Holding

The Supreme Court held that the RDDB Act, being a later enactment with an overriding non‑obstante clause, prevails over SICA, so Section 22 of SICA does not bar the recovery proceedings, and the High Court’s order was set aside.

Summary

The Industrial Development Bank of India obtained a recovery order against M/s Arihant Threads Ltd. under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act), leading to an auction of the company's assets which was won by KSL & Industries Ltd. The company later invoked Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) after being declared a sick company by BIFR, seeking to set aside the auction and the RDDB proceedings. The Delhi High Court held that SICA barred the recovery proceedings and set aside the Debt Recovery Appellate Tribunal's order confirming the sale. On appeal, the Supreme Court examined whether Section 34 of the RDDB Act, containing a non‑obstante clause, overrides the bar in SICA and whether the High Court erred in applying SICA. The Court concluded that the later RDDB Act, with its overriding effect, prevails over SICA and that the High Court’s reliance on Section 22 was misplaced. Consequently, the Supreme Court allowed the appeal, set aside the High Court judgment, and remitted the matter to the High Court for fresh consideration, noting the company's conduct but not deciding the merits. The matter was also referred to the Chief Justice for appropriate action on the divergent interpretations of Section 34.

Issues considered

The applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 to bar recovery proceedings under the RDDB Act after a company is declared sick.
Whether Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, with its non‑obstante clause, has overriding effect over the provisions of SICA.
The maintainability of the appeal under Section 30 of the RDDB Act challenging the fixation of the reserve price.
The effect of the company's conduct and lack of clean hands on the exercise of writ jurisdiction under Article 226.
The proper jurisdiction and hierarchy between the Debt Recovery Tribunal, Debt Recovery Appellate Tribunal, the High Court, and the BIFR in the context of conflicting statutes.

Legislation cited

Income Tax Act, 1961s. Second Schedule Rules 60,61,62,63
Recovery of Debts Due to Banks and Financial Institutions Act, 1993s. 19, s. 20, s. 30, s. 34(1), s. 34(2)
Sick Industrial Companies (Special Provisions) Act, 1985s. 22

Subjects

debt recoverysick industrial companynon-obstante clauseoverriding effectstatutory interpretationauction saleBIFRwrit jurisdictionclean hands doctrine

Judgment

[2008] 12 S.C.R. 702

A KSL & INDUSTRIES LTD. '\.
v.
MIS ARI HANT THREADS LTD. & ORS.
(Civil Appeal No. 5225 of 2008) ·
AUGUST 25, 2008
B
[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 ex-
parte 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·
as the Company in question was declared sick company by
G
BIFR - Correctness of.
~-C
Held: Per C.K. Thakker, J:
Conclusion arrived at by High Court that tl'1e proceedings
H 702
KSL & INDUSTRIES LTD. v. MIS ARI HANT 703
THREADS LTD. & ORS.

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:
In view of difference of opinion on interpretation of s. 34
D 'F
of the Recovery of Debts Due to Banks and Financial
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
demanding certain amount and also directed the company
G ,..._,..
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
property and also fixed the date for sale of immovable
H
..

KSL & INDUSTRIES LTD. v. MIS ARI HANT 705
THREADS
., LTD. & ORS .
... "';1

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
--y D
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
Industrial Finance & Reconstruction which was, rejected E
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'
which was not appealable; that it dispossessed the
0
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
THREADS LTD. & ORS.
-- "I
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
of Section 34 of the RDDB Act, referring the matter to the B
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 well-
D
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
laws. {Para - 23) [730-D] F

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
'Qi

708 SUPREME COURT REPORTS [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
-'
by the Bank not before a Civil Court by invoking Section
0
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
considerations. One of the tests applied by Courts is that B
'

:)(
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
sought and several other relevant considerations. It is clear E
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 Co-
operative 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
India Ltd. v. Fairgrowth Financial Services Ltd. & Ors., (2001)
0
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, non-
obstante 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]
G
Held:
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.

\i(',.
A thaCon 15.9.2006 anoth.er Reference was. filed by the
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
Act were barred under Section 22 of the SICA. Having
c 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] ·
y
1.3 The openin'g words of Sub-section (1) of Section
,
34 of the RDDB Act clearly make the provisions thereof
subject to the provisions of Sub-se-ctionj2) which in
unambiguous term provides that the provisions of the
E
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
t-'
facts of this case, then there can be no doubt that the
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 respondent-
Company 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 respondent-
Company 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 715
THREADS LTD. & ORS.

""' > 3.4 Since the respondent-Company did no.tchailenge A
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]
D
4. Even o_n merits, the conduct of the company leaves
'f 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
Recovery Officer, fixing the reserve price of the Company's E
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
respondent No.1, Company were far from bonafide and .... p
~ .;._
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 of-
the appellant. Hence, nothing further remains to be
decided by the High Court. (Paras - 38 & 39) [763-G & H; ' G
764-A,B & C]
.. 4
Case Law Reference
(2003) 4 sec 30s referred to (Para - 2~}
'
1989 ~upp (2) sec 627 referred to (Para - ~8) H
716 SUPREME COURT REPORTS [2008] 12 S.G.R.

A 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)
B (2000) 5 sec 515 referred to (Para - 43)
<?_OOO) 6 sec 545 {eferred to (Para - 44)
· (2,006) s sec 677 referred to (Para - 45)
:··. · '. ·1956' SCR 603, refer.red to (Para - 49)
c ' - '
_(1977) 1 sec 150 referred to (Para-. 51)
-
. (1990) 2 SC~ 288 referred\ to · (Para ~ 53)-
· (1981) 1 sec 315 . referred to. . (Para • 54)
(200~> 1 sec 291 to
/-'-~efer,red (Para-- 60)
D
._ (2ooor 4 ~cc 406 referred to (Para - 6~)
l . .
r
(2008) .1 sec 125__ referred to (Para - 62)
(2001) 3 sec -11 referred to (Para -63)
E 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 · · -·
' .
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. ·
G
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 ~ .- . -

H . The~J~dgment of th.e Court was delivered by ,
. \
.
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. 2041- 8
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.
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
~--f
~ 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
"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
F 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; .
G 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 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.
3. Copy of the judgment be sent to the defendants and
the recovery certificate be issued accordingly. 8

4. 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
I
'
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 ex- (,

parte 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
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. A copy of this order be also sent to
c the Recovery Officer; ORT~ Chandigarh for necessary
action and information. RC file be also sent immediately
back to the ORT Chandigarh by special messenger aldng
with copy of this order. File be consigned to records".
9. The Company, objecting the conditions imposed by ORT,
D filed an appeal against the said order to the DRAT, Delhi being
~
Appeal No. 167 of 2005. The appellant also filed an appeal
being aggrieved by the setting aside the sale. DRAT stayed
operation of the order dated July 26, 2005 which had set aside
ex-parte order passed by ORT. It also directed refund of sale
E amount to the appellant. Appeals were then heard and the
judgment was reserved.
10. _Meanwhile, on December 21, 2005, the Company filed
a Reference before the Board of Industrial Finance &
Reconstruction ('BIFR' for short) under SICA which was
F register-ed as BIFR Case No. 4 of 2006. On February 10, 2006,
+ ...
DRAT dismissed the appeal filed by the Company and allowed
.. the appeal of the appellant and confirmed auction-sale in favour
of the appellant on depositing the sale price. DRAT, in the
operative part of the order stated;
G
"In view of the detailed discussion made on the issues i-~
which are relevant for the purpose deciding these appeals,
the Miscellaneous Appeal 167/2005 filed by the judgment-
debtor shall stand dismissed. The Miscellaneous Appeal
173/2005 filed by the auction purchaser shall stand
H
KSL & INDUSTRIES LTD. v. M/S ARIHANT 723
THREADS LTD. & ORS. [C.K. THAKKER, J.]
""' )
allowed. Consequently, the appeal filed by the judgment- A
debtor in Appeal 52/2004 before the Presiding Officer,
ORT, Chandigarh which is renumbered on transfer to ORT-
I, Delhi as Transfer Appeal No. 1/2005 shall stand
dismissed. Points formulated for consideration are
answered accordingly. No costs. 6
-~
Since, the appeal filed by the auction-purchaser is allowed,
the Recovery Officer, ORT, Chandigarh shall confirm the
sale and shall take all steps immediately for handling over
the possession of properties in question, to the auction
purchaser, if necessary, by taking assistance from all c
authormes concerned. The auction purchaser, who was
permitted to withdraw the auction amount deposited
towards sale price without prejudice to its rights during
pending of these appeals, shall forthwith depositthe entire
amount and thereafter the Recovery Officer shall proceed D
to complete the other requirements according to law
forthwith."
11. By a separate order of even date, DRAT ordered the
Recovery Officer, Chandigarh to act upon and execute the
directions issued by it. The appellant deposited Rs.12.50 crores E
on the same day. But the sale could not be confirmed since the
Presiding Officer was on leave. The appellant moved an
application before DRAT for appointment of Recovery Officer,
ORT, Delhi for confirmation of sale. Within three days, however,
1 the Company filed two Writ Petitions being C.W. Nos. 2041 F
and 2042 of 2006 in the High Court of Delhi on February 13,
2006 against an order of DRAT dated February 10, 2006. The
High Court of Delhi, as already mentioned earlier, allowed the
writ petitions on February 23, 2006, set aside the order passed
by DRAT on the ground that Section 22 of SICA operated as a G
~ ... complete bar to recovery proceedings and no order could have
been passed by the Tribunal.

