# A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI EQUIPMENT FINANCE LIMITED & ORS

- **Citation:** [2021] 3 S.C.R. 597
- **Court:** Supreme Court of India
- **Decided:** 2021-03-01
- **Case number:** Civil Appeal Nos.4230-4234 of 2020
- **Bench:** Rohinton Fali Nariman, B. R. Gavai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/a-navinchandra-steels-private-limited-v-srei-equipment-finance-limited-ors-35013
- **Pages:** 25

## Headnote

Insolvency and Bankruptcy Code, 2016 - ss.7, 9 - Companies
Act, 1956 - ss.391-393, 446 - Companies Act, 2013 - ss.230(1),
279, fifth proviso to s.434(1)(c) - Winding up proceedings pending
- Petition u/s.7 filed before NCLT - Maintainability of - Held: A
petition either u/s.7 or s.9, IBC is an independent proceeding
unaffected by winding up proceedings that may be filed qua the
same company - Any "suppression" of the winding up proceeding
would not be of any effect in deciding a s.7 petition which is to be
tried on its own merits - Discretionary jurisdiction under the fifth
proviso to s.434(1)(c), 2013 Act, cannot prevail over the undoubted
jurisdiction of the NCLT under the IBC once the parameters of s.7
and other provisions of the IBC have been met - Plea of appellant
that respondent no.1 suppressed the winding up proceeding in its
application u/s.7, IBC before the NCLT is of no avail - Winding up
petition does not trump any subsequent attempt at revival of the
company through a petition u/s.7 or s.9, IBC - Further, on facts,
nothing can be said to have become irretrievable in the sense
mentioned in paragraph 31 of Action Ispat and Power Pvt. Ltd. v.
Shyam Metalics and Energy Ltd. reported as 2020 SCC OnLine SC
1025 - Interim order vacated.
Insolvency and Bankruptcy Code, 2016 - Object of vis-à-vis
Companies Act - Discussed.
Interpretation of Statutes:
Special Law v. General Law - Discussed - Insolvency and
Bankruptcy Code, 2016 - Companies Act.
Non-obstante clause - Insolvency and Bankruptcy Code, 2016
- s.238 - Held: Non-obstante clause in s.238 makes it even clearer
that in case of conflict, the provisions of the IBC will prevail -
Companies Act.
597
A
B
C
D
E
F
G
H
598
SUPREME COURT REPORTS
[2021] 3 S.C.R.
Dismissing the appeal, the Court
HELD: 1.1 The IBC is a special statute dealing with revival
of companies that are in the red, winding up only being resorted
to in case all attempts of revival fail. Vis-à-vis the Companies Act,
which is a general statute dealing with companies, including
companies that are in the red, the IBC is not only a special statute
which must prevail in the event of conflict, but has a non-obstante
clause contained in Section 238, which makes it even clearer
that in case of conflict, the provisions of the IBC will prevail.
[Para 14][606-G-H]
Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC
17 : [2019] 3 SCR 535; Allahabad Bank v. Canara
Bank, (2000) 4 SCC 406 : [2000] 2 SCR 1102;
Bakemans Industries (P) Ltd. v. New Cawnpore Flour
Mills, (2008) 15 SCC 1 : [2008] 9 SCR 705; Madras
Petrochem Ltd. v. BIFR, (2016) 4 SCC 1 : [2016] 11
SCR 419 - relied on.
1.2 A petition either under Section 7 or Section 9 of the
IBC is an independent proceeding which is unaffected by winding
up proceedings that may be filed qua the same company. Given
the object sought to be achieved by the IBC, it is clear that only
where a company in winding up is near corporate death that no
transfer of the winding up proceeding would then take place to
the NCLT to be tried as a proceeding under the IBC. Short of an
irresistible conclusion that corporate death is inevitable, every
effort should be made to resuscitate the corporate debtor in the
larger public interest, which includes not only the workmen of
the corporate debtor, but also its creditors and the goods it
produces in the larger interest of the economy of the country. It
is, thus, not possible to accede to the argument on behalf of the
Appellant (an operational creditor of Respondent No.2, the
company under winding up) that given Section 446 of the
Companies Act, 1956 / Section 279 of the Companies Act, 2013,
once a winding up petition is admitted, the winding up petition
should trump any subsequent attempt at revival of the company
through a Section 7 or Section 9 petition filed under the IBC.
While it is true that Sections 391 to 393 of the Companies Act,
1956 may, in a given factual circumstance, be availed of to pull
A
B
C
D
E
F
G
H
599
the company out of the

## Text

_Characters 0–39,856 of 55,936. This is a partial read: ask again with offset=39856 for what follows._

A
B
C
D
E
F
G
H
597
 [2021] 3 S.C.R. 597
A. NAVINCHANDRA STEELS PRIVATE LIMITED
v.
SREI EQUIPMENT FINANCE LIMITED & ORS.
(Civil Appeal Nos.4230-4234 of 2020)
MARCH 01, 2021
[ROHINTON FALI NARIMAN AND B. R. GAVAI, JJ.]
