framed and, thus, the High Court committed a
serious error in passing the impugned judgment relying, inter alia, on or on
the basis of Section 22(3) of SICA.
5 of the 1996 Act having an overriding effect, the counsel urged, even the
Board could not have interfered with the award. Contrasting the provision of
sub-section (1) of Section 22 with sub-section (3) thereof, it was contended
that the award under the 1996 Act did not fall within the ambit thereof, in
view of the fact that in terms of Section 36 thereof it becomes a decree.
Sharma, the learned counsel appearing on behalf of the Respondent, on the other
hand, submitted that the Board being not a judicial authority, Section 5 of the
1996 Act will have no application. On a conspectus of the provisions of SICA,
counsel contended, that the Board had the requisite jurisdiction to pass an
appropriate order directing sale of the property even at the stage of inquiry.
For the aforementioned purpose, Mr. Sharma argued, all the provisions inserted
by reason of Act 12 of 1994 of SICA Amendment Act, 1993, namely, Section 19A,
Section 22A and Section 22(1) as amended, must receive a harmonious
construction. Counsel urged that the interim award having merged with the final
award and furthermore in view of the fact that the award was yet to become a
decree of the court, the question of its having become enforceable in law did
not and could not arise.
was enacted in order to afford maximum protection of employment, optimize the
use of financial resources, salvaging the assets of production, realizing the
amounts due to the Banks and to replace the existing time consuming and
inadequate machinery by efficient machinery for expeditious determination and
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, ameliorative, remedial and other measures which
need to be taken with respect to such companies and the expeditious enforcement
of the measure so determined and for matters connected therewith or incidental
contains special provision. The said Act was enacted for giving effect to the
policy of the State for securing principles specified in Article 39 of the
Constitution of India.
industrial company' has been defined in Section 2(o) to mean "an
industrial company which has at the end of any financial year accumulated
losses equal to or exceeding its entire net worth.
III of SICA provides for references, inquires and schemes.
15 empowers the Board of Directors of a company to make a reference to the
Board for determination of the measures which shall be adopted with respect to
the company. The Board on receipt of such an application may make an inquiry
into the working of the sick industrial company in exercise of its power
conferred under Section 16 thereof, for determining whether the company has
become a sick industrial company or not. For the said purpose it may require an
operating agency to inquire into and to make a report to it. The Board or the
operating agency, as the case may be, is required to complete the enquiry as
expeditiously as possible and an endeavour is to be made, to do so within sixty
days from the commencement thereof. The Board may during the pendency of the
said inquiry appoint Special Directors. Section 17 empowers the Board to make
suitable orders on the completion of inquiry if it is found to be practicable
for a sick industrial company to make its net worth exceed the accumulated
losses within a reasonable time. The Board is also required to make an order in
writing and subject to such restrictions or conditions as may be specified
therein, give such company as it may deem fit to make its net worth exceed the
accumulated losses. However, in the event it comes to the conclusion that it is
not practicable for the sick industrial company to make its net worth exceed
the accumulated losses within a reasonable time, it may by an order in writing
direct any operating agency specified in the order to prepare, having regard to
such guidelines as may be specified, a scheme in relation to such company.
18 empowers the Board to prepare and sanction a scheme in terms whereof it is
permissible for the operating agency, inter alia, to prepare a scheme to direct
sale or lease of a part or whole of any industrial undertaking of the sick
industrial company. Section 19 provides for rehabilitation by giving financial
assistance where the scheme relates to preventive, ameliorative, remedial and
other measures with respect to any sick industrial company. Section 19A of SICA
reads as under:
Arrangement for continuing operations, etc. during inquiry.-
any time before completion of the inquiry under Section 16, the sick industrial
company or the Central Government or the Reserve Bank or a State Government or
a public financial institution or a State level institution or a scheduled bank
or any other institution, bank or authority providing or intending to provide
any financial assistance by way of loans or advances or guarantees or reliefs
or concessions to the sick industrial company may make an application to the
to an arrangement for continuing the operations of the sick industrial company;
a scheme for the financial reconstruction of the sick industrial company.