Subsequent development
12. Being aggrieved by the order passed by the High H
724 SUPREME COURT REPORTS [2008) 12 S.C.R.

A Court, the appellant filed Special Leave P·etition in this Court on
March 6, 2006. Notice was issued on March 27, 2006 by this
Court and the appellant was allowed to withdraw sale price
without prejudice to its rights and contentions. The matter was,
thereafter, adjourned from time to time. It was ordered to be
.s heard finally. For completion of record, it may be stated that on
Aprit.3, 2006, the BIFR rejected the Reference of the Company. ;:.
The Company preferred an appeal against the said order which
· is pending before the Appellate Authority for Industrial &
Financial Reconstruction (AAIFR). On September 15, 2006; ~·
c second Reference was filed by the Company which has been
registered as BIFR Case No. 18 of 2006. On February 22,
2007, the BIFR declared the Company as -a 'sick Company'
and appointed LSAS, respondent No. 5 as the Operating Agency
to prepare Rehabilitation Scheme. "
D · Submissions of the appellant
13. The Court has heard the learned counsel for the parties.
Learned counsel for the appellant raised several contentions.
He urged that the High Court has committed an error of law in
holding that the proceedings were barred by Section 22 of the
E sic.a; and DRAT was wrong in issuing directi.ons. The··
proceedings were neither covered by the first part nor by the
second part of Section 22 and the High Court ought to have
decided the case on merits. It was also submitted that Section
34 of ROOS Act has an 'overriding effect' and even on that
F ground, the matter ought to have been decided. It was contended
that the appeal preferred by the Company against fixation of
reserve price was not maintainable under Section 30 of the
RODS Act and could not have been entertained by ORT. So far
as ex-parte decree passed by ORT is c<!>ncerned, the cou·nsel
G submitted that the Company was duly $erved and in spite of
that, it failed to appear before the Trib~nal. A grievance was .. -
also made that in an appeal against fixinb reserve price (which
was not maintainable), ORT granted interim relief on certain
terms and conditions. But even those conditions had not been
H complied with by the Company. Reserve pfic;e
fixed was proper,
KSL & INDUSTRIES LTD. v. MIS ARIHANT 725
I
THREADS LTD. & ORS. [C.K. THAKKER, J.]
...._)
sufficient and reasonable and ORT ought not to have set aside A
the order passed by the Recovery Officer.
14. The counsel vehemently contended that the High Court
ought to have taken into account over att conduct of the party,
particularly when the Company had invoked discretionary and
equitable jurisdiction under Article 226 of the Constitution. In 8
exercising writ jurisdiction, submitted the counsel, the conduct
of the petitioner is indeed a relevant and extremely important
consideration. In the instant case, the Company had not come
with clean hands. It had not repaid the loan amount; did not
appear before DRT in spite of service of summons; an ex parte C
final order was, therefore, rightly passed against it; the Company
filed an appeal before DRT against an 'order' which was not
appealable; failed to comply with even the interim order under
which protection was obtained and no payment was made; by
committing criminal trespass and unlawfully entering the D
~ property, it dispossessed the receiver appointed by the Tribunal;
the actiori of taking over possession of the property by act of
highhandedness could not be approved; the Company also
removed machinery and other movable property from .the
dispute.d premises; created unlawful tenancy rights in favour of E
third party by accepting substantial amount from him, etc. The
counsel, therefore, urged that even if the case was covered by
SICA and Section 22 got attracted, the High Court, in exercise
of extraordinary and special jurisdiction, ought not to have
granted relief in favour of the Company. On all these grounds, F
-'\ it was submitted that the appeal deserves to be allowed.
15. The learned counsel for the supporting respondents
adopted the arguments advanced by the learned counsel for
the appellant.
G
Submissions of respondent
16. The learned counsel for the Company, on the other
hand, supported the order passed by the High Court. According
to him, no doubt the High Court was exercising powers under
Article 226 of the Constitution. But in exercising constitutional H
726 SUPREME COURT REPORTS [2008] 12 S.C.R.
I

A powers, the Court would undoubtedly keep in mind statutory "' ,.
provisions of SICA and precisely that has been done by the
Court. If the proceedings could not have been initiated or
continued in view of bar of Section 22 ·Of SICA, it cannot be
said that the High Court was wrong in passing the impugned
B order. Nb grievance, hence, can be made against such order.
As to ex-pane final order said to have been passed by ORT, it
was submitted that no opportunity of hearing was afforded to
the Company and the order was violative of principles of natural
justice and fair play. The appeal filed by the Company against
c fixation of reserve price before ORT was maintainable under
Section 30 of the RDDB Act as the appeal lies 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. Regarding non-depositing of ?mount as per interim
order, it was submitted that the Company was not in a position
D to comply with the conditions of stay and the directions issued f.
and hence; in accordance with law, it challenged the said order,
by filing an appeal before DRAT. It was the right of the Company
to take such action and the appellant cannot object against
such course being adopted by the Company. It was, therefore,
E submitted that the High Court was wholly justified in allowing
the petitions filed by the Company and no case has been made
out by the appellant for interference against the said order by
this Court.
F High Cout1's order
17. At the outset, it may be noted that the High Court had
disposed of the petitions only on one ground as to applicability
of SICA and held that the proceedings were barred under
Section 22 of the said Act. This is amply clear from.paragraph
G 13 of the order which reads as under:
+--
Several arguments have been advanced before us by
learned counsel for the parties, but we are of the opinion
that this petition deserves to be ~!lowed on the very first
submission of Dr. Abhishek M. Singhvi, learned senior
H
KSL & INDUSTRIES LTD. v. M/S ARI HANT 727
THREADS LTD. & ORS. [C.K. THAKKER, J.]

counsel for the petitioner, namely that the proceedings A
are barred by Section 22 read with Section 32 of the
SICA.
(emphasis supplied)
18: Referring to the relevant provisions of SICA and keeping B
in view the ratio laid down in the decisions cited before it, the
Court ruled that the petition filed by the Company was required
to be allowed. Accordingly, in the operative part (para 36); the
1

' . High Court concluded:
1 For the reasons given above, the petition is allowed and C
the impugned order dated 10.2.2006 passed by the DRAT
is set aside and it is held that no recovery can take place
against the petitioner in view of the bar of Section 22 of
the SICA.
D
(emphasis supplied)
19. As already adverted to, before the Court the arguments
had been advanced by all the parties on co"ntinuation or
otherwise of proceedings and also on the merits of the matter.
In view of the fact, however, that. the High Court has not entered E
into merits of the case and disposed of petitions holding that
the proceedings could not be continued because of the bar of
Section 22 of SICA, I do not wish to enter into allegations and
counter allegations levelled by the patties, At the same time, I
am of the view that the conclusion arrived at by the High Court F
that the proceedings were barred under Section 22 of SICA is
not weU-founded arid the decision- of the High Court on that
point deserves to be set aside.
SICA - Ambit and scope
G
20. So far as SICA is concerned, it has been stated in'the
Preamble that the Act has been enacted in public interest "with
a view to securing the timely detection of sick and potentially
sick companies owning industrial undertakings, the speedy
determination by a Board of experts of the preventive, H
728 SUPREME COURT REPORTS [2008] 12 S.C.R.

