# KSL & INDUSTRIES LTD. '\ v. MIS ARI HANT THREADS LTD. & ORS - **Citation:** [2008] 12 S.C.R. 702 - **Court:** Supreme Court of India - **Decided:** 2008-08-25 - **Case number:** Civil Appeal No. 5225 of 2008 - **Bench:** C.K. Thakker, Altamas Kabir - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ksl-industries-ltd-v-mis-ari-hant-threads-ltd-ors-23744 - **Pages:** 63 ## Headnote ~·' Recovery of Debts Due to Banks and Financial Institutions Act, 1993; Ss. 19, 20, 30, 34(1) & (2)/Sick Industrial c Companies (Special Provisions) Act, 1985; s. 22: Joint Venture Company - Recovery of Joan from company by Industrial Development Bank of India - Debt Recovery Tribunal passed ex-parte final order in favour of IDBI - Fixation of reserve price of property of the Company - D Challenged by the company by filing appeal No.52 of 2004 - Auction of movable and immovable property - Appellant was declared highest and successful bidder- Company filing an application in the· pending appeal for setting aside exparte final order-Auction purchaser filing an application for E imp/eadment- ORT allowed appeal No. 5212004 setting aside auction sale subject to fulfilling of certain conditions by the company with regard to payment of amount, interest etc. - Challenging the conditions imposed by ORT Company filing an appeal and cross appeal filed by auction purchaser- DRAT F allowed the appeal of the appellant confirming the auction sale in his favour after depositing the sale price - Challenge ,....---. to - Allowed by the High Court on ground that s.22 of Sick Industries Companies (Special) Provisions)Act, 1985 is a complete bar to recovery proceedings against sick companies· G as the Company in question was declared sick company by BIFR - Correctness of. Held: Per C.K. Thakker, J: ~-C Conclusion arrived at by High Court that tl'1e proceedings H 702 > KSL & INDUSTRIES LTD. v. MIS ARI HANT THREADS LTD. & ORS. 703 were barred under S.22 of the SICA not well-founded - S.22 A of SICA has two parts which bars initiation of any proceedings for winding up of the company or execution etc. against any property of the Company/appointment of receiver and also filing of money suit for recovery of/enforcing of any security against the Company without the consent of the Board/ a Appellate authority - RDDB Act was enacted in 1993 when SICA 1985 was very much in force - Both the Statutes employ non-obstante clause ~ Applying the tests laid down by Supreme Court, the provisions of 1993 Act should be given priority over 1985 Act - It must be presumed that legislature c intentionally inserted non-obstante clause ins. 34(1) of 1993 Act though it was there in the 1985 Act so as to ensure expeditious recovery of debts due to Banks/Financial institutions - Moreover, s.34(2) of 1993 Act declares that the provisions of the Act are in addition and not in derogation of 0 other enactment - Hence, in case of conflict, RODD Act 1993 will prevaii over SICA 1985 so far as recovery of public revenue is concerned - High Court erred in applying ' provisions of s. 22 of SICA -Hence, the matter remitted to High Court for decisions afresh. E Held: Per Altamas Kabir, J.: Sub-section(1) of s. 34 of RDDB Act, 1993 clearly provides that the provisions of the Act/Rules made thereunder would be in addition to and not in derogation of certain statutes including SICA - Thus, while the 1993 Act would have an F overriding effect over other enactments - Provisions under 1993 Act would be supplemental to those of SICA - Hence, if the situation in a case is covered by the provisions of SICA then view taken by the· High Court would have to be upheld else impugned judgment would have to be set aside - In the G instant case, final order passed by ORT directing the company to pay dues to IDBI remained unchallenged since neither an appeal under s. 20 of 1993 Act was filed nor an application for setting aside the sale under Rule 60 of the Income Tax Act, 1961 filed, thus order of ORT attained finality - Company H "I 704 SUPREME COURT REPORTS [2008] 12 S.C.R. > ~_. A filed second Reference before BIFR after order confirming the auction sale in favour of auction purchaser was passed by DRAT - Later, company was declared to be a sick company by~BIFR - Thus, provisions under s. 22 of SICA invoked by the company after recovery proceedings had been concluded B in favour of auction purchaser ## Text _Characters 0–39,919 of 129,236. This is a partial read: ask again with offset=39919 for what follows._ [2008] 12 S.C.R. 702 A KSL & INDUSTRIES LTD. '\. v. MIS ARI HANT THREADS LTD. & ORS. (Civil Appeal No. 5225 of 2008) · B AUGUST 25, 2008 [C.K. THAKKER AND ALTAMAS KABIR, JJ.] ~·' Recovery of Debts Due to Banks and Financial Institutions Act, 1993; Ss. 19, 20, 30, 34(1) & (2)/Sick Industrial c Companies (Special Provisions) Act, 1985; s. 22: Joint Venture Company - Recovery of Joan from company by Industrial Development Bank of India - Debt Recovery Tribunal passed ex-parte final order in favour of IDBI - Fixation of reserve price of property of the Company - D Challenged by the company by filing appeal No.52 of 2004 - Auction of movable and immovable property - Appellant was declared highest and successful bidder- Company filing an application in the· pending appeal for setting aside exparte final order-Auction purchaser filing an application for E imp/eadment- ORT allowed appeal No. 5212004 setting aside auction sale subject to fulfilling of certain conditions by the company with regard to payment of amount, interest etc. - Challenging the conditions imposed by ORT Company filing an appeal and cross appeal filed by auction purchaser- DRAT F allowed the appeal of the appellant confirming the auction sale in his favour after depositing the sale price - Challenge ,....