Insolvency and Bankruptcy Code, 2016 - ss.7, 9 - Companies
Act, 1956 - ss.391-393, 446 - Companies Act, 2013 - ss.230(1),
279, fifth proviso to s.434(1)(c) - Winding up proceedings pending
- Petition u/s.7 filed before NCLT - Maintainability of - Held: A
petition either u/s.7 or s.9, IBC is an independent proceeding
unaffected by winding up proceedings that may be filed qua the
same company - Any "suppression" of the winding up proceeding
would not be of any effect in deciding a s.7 petition which is to be
tried on its own merits - Discretionary jurisdiction under the fifth
proviso to s.434(1)(c), 2013 Act, cannot prevail over the undoubted
jurisdiction of the NCLT under the IBC once the parameters of s.7
and other provisions of the IBC have been met - Plea of appellant
that respondent no.1 suppressed the winding up proceeding in its
application u/s.7, IBC before the NCLT is of no avail - Winding up
petition does not trump any subsequent attempt at revival of the
company through a petition u/s.7 or s.9, IBC - Further, on facts,
nothing can be said to have become irretrievable in the sense
mentioned in paragraph 31 of Action Ispat and Power Pvt. Ltd. v.
Shyam Metalics and Energy Ltd. reported as 2020 SCC OnLine SC
1025 - Interim order vacated.
Insolvency and Bankruptcy Code, 2016 - Object of vis-à-vis
Companies Act - Discussed.
Interpretation of Statutes:
Special Law v. General Law - Discussed - Insolvency and
Bankruptcy Code, 2016 - Companies Act.
Non-obstante clause - Insolvency and Bankruptcy Code, 2016
- s.238 - Held: Non-obstante clause in s.238 makes it even clearer
that in case of conflict, the provisions of the IBC will prevail -
Companies Act.
597
A
B
C
D
E
F
G
H
598
SUPREME COURT REPORTS
[2021] 3 S.C.R.
Dismissing the appeal, the Court
HELD: 1.1 The IBC is a special statute dealing with revival
of companies that are in the red, winding up only being resorted
to in case all attempts of revival fail. Vis-à-vis the Companies Act,
which is a general statute dealing with companies, including
companies that are in the red, the IBC is not only a special statute
which must prevail in the event of conflict, but has a non-obstante
clause contained in Section 238, which makes it even clearer
that in case of conflict, the provisions of the IBC will prevail.
[Para 14][606-G-H]
Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC
17 : [2019] 3 SCR 535; Allahabad Bank v. Canara
Bank, (2000) 4 SCC 406 : [2000] 2 SCR 1102;
Bakemans Industries (P) Ltd. v. New Cawnpore Flour
Mills, (2008) 15 SCC 1 : [2008] 9 SCR 705; Madras
Petrochem Ltd. v. BIFR, (2016) 4 SCC 1 : [2016] 11
SCR 419 - relied on.
1.2 A petition either under Section 7 or Section 9 of the
IBC is an independent proceeding which is unaffected by winding
up proceedings that may be filed qua the same company. Given
the object sought to be achieved by the IBC, it is clear that only
where a company in winding up is near corporate death that no
transfer of the winding up proceeding would then take place to
the NCLT to be tried as a proceeding under the IBC. Short of an
irresistible conclusion that corporate death is inevitable, every
effort should be made to resuscitate the corporate debtor in the
larger public interest, which includes not only the workmen of
the corporate debtor, but also its creditors and the goods it
produces in the larger interest of the economy of the country. It
is, thus, not possible to accede to the argument on behalf of the
Appellant (an operational creditor of Respondent No.2, the
company under winding up) that given Section 446 of the
Companies Act, 1956 / Section 279 of the Companies Act, 2013,
once a winding up petition is admitted, the winding up petition
should trump any subsequent attempt at revival of the company
through a Section 7 or Section 9 petition filed under the IBC.
While it is true that Sections 391 to 393 of the Companies Act,
1956 may, in a given factual circumstance, be availed of to pull
A
B
C
D
E
F
G
H
599
the company out of the red, Section 230(1) of the Companies
Act, 2013 is instructive. What is clear by this Section is that a
compromise or arrangement can also be entered into in an IBC
proceeding if liquidation is ordered. However, what is of
importance is that under the Companies Act, it is only winding
up that can be ordered, whereas under the IBC, the primary
emphasis is on revival of the corporate debtor through infusion
of a new management. On facts also, in the present case,
nothing can be said to have become irretrievable in the sense
mentioned in paragraph 31 of Action Ispat. [Paras 23, 24]
[617-D-G; 618-D-F]
Jaipur Metals & Electricals Employees Organization v.
Jaipur Metals & Electricals Ltd., (2019) 4 SCC 227 :
[2018] 14 SCR 926; Duncans Industries Ltd. v. AJ
Agrochem, (2019) 9 SCC 725 : [2019] 12 SCR 830;
Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC
407 : [2017] 8 SCR 33; Kaledonia Jute and Fibres Pvt.
Ltd. v. Axis Nirman and Industries Ltd., 2020 SCC
OnLine SC 943; Forech (India) Ltd. v. Edelweiss Assets
Reconstruction Co. Ltd. (2019) 18 SCC 549 - relied
on.
Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and
Energy Ltd., 2020 SCC OnLine SC 1025 - referred
to.