*** *** ***" Section 20 provides for winding up of sick industrial
company; sub- section (4) whereof reads as under:
Notwithstanding anything contained in sub-section (2) or sub-section (3), the
Board may cause to be sold the assets of the sick industrial company in such
manner as it may deem fit and forward the sale proceeds to the High Court for
orders for distribution in accordance with the provisions of section 529A, and
other provisions of the Companies Act, 1956 (1 of 1956)".
(1) and (3) of Section 22 which are relevant for our purpose read as under:
Suspension of legal proceedings, contracts, etc..-
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." xxx
Where an inquiry under section 16 is pending or any scheme referred to in
section 17 is under preparation or during the period of consideration of any
scheme under section 18 or where any such scheme is sanctioned thereunder, for
due implementation of the scheme, the Board may by order declare with respect
to the sick industrial company concerned that the operation of all or any of
the contracts, assurances of property, agreements, settlement, awards, standing
orders or other instruments in force, to which such sick industrial company is
a party or which may be applicable to such sick industrial company immediately
before the date of such order, shall remain suspended or that all or any of the
rights, privileges, obligations and liabilities accruing or arising thereunder
before the said date, shall remain suspended or shall be enforceable with such
adoptions and in such manner as may be specified by the Board.
that such declaration shall not be made for a period exceeding two years which
may be extended by one year at a time so, however, that the total period shall
not exceed seven years in the aggregate." Sub-section (5) of Section 22
mandates that in computing the period of limitation for the enforcement of any
right, privilege, obligation or liability, the period during which it or the
remedy for the enforcement thereof remains suspended under the said Section
shall be excluded.
22A reads as under:
Directions not to dispose of assets.- The Board may, if it is of opinion that
any direction is necessary in the interest of the sick industrial company or
creditors or shareholders or in the public interest, by order in writing direct
the sick industrial company not to dispose of, except with the consent of the
Board, any of its assets
the period of preparation or consideration of the scheme under section 18; and
during the period beginning with the recording of opinion by the Board for
winding up of the company under sub- section (1) of section 20 and up to
commencement of the proceedings relating to the winding up before the concerned
High Court." Section 32 provides for a non-obstante clause.
Board in exercise of its rule making power made regulations, known as 'Board
for Industrial and Financial Reconstruction Regulations, 1987'. Chapters IV to
Chapter VIII thereof provide for various measures which are required to be
taken by the Board during the inquiry or thereafter.
1996 Act was enacted to consolidate and amend the law relating to domestic,
international and commercial arbitration and enforcement of the arbitral
Act is in four parts. Part I provides for the matter relating to domestic
arbitration; whereas Part II refers to enforcement of certain foreign awards.
Part III provides for conciliation; whereas Part IV provides for supplementary
provisions. We are concerned with the provisions contained in Part I of the
Act. Chapter I, which begins with the interpretation clause, provides for the general
provisions. Section 2(c) defines "arbitration award" to include an
interim award. Section 5 provides for a non-obstante clause in the matters
governed by Part I stating that no judicial authority shall intervene except
where so provided for therein. Section 16 provides for the power of arbitral
tribunal to rule on its own jurisdiction.