---. to - Allowed by the High Court on ground that s.22 of Sick Industries Companies (Special) Provisions)Act, 1985 is a complete bar to recovery proceedings against sick companies· G as the Company in question was declared sick company by BIFR - Correctness of. Held: Per C.K. Thakker, J: ~-C Conclusion arrived at by High Court that tl'1e proceedings H 702 > KSL & INDUSTRIES LTD. v. MIS ARI HANT THREADS LTD. & ORS. 703 were barred under S.22 of the SICA not well-founded - S.22 A of SICA has two parts which bars initiation of any proceedings for winding up of the company or execution etc. against any property of the Company/appointment of receiver and also filing of money suit for recovery of/enforcing of any security against the Company without the consent of the Board/ a Appellate authority - RDDB Act was enacted in 1993 when SICA 1985 was very much in force - Both the Statutes employ non-obstante clause ~ Applying the tests laid down by Supreme Court, the provisions of 1993 Act should be given priority over 1985 Act - It must be presumed that legislature c intentionally inserted non-obstante clause ins. 34(1) of 1993 Act though it was there in the 1985 Act so as to ensure expeditious recovery of debts due to Banks/Financial institutions - Moreover, s.34(2) of 1993 Act declares that the provisions of the Act are in addition and not in derogation of 0 other enactment - Hence, in case of conflict, RODD Act 1993 will prevaii over SICA 1985 so far as recovery of public revenue is concerned - High Court erred in applying ' provisions of s. 22 of SICA -Hence, the matter remitted to High Court for decisions afresh. E Held: Per Altamas Kabir, J.: Sub-section(1) of s. 34 of RDDB Act, 1993 clearly provides that the provisions of the Act/Rules made thereunder would be in addition to and not in derogation of certain statutes including SICA - Thus, while the 1993 Act would have an F overriding effect over other enactments - Provisions under 1993 Act would be supplemental to those of SICA - Hence, if the situation in a case is covered by the provisions of SICA then view taken by the· High Court would have to be upheld else impugned judgment would have to be set aside - In the G instant case, final order passed by ORT directing the company to pay dues to IDBI remained unchallenged since neither an appeal under s. 20 of 1993 Act was filed nor an application for setting aside the sale under Rule 60 of the Income Tax Act, 1961 filed, thus order of ORT attained finality - Company H "I 704 SUPREME COURT REPORTS [2008] 12 S.C.R. > ~_. A filed second Reference before BIFR after order confirming the auction sale in favour of auction purchaser was passed by DRAT - Later, company was declared to be a sick company by~BIFR - Thus, provisions under s. 22 of SICA invoked by the company after recovery proceedings had been concluded B in favour of auction purchaser - Steps taken by the company were far from bonafides and only armed at stalling the auction ;~ sale - Even no attempt made by the company to secure a bid higher than the auction purchaser - Hence, High Court erred in applying the provisions of-s-:z2- of-SICA when sale had c already been confirmed in favour of auction purchaser and ~ first reference rejected by BIFR - Income Tax Act, 1961 - Second schedule - Rule 60 - Interpretation of Statutes. By the Coμrt: D In view of difference of opinion on interpretation of s. 34 of the Recovery of Debts Due to Banks and Financial 'F Institutions Act, 1993, the matter referred to the Chief Justice for appropriate action in the matter. Respondent No.1 was a Joint Venture Company E manufacturing cotton yarn. The company got financed a project from the Industrial Development Bank of India (IDBI) but could not repay the loan amount. IDBI filed an original application before the Debt Recovery Tribunal for recovery of the dues in terms of Recovery of Debts Due F to Banks and Financial Institutions Act," 1993. ORT passed an ex-parte finai. order in favour of IDBI for recovery of ,, .. ' loan amount with interest thereon. The Recovery Officer issued a composit demand notice under Rule 2 of Second Schedule of the Income Tax Act, 1961 against the company G demanding certain amount and also directed the company to appear for settling terms and conditions of the ,..._,.. proclamation of sale and for disclosure of its movable and immovable property. The Recovery Officer on the basis of valuation report fixed the reserve price of the H property and also fixed the date for sale of immovable .. KSL & INDUSTRIES LTD. v. MIS ARI HANT 705 ... "';1 THREADS LTD. & ORS . . , and movable property. Against the order of the Recovery A ~ .. '.') " Officer fixing the reserve price, the company filed an appeal before DRT. In the meantime, auction took place in which the appellant was declared as highest and successful bidder, who deposited 25% of the reserve price and later remaining 75% of the amount. However, B " the company did not handover the possession to receiver . appointed by the Tribunal but moved an application for setting aside ex-parte final order. Appellant also filed an application to implead