1.3 A secured creditor stands outside the winding up and
can realise its security dehors winding up proceedings. Indiabulls,
a secured creditor of the corporate debtor, viz. Respondent No.2
has in enforcement of its debt by a mortgage, sold the mortgaged
property outside the winding up. The aforesaid sale is the subject
matter of proceedings in the Bombay High Court filed by the
provisional liquidator. If the aforesaid sale is set aside, the asset
of respondent No.2 that has been sold will come back to the
provisional liquidator for the purposes of winding up. If the sale
is upheld, equally, there are other assets of respondent No.2
which continue to be in the hands of the provisional liquidator for
the purposes of winding up. On the facts of this case, though no
application for transfer of the winding up proceeding pending in
the High Court has been filed, the High Court has itself, by the
orders dated 28.11.2019 and 23.01.2020, directed the provisional
A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI
EQUIPMENT FINANCE LIMITED
A
B
C
D
E
F
G
H
600
SUPREME COURT REPORTS
[2021] 3 S.C.R.
liquidator to hand over the records and assets of respondent no.2
to the interim resolution professional (IRP) in the Section 7
proceeding that is pending before the NCLT. This has not yet
been done as the IRP has not yet been able to pay the requisite
amount to the provisional liquidator for his expenses.
[Paras 25, 26][618-F; 620-C-F]
M.K. Ranganathan v. Govt. of Madras, [1955] 2 SCR
374 - relied on.
Central Bank of India v. Elmot Engineering Co., (1994)
4 SCC 159 : [1994] 3 SCR 766; Industrial Credit and
Investment Corpn. of India Ltd. v. Srinivas Agencies,
(1996) 4 SCC 165 : [1996] 2 SCR 960; Board of
Trustees, Port of Mumbai v. Indian Oil Corpn., (1998)
4 SCC 302 : [1998] 2 SCR 774 - referred to.
1.4 Section 7 is an independent proceeding which has to be
tried on its own merits. Any "suppression" of the winding up
proceeding would, therefore, not be of any effect in deciding a
petition on the basis of the provisions contained in the IBC.
Equally, it cannot be said that any subterfuge has been availed of
for the same reason that Section 7 is an independent proceeding
that stands by itself. A discretionary jurisdiction under the fifth
proviso to Section 434(1)(c) of the Companies Act, 2013 cannot
prevail over the undoubted jurisdiction of the NCLT under the
IBC once the parameters of Section 7 and other provisions of
the IBC have been met. The interim order passed by this Court
on 18.12.2020 stands vacated. [Para 27][621-A-B]
Case Law Reference
(2019) 18 SCC 549
relied on
para 8
[2019] 3 SCR 535
relied on
para 14
[2000] 2 SCR 1102
relied on
para 15
[2008] 9 SCR 705
relied on
para 16
[2016] 11 SCR 419
relied on
para 17
[2018] 14 SCR 926
relied on
para 18
[2019] 12 SCR 830
relied on
para 20
A
B
C
D
E
F
G
H
601
[2017] 8 SCR 33
relied on
para 20
[1955] 2 SCR 374
relied on
para 25
[1994] 3 SCR 766
referred to
para 25
[1996] 2 SCR 960
referred to
para 25
[1998] 2 SCR 774
referred to
para 25
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 42304234 of 2020.
From the Judgment and Order dated 07.02.2020 and 21.09.2020
of the National Company Law Appellant Tribunal, New Delhi in
Company Appeal (AT) (Insolvency) No. 1434 of 2019 and I.A Nos.
811/2020, 917/2020, 962/2020 and 1587 of 2020.
Dr. Abhishek Manu Singhvi, Mr. Ranjit Kumar, Sr. Advs., Arvind
Kumar Gupta, Amit Bhandari, Ms. Henna George, Ms. Shivani Sharma,
Ravindra Sadanand Chingale, Advs.for the Appellant.
Gopal Jain, Shyam Divan, Sr. Advs., Abhijeet Sinha, Arijit
Mazumdar, Shambo Nandy, Ms. Akanksha Kaushik, Manan Shishodia,
Snehasish Mukherjee, Anirudh Sanganeria, Santosh Kumar Ray, Ms.
Rituparna Sanyal, Saswata Ganguly, Gaurav Kejriwal, Aditya Kanoria,
Ankit Kohli, Pankaj Singal, Dhaval Vussonji, Rubin Vakil, Ms. Sonam
Mhatre, Ms. Saloni Sulakhe, Ms. Kritya Sinha, Saurabh Chaudhary, Ms.
Anne Mathew, Advs. for the Respondents.
The Judgment of the Court was delivered by
R. F. NARIMAN, J.
1. This appeal arises out of the judgment dated 07.02.2020, as
corrected by order dated 21.09.2020, by the National Company Law
Appellate Tribunal ["NCLAT"]. The Appellant is an operational creditor
of Respondent No.2 herein - M/s. Shree Ram Urban Infrastructure
Limited["SRUIL"], the company under winding up - and has a decree
dated 07.10.2015 in its favour passed by the Bombay High Court in
Summary Suit No.626 of 2014. Vide order dated 06.10.2016, the Division
Bench stayed the order dated 07.10.2015 and directed SRUIL to deposit
INR14 crore with the Prothonotary and Senior Master of the High Court
or furnish a bank guarantee for the same, failing which the stay order
would get vacated. The said appeal is pending as on date. We are also
A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI
EQUIPMENT FINANCE LIMITED
A
B
C
D
E
F
G
H
602
SUPREME COURT REPORTS
[2021] 3 S.C.R.
informed that an execution application, being Execution Application (L)
No.934 of 2016 was filed by the Appellant before the Bombay High
Court and the same is also pending as on date.
