# ~ TATA MOTORS LTD v. PHARMACEUTICAL PRODUCTS OF INDIA LTD. & ANR

- **Citation:** [2008] 9 S.C.R. 267
- **Court:** Supreme Court of India
- **Decided:** 2008-05-16
- **Case number:** Civil Appeal No. 3640 of 2008
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tata-motors-ltd-v-pharmaceutical-products-of-india-ltd-anr-24854
- **Pages:** 30

## Headnote

•
[2008] 9 S.C.R. 267
~
TATA MOTORS LTD.
A
v.
PHARMACEUTICAL PRODUCTS OF INDIA LTD. & ANR.
(Civil Appeal No. 3640 of 2008)
MAY 16, 2008
B
[S.B. SINHA, LOKESHWAR SINGH PANTA AND
-
~.
MARKANDEY KAT JU, JJ]
Companies Act, 1956; s. 391/Sick Industrial Companies
(Special Provisions) Act, 1984; Ss. 15-20, 26 and 32:
c
Liability of sick Company to pay to secured and unsecured creditors - Interpretation of provisions of 1956 Act and
1984 Act- Reference by sick company to Board for Industrial
and Financial Reconstruction - Board while recommending
...
for winding up of the company appointed an operating agency D
-4
- Appellate Authority staying operation of the order of Board -
Framing of schemes by operating agency for settling dues pf
selective creditors excluding the appellant-company and other
creditors - Approval of -
Company Judge approving the
Scheme - Letters Patent Appeal dismissed by High Court -
E
Correctness of - Held: Incorrect - Provisions under Special
Act override the provisions of a general Act - S.26 of SICA
bars the jurisdiction of Civil Courts in respect of any matter,
the Board or AA/FR is empowered to determine - Thus, juris-
~ diction of the High Court in a case of this nature is limited -
F
Order of the Board not appeared to be fair and reasonable to
meet the requirements of law - Hence, not only the impugned
judgment but also the order of the Board as also the Appellate Authority cannot be sustained and set aside - Matter remiffed to the Board for consideration afresh in accordance G
with the provisions of SICA - Interpretation of Statutes.
-+
Respondent No.1, a company took loan from another
company, the predecessor-in-interest of the appellant. Respondent No. 1, being unable to pay the dues to appel267
H
268
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A lant and other secured and unsecured creditors made a
reference before the Board for Industrial and Financial
Reconstruction. The Board appointed Industrial Development Bank of India (IDBI) as an operating agency and
recommended winding up of the respondent-company.
B An appeal was preferred thereagainst by the appellantcreditor before the Appellate Authority for Industrial and
Financial Reconstruction (AAIFR). The Appellate authority stayed the operation of the order of the Board. Before
the Appellate authority two separate Schemes were
C framed, one of them related to an arrangement between
respondent No. 1 and one Mis. Wanbury Ltd. for settling
of dues. Respondent No. 1, however, filed an application
before the High Court in terms of Section 391 of the Companies Act, during the pendency of the appeal, a Scheme
was presented before the Company Judge purported to
D be settling of dues of about 80 percent of the creditors.
Allegedly, even at that stage, it was not disclosed before
the Company Court that unsecured creditors listed in the
Scheme were only a selected few creditors, as a result
whereof a large number of creditors had been excluded.
E Before the Company Judge, the appellant filed an application for intervention objecting the scheme on certain
grounds. Rejecting objections, the scheme was approved
by the High Court. Letters Patent Appeal preferred thereagainst by the appellant was dismissed by the High Court.
F Hence, the present appeal.
Appellant contended that SICA being a special statute, the provision thereof shall prevail over the provisions
of the 1956 Act; that the High Court committed a manifest
G error in entertaining the respondent's application for
merger under Sections 391 to 394 of the Act, although
the matter was pending before the AAIFR; that the High
Court failed to notice the binding precedent of this Court
in NGEF Ltd. vs. Chandra Developers (P) Ltd. (2005) 8 SCC
219 wherein it has clearly been held by this Court that
H
TATA MOTORS v, PHARMACEUTICAL PRODUCTS 269
OF INDIA
SICA will prevail over the 1956 Act; that Section 26 of the A
SICA bars the jurisdiction of the company Judge; and that
the Division Bench of the High Court has failed t

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•
[2008] 9 S.C.R. 267
~
TATA MOTORS LTD.
A
v.
PHARMACEUTICAL PRODUCTS OF INDIA LTD. & ANR.
(Civil Appeal No. 3640 of 2008)
MAY 16, 2008
B
[S.B. SINHA, LOKESHWAR SINGH PANTA AND
-
~.