it in the pending appeals. The application for impleadment was allowed by DRT. 111 the c meantime, DRT allowed the appeal of the Company setting aside the auction sale subject to certain conditions with regard to payment of interest, expenses etc. How~ver, the Company preferred an appeal objecting the conditions as laid down in the order and the appellant filed a cross D --y appeal. The appellate Tribunal stayed the operation of the order setting aside the ex-parte order passed by DRT. The Debt Recovery Appellate Tribunal allowed the appeal filed by the appellant and confirmed the auction sale. The company filed a Reference Petition before the Board of E Industrial Finance & Reconstruction which was, rejected by BIFR. The Company filed another Reference petition, in which BIFR declared the Company as Sick Company. Aggrieved by the order of DRAT, the company filed writ petitions, which were allowed by the High Court on the _, j ground that s.22 of SICA put a complete bar to recovery F proceedings against a sick company. Hence the present appeal. Appellant-Auction purchaser contended that the proceedings were neither covereq by the first part nor by G ~-'/ the second part of Section 22 of· the SICA and the High Court ought to have decided the case on merits; that Section 34 of RDDB Act has an 'overriding effect' and even on that ground, the matter ought to have been decided; that t~e appeal preferred by the Company H 706 SUPREME COURT REPORTS [2008] 12 S.C.R. A against fixation of reserve price was not maintainable under Section 30 of the ROOS Act; that ORT granted interim relief subject to certain conditions, but even those conditions had not been complied with by the Company; that the reserve price fixed by the Recovery Officer was B proper, sufficient and reasonable and DRT ought not to have set aside the order passed by the Recovery Officer; that the High Court ought to have taken into account over all conduct of the Company, particularly when the Company had invoked discretionary and equitable C jurisdiction under Article 226 of the Constitution; that the Company had not come before the High Court with clean hands. It had neither repaid the loan amount nor did it appear before DRT inspite of service of summons; that the Company_ filed an appeal before DRT against an 'order' 0 which was not appealable; that it dispossessed the receiver appointed by the Tribunal; that the Company also removed machinery and other movable property . from the disputed premises; that it created unlawful tenancy rights in favour of third party by accepting substantial amount from him; and that even if the case E was covered by s.22 of SICA, the High Court, in exercise of extraordinary and special jurisdiction, ought not to have granted relief in favour of the Company. Respondents-Company submitted that no F opportunity of hearing was afforded to it and the ex-parte final order passed by ORT was violative of principles of natural justice and fair play; that the appeal filed against fixation of reserve price before DRT was maintainable under Section 30 of the ROOS Act as the appeal lies G against "an order of the Recovery Officer made under the Act" and an order of fixation of reserve price is also an 'order' within the meaning of the Act; and that the Company was not in a position to comply with the conditions of stay granted by the Tribunal and the directions issued and hence, in accordance with law, it H c KSL & INDUSTRIES LTD. v. MIS ARIHANT 707 -- "I THREADS LTD. & ORS. challenged the said order by filing an appeal before DRAT. A It was the right of the Company to take such action and the appellant cannot object against such course being adopted by the Company. In view of the difference of opinion on interpretation B of Section 34 of the RDDB Act, referring the matter to the Chief Justice, the Court HELD: Per C.K. Thakker, J: c 1.1 The High Court had disposed of the petitions only on one ground as to applicability of Sick Industrial Companies (Special Provisions) Act and held that the proceedings were barred under Section 22 of the Act. The conclusion arrived at by the High Court is not wellD founded and the decision of the High Court on that point deserves to be set aside. (Paras - 17 & 19) [726-F; 727-F] 1.2 Section 22 of SICA is a material provision which relates to suspension of legal proceedings, contracts, etc. Section 32 of SICA gives 'overriding effect' to the E provisions of the Act. (Paras - 21 & 22) [728-E; 729-D] 1.3 It is Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 which allows .... ~ 'overriding effect' to the provisions of the Act over other F laws. {Para - 23) [730-D] 1.4 Section 22 of SICA has two limbs. The first part enacts that "no proceeding for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company G '-'/ or for the appointment of a receiver in respect thereof shall lie or be, proceeded with further, except with the consent of the Board or, as the case may be, the Appel.fate Authority. The second part which is independent of the first part declares that no suit for the recovery of money H 708 SUPREME COURT REPORTS 'Qi [2008] 12 S.C.R. A 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 s Authority. The two parts use two different expressions; (i) 'proceeding' and (ii) 'suit'. (Para - 25) [731-0,E,F & G] Kai/ash Nath Agarwal & Ors. v. Pradeshiya Industrial & Investment Corporation of .IJp Ltd. & Anr., (2003) 4 SCC 305; Pandurang R. Mandlik