2. Sometime in 2015, the Appellant had filed a winding up petition,
being Company Petition No.1039 of 2015 against SRUIL before the
Bombay High Court, the same being pending as on date.
3. A winding up petition, being Company Petition No.1066/2015
filed by Respondent No.3 herein, M/s Action Barter Pvt. Ltd. ["Action
Barter"] against SRUIL, by a conditional order dated 05.10.2016, stood
admitted on the failure of SRUIL to deposit INR 5.90 crore. The appeal
instituted by SRUIL against this order was dismissed by the Division
Bench of the High Court on 17.01.2017, whereas the appeal instituted
by Action Barter was allowed vide the same order and the amount to be
deposited by SRUIL was enhanced from INR 5.90 crore to INR 18
crore. Vide order dated 27.02.2017, this Court disposed of SLP(C)
No.5849/2017 filed by SRUIL, after recording a statement by the counsel
for SRUIL that SRUIL would deposit INR three crore the same day,
and the balance of INR 15 crore within six months from the date of the
order. The parties then filed consent terms before the Single Judge of
the Bombay High Court on 22.03.2017, wherein Action Barter agreed
to accept a sum of INR 15 crore, payable in instalments. Apart from the
payment of the first instalment of INR 25 lakh, no further instalment
was paid, as a result of which the winding up petition stood revived on
24.08.2017.On 17.04.2018, the provisional liquidator took over the
physical possession of the assets of SRUIL.
4. While this winding up petition was pending, Indiabulls Housing
Finance Ltd. ["Indiabulls"], a secured creditor of SRUIL, filed a petition
under Section 7 of the Insolvency and Bankruptcy Code, 2016 ["IBC"]
before the National Company Law Tribunal ["NCLT"], which was
dismissed by the NCLT vide order dated 18.05.2018 as being not
maintainable as a winding up petition had already been admitted by the
Bombay High Court. An appeal to the NCLAT suffered a similar fate as
the appeal was dismissed on 30.05.2018. However, on 06.08.2018, the
Supreme Court admitted a Civil Appeal from the NCLAT order, which
is pending as on date.
5. An application filed by Indiabulls for the following relief:
A
B
C
D
E
F
G
H
603
"The Hon'ble Court be pleased to direct the Provisional Liquidator
to handover physical possession of the said Mortgaged Property
i.e. all the pieces and parcels of land bearing C.S. Nos. 288, 289
(part), 1/1540 (part), 2/1540(part) and 3/1540 (part), collectively
forming Plot Nos.5B and 6 admeasuring approximately 28,409.57
square meters situated at Worli Estate, Lower ParelDivision,
Mumbai to the Secured Creditor herein, in accordance with
andpursuant to the provisions of the Companies Act, 1956 and the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security InterestAct, 2002 ..."
resulted in an order dated 07.02.2019 by which the learned
Company Judge allowed the aforesaid application in favour of Indiabulls.
Indiabulls isa secured creditor who stood outside the winding up, and
who sought to realise its security outside such winding up proceeding,
notices having already been issued under Sections 13(2) and 13(4) of
the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 ["SARFAESI Act"]. The
Court referred to an order of 12.04.2018, by which the provisional
liquidator was to take physical possession of the assets of SRUIL within
one week of the date of that order. Importantly, paragraph 2 of the said
order stated:
"2. Ms. Maitra states that the secured creditors have already
commenced proceedings under SARFAESI against the company.
As and when the banks may take out an application for banks
submissions to hand over that part of the assets secured to the
bank, appropriate orders will be passed."
6. This being the case, the learned Company Judge allowed the
application in the following terms:
"13. For the reasons aforesaid, the present Application is allowed.
The Provisional Liquidator is directed to forthwith handover
possession of the Mortgaged Property to the Applicant. However,
the Applicant shall conduct the sale of the property in consultation
with the Official Liquidator. The Applicant shall also deposit the
sale proceeds or part thereof with this Court as and when the
Court directs the Applicant to do so, for the purpose of making
payments to workers as prescribed in section 529A of the
Companies Act, 1956."
A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI
EQUIPMENT FINANCE LIMITED [R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
604
SUPREME COURT REPORTS
[2021] 3 S.C.R.