MARKANDEY KAT JU, JJ]
Companies Act, 1956; s. 391/Sick Industrial Companies
(Special Provisions) Act, 1984; Ss. 15-20, 26 and 32:
c
Liability of sick Company to pay to secured and unsecured creditors - Interpretation of provisions of 1956 Act and
1984 Act- Reference by sick company to Board for Industrial
and Financial Reconstruction - Board while recommending
...
for winding up of the company appointed an operating agency D
-4
- Appellate Authority staying operation of the order of Board -
Framing of schemes by operating agency for settling dues pf
selective creditors excluding the appellant-company and other
creditors - Approval of -
Company Judge approving the
Scheme - Letters Patent Appeal dismissed by High Court -
E
Correctness of - Held: Incorrect - Provisions under Special
Act override the provisions of a general Act - S.26 of SICA
bars the jurisdiction of Civil Courts in respect of any matter,
the Board or AA/FR is empowered to determine - Thus, juris-
~ diction of the High Court in a case of this nature is limited -
F
Order of the Board not appeared to be fair and reasonable to
meet the requirements of law - Hence, not only the impugned
judgment but also the order of the Board as also the Appellate Authority cannot be sustained and set aside - Matter remiffed to the Board for consideration afresh in accordance G
with the provisions of SICA - Interpretation of Statutes.
-+
Respondent No.1, a company took loan from another
company, the predecessor-in-interest of the appellant. Respondent No. 1, being unable to pay the dues to appel267
H
268
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A lant and other secured and unsecured creditors made a
reference before the Board for Industrial and Financial
Reconstruction. The Board appointed Industrial Development Bank of India (IDBI) as an operating agency and
recommended winding up of the respondent-company.
B An appeal was preferred thereagainst by the appellantcreditor before the Appellate Authority for Industrial and
Financial Reconstruction (AAIFR). The Appellate authority stayed the operation of the order of the Board. Before
the Appellate authority two separate Schemes were
C framed, one of them related to an arrangement between
respondent No. 1 and one Mis. Wanbury Ltd. for settling
of dues. Respondent No. 1, however, filed an application
before the High Court in terms of Section 391 of the Companies Act, during the pendency of the appeal, a Scheme
was presented before the Company Judge purported to
D be settling of dues of about 80 percent of the creditors.
Allegedly, even at that stage, it was not disclosed before
the Company Court that unsecured creditors listed in the
Scheme were only a selected few creditors, as a result
whereof a large number of creditors had been excluded.
E Before the Company Judge, the appellant filed an application for intervention objecting the scheme on certain
grounds. Rejecting objections, the scheme was approved
by the High Court. Letters Patent Appeal preferred thereagainst by the appellant was dismissed by the High Court.
F Hence, the present appeal.
Appellant contended that SICA being a special statute, the provision thereof shall prevail over the provisions
of the 1956 Act; that the High Court committed a manifest
G error in entertaining the respondent's application for
merger under Sections 391 to 394 of the Act, although
the matter was pending before the AAIFR; that the High
Court failed to notice the binding precedent of this Court
in NGEF Ltd. vs. Chandra Developers (P) Ltd. (2005) 8 SCC
219 wherein it has clearly been held by this Court that
H
TATA MOTORS v, PHARMACEUTICAL PRODUCTS 269
OF INDIA
SICA will prevail over the 1956 Act; that Section 26 of the A
SICA bars the jurisdiction of the company Judge; and that
the Division Bench of the High Court has failed to consider that the Company Judge had no jurisdiction to entertain such a proceeding.
Respondent No. 1 submitted that the operation of B
the order of BIFR having been stayed, the Company Peti-
~
tion was maintainable; that Section 19 of SICA will have
no application as it speaks of financial assistance by the
persons specified therein; that Section 22 of SICA must c
be read in the context of Section 19 thereof; that Section
26 or any other provision of SICA do not oust the jurisdiction of the Company Court; that SICA would prevail over
1956 Act only if the provisions of the latter are inconsistent with the provisions of SICA and not otherwise; and
•
that the Scheme in question being subject to approval by D
+
BIFR and that BIFR by reason of its order dated 151 May,
2007 had granted approval thereof, the legal requirements
must be held to have been complied with.
Allowing the appeal, the Court
E
HELD: 1.1 The provisions of a special Act override
the provisions of a general Act. A later of it will override an
earlier Act. The Companies Act, 1956 is a general Act. It
-
consolidates and restates the law relating to companies
·,,.-
and certain other associations. It is prior in point of time F
to Sick Industrial Companies (Special Provisions) Act,
1984. Wherever any inconstancy is seen in the provisions
of the two Acts, SICA would prevail. (Para - 19) [285-E-F]
1.2 SICA is a special statute. It is a self contained Code.
The jurisdiction of the Company Judge in a. case where G
reference had been made to BIFR would be subject to
the provisions of SICA. (Para - 20) [285-G]
1.3 SICA was enacted to secure the principles specified in Article 39 of the Constitution of India. It seeks to H
270
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A give effect to the larger public interest. It should be given
primacy because of its higher public purpose. Section 26
of SICA bars the jurisdiction of the Civil Courts. (Para -
22) [291-F-G]
B
NGEF Ltd. vs. Chandra Developers (P) Ltd. (2005) 8 SCC
219 and Bombay Dyeing & Manufacturing Co. Ltd. vs. Bombay
Environmental Action Group (2006) 3 SCC 434 - referred to.