v. Shantibai R. Ghatge, 1989 C Supp (2) SCC'627; Hansraj Gupta v. Dehra Dun - Mussoorie Electric Trameray Co. Ltd.; 60 IA 13 : AIR 1933 PC 63 - referred to. 1.5 In the instant case, ·proceedings had been initiated -' 0 by the Bank not before a Civil Court by invoking Section 9 of the Code of Civil Procedure, 1908, but before DRT by taking recourse to jurisdiction under RDOB Act. It is, therefore, contended that the proceedings could not be said to be a "suit" fulling within the mischief of Section 22 of SICA. In any case, according to the counsel for the E appellant, ex parte final order was passed by ORT as back as on July 15, 2003 and hence even if it is assumed that the connotation "suit" should be construed liberally so as to take within its sweep all proceedings including an application before ORT, in view of final order passed by F ORT in 2003, bar envisaged by Secti()n 22 of SICA cannot operate. (Para ..... 29) [732-E,F,G & H] 2.1 It Is well-settled that when any law has been enacted, the Legislature must be presumed to be aware G of all existing laws. When ROOB Act was enacted in 1993, SICA was very much in force since it was enacted in 1985. In spite of that, Parliament wa.s pleased to give 'overriding - effect' to RODB Act by using non-obstante clause in Section 34. Sub-section (1) of s.34 expressly states that the provisions of the Act shall have effect notwithstanding H KSL &- INDUSTRIES LTD. v. M/S ARI HANT 709 THREADS LTD. & ORS. >,) anything inconsistent therewith contained in any other law A for the time being in force. (Paras 46) [739-G & H; 740-A & 8] 2.2 Where two statutes employ non-obstante clause having 'overriding effect'; such a conflict, as laid down in several cases, may be resolved by judiciary on various B ' considerations. One of the tests applied by Courts is that :)( normally a later enactment should prevail over the former. (Paras 47) [740-8 & C] 2.3 The law is fairly well settled. A provision beginning with non-obstante clause (notwithstanding anything c inconsistent contained therein in any other law for the time being in force) must be enforced and implemented by giving effect to the provisions of the Act and by limiting the provisions of other laws. But, it cannot be gainsaid that sometimes one may come across two or more D .....,, enactments containing similar non-obstante clause operating in the same or similar direction. Obviously, in such cases, the Court must attempt to find out the intention of the Legislature by examining the nature of controversy, object of the Act, proceedings initiated, relief E sought and several other relevant considerations. It is clear from the various decisions of this Court that Courts have applied several workable tests. They, inter alia, include to keep in view whether the Act is 'general' or 'special', whether the Act is a subsequent legislation, whether there ' ;\, is reference to the former law and the non-obstante clause F / therein. The above tests are merely illustrative and by no means they should be considered as exhaustive. It is for the Court when it is called upon to resolve such conflict by harmoniously interpreting the provision of both the competing statutes and by giving effect to one over the G ~--+ other. (Para - 66) [749-E,F,G & H 750-A] Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. & Anr., (1993) 2 SCC 144; Deputy Commercial Tax Officer & Ors. v. Corromandal H 710 SUPREME COURT REPORTS [2008) 12 S.C.R. A Pharmaceuticals & Ors., (1997) 10 SCC 649; Real Value Appliances Ltd. v. Canara Bank & Ors., (1998) 5 SCC 554; Rishabh Agro Industries Ltd. v. PN.B. Capital Services Ltd., (2000) 5 SCC 515; Patheja Bros. Forgings & Stamping & Anr. v. !CIC/ Ltd. & Ors., (2000) 6 SCC 545; Jai Engineering s Works Ltd. v. Industry Facilitation Council & Anr., (2006) 8 SCC 677; Shri Ram Narain v. Simla Banking & Industrial Co. Ltd., 1956 SCR 603; Shri Sarwan Singh & Anr. v. Shri Kasturi Lal, (1977) 1 SCC 750;. Sanwarmal Kejriwal v. Vishwa Cooperative Housing Society Ltd & Ors., (1990) 2 SCC 288; Life c Insurance Corporation of/ndia v. D.J. Bahadur & Ors., (1981) 1 SCC 315; Maharashtra Tubes Ltd., ; A.P State Financial Corporation v. Official Liquidator, (2000) 7 SCC 291; Allahabad Bank v. Canara Bank & Anr., (2000) 4 SCC 406; Mis. Transco re v. Union of India & Anr., (2008) 1 SCC 125; So/idaire 0 India Ltd. v. Fairgrowth Financial Services Ltd. & Ors., (2001) 3 SCC 71 and Bhoruka Steel Ltd. vs. Fairgrowth Fin~ncia/ Services Ltd., (1997) 89 Comp Cas 547 - referred to. . 2.4 Applying the tests as laid down by this Court in the instance case, it is crystal clear that the provisions of E RDDB Act should be given priority and primacy over SICA. Though, both the Acts are 'special Acts' in the sense that they have been enacted for a specific purpose and object in view. But RDDB Act is subsequent Act in the point of time being 1993 Act. It must, therefore, be presumed even F in absence of any specific provision in the 1993 Act that Parliament was aware of all statutes which had been enacted prior to 1993 including SICA of 1985. lnspite of that, in sub-section (1) of Section· 34 of RDDB Act, nonobstante clause has been inserted so as to ensure G expeditious adjudication and recovery of debts due to banks and financial institutions. But it is not only on the ground that the RODS Act is a later Act and SICA is a former Act in holding that the RDDB Act will prevail over SICA. There is an additional factor also which is of extreme H importance and supports the view. It is sub-section (2) of .. ; ... : , •. , .