7. As per the aforesaid order dated 07.02.2019, the provisional
liquidator handed over possession of the property mortgaged with
Indiabulls to Indiabulls, who then conducted a sale of the said property
to M/s. Honest Shelters Pvt. Ltd. ["HonestShelters"], Respondent
No.4 herein, for a sum of INR 705 crore, in which not only was the
mortgaged property sold, but also the superstructure standing thereon,
together with two other flats. We have since been informed that three
sale certificates were issued to Honest Shelters on 26.06.2019 by
Indiabulls on receiving the said payment of INR 705 crore. We have
also been informed that the ex-Directors of SRUIL had challenged the
aforesaid sale in the Debt Recovery Tribunal and the Debt Recovery
Appellate Tribunal unsuccessfully. The provisional liquidator has also
challenged the said sale in the Bombay High Court, alleging that the
conditions of the order dated 07.02.2019 were flouted, and that what
was sold was much more than what was mortgaged to the secured
creditor, and that too at a gross undervalue. We are informed that the
next date in these pending proceedings is 23.03.2021.
8. Meanwhile, Respondent No.1 before us, i.e., SREI Equipment
Finance Limited ["SREI"] filed a petition under Section 7 of the IBC
before the NCLT, which petition was admitted by the NCLT on
06.11.2019. An appeal was then filed by Action Barter against the
aforesaid NCLT order in which, after setting out this Court's judgment
in Forech (India) Ltd. v. Edelweiss Assets Reconstruction Co.
Ltd., (2019) 18 SCC 549 ["Forech"], the NCLAT dismissed the appeal
with the following observations:
"5. The case of the Appellant is covered by the decision of the
Hon'ble Supreme Court in Forech India Ltd (supra), therefore,
we hold that the Application under Section 7 of the I&B Code
filed by the Respondent - SREI Equipment Finance Limited is
not maintainable. In so far as pending winding up petition before
the Hon'ble Bombay High Court is concerned, the Appellant in
terms of the decision of the Hon'ble Supreme Court in Forech
India Ltd (supra) may move before the Hon'ble High Court of
Bombay.
The Appeal is dismissed with the aforesaid observations. No costs."
9. By an order dated 21.09.2020, the NCLAT corrected the order
by deleting the word "not" that occurred in paragraph 5 of the order
dated 07.02.2020.
A
B
C
D
E
F
G
H
605
10. An appeal was then filed to this Court by Action Barter on
08.10.2020, in which this Court, by order dated 27.10.2020, issued notice
and directed the parties to maintain status quo qua the mortgaged property
and also stayed further proceedings before the NCLAT. An appeal was
also filed by the Appellanton 09.12.2020, in which this Court, by order
dated 18.12.2020, issued notice and stayed further proceedings before
the NCLTand tagged the appeal with the appeal filed by Action Barter.
11. We have been informed that pursuant to a settlement between
Action Barter and the purchaser of the mortgaged property, i.e., Honest
Shelters, Action Barter has now withdrawn its appeal that was filed
before this Court. Thus, the only surviving appeal before us is Civil Appeal
Nos.4230-4234 of 2020, filed by A. Navinchandra Steels Pvt. Ltd.
12. Dr. Abhishek Manu Singhvi and Shri Ranjit Kumar, learned
Senior Advocates appearing on behalf of the Appellant, argued that in
view of the judgment in Action Ispat and Power Pvt. Ltd. v. Shyam
Metalics and Energy Ltd., 2020 SCC OnLine SC 1025 ["Action
Ispat"], this matter is concluded in their favour in asmuch as irreversible
steps have been taken in a winding up petition that has already been
admitted by the Bombay High Court in that the plot on which a 72storey building stands, has now been sold, as a result of which it is now
clear that the Section 7 petition that was filed by SREI on 30.05.2019
under the IBC, would have to be held to be non-maintainable. They also
argued that the effect of Section 446 of the Companies Act, 1956 (which
is equivalent to Section 279 of the Companies Act, 2013) is that no suit
or other legal proceeding can be initiated once there is admission of a
winding up petition. This being the case, post admission of a winding up
petition, no petition under Section 7 of the IBC can be filed. They also
argued that it is a misnomer to think that winding up proceedings must
result in corporate death. On the contrary, according to them, Sections
391 to 393 of the Companies Act, 1956 would apply if the company
were to be restructured, as a result of which the winding up court could
then stay the winding up and order restructuring. The learned counsel
have also argued that there are gross malafides in the present case as
SREI was not only aware of the winding up petition before the Bombay
High Court, but has also participated in the winding up proceeding and
filed its claim before the provisional liquidator. All this has been suppressed
in the petition filed under Section 7 of the IBC. Further, the only route
available to SREI was really to ask for transfer of the company petition
A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI
EQUIPMENT FINANCE LIMITED [R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
606
SUPREME COURT REPORTS
[2021] 3 S.C.R.
in winding up from the Bombay High Court to the NCLT, which route
has been circumvented by filing a Section 7 petition and suppressing the
winding up proceeding.
13. Shri Abhijeet Sinha, learned counsel appearing on behalf of
SREI, took us through various judgments of this Court, including the
latest judgment in Action Ispat (supra). According to him, a Section 7
proceeding under the IBC is an independent proceeding, which can be
initiated at any time, even after a winding up order is made. He argued
that this was a result of our decisions and that Section 238 of the IBC,
which contains a non-obstante clause, clearly comes to his rescue as, if
there is any conflict between Section 446 of the Companies Act, 1956 /
Section 279 of the Companies Act, 2013 and the IBC, the IBC will
prevail. According to him, this point is no longer resintegra. He also
argued, in the alternative, that there are no irretrievable steps that have
been taken in the winding up proceeding in the present case, as the
provisional liquidator continues to be seized of other assets of SRUIL.