1.4 What scheme should be prepared by the operat-
).
ing agency for revival and rehabilitation of the sick indusc trial company is within the domain of BIFR. Section 26 of
SICA not only covers orders passed under SICA but also
any matter which BIFR is empowered to determine. (Para
- 22) [291-H; 292-A]
1.5 The jurisdiction of civil court is barred in respect
D of any matter for which the appellate authority or the
Board is empowered. The High Court may not be a civil
..
+
court but its jurisdiction in a case of this nature is limited.
(Para - 23) [291-A-B]
E
Jyoti Bhushan Gupta vs. Banaras Bank Ltd. (1962) Supp
1 SCR 73 and Damji Valli Shah vs. Life Insurance Corporation of India (1965) 2 SCR 665 - referred to.
2.1 The jurisdiction of the Company Court is now
vested in the Tribunal. Therefore, it will be difficult to hold,
F in view of a changed situation, that Section 26 of SICA
~
ousts the jurisdiction of the Company Court in totality.
(Para - 26) [294-D]
2.2 It is not possible to harmonize the provisions of Sections 391 to 394 of the 1956 Act with the provisions of SICA.
,...
In the facts and circumstances of the case, the judgment of
I_;
the High Court cannot be sustained. (Para - 26) [295-C,B]
3.1 The Scheme provides for not only entering into
an arrangement as regards repayment of debts to seH cured creditors and unsecured creditors but also provides
TATA MOTORS v. PHARMACEUTICAL PRODUCTS 271
OF INDIA
,.._
for a merger, subject of course, to an appropriate order A
being passed by BIFR. The question is as to whether such
a Scheme could be placed for approval before BIFR. This
Court is of the view that it could not be. Before BIFR could
approve a scheme, the same must be drawn in terms of
the provisions of the Act and not de hors the same. It is B
required to apply its own mind. The operating agency is
_...
supposed to make a scheme. The operating agency be-
~
fore the AAIFR took one stand and before this Court it
has taken another. According to it, it was not involved in
the preparation of the Scheme. It had no occasion to apply c
its own mind. Furthermore, after the Single Judge passed
its order, AAIFR disposed of the appeal only in terms of the
order of the High Court directing BIFR to consider the
scheme vetted by the operating agency within a period of
three months from the date of this order and take necesD
~
sary further steps for the revival of the appellant company
+
in accordance with law. The order of BIFR also clearly
shows that it has granted its approval in view of the observations made by the appellate authority. It might have done
so keeping in view the doctrine of judicial discipline in mind.
E
(Paras - 28 and 29) [295-E-H; 296-A-C]
3.2 The order of BIFR is not an outcome of any preapplication of mind. There is no finding that it has taken
into consideration all the relevant facts. There is nothing
"'r
to show that such an order is fair or reasonable or meets
the requirements of law. Hence, this Court is of the opinF
ion that not only the judgment of the High Court but also
the orders of BIFR as also the AAIFR should be set aside
...
and the matter should be remitted to the BIFR so as to
enable it to proceed in accordance with the provisions of G
SICA afresh. (Paras - 30 and 31) [296-D-E]
-(
4. It is a fit case where this Court should exercise its
jurisdiction under Section 142 of the Constitution of India to meet the object for which the Act has been enacted.
(Para - 27) [295-D]
H
272
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 3640
of 2008
From the Judgment and Order dated 16.10.2006 of the
High Court of Judicature at Bombay in Appeal No. 725 of 2006
B
in Company Petition No. 470 of 2005 connected with Company Application No. 282 of 2005
R.F. Nariman, C.A. Sundaram, Abhishek, M. Singhavi,
Shyam Divan, Birendra Saraf, Amar Dave, Nandini Gore, Sonia
...
Nigam, S. Jayaram, Rohni Musa, Sudanshu Batra, Abhishek
c Gupta, Pramit Saxena, Amit Yadav, S.V. Deshpande, S.M.
Jadhav, P.K. Manohar, Arvind Kumar Gupta and Bipin Bihari
Singh for the Appearing Parties.
The Judgment of the Court was delivered by
D
S.B. SINHA, J. 1. Leave granted
Introduction
~
+
2. Interpretation/application of the provisions of the Sick
Industrial Companies (Special provisions) Act, 1984 (SICA) visE a-vis the Companies Act, 1956 (1956 Act) is in question in this
appeal which arises out of a judgment and order dated 16th
October, 2006 passed by a Division Bench of the High Court of
Judicature at Bombay in Appeal No.725 of 2006 arising out of
a judgment and order dated 13th February, 2006 passed by a
F
learned Single Judge of the Bombay High Court approving a
Scheme filed by the respondent herein in Company Petition
,
..
No.470 of 2005 which was under Section 391 of the 1956 Act.
Background Facts:
3. First respondent is a company registered and incorpo-
..