A · ameliorative, remedial and other measures which need to be
taken with respect to such companies and the expeditious
enforcement of the measures so determined and for matters
connected therewith or incidental thereto", While interpreting
various provisions of the Act, the said object has to be kept in
B mind by Courts. Section 2 is in the form of 'declaration' and
declares that the Act has been enacted for giving effect to the
policy of the State towards securing the principles specified in
clauses (b) and (c) of Artide 39 of the Constitution. Section 3
defines various terms used in the Act. Chapter II relates. to
c establistlment of Board. and Appellate Authority, term of office;
conditions of service of officials and working -Of the Board and
• Appellate Authority. References, Inquiries and Schemes hav_e
been dealtwithjn Chapt~r Ill. Whereas Section 15 provides for
Reference to Board, Section 16 speaks of Inquiry into working
of sick industrial compaRies. Section 17 empowers the Board
D to make suitable order on the completion of inquiry. Sections .
·1a, 19 and 19A deal with Prep·aration of Schemes, Rehabilitation 'i-
and Arrangement for' continuing operations during inquir}i. -
Winding up of sick industrial-company is found in Section 20.
Section 21 allows Operating Agency to prepare inventory: Under
E Section 22A, directions can be issued preventing disposal of
assets in certain cases. ·
21. Section 22 is a material provision which·1elates to
suspension of legal proceedings, contracts, etc. Sub-seetion
F (1) ·is important and may be reproduced;
22. Suspension of legal proceedings, contracts, etc.-
(_1) Where in respect of an industrial company, 'an inquiry .
under section 16 is pending or any scheme referred to
under section 17 is .under preparation or consideration or
G a sanctioned scheme is under implementation or where
_an appeal under section 25 relating to an industrial
company is pending, th.en, notwithstanding anything t--
contained in the-Companies Act, 1956 (1 of 1956) or any
other law or the memorandum and articles of association
H of the industrial compa_ny or any other instrument having
__..

KSL & INDUSTRIES LTD. v. MIS ARIHANT 729
THREADS LTD. & ORS. [C.K. THAKKER, J.]
.......
)
effect under the said Act or other law, no proceedings for A
the winding up of the industrial company or for execution,
distress or the iike against any of. the properties of the
industrial company or for the appointment of a receiver in
respect thereof and no suit for the recovery of money or
for the enforcement of any security against the industrial B
company or of any guarantee in respect of any loans or
advance granted to the industrial company shall lie or be
proceeded with further, except with the consent of the

.. Board or, as the case may be, the Appellate Authority.
c
22. Chapter IV covers potentially sick industrial Companie~;
misfeasance proceedings, appeals and other miscellaneous
matters with which the Court is not concerned in the present
case except Section-·32 whfch gives 'overriding effect' to the
D
~ provisions of the Act. It reads as under:
32. Effect of the Act on other laws.-( 1) The 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 E
ofthe Foreign Exchange Regulation Act, 1973 (46of1973)
.and the Urban Land (Ceiling and 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 F
of any law other than this Act.
(2) Where there has been under any scheme under this
Act an amalgamation of a sick industrial company with
another comp~ny, _.the provisions of section 72A of the
Income-tax Act, 1961 (43 of·1961), shall, subject to the .G
... • -t modifications that the power of 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 amalgamatlon
as they apply in relation to the amalgamation of a company H
'·
SUPREME. COURT REPORTS . [2008] 12 S.C.R.

;--·
A owning an industrial undertaking with another company. ~

RDDB Act - Ambit and scope
23. The RODS Act (Recovery of Debts Due to Banks and
Financial lnstitutions~Act, 1993) has been enacted with a view
8 "to provide for the establishment of Tribunals for expeditious
adjudication and recovery of debts due to banks and financial
institutions and for matters connected therewith or incidental r
"thereto". Chapter I is Preliminary in nature·and Section 2 defines
various terms. Chapter II provides for establishment of Tribunals ·
c and Appellate Tribunals, their composition, qualifications and
term of office of the staff, salaries, allowances, etc. Jurisdiction·,
powers and authority of Tribunals are found in Chapter Ill. The
Tribunals are required to follow procedure laid down in Chapter
IV. Chapter V relates to 'Recovery of debt determiqed by the
Tribunal'. Section 29 declares that the provisions of the Sec.and
D
and Third Schedules of the Income Tax Act, 1961 will apply to
'(_
the recovery of amount due under the RODS Act. Chapter VI is
Miscellaneous. One section, however, is of extreme importance.
It is Section 34 which allows 'overriding effect' to the provisions
of the Act over other laws. It is a crucial provision and may be
E quoted in extenso;

34. Act to have overriding effect.-·· (1) Save as provided
under sub-section (2), the provisions of this Act shall have
effect notwithstanding. anything inconsistent therewith
F contained in any other law for the time being in force or in
any instrument having effect by virtue of any law other than f-
this Act.
(2) The provisions of this Act or4.J:le..ruJes made thereunder
shC:;lll be in addition to, and not in derogation of, the Industrial
G Finance Corporation Act, 1948, the State Financial
Corporations Act, 1951, the Unit Trust of India Act, 1963,
t .. ~
the Industrial Reconstruction Bank of India Act,· 1984 and
the Sick Industrial Companies (Special Provisions) Act,
1985 and the Small Industries Development Bank of lpdia
H Act, 1989. (emphasis supplied)
< ' :

KSL & INDUSTRIES LTD. v. MIS ARIHANT 731
THREADS LTD. & ORS. [C.K. THAKKER, J.]

. 24. According to the Company, there is a bar against A
initiation or· conti~uatiQn of proceedings under Section 22 of
SICA against sick compa.ni.es°' "Ihe High Court was, therefore,
right.in allowing the petitions filed by the C'ompany. The case of ·
the appellant and supp9rting respondents, on the other hand, is
that Section 22 of SICA has no application to the case on hand B
i and the High Court was in error in invoking the said section and
denying relief to the auction purchaser as well as other creditors
by wrongly extendin_g benefit of the said provision to the
Company. The appeHant alternatively contended that even if the
proceedings pending against the Company are covered by c
Section 22 of SICA, non-obstante clause in Section 34 of RDDB
Act, which is a subsequent legislation will operate and recovery
could not have been suspended, stalled or arrested.
Interpretation 9f statutes
25. ·The question,. therefore, ~s whether the Hi.gh Court D
was right in holding that the proceedings ~ere barred under
Section 22 of SICA. I have extracted the relevant part of the
said section. 1t has two limbs. The first part enacts that "no
proceeding for the winding up of ·the industrial company or for E
execution, distress or the like against any of the properties of
the industrial company or for the appointment of a receiver in
respect thereof ... shall Ii~ or be proceeded with further, except
with the c.onsent of the Board or, as the case may be, the
1
Appellate Authority.' The se,cond part which is independent of
the first part declares. that "no suit for the recovery of money or F
for the enforcement of any security against the industrial
company or of any guarantee in respect of any loans or advance
granted to the in.d1,1strial company shall lie or be proceeded with
further, except wit~· the consent of the Board or, as the case
may be, th~ AppeU~te Authority." The two parts use two different G
e.xpressions; (i) 1 'p_~oceeding' and_ (ii) 'suit'.
· Case law.

26.- In Kci'ilash Nath Agarwal & Ors. v. Pradeshiya
Industrial & Investment Corporation of UP Ltd. &Anr., (2003) H
732 SUPREME COURT REPORTS [2008] '12 S.C.R.

A 4 sec 305, this Court had an occasion to consider the meaning
of these two expressions. The Court noted thatsQ.metime$. two
different words are used in one and the same statute to convey
the same meaning, but "that is exceptionirath$r than the rule".
The general rule is that when two differentwords are used-by
B a statute, prima facie _one has to construe different words as
carrying different meanings.
27. The Court stated;
"The word "suit" and "proceeding" have not been. used
c interchangeably in SICA.'' ·
28. Referring to Pandurang R. Mandlik v. Shantibai R
Ghatge, 1989 Supp (2) SCC 627, the Court observeo that in
its comprehensive setisej the wor~ ·suit' is understood to apply
to any proceeding in a Court of Justice by which an individual
D pursues a remedy Which the la.w affords. The modes 6f
proceedings may be various, bu.t if a right is litigated between
parties in a Court of J1,Jstice, the proce~dirigs by which the
decision of. the Court is sought may be a St.Jit. The WOJO 'suit'
ordinarily means and, apart from somecontext, must be taken ...
E to mean a civil. proceeding instituted by the presentation of a
plaint". (vide Hansraj Gupta v. Dehra Dun- Mussoorief5/ectric
Trameray Co. Ltd.; 60 IA 13 : AIR 1933 RC: 6~).. ,•.. ·

29. In the instant case, proceedings had been initiated by
the Bank not before a Civil Court by invoking Section 9 of the
F Code of Civil Procedure, 1908, but before D.RT by taking
recourse to jurisdiction under RDDB Act. l,t is, therefore,
contended that the proceedings could not be said to be-a "suH"
falling within the mischi~f of Section 22. of SICA. In any case,
according to the learned cqunsel for the appellant, ex parle )

G final order was passed by DRT as b'ack ·as on July 15, 4003 '
and hence even if it is assurned·that the c;onnotation "suif sh0uld t-~·

be construed liberally so a~ to take within its sweHp a!I
proceedings including an application before DRT, in vh-::w of
final order passed by DRT in Z003, bar: envisaged. by .Section
H 22 of SICA cannot operate.
.·- -'