- .:- . , >~· .. KSL & INDUSTRIES LTD. v. M/S ARIHANT 711 THREADS LTD. & ORS. Section 34 of the Act. Sub-section (2) of Section 34 of A RDDB Act declares that the provisions of this Act are "in addition to and not in derogation of', certain enactments referred to in the said sub-section. SICA has been expressly mentioned in the said sub-section. RDDB Act, 1993 has been enacted with a view to provide for the B establishment of the Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. All other laws, therefore, whether general or special, prior or subsequent, must be interpreted and applied keeping in view the above object c of enacting 1993 Act. Therefore, even though both the conflicting statutes, viz., SICA of 1985 and RDDB Act of 1993 contain non-obstante clause but in case of conflict, RDDB Act, 1993 will prevail over SICA, 1985 so far as recovery of public revenue is concerned. (Paras - 67 & D -y 68) [750-8,C,E,F,G & H; 751-A,B & C] 3. The High Court has committed an error of law in invoking and applying provisions of Section 22 of SICA and in dropping proceedings against the Company. The order of the High Court, therefore, deserves to be set aside E and ordered accordingly. The matter is remitted to the High Court to decide it afresh on all points including the conduct of the Company after hearing the parties. All contentions of all parties are kept open. (Para - 69) [751-D & E] 4. It is clarified that no opinion has been expressed F on other issues and as and when the matter will come up before the High Court, the same will be decided on its own merits without being inhibited by such observations. (Para - 70) [751-G] Held: G Per Altamas Kabir, J. : 1.1 It may be significant to note that on 3.4.2006 the BIFR rejected the Reference made by the Company and H 11- !>'- 712 SUPREME COURT REPORTS . [2008] 12 S.C.R. A thaCon 15.9.2006 anoth.er Reference was. filed by the \i(',. respondent-Company before BIFR. It is in the said Reference that on 22.2.2007 the BIFR declared the Company to be a "sick. company" and the respondent No.5 was appointed as the Operating Agency for preparation of B a rehabilitation scheme. (Para - 1·2) [756-A & B] 1.2 The writ petitions filed by the respondent- )(, Company were allowed by the High Court on the sole ground that the recovery proceedings under the RDOB c Act were barred under Section 22 of the SICA. Having once come to the conclusion that the proceedings were barred under-Section 22 of the_SICA, the High Court did not go into any otherquestfon with regard to the merits of the matter and. set-aside the order of the DRAT confirming the auction·s·a1e on that one ground alone. D (Para - 16) ·[757·F & G] · 1.3 The openin'g words of Sub-section (1) of Section y , 34 of the RDDB Act clearly make the provisions thereof subject to the provisions of Sub-se-ctionj2) which in E unambiguous term provides that the provisions of the Act or the Rules made thereunder would be in addition to and not in derogation of, certain statutes indicated therein, including the Sick Industrial Companfes (Special Provisions) Act, 1985. It is, therefore; clear that while the RDDB Act would have ah over-riding effect over other F enactments, its provisions would only be supplemental - ~ ~ to those of the SICA and consequently the provisions of the SICA would prevail over the provisions of the RDDB Act. Accordingly, if it is held that the situation in this case is covered by the provisions of SICA .... then the view taken G by the High Court would have to be upheld. If, however, it is found that the provisions of SICA do not apply to the facts of this case, then there can be no doubt that the t-' judgment of the High Court would have to be set aside. (Para - 20) t759-A,B,C & D] H KSL & INDUSTRIES LTD. v. MIS ARIHANT 713 THREADS LTD. & ORS. ... 'I 2.1 It will be of interest to note that the proceedings A taken by the Company after the passing of the final order by ORT, Chandigarh, on 15.7.2003, were directed against fixation of the reserve price by the Recovery Officer though in Appeal No.52 of 2004 an application was. made by the Company for setting aside the final order passed by the 8 ORT Chandigarh. The same was however, of no )I consequence as the appeal was preferred against the order of the Recovery Officer fixing the reserve price of the Company's assets and not the final order, which, in any event, could not have been challenged in the said c proceedings. (Para - 29) [761-A,B & C] 2.2 In effect, the final order passed by the ORT, Chandigarh, directing the respondent-Company to pay the dues of IDBI remained unchallenged and attained finality. The two courses available to the Company for D ...,. preferring an appeal under Section 20 of the RDDB Act or by way of an application for setting aside the sale under Rule 60 of the Second Schedule of the Income Tax Act, 1961, were not resorted to by the respondent-Company. Instead, it chose to adopt a path restricted to the setting E aside of the auction sale on the ground that the-,.. reserve price of the Company's assets had nof been correctly fixed by the Recovery Officer prior to the auction sale. Consequently, the scope-of the appeal preferred by the Company was confined only to the question as t_p whether F ..