G rated under the 1956 Act. It took loan from Tata Finance Ltd,
,;;
predecessor-in-interest of the appellant on interest@ 18% per
annum. Disputes and differences arose between the parties,
'r
which were referred to arbitral tribunal. An award was passed
on 301h July, 2002 in the Arbitration proceedings for a sum of
H Rs.1,51,36, 795/- together with interest @ 18% per annum till
TATA MOTORS v. PHARMACEUTICAL PRODUCTS
273
OF INDIA [S.B. SINHA, J.]
payment and/or realization. It is stated that the total amount due A
to the appellant from the respondent would be near about 5.7
crores of rupees. There were other secured and unsecured
creditors also.
Proceedings under SICA
B
.....
4. Respondent being unable to pay the dues made a ref-
-I
erence in terms of Section 15 of SICA before the Board for
Industrial and Financial Reconstruction (BIFR). The BIFR appointed Industrial Development Bank of India (IDBI) as an operating agency. It purported to have considered various c
schemes. However, as Unit Trust of India (UTI) raised an objection for giving up any of its dues and there were six secured
creditors and large number of unsecured creditors, BIFR on or
about 271h October, 2004 passed an order recommending wind-
..
ing up of the respondent. An appeal was preferred thereagainst D
_...
before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).
5. The AAIFR granted stay of operation of the order of
BIFR dated 27th October, 2004 by an order dated 131h September, 2005. Before the AAIFR two separate Schemes were E
framed, one of them related to an arrangement between the
respondent and Mis. Wanbury Ltd. It agreed to settle the outstanding dues of the creditors of PPIL. But before· doing so, it
'.,-
thought it fit to settle all the large creditors being Financial lnstitutions and Banks. The scheme envisaged payment to a class
F
of creditors.
It was also envisaged:
" In addition, two immovable properties of the company
(which were its primary and main assets) were to be sold G
and the unsecured creditors were to be paid a proportion
of the sale proceeds. The balance of the sale proceeds
were to be paid over to the secured creditors.
Upon payment of the cash consideration, Wan bury was to
get complete control over the Respondent including all its H
274
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
assets subject to the approval of the merger before the
appropriate forum.
B
The scheme was to become effective upon approval of
overall settlement including an order for merger or any
other mode of acquisition of assets of PPIL by Wanbury
or such scheme of PPIL by BIFR/AAIFR."
Appellant was kept outside the said Scheme. The scheme
~
involved some selective secured creditors and some selective
unsecured creditors.
C
Company Court Proceedings
6. Respondent, however, filed an application before the
High Court of Judicature at Bombay purported to be in terms of
Section 391 of the 1956 Act during the pendency of the said
0 appeal on or about 291h April, 2005. A Scheme was presented
•
before the Company Judge purported to be involving about 80
+
percent of the creditors, most of them being banks, financial
institutions. Allegedly, even at that stage, it was not disclosed
before the Company Court that unsecured creditors listed in
E the Scheme were only a selected few creditors, as a result
whereof a large number of creditors had been excluded.
F
G.
H
7. Before the Company Judge, the appellant filed an application for intervention. It filed an objection to the said Scheme
primarily on the grounds:-
"That the revival/rehabilitation of the company was under
consideration of a specialized body formed under the Sick
Industries Act which is a special legislation and would
prevail over the provisions of the Companies Act.
That the non-obstante clause contained in the Sick
Industries Act will have the effect of overriding and excluding
the provisions of the Companies more so where there is
an overlapping between the two Act.
That considering the scheme of the Sick Industries Act,
the revival/restructing of the company cannot be considered
TATA MOTORS v. PHARMACEUTICAL PRODUCTS 275
OF INDIA [S.B. SINHA, J.]
by two separate forums separately.
A
That the scheme involved financial reconstruction, sale of
assets of the company and merger/take over by Wanbury ..
These issues expressly fall within the domain of the BIFR
under Section 18 of the Sick Industries Act.
B
That a scheme could not be presented only in respect of
-
selected unsecured creditors to the exclusion of the other
...
similarly placed unsecured creditors such as the
Petitioners.
That the entire scheme was nothing but a fraud which was c
being played whereby the company and its assets were
being transferred to Wanbury which was associated with
the company itself."
..
UTI also filed an objection.
D
....
8. The said contentions of the appellant, however, were
rejected by a learned Single Judge of the High Court by his
order dated 13th April, 2006 and the Scheme was approve?.
Order of the AA/FR
E
9. In view of the aforementioned order of the High Court,
AAIFR also on or about 1s1 June, 2006 approved the said
Scheme opining :-
"5. Learned counsel for the Appellant Company states
F
that the scheme of Compromise and Arrangement approve
by the Bombay High Court have been incorporated in the
scheme of revival cum merger submitted to IDBI (Operating
Agency) in pursuance of direction given by us on 9.11.2005.
6. In view of IDBl's recommendation of the revival cum G
merger proposal submitted by PPIL, which· is in
accordance with Bombay High Court's order dated
13.2.2006, we set aside the impugned order dated
27.10.2004 and direct BIFR to consider the scheme vetted
by the OA within a period of three months from the date of H
276
SUPREME COURT REPORTS
(2008) 9 S.C.R.