~
I

KSL & INDUSTRIES LTD. v. MIS ARIHANT 733
THREADS LTD. & ORS. [C.K. THAKKER, J.]
..... ~

30. So far as "proceedings" are concerned, it was A
submitted by the appellant that the final order had been passed
by ORT under RODS Act. A Certificate had been issued under
Section 19 and in accordance with Section 29 of the Act,
procedure laid down in Second and Third Sched.ules to the
Income Tax Act, 1961 had been followed. Reserve price was S
i fixed. Sale-proclamation was published. Auction was held. The
, appellant was found to be the highest bidder and its bid was
accepted. Necessary amount was deposited. All actions were
thus in conformity with law. If the Company fe.lt aggrieved by
auction sale, it ought to have proceeded in accordance with c
Rules 60 to 62 of the Rules in the Second Schedule. Rule 60 -
permits a person adversely affected by the sale to apply to the
Tax Recovery Officer within thirty days from the date of sale to
set aside such sale on his depositing the entire amount with
interest thereon and penalty. Admittedly, the Company did not
~ D
avail the said remedy. Rule 61 allows an application to set
aside sale of immovable property on the ground of non-service
of notice or material irregularity in publishing or conducting the
sale. The said rule also provides for deposit of amount
.recoverable under the Certificate. The Company failed to do
so. Under Rule 62, sale can be set aside when defaulter has no E
saleable interest. No such case had been put forward by the
Company by applying under Rule 62. The Company, therefore,
could not make grievance against the auction sale.
... _.. 31. Strong reliance was placed on behalf of the appellant F
on Rule 63 which states that where no application is made for
setting aside the sale or where such application is made and
is dismissed, the Tax Recovery Officer shall make an order
confirming the sale a!ld thereupon the sale· shall become
absolute. It was submitted that none of the Rules had been
G
"--t invoked by the Company by applying to the Tax Recovery Officer
and by depositing the amount. The Tax Recovery Officer, hence,
was enjoined to confirm sale as per the mandate of Rule 63. An
appeal filed by the Company under Section 30 of RODS Act
before ORT against the order of Tiix Recovery Officer fixing
H
-..·,:.....
SUPREME COURT REPORTS - [2008] ·12 S.C.R. "
734

~
,,.
A reserve price was ill-conceived and not maintainable as ther~
was no 'order' within the meaning of RDDB A.ct· which wa.s
appealable. Attention of the Court in this connection was invite_d
by the learned counsel to Rule 53 [Contents of proclamation].
It provides that a proclamation of sale shall speeify, inter a/if#,
B "the reserve price, if any, below Which the property may not be
sold" [Clause (cc)]. It was submitted that fixation of 'reserve y
price' is not mandatory, condition precedent or sine qua non L
"~

and if reserve price is not fixed, the order cannot be said to be
non est, contrary to law or unlawful. In any case, when reserve
c price was fixed and property was sold not below such price, the
only remedy available to the Company or any person whose
interest was affected was to apply under Rule 60 or 61 or 62. t-
The appeal before ORT was thus totally misconceived and ought
not to have been entertained by the Tribunal.
..
D 32. According to the Company, reserve price was grossly
inadequate. The Company was aggrieved and preferred an
appeal under Section 30 of RDDB Act as the order fixing r_eserve
price was also an 'order' within the meaning of the Act. To
buttress the submission, the counsel relied upon a decision of
E this Court in Union of India & Anr. v. Delhi High Court Bar
Association & Ors., (2002) 4 SCC 275. In Delhi High Court
Bar Association, while upholding the validity of RDDB Act, this ·
Court considered various safeguards and remedies available
to the aggrieved party. In paragraph 30 of the decision, it was
F inter alia observed; .,,e.._
~
Furthermore, Section 30, after amendment by the
Amendment Act, 2000, gives a right to any person
aggriev_ed by an order of the Recovery Officer, to prefer
an appeal to the Tribunal. Thus now an .appellate f-0rum
G has been provided against any orders of the Recover/:
t--~
Officer which may not be in accordance with law. There is,.
therefore, sufficient safeguard which has been provided
in the event of the Recovery Officer acting in an arbitrary
or an unreasonable manner. The provisions of Sectipns
H 25 and 28 are, therefore, not bad in law
KSL & INDUSTRIES LTD. v. M/S ARIHANT 735
THREADS LTD. & ORS. [C.K. THAKKER, J.]
...,,.
-..)
33. I express no opinion one way or the other on the A
controversy. As noted earlier, the High Court allowed the
petitions filed by the Company only on the ground of bar of
Section 22 of SICA. Since I am of the view that the High Court
was not right in coming to that conclusion, the matter must go
bac~ to the High Court for deciding all points not dealt and B
..._ decided .
34. The learned counsel for the Company emphatically
argued that Section 32 of SICA is explicitly clear and uses non-
obstante clause ("Notwithstanding anything inconsistent
·therewith contained in any other law"). It was urged that SICA is c
a 'self-contained Code' and makes detailed and exhaustive
provisions 'in respect of sick companies. It is also a 'special
law' and effect must be given to the provisions of the Act. The
argument of the appellant on the other hand is that Section 34
of RDPI? Act is a subsequent legislation which also contains a D
t similar non-obstante clause and that Act should prevail over
SICA.
35. The learned counsel for the parties, in support of their
respective submission~. referred to several decisions. Let us
consider few of them~ E

36. In Maharashtra Tubes Ltd. v. State Industrial &
Investment Corporation of Maharashtra Ltd. & Anr., (1993) 2
SCC 144, this Court was called upon to consider the provisions
ofSICA and State Financial Corporation Act, 1951. Observing F
-+ that the word 'proceeqings' in sub~section (1) of Section 22 of
SICA could not be given narrow or restricted meaning to limit
the legal proceedings, the Court held that if Section 22(1) is
attracted, the proceedings must be held to be barred.

3 7. Keeping in view the-underlying object of enacting SICA, G
""- ... the Court stated;
Now we come to the impugned decision. The High Court
was considerably influenced by the fact that the appellant-
company owed crores of rupees to banks and felt that so
H
736 $UPREME COURT REPORTS [2008] 12 S.C.R.

A far as such creditors are concerned, .different
consideratio.ns may come into play but the High Court ·
with respect faiied to appreciate that the 1985 Act was
enacted primarily to assist sick industrial undertakings
which inter alia failed to meet their financial o~ligations. It
B is, therefore, difficult to accept'the view of the High Court
that where the creditors of a sick industrial concern happen
to be Banks or State Financial Corporations different
considerations would come into play. It must .be realised
that in the modern industrial environment large industries
c are generally financed by banks and statutory corporations ·
created specially for that purpose and if they are permitted
to resort to independent action in total disregard of the
pending. inquiry under Sections 15 to .19 of the 1985 Act
the entire exercise under· the safd provisions would be
rendered nugatory by the time the BIFR is able to evolve
D
a scheme of revival or rehabilitation of the sick industrial
concern by : device of the Financial Corporation resQ.rting
to Section 29 of the 1951 Act. We are, therefore, of the
opinion that where· an inquiry is pending under Section
16/17 or an appeal is pending under Section 25 of the
E 1985 Act there should be cessation of the coercive
activities of the type mentioned in Section 22(1) to permit
the BIFR to consider what remedial measures it should
· take with respect to the 'sick·. industrial company. The
expression 'proceedings' ·in Secti'on 22(1), therefore,
F cannot be confined to legal proceedings understood in
the narrow sense of proceedings in a Court of law or a
lagal tribunal for attachment and sale of the debtor's
property. ·

G 38. In Deputy Commercial Tax Offiqer & Ors. v.
Corromandal Phacmaceuticals & Ors., (1997) 10 SCC 649,
this Court held that the embargo under Section 22(1) would not
app!y to payment of tax collected by the sick industrial company
after the date of the sanctioned schern.e and legitimately
.H belonged to the Revenue. "Any other _construction will be
KSL & INDUSTRIES LTD. v. MIS ARI HANT 737
THREADS LTD. & ORS. [C.K. THAKKER, J.]
...,.
-)
unrea$onable and unfair and will lead to a state of affairs A
enabling the sick industrial unit to collect amo~nts due to the
Revenue ahd withhold it indefinitely and unreasonably. Such a
construction which is unfair, unreasonable and agalnst the.
spirit of the statute in a business sense, .should be. avoided. "
(emphasis supplied) B

39. Justice Jeevan Reddy was much more ~mphatic. 1.n a ·
concurrent judgment, His Lordship stated;
Looking at the provisions of the Sick Industrial Companies
(Special Provisions) Act, 1985 [the Act], I was wondering c
how out of tune the Act has become with the economic
policies being pursued now in this country. Since 1991-
92, we are launqhed upon, what is being called,
liberalisation of our economy. We have given up the policy
of protecting our .industries against foreign competition D
on the ground that it has given rise to an inefficient and
outdated industrial system in our country. Our industries
are suddenly being asked to compete with foreign
companies, many of whom being giant multi-nationals have
vast resources at their disposat. [They are me'rfily gobbling E
up our poor native companies. Many local industries,
unable to stand the said competition are joining the foreign
giants in one form of venture or other. Several hundreds of
small-scale and medium scale· units in telecom sector, for
example have suffered enormously because of our love F
'1
• for foreign companies and their capital. The state of several
public sector companies is no better. I am not saying that
we have totally embraced, what may be called·
"Reaganism" or "Thatcherism". The fact however, remains
that it i~ no longer thought advisable to keep alive inefficient
G
and uneconomic industries by injecting public funds or in
"'-~
the name of ~afeguarding the employment ·of the workers .
.And here is this Act, a product of the era of protectionism,
seeking to keep alive "sick" companies by p_umping in
funds - mostly public funds - and by providing various
H ·!
738 SUPREME COURT REPORTS [200~] 12 S.C.R.
<· , .....