- 1' the reserve price had been correctly fixed by the Recovery l Officer. (Paras - 29 & 30) [761-C,D,E & F] 3.1 The final order was passed by ORT, Chandigarh, at a point of time when no Reference had at all been made by the Company to the BIFR for being declared a "sick G company". The auction was held and concluded on .... ·1 30.10.2004, again before a Reference had been made by the Comp~ny to the BIFR. It is only on 21.12.2005 that the Company filed a Reference before the 61FR which was rejected on 3.4.2006. In between, the appeal preferred by H 714 SUPREME COURT REPORTS [2008] 12 S.C.R A the Company (No.52 of 2004) before the ORT under ~,. Section 30 of the RDDB Act was allowed and the auction sale was set aside, but the final order passed by ORT, Chandigarh, remained untouched. The appeal preferred by the appellant against the order of the ORT allowing B Appeal No.52 of 2004 was subsequently decided in favour of the appellant on 10.2.2006 and the auction sale was confirmed in favour of the appellant with a direction upon the Recovery Officer and the other concerned authorities to complete the sale in favour of the appellant. It is only on c 15.9.2006, after all the aforesaid orders had been passed that a second Reference was filed by the respondentCompany before the BIFR on 15.9.2006 and on 22.2.2007 the Company was declared to be a "sick company" by the BIFR. (Para - 32) [761-H; 762-A,B,C & D] D 3.2 The final order in the recovery proceedings under Section 19 of the RDDB Act was passed and the auction sale was concluded before the first Reference was filed by the Company with the BIFR and long before the respondent-Company was declared to be a sick E Company. It is, therefore, clear that the provisions of SICA, were sought to be invoked by the Company after the recovery proceedings had been concluded in favour of the appellant who had also deposited the sale price in respect of his offer which had been accepted by the F Recovery Officer. (Para - 34) [762-G & H; 763-A & B] 3.3 For reasons which are obvious, the respondentCompany chose not to take recourse either to Section 20 of the RDDB Act or Rule 60 of the Second Schedule of the Income Tax Act, 1961, and took a chance of filing an G appeal under Section 30 of the RDDB Act with regard to the fixation of the reserve price of the Company's assets by the Recovery Officer for the purposes of the auction sale and the scope of the appeal was limited to such issue alone. (Para - 35) [763··8,C & D] H ~ KSL & INDUSTRIES LTD. v. M/S ARI HANT THREADS LTD. & ORS. 715 ""' > 3.4 Since the respondent-Company did no.tchailenge A 'f .;._ .. 4 the final order of the DRT, the same continued to be in force and was carried to its logical conclusion oy the holding of auction sale and confirmation thereof in favour of the appellant. (para - 36) [763-D & E] 3.5 The order passed by the DRAT on 10.2.2006 S confirming the sale i.n favo.ur of the appellant was made long before the respondent-Company was declared to be a "sick company" on 22.2.2007. The High Court was, therefore, in error in applying the provisions of Section 22 of the SICA when the sale had already been confirmed . C in favour of the appellant and the purchase price had .... ' already been deposited. Furthermore, the first Reference made by the Company was .also r.ejected by the BIFR on 3.4.2006. (Para - 37) [763-E & F] 4. Even o_n merits, the conduct of the company leaves D much to be desired. Without challenging the final order passed by the DRT, Chandigarh, allowing the Bank's claim . of Rs.25,26,60,836/- together with interest @ 7.8% per annum, the said respondent questioned the order of the E Recovery Officer, fixing the reserve price of the Company's assets for the purposes of the auction sale, under Section · 30 of the RDDB Act, having full knowledge of the facphat · the final order of the ORT, Chandigarh, could not be . ' challenged in such appeal. The steps taken by the p respondent No.1, Company were far from bonafide and .... were only aimed at stalling the auction sale. Even at the1 · time of auction of the company's assets, no attempt was made by the Company to secure a bid higher-than that ofthe appellant. Hence, nothing further remains to be ' decided by the High Court. (Paras - 38 & 39) [763-G & H; G 764-A,B & C] Case Law Reference (2003) 4 sec 30s referred to (Para - 2~} ' 1989 ~upp (2) sec 627 referred to (Para - ~8) H A B c D E 716 SUPREME COURT REPORTS [2008] 12 S.G.R. 60 lA 13:: AIR 1933 PC 63 referred to (Para - 28) (1993) 2 sec 144 referred to (Para - 36). (1997) 10 sec 649 referred to (Para - 38) ~'. -· (1998) 5 sec 554 referred to (Para - 40) (2000) 5 sec 515 referred to (Para - 43) 1 sec 291 /-'-~efer,red to (Para-- 60) _ (2ooor 4 ~cc 406 referred to (Para - 6~) l . . . (2008) . 1 sec 125 __ referred to (Para - 62) (2001) 3 sec -11 referred to (Para -63) t1997). 8~_.£omp. Cas · ~47 referred to (Para - 64) . CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5225 of 2008 ; ' 1 ·From the final Judgment and Order dated 23.02.2006 of F the High Court of Delhi at New Delhi in Civil Writ Petition Nos. 2041. & -2042 of 2006 · · -· G H ' . Harish N. Salve and Shyam Diwan, Paras Ku had, Hemant . -Sharma, Pitateek Jalan, Gaurav Pachnanda, Ajay Kumar, Prashant V.G. and lndu Sharma for the Appellant. · C.A~ Sunderam, Ranjit Kumar.and J.L. Gupta, Rohini Musa, Neha Tandop, B.S. Nagar, Ajay ,Choudhary, ·P-unit Dutt Tyagi, Sanje~v Sharma, Rajesti K Sharm_a~halu Sharma and Sanjay Bhatt for the Respondents.- - . ~ . . l .: . ~I ~ .