A
this order and take necessary further steps for the revival
of the appellant company in accordance with law."
10. An intra court appeal was preferred thereagainst by
the appellant on or about 3rc1 August, 2006. By reason of the
impugned judgment the said Letters Patent Appeal has been
B
dismissed, stating:-
c
D
E
F
"2. The Appellant claims to be an unsecured creditor to
the extent of Rs .1.51 crores as set out in the award dated
30.7.2002 with further interest atthe rate of 18% per annum.
It is not in dispute that the Scheme of Arrangement
approved by the learned Company Judge between
Pharmaceutical Products of India Ltd. and its unsecured
creditors and Wanbury does not affect the rights of the
appellant as the appellant, though an unsecured creditor,
is not specified in Schedule-I, appended to the Scheme.
In this backdrop, the impugned order cannot be faulted.
However, it is clarified that whatever objections the
appellant may have against the revival scheme pending
before the BIFR, pursuant to the order dated 1.6.2006
passed by the AAIFR, they may place their objections
before the BIFR and obviously upon such objections being
placed theBIFR shall consider the revival scheme of the
respondent-Company on is own merits, keeping in view
all relevant fact and circumstances, including the objections
of the appellant."
Subsequent Events
11. We may also take note of some subsequent events. In
view of the order of AAIFR dated 1st June, 2006, BIFR issued
notice on 1st February, 2007 to consider the Scheme-cumG merger with M/s. Wan bury Ltd. propounded by the respondent
company returnable on 29th March, 2007. On the said date, all
the interested parties including the appellant were heard. By an
order dated 1st May, 2007, BIFR is said to have sanctioned the
Scheme-cum-merger of Mis. Wanbury Ltd. with the respondent:
H
..
TATA MOTORS v. PHARMACE:UTICAL PRODUCTS
277
OF !NOIA [S.B. SINHA, J.]
12. We may also place on record that inter alia on the A
premise that the said Scheme of merger was approved in gross
violation of this Court's order dated 15'h December, 2006, a
contempt petition was filed. We are not concerned with the said
Contempt Petition herein.
Contentions
B
-(~
13. Mr. R.F. Nariman, learned Senior Counsel appearing
on behalf of the appellant, in support of this appeal would submit :-
1.
SICA being a special statute, the provision thereof c
shall prevail over the provisions of the 1956 Act.
2.
The High Court committed a manifest error in
entertaining the respondent's application for merger
under Sections 391 to 394 of the Act, although the D
~
matter was pending before the AAIFR.
..
3.
The High Court failed to notice the binding precedent
of this Court in NGEF Ltd. vs. Chandra Developers
(P) Ltd. : (2005) 8 SCC 219 wherein it has clearly
been held that SICA will prevail over the 1956 Act.
E
4.
The Division Bench of the High Court has failed to
consider that the Company Judge had no jurisdiction
to entertain any proceeding.
5.
Section 26 of the SICA bars the jurisdiction of the
F
Company Judge.
14. Mr. C.A. Sundaram, learned senior counsel appearing on behalf of the respondent, on the other hand would urge :-
1.
The operation of the order of BIFR having been
stayed, the Company Petition was maintainable at
G
the instance of the respondent.
2.
Section 19 of SICA will have no application as it
speaks of financial assistance by the persons
specified therein.
H
278
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
3
Section 22 of SICA must be read in the context of
Section 19 thereof.
B
c
D
4.
Section 26 or any other provision of SICA do not
oust the jurisdiction of the Company Court.
5
SICA as interpreted by this Court in NGEF Ltd.
(supra) would prevail over 1956 Act only if the
provisions of the latter are inconsistent with the
provisions of SICA and not otherwise.
6.
The Scheme in question being subject to approval
by BIFR and that BIFR by a reason of its order dated
151 May, 2007 had granted approval thereof, the legal
requirements must be held to have been complied
with.
STATUTORY PROVISIONS
SICA
15. SICA was enacted to make, in the public interest, special provisions with a view to securing the timely detection of
E
s1c1< and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the
p1e1.•e-rtive, ~meliorative, remedial and other measures which
neerl to be taken with respect to such companies and the expeditiouc; enforcement of the measures so determined and for
F
matters connected therewith or incidental thereto.
16 . .Sed1on 15 of SICA provides for making reference by
tt-.1:; budld uf u1recturs of the Company on becoming an indus-
:na1 t-0mJ.idny, d sick industrial company, to the Board for determmati.31 of ttie meC:1::.ures to be adopted with respect to the
,. ccn ·tJdf; 1 0.,..;\lun l t, J.lrov1de::; for making inquiry into the work-
, .J
inq ot .:;1cK 111uusil 1ai co111f.JC1ny by the Board atter receiving ref-
<.:• c'lt,a. ~1:;1,uu11 ·1 / prov1ue::; tor powers ot Board to make suit-
,.;:._ . 1;v· _.