A concessions. In the process,. QO.t>ody jnquir~s. w~y a
particular industrial corrmariy ba~" beq6rne sick, viz.,
whether it is an induced one or whethe~ iri~on ·account of
factors beyond their. c9nfrof, Th~ obj~ft of the· Act fs
undoubtedly laudatory 'but it must' alsc;)_ provide for
B appropriate measures against persons resp'on'sible where
it is found that sickness is caused by factors other than
circumstances beyond the control of the management. It
is also a well-known fact'th'at the' ~ro·ceedings before the
Board of Industrial and Financicil ~Reconstruction take a
c long time to conclude ·and au the, .while~ the protective
umbrella of Section :22, is held over the ;company which
has reported sick. We have come across cases.>where
unfair advantage is soughtto be taken of.the provisions of
0

Section 22 by certain ind.ustrial companies - ·and th~ wide
language employed in· the section, is pr0Midi11g· them a
D
cover. We are sure Section 22, was .not;.imeant to breed
dishonesty nor can it be so operated as· to, encourage
unfair practices. The ultimate ..prejudice to public monies
should not be overlooked.,, .in .the· process of promoting
industrial progress. We are quite sure,Jhat the Government
E is fully alive to the situation and are equaUy certain that
they must be thinking of necessary modifications in the
Act. These few observations are meant me;e/y to record
·the need for changes in the Act. (emphasis .supplied)
F 40. In Real Value Appliances Ltd .v. ·:Canara Bank & Ors.,
( 1998) 5 sec 554, acontention was advanced on behalf of the
creditors that the conduct of the Company was far from
satisfactory and highly objectionable. it suppre.ssed several facts
from the Court. Contradictory and inconsistent pleas were taken
G and fraud was practised on the'-~durC. _ . '. ·· .. ··_
'4 L This Court agreed .with· what was submitted and
observed.; -.·
ihis conduct of the appelJant,,in our_vie'N, was''certainly
very unfair to the High GoLirt.. and, ther~fQr.e.
.
the High- Court
H . ' '
KSL & INDUSTRIES LTD. v~ M/S ARI HANT 739
THREADS LTD. & ORS. [G.K. THAKKER, J.]
.....,, ~
had rightly depreciated the same ..Jn ourview, there was A
a clear attempt to keep the Court in the dark"
42. The Court, however, proceeded to state that on that
count reference-application to the BIFR would not become bad
and if the Company was entitled ~-o the.benefit of SICA, it could
not be denied the said benefit. B'
"'!
43. In Rishabh Agro Industries Ltd. v. PN.~. Capital.
Services Ltd., (2000) 5 SCC 515, this Court held that where
conditions precedent for applicability of SICA were satisfied,
then notwithstanding that the order for winding up of the c.
Company had been passed, the bar would get attracted.
44. In Patheja Bros. Forgings & Stamping & Anr. v. !CIC/
Ltd. & Ors., (2000) 6 SCC 545, this Court held that without
requisite sanction under Section 22 of SICA, no suit can be
proceeded with. D·
)'
45. In Jai Engineering Works Ltd. v. lndustryFacilitation
Council & Anr., (2006) 8 SCC 677, after referring to all leading
decisions on the point and describing 1985 Act as a 'complete
Code', this Court stated;
E
The 1985 Act was enacted in public interest. It contains I

special provisions. The said special provis,ions had been
made with a view to secure the timely detection of sick
and potentially sick companies owning industrial
undertakings, the speedy determination by a Board of F
'I' experts for preventive, ameliorative, remedial and other
measures which need to be taken with respect to such
companies and the expeditious enforcement of the
measures so determined and for matters connected
therewith or incidental thereto.
G
~-~
46. In my view, however, the learned counsel for the
appellant is right in submitting that RDDB Act is a 'special law'
and also a subsequent legislation, i.e. later law. It is well-settled
that when any law has been enacted, the Legislature must be
presumed to be aware of all existing laws. When RDDB Act H

-,......
..,, I
740 SUPREME COURr REPORTS (2008) 12 S.C.R.

A was enacted in 1993, SICAwas·very much in force since it was
enacted in 1985. In spite of that, Pa.rliament was pleased to
give 'overriding effect' _to .RDDB Act by using non-obstante
clause in Section 34. Sub-section (1) e.xpressly stated that the
provisions of.the, Act "shall have.~ffect notwithstanding anything
B inconsistent therewith contained in any other law for the time
being in force" .
. 47. I am thus at a point where two statutes employ non-
obsfafJfe clause having 'o.verriding effect'. Such a conflict, as
laid down in several cases, may' be. resol~ed by judiciary on
C various considerations; such as the policy underlying the
enactments, the language used, the object intended to be
achieved; or mischief sought fo be remedied, etc. One· of the
tests applied by Courts is that normally·a later enactment should
prevail over the former. The Courts would also 'try to reconcile
D both Acts by adopting harmonious interpretation·and-~pplying
them. in their respective fi~lds so that both may operate ~ithout
9oming into conflict with each-other. In resolving the clash, the
Court may further examine. whether one of th.e two en.actments
is 'special' and the other one is 'general'. there car1 also.be.a
E situation in law where one and the same statute may be held to
be a ''special' statute vis-a-vis one legislation and 'general'
st~tute· vis-a-vis another legislation. on·· the basis of one or
more tests, the Court will try·to salvage the situation by giving
effect to' non obstante clause in both the legislations.
F 48. Let 1)1e .consider some of the decisions of this Court
on this vexed issue.
49. In Shri Ram Narain v. Simla Banking & Industrial
Co. Ltd.; 1956 SCR 603; two competing statutes came up for
G consideration before this Court being the Banking Companies
, Act1 1.949 (as amended byAct 52 of 1953) and the Displaced
Persons (Debt Adjustment) Act, 1951. Section 45-A of the·
Banking Companies Act (introduced by the amending Act of
1~53) and Section ·13 of the Displaced Persons Act, 1951 bt?th
contained a non-obstante clause stating that certain provisions
H
KSL & INDUSTRIES LTD. v. M/S ARI HANT 741
THREADS LTD. & ORS. [C.K. THAKKER, J.]
--..
-j
of the Act shall have effect "notwithstanding anything inconsistent A
therewith in any other law forthe time being.in force';. This Court
resolved the conflict by considering the object and purpose of
the two laws and giving primacy to the Banking Companies
Act. The Court indicated that when two Acts contain provisions
giving overriding effect, it would be a difficult question as to B
which Act should prevail. .
~
50. The Court stated-
"It is, therefore, desirable to determine the overriding eff~ct
of one or the other of the relevant provisions in these two c
Acts, in a,given case, on much broader considerations of
the purpose and policy underlying the two Acts and the
clear intendment conveyed by the language of the relevant
provisions therein".
51. In Shri Sarwan Singh &Anr. v. Shri KasturiLal, (1977) D
.r 1 SCC 750, two provisions were before this Court. Section 19
of the Slum Areas (Improvement and Clearance) Act, 1956 (as
amended by Act 43 of 1964) provided that proceedings for
.eviction of tenants could not be taken without permission of the
competent authority "notwithstanding anything contained in any E
other law for the time being in force". Section 39 of the Act
further declared that the provisions of the Act shall take effect
"notwithstanding anything inconsistent therewith contained in
any other law". The other statute was the Delhi Rent Control Act,
1958 (as amended by Act 18 of 1976). Section 14-A as inserted F
.i by the amendment Act conferred a right on a landlord to recover
immediate possession of any premises let out by him in case
he was required to vacate any residential premises allotted to
him by the Central Government or by a local Authority. The
conferment of the right was "notwithstanding anything contained G,
elsewhere in this Act or in any other law for the time being in
~ .... force". Section 25-B laid down special proced1,J.re for.
enforcement of right conferred by Section 14:..A. Section 25-A
stated that the provisions in Section 25-·B shall have effect
"notwithstanding anything inconsistent therewith contained H,
c:::_._.
.,
742 SUPREME COURT REPORTS [2008] ·12 S.C.R.