VII provides for recourses available against the arbitral awards. Section 34 of
the Act provides that the Court may be approached against an arbitral award by
way of an application for setting aside the same in terms of sub-section (2) or
sub-section (3) thereunder. Section 36 provides for enforcement of award in the
- Where the time for making an application to set aside the arbitral award
under section 34 has expired, or such application having been made, it has been
refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5
of 1908) in the same manner as if it were a decree of the Court." In Mcdermot
International Inc. v. Burn Standard Co. Ltd. [2006 (6) SCALE 220], this Court
noticing the changes made in the 1996 Act vis-`- vis the 1940 Act, observed:
1996 Act makes a radical departure from the 1940 Act. It has embodied the
relevant rules of the modern law but does not contain all the provisions
thereof. The 1996 Act, however, is not as extensive as the English Arbitration
statutes operated in the field in respect of a domestic award and a foreign
award prior to coming into force of the 1996 Act, namely, the 1940 Act, the
Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards
(Recognition and Enforcement) Act, 1961. All the aforementioned statutes have
been repealed by the 1996 Act and make provisions in two different parts,
namely, matters relating to domestic award and foreign award
respectively." The 1996 Act is a complete Code by itself. It lays down the
machinery for making an arbitral award enforceable. In terms of Section 36 of
the 1996 Act, an award becomes enforceable as if it were a decree; where the
time for making the application for setting it aside under Section 34 has
expired, or such application having been made, has been refused.
of the Statutory Provisions:
not in dispute that during the pendency of an inquiry before the Board, the
respondent could sell its shares. It, however, could not, do so because of the
restraint order passed against it. Was it, therefore, permissible for the High
Court to direct sale of the shares despite refusal on the part of the Board so
to do, is the question. The Board exercises statutory functions. It is a quasi
judicial authority. It exercises various powers under the Code of Civil
Procedure. For the purpose of the 1996 Act it is a judicial authority.
power to pass an interim order, however, and that too directing disposal of the
assets must be found out in the scheme of the statute itself.
the courts of limited jurisdiction may also possess by necessary implication
incidental power so as to enable it to direct preservation of property during
the pendency of a proceeding before it, it is doubtful whether such incidental
power can be exercised for sale of the assets of the company.
reference is made before the Board, certain consequences ensue, the proceedings
for the winding up of a company or for execution of distress or the like
against the property of the company or for the appointment of a receiver would
not continue. Even, no suit for recovery of money or for the enforcement of any
security or of any guarantee shall lie or be proceeded with further, save and
except with the consent of the Board or the appellate authority.
22A, however, permits the Board to pass certain conditional orders. Upon
receipt of a reference, the Board has no other option but to make an inquiry,
of course, therefor the reference is to be registered, upon scrutiny thereof.
The imperative character of an inquiry at the hands of the Board is inherent in
the scheme of the Act. The legislative intention therefor is clear and
explicit. The consequences flowing from registration of a reference necessarily
would mean initiation of an inquiry which would include investigation into
facts, causes and effects thereof. Act No. 12 of 1994 amending SICA also
specified the main features of the amendments to be as under:
jurisdictional amendments which redefine the category of the companies coming
within the purview of the Act, and the options which are available for revival,
rehabilitation or winding up of sick industries companies;
to enhance the effectiveness of Board;
which seek to remove certain ambiguities and strengthen internal coherence of
the Act by redefining certain provisions which are clarificatory in
nature." Section 19A of SICA as inserted in the year 1994, although may be
held to be clarificatory in nature, however, confers a special power to pass an
order envisaged thereunder. Section 19A does not empower the Board to direct
sale of the assets at the stage of enquiry. Section 22(1) and 22(3) again
would, however, be applicable where an inquiry under Section 16 is pending.
Whereas under sub-section (1) of Section 22 no specific order is required to be
passed by the Board; it is necessary, in respect of the matters enumerated
under sub-section (3) of Section 22 thereof.
for the aforementioned purpose, it may not be imperative that such an order be
passed only in terms of a scheme, as was submitted by Mr. Sundaram, but it is
true that application of mind on the part of the Board in relation thereto is
difficult to accept the submission of the learned Senior Counsel that
sub-section (3) of Section 22 of SICA deals only with contractual obligations.