~:1e -.uP1plet10n uf m(j . .Jll)' Sub sect10n U,1 thereof
't:af: as unaer: ·
1-1
1 ' nJ.:cn 1t Board to make su.tRble 0rder on the
+
A
+
111
' )-
TATA MOTORS v. PHARMACEUTICAL PRODUCTS 279
OF INDIA [S.B. SINHA, J.]
completion of inquiry.
A
(3) If the Board decides under sub-section (1) that it is not
practicable for a sick industrial company to make its net
worth exceed the accumulated losses within a reasonable
time and that it is necessary or expedient in the public
interest to adopt all or any of the measures specified in B
section 18 in relation to the said company it may, as soon
as may be, by order in writing, direct any operating agency
specified in the order to prepare, having regard to such
guidelines as may be specified in the order, a scheme
providing for such measures in relation to such company." C
17. Section 18 provides for preparation and sanction of
Scheme. Sections 18(1}(c}, 18(3) and 18(6A) read as under:-
"Section 18 - Preparation and sanction of Schemes
(1) Where an order is made under sub-section (3) of
section 17 in relation to any sick industrial company, the
operating agency specified in the order shall prepare, as
expeditiously as possible and ordinarily within a period of
ninety days from the date of such order, a scheme with
respect to such company providing for any one or more of
the following measures, namely:-
(c) the amalgamation of-
(i) the sick industrial company with any other company, or
(ii) any other company with the sick industrial company;
(hereafter in this section, in the case of sub-clause (i), the
other company, and in the case of sub-clause (ii), the sick
industrial company, referred to as "transferee company");
(3) (a) The Scheme prepared by the operating agency
shall be examined by the Board and a copy of the scheme
with modification, if any, made by the Board shall be sent,
in draft, to the sick industrial company and the operating
agency and in the case of amalgamation, also to any other
D
E
F
G
H
280
SUPREME COURT REPORTS
(2008] 9 S.C.R.
A
company concerned, and the Board shall publish or cause
to be published the draft scheme in brief in such daily
newspapers as the Board may consider necessary, for
suggestions and objections, if any, within such period as
B
c
D
E
F
G
the Board may specify.
(b) The Board may make such modifications, if any, in the
draft scheme as it may consider necessary in the light of
the suggestions and objections received from the sick
industrial company and the operating agency and also
from the transferee industrial company and any other
company concerned in the amalgamation and from any
shareholder or any creditors or employees of such
companies:
Provided that where the scheme relates to amalgamation
the said scheme shall be laid before the company other
than the sick industrial company in the general meeting
for the approval of the scheme by its shareholders and no
such scheme shall be proceeded with unless it has been
approved, with or without modification, by a special
resolution passed by the shareholders of the company
other than the sick industrial company.
(6A) Where a sanctioned scheme provides for the transfer
of any property or liability of the sick industrial company in
favour of any other company or person or where such
scheme provides for the transfer of any property or liability
of any other company or person in favour of the sick
industrial company, then, by virtue of, and to the extent
provided in, the scheme, on and from the date of coming
into operation of the sanctioned scheme or any provision
thereof, the property shall be transferred to, and vest in,
and the liability shall become the liability of, such other
company or person or, as the case may be, the sick
industrial company."
18.Section 19 provides for rehabilitation by giving finanH cial assistance; sub-sections (1 ), (2) and (4) whereof reads as
;.
.....
~
>
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TATA MOTORS v. PHARMACEUTICAL PRODUCTS
281
OF INDIA [S.B. SINHA, J.]
under:-
A
"Section 19 - Rehabilitation by giving financial assistance.
-(1) Where the scheme relates to preventive, ameliorative,
remedial and other measures with respect to any sick
industrial company, the scheme may provide for financial
B
assistance by way of loans, advances or guarantees or
reliefs or concessions or sacrifrces from the Central
Government, a State Government, any scheduled bank or
other bank, a public financial institution or State level
institution or any institution or other authority (any
Government, bank, institution or other authority required c
by ascheme to provide for such financial assistance being
hereafter in this section referred to as the person required
by the scheme to provide financial assistance) to the sick
industrial company.
(2) Every scheme referred to in sub-section (1) shall be D
circulated to every person required by the scheme to
provide financial assistance for his consent within a period
of sixty days from the date of such circulation or within
such further period, not exceeding sixty days, as may be
E
allowed by the Board, and if no consent is received within
such period or further period, it shall be deemed that
consent has been given.
(4) Where in respect of any scheme consent under subsection (2) is not given by any person required by the
F
scheme to provide financial assistance, the Board may
adopt such other measures, including the winding up of
the sick industrial company, as it may deem fit."
Sections 20, 26 and 32 of SICA read as under :-
G
"Section 20 - Winding up of sick industrial company. - (1)
Where the Board, after making inquiry under section 16
and after consideration of all the relevant facts and
circumstances and after giving an opportunity of being
heard to all concerned parties, is of opinion that the sick
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[2008] 9 S. C.R.