,_-·
~·
A elsewhere i.n. this Act or .in a.ny other law for the time being in
force".
.
The Co.urt
.
held that the right to imm~diate possession
conferred by Section 14-A of the Delhi Rent Act was not
controlled by the Slum Clearance Act and the right could be
enforced
. in. the .manner provided in Section 25-8 without
B obtaining prior permission of the competent Authority under th~
Slum Clearance Act. ~·

52. Speaking for the Court Chandrachud, J. (as His
Lordship then was) observed:
.,

c "For re~olving such intw s~ conflicts, one other test may
also be applied though the pers.~asive force of such a test
is but one of the factors which combine to give a fair
meaning to the language of the law. That test is that the
later enactment must prevail over the earlier one. Section
14A and Chapter lllA having been enacted with effect from
D
December 1, 1975 are· later enactments in reference to i
Section 19 of the Slum Clearance Act which, in its present
form, was placed on the statute book with effect from
February 28, 1965 and in reference to Section 39 of the
same Act, which came into force in 1956 when the Act
E · itself was passed. The legislature gave overriding effect
to Section 14A and Chapter lllA with the knowledge that
Sections 19 and 39 of the Slum Clearance Act contained
non obstarite clauses of equal efficacy. Therefore the later
enactment must prevail oiler the former".
F
(emphasis supplied) •
I

53. In Sanwarmal Kejriwal v. Vishwa Co-operative Housing
Society Ltd & Ors., (1990) 2 SCC 288, this Court applied the
test as to 'general' and 'special' Act and held that special law
G would have primacy over the general law.
r· ..
54.-ln Life lns{lrance Corporation of India v. D.J. Bahadur ·
& Ors .. (1981) 1$CC315, before th.is Court two Acts came up
for consideration; (1) Industrial Disputes Act, 1947 (ID Act), and
H (2) Life Insurance Corporation Act, 1956 (UC Act). One of the
'
KSL & INDUSTRIES LTD. v. MIS ARIHANT 743
-. THREADS LTD. & ORS .. [C.K. THAKKER, J.]
~
questions before the Court was which ofthe two should be A
considered as 'special law'. It was urged that the Industrial
Disputes Act should be regarded as 'general law' relating to
workmen and Life Insurance· Corporation Act. should, be
considered as 'special law' in relation to employees engaged
by UC. It was, therefore, submitted that when a complaint is B
... made by an employee of UC, he cannot invoke the provisions
of ID Act and the matter must be decided in accordance with
UC Act.
55. Krishna Iyer, J. described ·the question as 'crucial'
which demanded an answer about the statute being 'general' c
or 'special'. The well known doctrine of generalia specialibus
non derogant (general provisions will not abrogate special
provisions) was also noted and it was observed that if UC Act
was considered 'special', it must operate over ID Act treating
~· ID Act to be 'general' law. Noticing, however, the long title of LIC D
Act and its object for providing nationalization of life insurance
business in the country and the matters connected therewith,
the Court observed that the primary purpose of the Act was to .
nationalize private insurance business by establishing Life
Insurance Corporation of India. Incidentally, the said Act provided E
for transfer of service of existing employees of the insurers to
the Corporation, their conditions of service, etc. But it was 'plain
and beyond doubt' that it was not concerned with disputes
between employ~r and employee. The principal object of the
.... .. Act was nationalization of insurance business and it was a F
'special' legislation so far as business purpose was concerned.
Disputes between employer and employee had been dealt with
by ID Act which was a 'special' law covering that field and if
there is dispute between employer and employee in Life
Insurance Corporation, UC Act must be treated as 'general
G
law' vis-a-vis ID Act which should be treated as 'special law'.
···~

56. His Lordship, therefore, made the following pertinent
observations:
"In determining whether a statute is a special or a general
H
744 . SUPREME.COURT.REPORTS 12008] 12 S.C.R.

A -one, the focus rnustbe on the principal subject matter plus
the particular perspective. For certain purposes, an Act
may be genera/;alJrjfor certain other purposes it may be-
special and we: cannot blur distinctions when d_ealing
with finerpointsofJaw.Jn law, we have a cosmos of relativity
B. not absolutes,..sd;foo;in life".
(emphasis s'u.pplied)
,. •' ' ..

57 .. lt was, therefore, concluded that ID Act was a special
statute devoted onlytoJnvestigation and settlement of industrial
c dispu.tes and sinhe:ucAc(was a general statute, in cases of
disputes between an:.employer '.and employee, ID Act would
have primacy overtfCA~~: ·
58. In Maharashtta Tubes· Ltd., a conflict between
provisions oft~o. special statutes, viz. (1) .th~ State Financial
D Corporation: Aqt, -1951 ·and (2) the ·sick Industrial Companies
(SpecialProvisions) Act, 1985 (SICA) was highlighted. Both
contained non::-Ob$tante c_lause. _The conflict was resolved. by
this Court by giving overriding effect to SICA on the ground that·
SICA was a:SLJbs,equent enactment (1985) and non-obstante
E . clause_ therein: would prevail over the non-obstante clause in
· the State Financial Corporation Act (1951 ).
59~. The G_ourt, speaking through Ahmadi, J. (as His
Lordshi~ t.he_hwas), ~bserved: ·

F •iHa\ling ·,reached the· conclusion that both the 1'951 Act
and.the.1 ~85:Actare-special statutes dealing with di.fferent
. situation~"'"'-tf1e'fdrmer providing for the grant offinancial
· assistan:ce Jt> industrial concerns with a view to boost up
industrialisation .and the latter providing for revival and
G
reh~bilitatiqn . of
sick industrial undertakings, if necessary,
by grant of financial assistance, we cannot uphold the
contention urged·on behalf of the respondent that the .1985
· Act is a general statute covering a larger number of
industriatd:mcerns than the 1951 Act and, therefore, -the
latter wouldprevail over the former in the event of conflict.
H
KSL & INDUSTRIES LTD. v. MIS ARIHANT 745
THREADS LTD. & ORS. [C.K. THAKKER, J.]
--. .J
Both the statutes have competing non-obstante provisions. A
Section 468 of the 1951 Act P.rovides that the provision of
the statute and of any rule or order made thereunder shall
have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force
whereas Section 32(1) of the 1985 Act also provides that B
... the provisions of the said Act and of any rules or schemes
made thereunder shall have effect notwithstanding anything
inconsistent therewith containeq in any other law. Section
22(1) also carries a non-obstante clause and says that
the said provision shall apply notwithstanding anything c
contained in Companies Act, 1956 or any other law. The
1985 Act being a subsequent enactment, the non-obstante
clause therein would ordinarily prevail over the non-
obstante clause found in Section 46B of the 1951 Act
unless it is found that the 1985 Act is a general statute and
D
the 1951 Act is a speci~I one. In that event the maxim
generalia specialibus non derogant would apply. But in
the present case on a consideration of the relevant
provisions of the two statues we have come to the
conclusion that the 1951 Act deals with post-sickness
situation. It is, therefore, not possible to agree that the E
1951 Act is a special statute vis-a-vis the 1985 Act which
is a general statute. Both are special statutes dealing
with different situations notwithstanding a slight owirlap
here and there, for example, both of them provide for
~
grant of financial assistance though in different situations. F
We must, therefore, hold that in case of sick industrial
undertakings the provisions contained in the 1985 Act
would ordinarily prevail and govern".·
(emphasis supplied)
G
.. ~ 60. A similar conflict came to light between two statutes,
namely, (i) the State Financial Corporations Act,. 1951 and (ii)
the Companies Act, 1956 in AP State Financial Corporation
v Official Liquidator, (2000) 7 SCC 291. The Court treated
1951 Act as a 'special Act' for grant of financial assistance to H
746 SUPREME COURT REPORTS [2008] 12 S.C.R.