The expression "award, standing orders or other instruments" in our
considered view does not refer only to a contractual obligation which is
binding on the company, but also liabilities thereunder.
expression "award" has a distinct connotation. It envisages a binding
decision of a judicial or a quasi judicial authority. It may be an arbitral
award. It may also be an award under Section 10A of the Industrial Disputes
Act, 1947, or one made by the Labour Court
or an Industrial Tribunal. An award of a quasi judicial or judicial authority
may provide for a binding decision on the company.
of the term "award" in our opinion cannot be restricted to a
contractual obligation inasmuch as by its very nature a third party
intervention, for resolution of disputes between the parties where company is a
party, is envisaged. Even a 'settlement' arrived at by and between the parties
thereto would be binding, inter alia, in terms of the provisions of Section 18
of the Industrial Disputes Act, 1947.
of Mr. Sundaram that sub-section (3) of Section 22 would be attracted only in a
case where a scheme has been made, in our opinion, does not stand a close
scrutiny. Sub-section (3) of Section 22 contemplates four different regimes :
an inquiry under Section 16 is pending; or
where any scheme referred to in Section 17 is under preparation; or
the period of consideration of any scheme under Section 18; or
any such scheme is sanctioned thereunder.
expression "for due implementation of the scheme" would refer only to
the scheme which has been sanctioned under Section 18 and not any stage prior
thereto. If the submission of Mr. Sundaram is accepted, the other provisions
contained in sub-section (3) of Section 22 cannot be given effect to, as a
result whereof the same would become otiose.
however can be directed to be suspended were the matters which were existing
immediately before the date of such order.
of ejusdem generis for construing the words "agreement, settlement
standing order or other instruments" is also not applicable in the instant
award under the 1996 Act indisputably stand on a different footing vis-`-vis an
award made under the Arbitration Act, 1940. Whereas under the 1940 Act, an
award was required to be made a rule of the court to make it enforceable; the
1996 Act, however, raises a legal fiction. When an award is made, an
application under Section 34 is required to be filed questioning the validity
thereof. Once such an application is filed, it remains under suspension in the
sense that it would not be enforceable. Only upon expiry of the period
specified in Section 34 to challenge an award or when such objection is
refused, the same would become enforceable. Section 36 merely specifies as to
how such an award can be enforced by laying down that it can be enforced as if
it were a decree.
legal fiction created under Section 36 has, therefore, a limited application.
An award is, thus, to be treated to be a decree even without intervention of
the court only for the purpose of its enforceability.
an order can be passed by the Board for suspending the operation of the award
if any occasion arises therefor.
Agro Industries Ltd. v. P.N.B. Capital Services Ltd. (2000) 5 SCC 514], it was
held that the word 'deemed' used in the section would thus mean,
"supposed", "considered", "construed",
"thought", "taken to be" or "presumed".
question, however, will moreover have to be considered in the light of Section
5 of the 1996 Act, which would depend on the meaning of the word "judicial
authority" occurring therein.
sub-section (1) of Section 22 would be attracted only when an award becomes a
decree and, thus, enforceable in a court of law, albeit in the event a
proceeding is initiated therefor. In this case, an objection to the award has
been filed. It is, therefore, yet to become a decree.
exercising its power under sub-section (3) of Section 22, the Board cannot
ignore an order passed by a superior court. It may be bound by the doctrine of
(1) of Section 22 itself provides for a non-obstante clause.
only refers to the provisions of the Companies Act or the Memorandum or
Articles of Association of an industrial company or any other instrument in
force under the said Act, but also of other laws.
furthermore was enacted to give effect to a larger public interest so as to
secure the principles specified in Article 39 of the Constitution of India.