He further argued that a private sale by a secured creditor outside the
windingup is not the irretrievable step that is spoken of in Action Ispat
(supra), such step having to be taken by the provisional liquidator himself
in selling the assets of the company in the process of winding up the
company. He also added that, on facts, two orders dated 28.11.2019 and
20.01.2020 of the Bombay High Court would indicate that the Company
Court itself had directed the provisional liquidator to hand over the records
and assets of SRUIL to the interim resolution professional ["IRP"] that
had been appointed in the Section 7 proceeding. Doubtless, such assets
had not been handed over because they were only to the handed over
two weeks after certain payments had been made by the IRP to the
provisional liquidator, which payments have not yet been made.
14. Having heard learned counsel for all the parties, it is important
to restate a few fundamentals. Given the object of the IBC as delineated
in paragraphs 25 to 28 of Swiss Ribbons (P) Ltd. v. Union of India,
(2019) 4 SCC 17 ["Swiss Ribbons"], it is clear that the IBC is a special
statute dealing with revival of companies that are in the red, winding up
only being resorted to in case all attempts of revival fail. Vis-à-vis the
Companies Act, which is a general statute dealing with companies,
including companies that are in the red, the IBC is not only a special
statute which must prevail in the event of conflict, but has a non-obstante
clause contained in Section 238, which makes it even clearer that in
case of conflict, the provisions of the IBC will prevail.
A
B
C
D
E
F
G
H
607
15. In Allahabad Bank v. Canara Bank, (2000) 4 SCC 406, this
Court had to deal with whether the Recovery of Debts Due to Banks
and Financial Institutions Act, 1993 ["RDB Act"] was a special statute
qua the Companies Act, 1956. This Court held that the Companies Act
is a general Act and does not prevail against the RDB Act, which was a
later Act and which has a non-obstante clause that clearly excludes the
provisions of the Companies Act in case of conflict. This was stated by
the Court as follows:
"Special law v. general law
38. At the same time, some High Courts have rightly held that
the Companies Act is a general Act and does not prevail under
the RDB Act. They have relied upon Union of India v. India
Fisheries (P) Ltd. [AIR 1966 SC 35 : (1965) 3 SCR 679 : (1965)
57 ITR 331].
39. There can be a situation in law where the same statute is
treated as a special statute vis-à-vis one legislation and again as a
general statute vis-à-vis yet another legislation. Such situations
do arise as held in LIC of India v. D.J. Bahadur[(1981) 1 SCC
315 : 1981 SCC (L&S) 111 : AIR 1980 SC 2181]. It was there
observed:
"... for certain cases, an Act may be general and for certain
other purposes, it may be special and the court cannot blur a
distinction when dealing with the finer points of law".
For example, a Rent Control Act may be a special statute as
compared to the Code of Civil Procedure. But vis-à-vis an Act
permitting eviction from public premises or some special class of
buildings, the Rent Control Act may be a general statute. In fact
in Damji Valji Shahv.LIC of India[AIR 1966 SC 135 : (1965) 3
SCR 665] (already referred to), this Court has observed that visà-vis the LIC Act, 1956, the Companies Act, 1956 can be treated
as a general statute. This is clear from para 19 of that judgment.
It was observed:
"Further, the provisions of the special Act, i.e., the LIC Act, will
override the provisions of the general Act, viz., the Companies
Act which is an Act relating to companies in general."
(emphasis in original)
A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI
EQUIPMENT FINANCE LIMITED [R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
608
SUPREME COURT REPORTS
[2021] 3 S.C.R.
Thus, some High Courts rightly treated the Companies Act as a
general statute, and the RDB Act as a special statute overriding
the general statute.
Special law v. special law
40. Alternatively, the Companies Act, 1956 and the RDB Act can
both be treated as special laws, and the principle that when there
are two special laws, the latter will normally prevail over the former
if there is a provision in the latter special Act giving it overriding
effect, can also be applied. Such a provision is there in the RDB
Act, namely, Section 34. A similar situation arose in Maharashtra
Tubes Ltd. v. State Industrial and Investment Corpn. of
Maharashtra Ltd. [(1993) 2 SCC 144] where there was
inconsistency between two special laws, the Finance Corporation
Act, 1951 and the Sick Industries Companies (Special Provisions)
Act, 1985. The latter contained Section 32 which gave overriding
effect to its provisions and was held to prevail over the former. It
was pointed out by Ahmadi, J. that both special statutes contained
non obstante clauses but that the
"1985 Act being a subsequent enactment, the non obstante
clause therein would ordinarily prevail over the non obstante
clause in Section 46-B of the 1951 Act unless it is found that
the 1985 Act is a general statute and the 1951 Act is a special
one". (SCC p. 157, para 9)
Therefore, in view of Section 34 of the RDB Act, the said Act
overrides the Companies Act, to the extent there is anything
inconsistent between the Acts."