A the industrial concerns Wi.th a ,]iew to boost up industriaiization
and also recovery offinandal.assistance if it becomes bad.
Likewise, the Companies Act dealt With Companies including
winding up of such Companies. Toe Gou.rt, however, held that
the proviso to sub:.section (1) of Section 529 and Section 529-
8 A being a subsequent e'nactment, the non-obstante clause in
Section 529-A would prevaif~overSection 29 of the 1951 Act.
Hig_hlighting the.underlying obj~~d-of non-obstante clause in
Section- 529-A of the· Compani~·~ ·Act and a social purpose
underlying therein td ensure payment Of dues to the workmen
c in priority over all other d~bts; the Court concluded that "if
conditions are not impos~d-tdprntect the right of the workmen,
there is every po$sibility tha~ th~setured creditor may frustrate
of
the above paripassu right the.workmen".
61. In Atlahabad:Bank.i/'Ca;ara Bank & Anr., (2000) 4
D SCC 406, a similar questieh:was raised before this Court.
There the Court considered:tWoActs, (i) RDDB Act, 1993 and
Companies Act, 1956. ltw~sheld that even where a winding up
a
petition was pending 6r winding up order had been passed
· against a Comp~r)Y for, debt payable to banks and financial
E institutions, goverping law.was RDDBAct. No leave of Company
Court as envisaged ·under the Company Act, therefore, was
necessary. The CoLJrtheld that though both the laws could be
in
treated as 'special laws' respect of recovery of dues by banks
and financial institutions, it was 1993 Act which should be
F considered as·'special' _vis..,a-vis Company Law. L

62. I may referto ·a recent decision of this Court in Mis.
Transcore v. Vhi6noflndla.'&Ani., (2008) 1 SCC 125, Wherein
this Court considered the ·provisions of RDDB Act, 1993 and
Securitization and Reconstru'ction of Financial Assets and
. G Enforcement' of Security :Interest Act, 2002. Considering the
scheme of·both the laWs/the Court held that 1993 Act was a
'complete Cdde' by itself a~ far as recovery of debt is concerned:·:,.·
It was a 'special law' in the matters of recovery of dues and the·.·.
provisions of the said Act wolild prevail over other laws.
H
KSL & INDUSTRIES LTD. v. M/S ARIHANT 747
THREADS LTD. & ORS. [C.K. THAKKER, J.]

63 .. It may also be profitable to refer to a three J..~dge A
Bench decision of this Court in Solidaire India Ltd. v. Fairgrowth
Financial Services Ltd. & Ors., (2001) 3"scc 71. In that case,
S took loan of Rs. one crore from F The amount was not repaid.
F, therefore, instituted proceedings under the Special Court
(Trial of Offences Relating to Transactions in Securities) Act, B
1992 for the recovery of the amount. The Special Court came
to the conclusion that S had not repaid the loan and accordingly
ordered S to pay the amount with interest. During the pendency
of the appeal before this Court, S became sick and proceedings
were initiated under SICA. One of the contentions raised before c
this Court by S-was that in view of special provisions contained
in SICA, no proceedings could have been initiated or continued
under the Special Court Act. This Court admitted that SICA was
a 'special' Act. The Court was also aware of the non-obstante
clause in Section 32 of SICA. It noted that the effect of the said
0
provision was that SICA will have effect "notwithstanding anything
inconsistent therewith contained in any other law for the time
being in force". But it noted that there was a similar non-obstante
clause in Section 13 of the Special Court Act which was as
under: ''
E
"13. Act to have overriding effect.-The provisions of this
Act shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in
force or in any instrument having effe_ct-by virtue of any law,
other than, this Act, or in any decree or order of any court, F
tribunal or other authority." ,,

64. The Court then stated; ''This Court has laid down in no
uncertain terms that in such an event it is the later Act which
must prevail". The Court referred to a decision rendered by a'
Special Court in Bhoruka Steel Ltd. vs. Fairgrowth Financial G
Services Ltd., ((1997) 89 Comp Cas 547]-wherein the Special
Court stated:

"Where there are two special statues which contain non-
obstante clauses the later statute must prevail. This is H

..,.. -+-·
748 SUPREME COURT REPORTS [2008] 12 S.C.R. '
~
-

~· r
A because at the time of enactment of the later statute, the
Legislature was aware of th.e earlier legislation and its . l

non-obstante clause. If the Legislature still confers the later
enactment with a non-obstante clause it means that the
Legislature wanted that enactment to prevail. If the
B Legislature does not want the later. enactment to prev~i~
then it could and would provide in the later enactment that
the provisions of the earlier enactment continue to apply.
The Special Court (Trial of Offences Relating to
Transactions in Securities) Act, 1992, provides in Section
c 13, that its provisions are to prevail over any other Act.
Being a later ~nactment, it would prevail over the Sick
Industrial Companies (Special Provisions) Act, 1985. Had
the Legislature wanted to exclude the provisions of the
Sick Companies ~ct from the ambit of the said Act, the
D Legislature would have specifically so provided. The fact
'i
that the Legislature did not specifically so provide
necessar.iJy means th.at the Legislature intended that the
provisions of the said Act were to prevail even over the
provisions of the Sick Companies Act.
,.'i
E

It is a settled rule of interpretation that if one constructions
leads to a conflict, whereas on another construction, two
· Acts can be harmoniously constructed then the latter must
· be adopted. If an interpretation i~ given that the Sick
F
Industrial Companies (Special Provisions) Act, 1985, is
,.. "
to prevail then there would be a clear conflict. However,
there would be no conflict if it is held t~at the 1992 Act is
to prevail. On such an interpretation the objects of both
would be fulfilled and there would be no conflict. It is clear
G
that the Legislature intended that public monies should be
~·
recovered first even from ·sick companies. Provided the
sick company was in a position to first pay back the public
money, there would be no difficulty in reconstruction. The
Board for Industrial and Financial Reconstruction
H
KSL & INDUSTRIES LTD. v. M/S ARIHANT 749
..., THREADS LTD. & ORS. [C.K. THAKKER, J.]
-J
considering a scheme for reconstruction has to keep in A
mind the fact that it is to be paid off or directed by the
Special Court. The Special Court can, if it is convinced,
grant time or instalments."
65. Approving the above observations, this Court stated:
B
"We are in agreement with the aforesaid decision of the
case, more so when we find that whenever the legislature
wishes to do so it makes appropriate provisions in the Act
in that behalf. Mr. Shiraz Rustomjee has drawn our attention
to Section 34 of the Recovery of Debts Due to Banks and c
Financial Institutions Act, 1993 wherein after giving an
overriding effect to the 1993 Act it is specifically provided
that the said Act will be in addition to and not in derogation
of a number of other Acts including the 1985 Act. Similarly
under Section 32 of the 1985 Act the applicability of the
·t
0
Foreign Exchange Regulation Act and the Urban Land
Ceiling Act is not excluded."
Legal position
66. From the above discussion, in my judgment, the law
is fairly well settled. A provision beginning with non-obstar:ite E
clause ("notwithstanding anything 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 F
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 sought and several other relevant G
.._ -1
considerations. From the case-law referred to above, it is clear
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 H
750 SUPREME COURT REPORTS [2008] 12 S.C.R.
r·
~
A 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 other.
B Primacy of RDDB Act
67. Applying the above tests in the instance case, to me,
.
it is crystal clear that the provisions of RDDB Act should be
given priority and primacy over SICA. I may concede that both
c the Acts are 'special Acts' in the sense that they have been
enacted for a specific purpose and object in view. Whereas
SICA has been enacted in the public interest with a view tq
securing the timely detection of sick or potentially sick
companies owning industrial undertakings, the speedy
determination by a Board of Experts of the preventive,
D
ameliorative, remedial and other measures which need to be
taken with respect to such companies and the expeditious
enforcement of the measures so determined and for matters
connected therewith or incidental thereto, RDDB Act has been
enacted to secure and proiect public rev.enue and for
E expeditious adjudication and recovery of debts due to banks
and financial institutions. RDDB Act is subsequent Act in the
point of time being 1993 Act. It must, therefore, be presumed
even in absence of any specific provision in the 1993 Act that
Parliament was aware of all statutes which had been enacted
F prior to 1993 including SICA of 1985. In spite of that, in sub- ,... .
section (1) of Section 34 of RDDB Act, non-obstante clause
has been inserted so as to ensure expeditious adjudication
and recovery of debts due to banks and financial institutions.
68'. But it is not only on the ground that the RDDB Act is
G
.a later Act and SICA is a former Act that I am holding that the t- A

RDDB Act will prevail over SICA. There is an additional factor
also which is of extreme imprniance and supports the view
which I am inclined to take. It is sub-section (2) of Section 34.
To recall, sub-section (2) of Section 34 of RDDB Act declares
H
...
" KSL & INDUSTRIES LTD. v. MIS ARIHANT 751
THREADS LTD. & ORS. [C.K. THAKKER, J.]
·'1 ~J
that the provisions of this Act (RDDB Act of 1993) are "in A
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. As already adverted to
earlier, RDDB Act, 1993 has been enacted with a view "to
provide for the establishment of the Tribunals for expeditious B
adjudication and recovery of debts due to banks and financial
-i
institutions" (Preamble of the Act). All other laws, therefore,
whether general or special, prior or subsequent, must, in my
considered view, be interpreted and applied keeping in view
the above object of enacting 1993 Act. I have, therefore, no c
hesitation in holding that even though both the conflicting statutes,
"\ (SICA of 1985 and RDDB Act of 1993) contain non-obstante
clause, in case of conflict, RDDB Act, 1993 will prevail over
SICA, 1985 so far as recovery of public revenue is concerned.
Final Order D
i'
69. For the aforesaid reasons, I hold that 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 and I do accordingly. The matter is E
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.