Sub-section (1) of Section 22 must be construed having regard to the
aforementioned principles in mind. It seeks to restrain the Court from
entertaining and/or proceeding with any court proceeding if the lis is before
provisions contained in sub-section (1) of Section 22, however, appear to be
clear and unambiguous. Sub-section (3) of Section 22, on the other hand, does
not speak of automatic suspension of the proceedings or bar the jurisdiction of
the Court in entertaining any application. The provision empowers the Board to
make a declaration in terms whereof, inter alia, operation of a settlement or
award, not only where the industrial company is a party, but also where the
same would be applicable thereto, would remain suspended. It envisages
suspension of not only operation of any contract of assurances of property,
agreement, settlement, award, standing orders, etc., but also rights,
privileges, obligations and liabilities accruing or arising thereunder. The
result of such declaration is not far to seek. Such declaration, however,
either for suspension or operation of the contract or award, etc. for the
rights, privileges, obligations and liabilities or all or any of the rights,
privileges, obligations and liabilities accruing or arising thereunder is to be
made specifically. The Board may choose to make either of the declarations, as
provided for thereunder. The period for such suspension, however, is controlled
by the proviso appended thereto.
statutory distinction has, thus, been made by the Legislature as regard
suspension of a proceeding, on the one hand, and initiation and/or continuance
thereof, on the other. Whereas in the former case the statutory impact would be
automatic, in the latter the court is required to apply its mind having regard
to facts and circumstances of each case. When an order is passed by the Board
in exercise of its jurisdiction under sub-section (3) of Section 22 directing
the parties not to continue the proceeding, an award or decree is not set aside
thereby. They are merely kept in abeyance so as to enable the Board to pass an
appropriate order, inter alia, for revival of a sick company for the purpose of
giving effect to the purport and object for which the laws relating to
corporate insolvency have been enacted.
it has to be acknowledged that that the Board has a duty to afford maximum
protection to employment, optimize the use of financial resources, salvaging
the assets of production, realizing the amounts due to the Banks and to replace
the existing time consuming and inadequate machinery by efficient machinery for
expeditious determination by a body of experts and, thus, to a limited extent
making it entitled to safeguard the economy of the country and protect viable
sick units, it, however, must act within the four-corners of the statute. The
Board, however, while passing an interim order has to keep in mind not only the
governing principles relating to grant of injunction as envisaged in Morgan
Stanley Mutual Fund etc. v. Kartick Das etc. [(1994) 4 SCC 225], but also the
principles of judicial amity or comity. [See 'A Treatise on the Law Governing
Injunctions' by Spelling and Lewis' page 10 - See also M/s Transmission
Corporation of A.P. Ltd. & Ors. v. M/s Lanco Kondapalli Power Pvt. Ltd. (2006)
1 SCC 540, Ramdev Food Products Pvt. Ltd. v. Arvindbhai Rambhai & Ors. 2006
(8) SCALE 631 and M. Gurudas & Ors. v. Rasaranjan & Ors. 2006 (9) SCALE
275] Judicial Authority:
1996 Act does not define the term 'Judicial Authority'. What is defined in
Section 2(e) thereof is 'Court'. In its ordinary parlance 'judicial authority'
would comprehend a court defined under the Act but also courts which would
either be a civil court or other authorities which perform judicial functions
or quasi judicial functions.
& Co. v. Patel Engineering Ltd. and Another [(2005) 8 SCC 618], a Seven
Judge Bench of this Court although did not have the occasion to deal with the
question directly; but while overruling the decisions in Konkan Railway
Corporation Ltd. and Others v. Mehul Construction Co. [(2000) 7 SCC 201] and Konkan
Railway Corporation Ltd. and Another v. Rani Construction Pvt. Ltd. [(2002) 2
SC 388] opined:
judicial authority as such is not defined in the Act.
would certainly include the court as defined in Section 2(e) of the Act and
would also, in our opinion, include other courts and may even include a special
tribunal like the Consumer Forum (see Fair Air Engineers (P) Ltd. v. N.K. Modi).