- . - . The~J~dgment of th.e Court was delivered by , . \ r . KSL & INDUSTRIES LTD. v. iV1/S ARIHANT 717 THREADS LTD. & ORS. [C.K. THAKKER, J.] C.K. THAKKER, J. 1. Leave granted. A 2. The present appeal raises a question of great public importance having far-reaching consequences. The appeal is filed by KSL & Industries Ltd. ('appellant' for short) against final, judgment and order passed by the Division Bench of High Court, of Delhi on February 23, 2006 in Writ Petition (Civil) Nos. 20418 x ·· 42 of 2006. By the said judgment, the High Court, set aside the order passed by the Debt Recovery Appellate Tribunal, Delhi ('DRAT' for short) and held that in view of the provisions of Section 22 of the Sick tndustrial Companies (Special· Provisions) Act, 1985 (hereafter referred to as 'SICA'), no C recovery proceedings could· be effected against the first. respondent-Company in the light of ·the bar con,tai_ne.d therein. -. ~ ~--f Factual Background 3. To understand the controversy in its proper perspective, D it is necessary io keep in mind the factual matrix of the case, Respondent ~o. 1 (M/s. Arihant Threads Ltd.) ('Company' for short) was incorporated as a joint venture with Punjab State Industrial Development Corporation. It set up an export oriented spinning unit for manufacturing cotton yarn in the in<:lustrial area · E of Amritsar District of the State of Punjab. In 1992, Goindwal Sahib Industrial & Investment Corporation allotted Plot No. 454, Flocal Point of Goindwal Sahib Industrial Area by way of-tease to the Company for a period of 99 years with a specific condition that the lessee will not transfer the interest in the property for F first fiftee_n years without prior permission of the lessor. The le.ssee was to enjoy th~ right of possession so long as it continued paying instalments of the premium by due-date and abide by other terms and conditions of ttre ~ease. It was, however, stated that the lessee would be entitled to mortgage lease-hold G · rights to a Bank, Punjab Financial Corporation or Life Insurance ~ Corporation of India as security_ for a loan to be raised for - construction of factory building, purchase of raw materials, etc. The Industrial Development Bank of India ('IDBI' for short) which was the predecessor of the Stressed Assets Stabilisation Fund H 718 SUPREME COURT REPORTS [2008] 12 S.C.R. A ('SASF' for short), fjnariced the project undertaken by the Company by way of foreign currency loan and also working capital of Rs. 93.1 million. 4. It was the case of the Company that due to overall recession in Textile Industry, the Company suffered huge loss 'B and. could not repay the amount of loan. Since the Company failed to pay instalments, IDBI filed Original Application No . . 1368 of 2001 on December20, 2001 in Debt Recovery Tribunal, Chandigarh ('ORT' for short) for recovery of Rs.25;26,60,836/ - under the Rec9very of Debts· Due to· Banks and Financial \ C Institutions Act, 1993 (hereinafter referred to as the 'RDDB' Act).· On June 10, 2002, M/s Roland Exports (successor of Goindwal Industrial & Investment Corporation) cancelled the -lease agreement on account of non-payment of lease money amounting to Rs.3,19,94, 149/-. The Company did not remain , I . D · ·present before the ORT thoqgh duly served. On July 15, 2003, therefore, an ex-parte final order in favour of IDBI (SAFS) for recovery of Rs.25,26,60,836/- along with interest@ 7.8% p.a. was passed by ORT. '- · 5. The Tribunal in operative part· of the order stated; E F G "The application for recovery of a sum Rs.25,26,60,83@.00 is decreed against defendant company and the defendant/ company .is ord.ered to pay>_ i. A sum of Rs. 25,26.,60,836.00 alongwith pendent elife and future· interest @ 7.8% per .. · anriumwith half yearly rests jointly and severally., from the date of filing of the suit till reall?:~~~on; ii. , Pay the cost of litigation; . iii. _ Pay the s.aid amount within 30 days from the d~te of receipt .df this order. 2. In the ev§.nt of failure on the part of defendants to pay . ' the above amount within the stipulated period, the applicant bank shall be entitled to recove(the said ., I , \ 3. 4. KSL & INDUSTRIES LTD. -v. fvl/S ARIHANT 719 THREADS LTD. & ORS. [C.K. THAKKER, J.] amount from the sale of mortgaged properties of the A defendants. Even if the said amount is not so realized, it shall be recovered from the sale of personal properties of the defendants. Copy of the judgment be sent to the defendants and the recovery certificate be issued accordingly. 8 Parties to appear before the Recovery Officer, ORT, Chandigarh on 22.8.2003." 6. A recovery certifica_te was issued against the Company. On September 9, 2003, the Recovery Officer issued_ a C __ composite demand notice under Rule 2 of Second Sch~gule qf the Income Tax Act, 1961 against the Company demanding payment of Rs.28,60,87,384/-. He also directed the Company to appear on October 23, 2003 for settling terms and conditions of the proclamation of sale and for disclosure of its movable D and immovable assets. Harnek Singh, Security Guard who was_. present at the Company premises was served and he signed the,_summons in token of acceptance of notice on behalf of the ···Company. Service Report was filed by one Rajesh Mahajan, Advocate for certificate holder affirming Dasti service on the E Company. Another service report was also filed along with affidavit by the same advocate on October 6, 2003. On January 3, 2004, Mr. Vivek