A
industrial company is not likely to make its net worth exceed
,I..
the accumulated losses within a reasonable time while
meeting all its financial obligations and that the company
as a result thereof is not likely to become viable in future
and that it is just and equitable that the company should
B
be wound up, it may record and forward its opinion to the
concerned High Court.
(2) The High Court shall, on the basis of the opinion of the
......
Board, order winding up of the sick industrial company
,,.
c
and may proceed and cause to proceed with the winding
up of the sick industrial company in accordance with the
provisions of the Companies Act, 1956 (1 of 1956).
(3) For the purpose of winding up of the sick industrial
company, the High Court may appoint any officer of the
D
operating agency, if the operating agency gives its
consent, as the liquidator of the sick industrial company
and the officer so appointed shall for the purposes of the
•
winding up of the sick industrial company be deemed to
...+
be, and have all the powers of, the official liquidator under
E
the Companies Act, 1956 (1 of 1956).
(4) 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
F
Court for orders for distribution in accordance with the
provisions of section 529A, and other provisions of the
~
'
Companies Act, 1956 (1 of 1956).
Section 26 - Bar of jurisdiction. - No order passed or
proposal made under this Act shall be appealable except
G
as provided therein and no civil court shall have jurisdiction
in respect of any matter which the Appellate Authority or
the Board is empowered by, or under, this Act to determine
)-
and no injunction shall be granted by any court or other
authority in respect of any action taken or to be taken in
H
pursuance of any power conferred by or under this Act.
>
+
TATA MOTORS v. PHARMACEUTICAL PRODUCTS
283
OF INDIA [S.B. SINHA, J.]
Section 32 - Effect of the Act on other laws. - (1) The A
provisions of this Act and of any rules or schemes made
thereunder shall have effect notwithstanding anything
inconsistent therewith contained in any other law except
the provisions of the Foreign Exchange Regulation Act,
1973 (46 of 1973)and the Urban Land (Ceiling and
B
Regulation) Act, 1976 (33 of 1976) for the time being in
force or in the Memorandum or Articles of Association of
an industrial company or in any other instrument having
effect by virtue of any law other than this Act.
(2) Where there has been under any scheme under this C
Act an amalgamation of a sick industrial company with
another company, the provisions of section 72A of the
Income-tax Act, 1961 (43 of 1961 ), shall, subject to the
modifications that the power of the Central Government
under that section may be exercised by the Board without D
the Central Government under that section may be
exercised by the Board without any recommendation by
the specified authority referred to in that section, apply in
relation to such amalgamation as they apply in relation to
the amalgamation of a company owning an industrial
E
undertaking with another company."
The Companies Act, 1956
Section 391 of the Companies Act, 1956 reads as under:
Section 391 - Power to compromise or make
F
arrangements with creditors and members.- (1) Where a
compromise or arrangement is proposed-
(a) between a company and its creditors or any class of
them; or
(b) between a company and its members or any class of
them,
G
the Tribunal may, on the application of the company or of
any creditor or member of the company or, in the case of H
284
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
a company which is being wound up, of the liquidator,
order a meeting of the creditors or class of creditors, or
of the members or class of members, as the case may be
to be called, held and conducted in such manner as the
Tribunal directs.
B
(2) If a majority in number representing three-fourths in
value of the creditors, or class of creditors, or members,
.._
or class of members as the case may be, present and
~
voting either in person or, where proxies are allowed under
c
the rules made under section 643, by proxy, at the meeting,
agree to any compromise or arrangement, the compromise
or arrangement shall, if sanctioned by the Tribunal, be
binding on all the creditors, all the creditors of the class,
all the members, or all the members of the class, as the
case may be, and also on the company, or, in the case of
D
a company which is being wound up, on the liquidator and
contributories of the company:
•
+
Provided that no order sanctioning any compromise or
arrangement shall be made by the Tribunal unless the
E
Tribunal is satisfied that the company or any other person
by whom an application has been made under sub-section
(1) has disclosed to the court, by affidavit or otherwise, all
material facts relating to the company, such as the latest
financial position of the company, the latest auditor's report
F
on the accounts of the company, the pendency of any
investigation proceedings in relation to the company under
sections 235 to 351, and the like.
(3) An order made by the Tribunal under sub-section (2)
shall have no effect until a certified copy of the order has
G
been filed with the Registrar.
(4) A copy of every such order shall be annexed to every
copy of the memorandum of the company issued after the
certified copy of the order has been filed as aforesaid, or
in the case of a company not having a memorandum, to
H
every copy so issued of the instrument constituting or
,,,.
~
>
+.
~ ~ 'r
TATA MOTORS v. PHARMACEUTICAL PRODUCTS 285
OF INDIA [S.B. SINHA, J.]
defining the constitution of the company.
(5) If default is made in complying with sub-section (4), the
company, and every officer of the company who is in default,
shall be punishable with fine which may extend to one
hundred rupees for each copy in respect of which default
is made.
(6) The Tribunal may, at any time after an application has
been made to it under this section stay the commencement
or continuation of any suit or proceeding against the
company on such terms as the Tribunal thinks fit, until the
application is finally disposed of."