16. Likewise, in Bakemans Industries (P) Ltd. v. New
Cawnpore Flour Mills, (2008) 15 SCC 1, this Court, in the context of
the State Financial Corporations Act, 1951 ["SFC Act"] and the
Companies Act, 1956, held that though the SFC Act was an earlier Act
of 1951, yet, it would prevail over the winding up proceedings before a
Company Judge, given that the SFC Act is a special statute qua the
general powers of the Company Judge under the Companies Act. This
was stated as follows:
"37. The 1951 Act indisputably is a special statute. If a financial
corporation intends to exercise a statutory power under Section
A
B
C
D
E
F
G
H
609
29 of the 1951 Act, the same will prevail over the general powers
of the Company Judge under the Companies Act.
38. There cannot be any doubt whatsoever that the proceedings
under Section 29 of the 1951 Act would prevail over a winding-up
proceeding before a Company Judge in view of the decision of
this Court in International Coach Builders Ltd. v. Karnataka
State Financial Corpn. [(2003) 10 SCC 482] wherein it has been
held: (SCC p. 496, para 26)
"26. We do not really see a conflict between Section 29 of the
SFC Act and the Companies Act at all, since the rights under
Section 29 were not intended to operate in the situation of
winding up of a company. Even assuming to the contrary, if a
conflict arises, then we respectfully reiterate the view taken
by the Division Bench of this Court in A.P. State Financial
Corpn. Case[A.P. State Financial Corpn. v. Official
Liquidator, (2000) 7 SCC 291]. This Court pointed out therein
that Section 29 of the SFC Act cannot override the provisions
of Sections 529(1) and 529-A of the Companies Act, 1956,
inasmuch as SFCs cannot exercise the right under Section 29
ignoring a pari passu charge of the workmen."
The view taken therein was reiterated by a three-Judge Bench of
this Court in Rajasthan State Financial Corpn. v. Official
Liquidator[(2005) 8 SCC 190] wherein it was stated: (SCC pp.
201-02, para 18)
"18. In the light of the discussion as above, we think it proper
to sum up the legal position thus:
(i) A Debts Recovery Tribunal acting under the Recovery of
Debts Due to Banks and Financial Institutions Act, 1993 would
be entitled to order the sale and to sell the properties of the
debtor, even if a company-in-liquidation, through its Recovery
Officer but only after notice to the Official Liquidator or the
Liquidator appointed by the Company Court and after hearing
him.
(ii) A District Court entertaining an application under Section
31 of the SFC Act will have the power to order sale of the
assets of a borrower company-in-liquidation, but only after
A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI
EQUIPMENT FINANCE LIMITED [R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
610
SUPREME COURT REPORTS
[2021] 3 S.C.R.
notice to the Official Liquidator or the Liquidator appointed by
the Company Court and after hearing him.
(iii) If a financial corporation acting under Section 29 of the
SFC Act seeks to sell or otherwise transfer the assets of a
debtor company-in-liquidation, the said power could be
exercised by it only after obtaining the appropriate permission
from the Company Court and acting in terms of the directions
issued by that court as regards associating the Official
Liquidator with the sale, the fixing of the upset price or the
reserve price, confirmation of the sale, holding of the sale
proceeds and the distribution thereof among the creditors in
terms of Section 529-A and Section 529 of the Companies
Act.
(iv) In a case where proceedings under the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 or the SFC
Act are not set in motion, the creditor concerned is to approach
the Company Court for appropriate directions regarding the
realisation of its securities consistent with the relevant provisions
of the Companies Act regarding distribution of the assets of
the company-in-liquidation."
(See also ICICI Bank Ltd. v. SIDCO Leathers Ltd. [(2006) 10
SCC 452 : (2006) 5 Scale 27])"
17. In Madras Petrochem Ltd. v. BIFR, (2016) 4 SCC 1, this
Court had to deal with whether a predecessor statute to the IBC, which
has been repealed by the IBC, namely, the Sick Industrial Companies
(Special Provisions) Act, 1985, prevails over the SARFAESI Act to the
extent of inconsistency therewith. This Court noted that in the case of
two statutes which contain non-obstante clauses, the laterAct will normally
prevail, holding:
"36. A conspectus of the aforesaid decisions shows that the Sick
Industrial Companies (Special Provisions) Act, 1985 prevails in
all situations where there are earlier enactments with non obstante
clauses similar to the Sick Industrial Companies (Special
Provisions) Act, 1985. Where there are later enactments with
similar non obstante clauses, the Sick Industrial Companies (Special
Provisions) Act, 1985 has been held to prevail only in a situation
where the reach of the non obstante clause in the later Act is
A
B
C
D
E
F
G
H
611
limited-such as in the case of the Arbitration and Conciliation
Act, 1996-or in the case of the later Act expressly yielding to
the Sick Industrial 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 the case
of Special Courts Act, 1992, it is the Special Courts Act, 1992
which was held to prevail over the Sick Industrial Companies
(Special Provisions) Act, 1985.