Verma, Local Commissioner appointed by the Recovery Officer, visited the site and filed his report wherein he stated that two machines were missing. He also recor9ed F that the unit was in running condition. At the instance of SASF,' North India Technical Consultancy Association Ltd. ('NITCO'rfor short) filed a valuation report in January, 2004 assessing the fixed assets at Rs.17.51 crores. It is alleged that on July 1, 2004, the Company created illegal tenancy in favour of M/s G Roland Exports. On September 16, 2004, the Recovery Officer: fixed the reserve price of the property at Rs.12 .50 crores (Rs.4.50 crores for movables and Rs.8.00 crores for' immovables). He also fixed the date for sale of immovable property as October 27, 2004 and for movable property as. H 720 SUPREME COURT REPORTS . (2ooa112 s.c .. R. A Oct~ber 30, 2004. The auction was, however, adjourned. The C_ompany on. October 18, 2004, filed an, appeal against_ the . order dated September 16, 2004 fixing reserve price of Rs .. - 12.50 crores in the ORT being Appeal No. 52 of 20.04 under Section 30 of the RDDB Act. On October 27, 2004, ORT allowed B auction sale to proceed but ordered that the sale should not be confirmed till further orders. On October 30, ?004, auction was concluded and the appellant herein was declared the highest . and successful bidder at Rs.12.52 crores. It deposited 25% of the reserve price. On November 2, 2004, on a.n application by C the appellant, ORT appointed representative of the appellant as a receiver to prepare inventory of auctioned property. · . 7. -On Nov~mber,. 11, 2004, th·e appellant made an application to ORT praying for acceptance of the bank guarantee in lieu of payment of the remaining amount of 75% and also by D refunding the amount deposited (25%). ORT dismissed the said ~pplication and the appellant-auction purchase( on the same day, i.e. November 11, 2004 deposited the balance amount of 75% of the purchase money i.e. Rs.9,39,00,000/- by a Bank draft. On Decemb~r 13, 2004, the receiver lodged a E First Information Report (FIR) and filed an affidavit before ORT complaining that the agent of the Company had forcibly dispossessed him by using criminal force. On December 15, 2004, the Company moved an application for setting aside exparte final o.rder passed on July 15, 2003 by ORT, Chandigarh F W,hich was registered as M.A. No. 103 of 2004. The appellant filed an application objecting the prayer of the Company ·with an added prayer to implead it in Appeal No. 52 of 2004 as also in rVi.A. No. 103 of 2004. The ORT allowed the impleadment application· of the appellant vide order dated December 17, G 2004. On March 28, 2005, the appellant filed an application for hearing preliminary issue as to maintainability of appeal filed by the Company (Appeal No. 52 of 2004). On April 8, 2005·, a suit for permanent injunction was filed by Roland Exports against the Company in the Civil Court at Tarantaran, District Amritsar. Status quo with regard to possession was ordered "to be H (, ' I <- " KSL & INDUSTRIES LTD. v. M/S ARI HANT 721 THREADS LTD. & ORS. [C.K. THAKKER, J.] maintained by the Court. An appeal against the said order is A said to have been pending in the Hig.h Court. Meanwhile, the Company got the property valued by Himachal Consultancy Organisation Ltd. ('HIMCO' for short), according to which the realizable value of the property had been increased to Rs.20.22 crores. On July 26, 2005, DRT-1, Delhi allowed Appeal No. 52 · s of 2004, set aside the auction sale subject to the Company fulfilling terms and conditions with regarct_to payment of certain amount, interest, expenses etc. 8. The Tribunal, while granting relief to the Company, o~ered; · C "In my humble opinion, natural justice requires that the appeal be allowed but with some conditions so that further progress of recovery be not stalled by the appellant. In these circumstances, this appeal is allowed, subject to 0 the following conditions:- (i) That the appellant will pay 5% of the amount deposited by the auction purchaser within 10 days as a penalty as per rule 60 of the Second Schedule of Income Tax Act. E (ii) The appellant will pay an interest on the amount deposited by the auction purchaser @ 9% p.a. · calculated from the date of deposit of the same till · today. The interest accumulated on the FDRs of auctioned _~mount till date will be paid to the CH Fl F who will adjust this amount against the outstanding dues of the appellant. ... (iii) The appellant will also bear all the expenditure incurred by the CH Fl in conducting the sale. The details of G the same will be given by the CH Fl within a week and thereafter within 10 days, this amount will be deposited by the appellant with the CH Fl. Failing to comply all the above three conditions, this appeal ., will be treated as dismissed and the restraint order passed H 722 SUPREME COURT REPORTS [2008] 12 S.C.R. ... A by this Tribunal will stand vacated and the Ld. Recovery ~- ~ Officer wiff be"-at liberty to pass the necessary orders as per faw and if, the above conditions are fulfilled by the appe11ant, the Ld. Recovery Officer is directed to re-auction this property as early as possible, within 75 days as per B law a11d release the amount deposited by the auction purchaser immediately. The present appeal bearing ' ·Transfer Appeal No. 1/2005 (Appeal NO. 52/04) stands disposed off accordingly. A copy of this order be given. ., dasti to all the parties.