When the defendant to an action before a judicial authority raises the plea
that there is an arbitration agreement and the subject-matter of the claim is
covered by the agreement and the plaintiff or the person who has approached the
judicial authority for relief, disputes the same, the judicial authority, in
the absence of any restriction in the Act, has necessarily to decide whether,
in fact, there is in existence a valid arbitration agreement and whether the
dispute that is sought to be raised before it, is covered by the arbitration
clause. It is difficult to contemplate that the judicial authority has also to
act mechanically or has merely to see the original arbitration agreement
produced before it, and mechanically refer the parties to an arbitration"
In Management Committee of Montfort Senior Secondary School v. Vijay Kumar and
Others [(2005) 7 SCC 472] a question arose as to whether a Tribunal under the
Delhi School Education Act, 1973, is a judicial authority. It was held that a
School Tribunal is a judicial Authority, as it act judicially and exercise a
question again came up for consideration indirectly in P. Anand Gajapathi Raju
and Others v. P.V.G Raju (Dead) and Others [(2000) 4 SCC 539] wherein it was
The conditions which are required to be satisfied under sub-sections (1) and
(2) of Section 8 before the court can exercise its powers are:
is an arbitration agreement;
party to the agreement brings an action in the court against the other party;
subject-matter of the action is the same as the subject-matter of the
other party moves the court for referring the parties to arbitration before it
submits his first statement on the substance of the dispute.
last provision creates a right in the person bringing the action to have the
dispute adjudicated by the court, once the other party has submitted his first
statement of defence. But if the party, who wants the matter to be referred to
arbitration applies to the court after submission of his statement and the
party who has brought the action does not object, as is the case before us,
there is no bar on the court referring the parties to arbitration." In
Fair Air Engineers Pvt. Ltd. and Another v. N.K. Modi [(1996) 6 SCC 385], it
was held that the District Forum, National Commission and the State Commission
under the Consumer Protection Act are included in the term 'judicial authority'
for the purpose of Section 34 of the Arbitration Act, 1940.
Bank v. Nuclear Power Corporation of India Ltd. and Others (1995) Supp. 3 SCC
page 81], it was held :
Sub-section (1) of Section 9-A empowers the Special Court to exercise the jurisdiction, powers and authority
exercisable by a civil court. It so empowers the Special Court in relation to any matter or claim, inter alia, that arises
out of transactions in securities entered into between the stated dates in
which a notified person is involved. The words "civil court" are used
in the context of the jurisdiction, powers and authority that the Special Court may exercise. The Special Court is empowered to exercise such
jurisdiction, powers or authority in relation to the matters or claims therein
specified. These matters or claims include those arising out of transactions in
securities entered into between the stated dates in which a notified person is
involved. Sub-section (2) of Section 9- A deals with the transfer of certain
suits, claims or other legal proceedings (other than an appeal) to the Special Court. Every suit, claim or other legal
proceeding pending before any court the cause of action whereof is such that,
had it arisen after the commencement of the Amendment Ordinance, the suit,
claim or other legal proceeding would have had to be filed before the Special
Court, stands transferred to the Special Court. Every suit, claim or other
legal proceeding pending before any court the cause of action whereof arises
out of transactions in securities entered into between the stated dates in
which a notified person is involved would, therefore, if it is pending before
any court on the date on which the Amendment Ordinance came into force, stand transferred
to the Special Court. By reason of sub-section (3) of Section 9-A, on and after
the commencement of the Amendment Ordinance, no court other than the Special
Court may exercise any jurisdiction, powers or authority in relation to any
matter or claim referred to in sub- section (1), that is to say, in relation to
any matter or claim, inter alia, arising out of transactions in securities
entered into between the stated dates in which a notified person is
involved." We are, however, not oblivious of a decision of this Court in
The Bharat Bank Ltd., Delhi v. Employees of the Bharat Bank Ltd., Delhi [1950
SCR 459] wherein an Industrial Tribunal functioning under the Industrial Disputes
Act was held to be not a Judicial Tribunal, stating that although it has all
the trappings of a court but is not a court.
expression 'judicial authority' must, therefore, be interpreted having regard
to the purport and object for which the 1996 Act was enacted.
the contention of the Board and having regard to the width of its jurisdiction,
we are of the opinion that the Board is a judicial authority within the meaning
of Section 5 of the Act.