37. We have now to undertake an analysis of the Acts in question.
The first thing to be noticed is the difference between Section 37
of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 and Section 34 of the
Recovery of Debts Due to 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 Companies (Special Provisions)
Act, 1985 unlike Section 34(2) of the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993. Section 37 of the
Securities and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 states that the said
Act shall be in addition to and not in derogation of four Acts,
namely, the Companies Act, the Securities Contracts (Regulation)
Act, 1956, the Securities and Exchange Board of India Act, 1992
and the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993. It is clear that the first three Acts deal with securities
generally and the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 deals with recovery of debts due to banks
and financial institutions. Interestingly, Section 41 of the
Securitisation and 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 significance that only the first
two Acts are included in Section 37 and not the third i.e. the Sick
Industrial Companies (Special Provisions) Act, 1985. This is for
the obvious reason that the framers of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 intended that the Sick Industrial Companies
(Special Provisions) Act, 1985 be covered by the non obstante
A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI
EQUIPMENT FINANCE LIMITED [R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
612
SUPREME COURT REPORTS
[2021] 3 S.C.R.
clause contained in Section 35, and not by the exception thereto
carved out by Section 37. Further, whereas the Recovery of Debts
Due to Banks and Financial 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) of 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
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 the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993."
18. Indeed, this position has been echoed in several judgments of
this Court. In Jaipur Metals & Electricals Employees Organization
v. Jaipur Metals & Electricals Ltd., (2019) 4 SCC 227 ["Jaipur
Metals"], this Court, in dealing with whether proceedings under the
Sick Industrial Companies (Special Provisions) Act, 1985 were to be
transferred to the NCLT under the IBC, held:
"19. However, this does not end the matter. It is clear that
Respondent 3 has filed a Section 7 application under the Code on
11-1-2018, on which an order has been passed admitting such
application by NCLT on 13-4-2018. This proceeding is an
independent proceeding which has nothing to do with the transfer
of pending winding-up proceedings before the High Court. It was
open for Respondent 3 at any time before a winding-up order is
passed to apply under Section 7 of the Code. This is clear from a
reading of Section 7 together with Section 238 of the Code which
reads as follows:
"238. Provisions of this Code to override other laws.-The
provisions of this Code shall have effect, notwithstanding
anything inconsistent therewith contained in any other law for
the time being in force or any instrument having effect by virtue
of any such law."
A
B
C
D
E
F
G
H
613
20. Shri Dave's ingenious argument that since Section 434 of the
Companies Act, 2013 is amended by the Eleventh Schedule to the
Code, the amended Section 434 must be read as being part of the
Code and not the Companies Act, 2013, must be rejected for the
reason that though Section 434 of the Companies Act, 2013 is
substituted by the Eleventh Schedule to the Code, yet Section
434, as substituted, appears only in the Companies Act, 2013 and
is part and parcel of that Act. This being so, if there is any
inconsistency between Section 434 as substituted and the provisions
of the Code, the latter must prevail. We are of the view that NCLT
was absolutely correct in applying Section 238 of the Code to an
independent proceeding instituted by a secured financial creditor,
namely, the Alchemist Asset Reconstruction Company Ltd. This
being the case, it is difficult to comprehend how the High Court
could have held that the proceedings before NCLT were without
jurisdiction. On this score, therefore, the High Court judgment
has to be set aside. NCLT proceedings will now continue from
the stage at which they have been left off. Obviously, the company
petition pending before the High Court cannot be proceeded with
further in view of Section 238 of the Code. The writ petitions that
are pending before the High Court have also to be disposed of in
light of the fact that proceedings under the Code must run their
entire course. We, therefore, allow the appeal and set aside the
High Court's judgment [Jaipur Metals and Electricals Ltd., In
re, 2018 SCC OnLine Raj 1472]."
19. Likewise, in Forech (supra),in a situation in which notice had
been issued in a winding up petition and the said petition was ordered to
be transferred to the NCLT,to be treated as a proceeding under the
IBC, this Court clearly held:
"22. This section is of limited application and only bars a corporate
debtor from initiating a petition under Section 10 of the Code in
respect of whom a liquidation order has been made. From a
reading of this section, it does not follow that until a liquidation
order has been made against the corporate debtor, an insolvency
petition may be filed under Section 7 or Section 9 as the case may
be, as has been held by the Appellate Tribunal. Hence, any
reference to Section 11 in the context of the problem before us is
wholly irrelevant. However, we decline to interfere with the
A. NAVINCHANDRA STEELS PRIVATE LIMITED v. SREI
EQUIPMENT FINANCE LIMITED [R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
614
SUPREME COURT REPORTS
[2021] 3 S.C.R.
ultimate order passed by the Appellate Tribunal because it is clear
that the financial creditor's application which has been admitted
by the Tribunal is clearly an independent proceeding which must
be decided in accordance with the provisions of the Code."
20. In Duncans Industries Ltd. v. AJ Agrochem, (2019) 9
SCC 725, this Court was faced with a situation of conflict between
Section 16-G(1)(c) of the Tea Act, 1953, under which winding up/
liquidation proceedings were to take place (and which could not take
place without prior consent of the Central Government), and aproceeding
initiated under Section 9 of the IBC. After relying upon the judgment of
this Court in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1
SCC 407 and Swiss Ribbons (supra), this Court held:
"7.4. Section 16-G(1)(c) refers to the proceeding for winding up
of such company or for the appointment of receiver in respect
thereof.