Interpretation of the Statutory Provisions
19. It was conceded by Mr. Sundaram SICA being a special law vis.-a-vis the 1956 Act, it shall prevail over the latter.
The learned counsel, however, qualifies his submission by contending that SICA only excludes the provisions of the Companies Act when they are inconsistent with each other.
The provisions of a special Act will override the provisions
of a general Act. A later of it will override an earlier Act. 1956
Act is a general Act. It consolidates and restates the law relating to companies and certain other associations. It is prior in
point of time to SICA.
Wherever any inconstancy is seen in the provisions of the
two Acts, SICA would prevail. SICA furthermore is a complete
code. It contains a non-obstante clause in Section 32.
20. SICA is a special statute. It is a self contained Code.
The jurisdiction of the Company Judge in a case where reference had been made to BIFR would be subject to the provisions of SICA.
We may, at this stage, notice the effect of SICA vis-a-vis
the other Acts, as has been noticed by this Court in some of its
judgments
A
B
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SUPREME COURT REPORTS
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21. In NGEF Ltd. vs Chandra Developers (P) Ltd. : (2005)
8 SCC 219, in regard to the jurisdiction of the Company Court
it was held :-
"20. Mr K.K. Venugopal, the learned Senior Counsel, would
B
submit that having regard to sub-section (2) of Section
536 of the Companies Act, the High Court has the
jurisdiction to permit sale of assets of the Company even
.....
before passing of the winding-up order, in relation whereto
,,
Section 20(4) of SICA will have no application.
c
23. The provisions relating to winding up by the courts
occur in Chapter II of the Companies Act, 1956. Section
433 of the Act enumerates the circumstances in which the
company may be wound up by the court including the
inability on the part of the company to pay its debts. Section
D
441 of the Act specifies as to when the proceeding for
"
winding up of a company by the court shall commence at
the time of the presentation of the petition for the winding
+
up.
In a case, however, where winding-up proceedings are
E
initiated in terms of recommendations made by BIFR or
AAIFR, as the case may be, no such petition is required
to be presented. Section 443 lays down the power of a
court on hearing petition; clause (d) of sub-section (1)
whereof provides for a power to make an order for winding
~ '
F
up of the company with or without costs or any other order
-(
that it thinks fit. Section 444 lays down the consequences
of the winding-up order. In terms of Section 446 of the Act,
in the event of passing of a winding-up order or
appointment of liquidator as Provisional Liquidator, no
G
suit or legal proceeding would commence or if pending at
the date of the winding-up order, shall not be proceeded
with against the company except by leave of the court and
'r
subject to such terms as the court may impose. Sub-section
~
(2) of Section 446 provides for a non obstante clause, in
H
terms whereof the Company Court shall have jurisdiction
TATA MOTORS v. PHARMACEUTICAL PRODUCTS 287
OF INDIA [S.B. SINHA, J.]
to entertain or dispose of any suit or proceedings specified A
therein. Section 451 lays down general provisions as to
liquidators. Section 457 specifies the power of the
liquidator which is required to be exercised with the
sanction of the court. Sub-section (2) of Section 536 reads
as under:
B
"536. Avoidance of transfers, etc., after commencement
of winding up.-(1)
*
*
*
(2) In the case of a winding up by the Tribunal, any
disposition of the property (including actionable claims) c
of the company, and any transfer of shares in the company
or alteration in the status of its members, made after the
commencement of the winding up, shall, unless the Tribunal
otherwise orders, be void."
In regard to jurisdiction of the Company Court it was held:-
D
"39. The provisions of SICA contain non obstante clauses.
It is a special statute. It is a complete code in itself. The
jurisdiction of the Company Court in such matters would
arise only when BIFR or AAAIFR, as the case may be, has
exercised its jurisdiction under Section 20 of SICA E
recommending winding up of the Company upon arriving
at a finding that there does not exist any chance of revival
of the Company."
It was furthermore held:
"40. Mr Venugopal has placed reliance upon a decision
of a learned Single Judge of the Karnataka High Court in
Karnataka State Industrial Investment and Development
Corpn. Ltd. v. lntermodel Transport Technology Systems
F
for the proposition that despite. the fact BIFR retains G
jurisdiction to get the assets of a sick company sold in
terms of sub-section (4) of Section 20 of SICA; still the
leave of the Company Court, therefor would be required.
The said decision, however, has been reversed by the
Division Bench of the Karnataka High Court in BPL Ltd.
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SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
v. lntermodal Transport Technology Systems (Karnataka)
Ltd. holding that the Company Court has no such
jurisdiction. We generally accept the views of the Division
Bench.
B
c
D
E
F
G
H
41. 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 subsection (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.
42. Apart from the fact that sub-section (4) of Section 20
contains a non obstante clause and, thus, it shall prevail
over the provisions contained in sub-section (2). The said
Act is also a latter statute.
43. The provisions of SICA would prevail over the
provisions of the Companies Act.