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 would depend upon the limited
context of the statute. [See Allahabad Bank v. Canara Bank and Another (2000) 4
SCC 406 para 34].
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" In Shri Sarwan
Singh and Another v. Shri Kasturi Lal [(1977) 1 SCC 750], this Court opined:
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.
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" The endeavour of the court would, however, always be to
adopt a rule of harmonious construction.
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
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 such a power, in our opinion, in the
Company Judge is not available. (See BPL Ltd.)
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
non-obstante nature of a provision although may be of wide amplitude, the
interpretative process thereof must be kept confined to the legislative policy.
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
clause must be given effect to, to the extent the Parliament intended and not
beyond the same." Section 5 of the 1996 Act also provides for a non-obstante
clause. It has, however, a limited application aiming at the extent of judicial
intervention. Its application would be attracted only when an order under
sub-section (3) of Section 22 is required to be passed. If the said provision
is to be given effect to, the Board would not intervene in the matter of the
implementation of the award. It would merely suspend the operation of it.
even pass an order suspending the liabilities or obligations of the industrial
company under the award. Even otherwise in the fact of the present case it
Board however, has not passed an order under sub-section (3) of Section 22 of
SICA. The court, therefore, must proceed with the objection filed by the
Respondent under Section 34 of the 1996 Act. However, if the objection filed by
the Respondent is rejected, the question of its enforceability would come into
being. Once the arbitral award having the force of a decree is put into
execution, sub-section (1) of Section 22 of SICA would come on its way from
being enforced. The contention raised by Mr. Sundaram that having regard to the
provisions of Section 5 of the 1996 Act, the Board would have no jurisdiction,
therefore, does not seem to have any force.
(3) of Sections 22 SICA provides for a specific power in the Board The said
provision contemplates a larger public interest. In the event an arbitral award
is held to be outside the purview of sub-section (3) of Section 22 thereof, it
may be difficult to frame a scheme or in a given case implement the same under
SICA. SICA provides for a time-frame for all the stages of proceedings. Proviso
appended thereto assumes significance in this behalf.
Parliament presumed that the suspension of an award shall not be for a long
period. In a given case, a party to an award may face some hardships owing to
its suspension; but in such an event, it would always be open to it to bring
the same to the notice of the Board The Board under sub-section (3) of Section
22 of SICA may pass such an order or may not do so. If an order is passed by
the Board, an appeal lies thereagainst. The provisions of SICA, it will bear
repetition to state, have been made to seek to achieve a higher goal and, thus,
the provisions of SICA would be applicable, despite Section 5 of the 1996 Act.
Nath Agarwal and Others v. Pradeshiya Industrial & Investment Corporation
of U.P. Ltd. and Another [(2003) 4 SCC 305], it was held:
object for enacting SICA and for introducing the 1994 Amendment was to
facilitate the rehabilitation or the winding up of sick industrial companies.
It is not the stated object of the Act to protect any other person or body"
In Burn Standard Co. Ltd. v. Mc.Dermott International Inc. & Others
disposed of on 11.06.1997, a Division Bench of the Calcutta High Court opined
that the arbitration proceedings may continue during the pendency of an inquiry
pursuant to a reference made under SICA.
again in Saurabh Kalani v. Tata Finance Lrtd. and Anr. [2003 (3) Arb. LR 345 (Bombay), the Bombay High Court took the
this case, the shares have been sold. The sale proceeds have been deposited
before the Board. It is, thus, futile to interfere with the impugned order at
this stage. However, we thought it necessary to lay down the law for future
guidance of the Board while deciding a similar case.
the reasons aforementioned, we do not intend to interfere with the impugned
judgment of the High Court. It is dismissed accordingly having become infructuous.