70. Before parting with the matter, I may clarify that any F
.... observation on merits which might have been made in this
judgment is only for the purpose of deciding the preliminary
question as to maintainability of proceedings against the
Company since the High Court has allowed the petitions filed
by the Company only on that ground. I make it clear that I may
G
not be understood to have expressed any opinion 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.

71. The appeal is accordingly allowed with costs. H
~
.....-
752 SUPREME COURT REPORTS [2008] 12 S.C.R. I
~

\r ,..
A ALTAMAS KABIR, J. 1. I have had the benefit of going
through the draft judgment prepared by my learned Brother and
while-1 agree with the conclusionarrived at by His Lordship, that
the High Court erred in applying the provisions of Section 22 of
the Sick Industrial Companies (Special Provisions) Act, 1985,
B and dropping the proceedings against the Company, with utmost
respect I find myself unable to accept the legal reasoning on
which His Lordship's conclusion is based. I would like to traverse t- ,_
a different route in arriving at the same conclusion as arrived at
by my learned brother.
c 2. Since my learned Brother has set out the facts involved
. in detail, I shall only highlight some of the facts which compel )
me to pen my views in a separate judgment.
3. The respondent No.1-Company, M/s Arihant Threads
Limited, was incorporated as a Joint Venture Company with ~

D \

Punjab State Industrial Development Corporation. In 1992 the
't"
said Company was granted lease of Plot No.454 for 99 years
by Goindwal Sahib Industrial and Investment Corporation in the
Goindwal Sahib Industrial Area. The lease contained a specific
provision disentitling the lessee from transferring its interest in
E the demised property for the first 15 years of the lease without
the prior permission of the lessor,. However, it was also provided
that the lessee would be entitled to mortgage its leasehold
· rights to a Bank, the Punjab Financial Corporation or the Lif? .
Insurance Corporation of India as security for development of
F the demised premises by constructing factory buildings and for
purchase of raw-material etc. In view of the said provision, the ~
Industrial Development Bank of India (hereinafter referred to as
'IDBI'), which was the predecessor of the Stressed Assets
Stabilisation Fund (hereinafter referred to as 'SASF'), financed
G the project undertaken by the Company.
"-·

4. As it appears from the records, the respondent no.1- ~- .~

Company was unable to repay the loan and IDBI filed Original
Application No.1368 cf 2001 in the Debts Recovel"'J Tribunal,
Chandigarh, (hereinafter referred to as 'ORT, Chanaig3rh') on
H
(
KSL & INDUSTRIES LTD. v. M/S ARIHANT. 753
THREADS LTD. & ORS. [ALTAMAS KABIR, J.]
..i., ...
20.12.2001, for recovery of Rs.25,26,60,836/-, under the A
Recovery of Debts Due to Banks and Financial Institutions Act,
1993 (hereinafter referred to as the 'RDDB Act'). Despite
service of notice of the said proceedings, the respondent No.1
Company remained unrepresented before the ORT and ori
15. 7 .2003 an ex-pa rte final order was passed in favour of IDBI B
for recovery of Rs.25,26,60,836/- together with interest at the
rate of 7.8% per annum and a Recovery Certificate was also
issued against the respondent No.1-Company.
5. In keeping with Section 29 of the RDDB Act; the
Recovery Officer issued a composite demand notice to the c
respondent No.1-Company on 9.9.2003 under Rule 2 of the
Second Schedule to the Income Tax Act, 1961, demanding
payment of Rs. 28,60,87,384/-. A separate direction was given
to the Company to appear before the Recovery Officer on.
23.10.2003 for settling terms and conditions relating to the· D
proclamation of sale and for disclosure of its movable and
immovable assets.
6. A Valuation Report was also obtained from the Local
Commissioner, appointed by the Recovery Officer, who in his
report indicated that two machines were missing from the E
Company's factory. A further Valuation Report was obtained
from the North-India Technical Consultancy Association Limited
in January 2004, wherein the assets of the Respondent No.1-
Company was valued at Rs.17.5 crores on 16.9.2004. The
. reserve price of the property was fixed at Rs.12.50 crores by
the Recovery Officer and two separate dates were fixed for
F

sale of the immovable and movable properties of the Company.
The respondent No.1 - Company filed an appeal, being Appeal
No.52 of 2004, before the ORT on 18.10.2004 under Section
30 of the RDDB Act questioning the fixation of the reserve price G
~ »-----J by the Recovery Officer at Rs.12.50 crores. The proposed
auction sale was, therefore, cancelled till the ORT by its order
dated 27.10.2004 allowed the auction sale to proceed but
restrained t/le Recovery Officer from confirming the same till.
further orders. Consequently, the auction was held and H
754 SUPREME COURT R.EPORTS [2008] 12 S.C.R.

. ,..
';r

A concluded on 30.10.2004 and the appellan.t herein was declared
~
to be the successful bidder. Consequently, as per rules laid
down, the appellant deposited 25% of the reserve price
immediately. On 11.11.2004, the appellant made an application
to the ORT for accepting bank guarantee for the remaining
B balance of 75% of the sale price. On the said application being
dismissed the appellant-auction purchaser on the same day
deposited the balance amount of 75% of the sale price by a
bank draft.· it is .only after the sale had been conducted and
concluded on 30.10.2004 that an application was made by the
c respondent-Company on 15.12.2004 in the pending appeal for
setting aside the ex-parte final order passed by the ORT,
Chandigarh, on 15.7.2003 and the same was registered as
M.A.No.103/2004. The appellant herein filed an application for
being added as a party in Appeal No.52 of 2004 and also in
M.A. No.103 of 2004 to enable it to oppose the prayer of the
D
Company for setting aside the final order passed by the ORT,
't
Chandigarh, on 15.7.2003. Such prayer for impleadment was
allowed by the ORT by its order dated 17.12.2004.

7. At this juncture it may be indicated that on 10.6.2002 M/
E s Roland Exports, which had succeeded to the interests of
Goindwal Sahib Industrial Corporation, cancelled the lease of
the respondent No.1-Company on account of non-payment of
lease dues amounting to Rs.3, 19,94, 149/-. On 8.4.2005 M/s
Roland Exports filed a suit for permanent injunction against the
F respondent No.1-Company in the Civil Court at Tarantaran,
District Amritsar, wherein an order of status-quo with regard to
possession was passed. •
8. On 26.7.2005, ORT-I, Delhi, allowed Appeal No.52 of
2004 and set aside the auction sale subject to the Company
G fulfilling certc:tin terms and conditions laid oown in the order.
One of the conditions imposed by the Tribunal was that the
~- ... - : .
Company would have to pay 5% of the amount deposited by
the auction purchaser within 10 days as penalty in terms of Rule
60 of the Second Schedule of the Income Tax Act, 1961.
H Objecting to the said terms and conditions imposed by the
KSL & INDUSTRIES LTD. v. MIS ARI HANT 755
THREADS LTD. & ORS. [ALTAMAS KABIR, J.]
,, j
ORT the Company filed an appeal with DRAT, Delhi, being A
Appeal No.167 of 2005. The appellant herein also filed an
appeal against the setting aside of the auction sale. The DRAT
stayed the operation of the order dated 26. 7 .2005 by which the
DRT-1, Delhi, had allowed Appeal No.52 of 2004 and had set
aside the auction sale. The DRAT also directed refund of the B
sale amount to the appellant.
9. While the matter was pending before the DRAT, the
respondent-Company filed a Reference before the Board for
Industrial and Financial Reconstruction (hereinafter referred to
as 'BIFR'), on 21.12.2005 under the provisions of the Sick c
Industrial Companies (Special Provisions) Act, 1985, and the
same was registered as BIFR Case No.4 of 2006.
10. On 10:2.2006 the DRAT dismissed the appeal filed
by the Company and allowed the appeal of the appellant and
D
confirmed the auction sale in favour of the appellant, subject to
its depositing the sale price. By a separate order passed on
the same day the DRAT ordered the Recovery Officer,
Chandigarh, to implement the directions issued by it. However,
despite the appellant depositing the full purchase price on the
very same day, the sale could not be confirmed as the Presiding E
Officer was on leave. The appellant moved the DRAT for
appointment of a Recovery Officer for confirmation of the sale.
While the said matters were pending, the respondent-Company
filed two writ petitions being C.W. Nos.2041 and 2042 of 2006,
in the High Court of Delhi·, against the order dated 10.2.2006 F
4i.
passed by DRAT dismissing the Company's appeal. The Delhi
High Court allowed the writ petitions filed by the respondent-
Company and by its order dated 23.2.2006 set aside the order
passed by the DRAT on the ground that Section 22 of the Sick
Industrial Companies (Special Provisions) Act, 1985 operated G
-..__., as a complete bar for taking recovery proceedings and no
order could therefore have been passed by the Tribunal
confirming the sale.

11. It is against the said order of the Delhi High Court that
H
"

756 SUPREME COURT REPORTS (2008] 12 S.C.R.

(.. I':
A the Special Leave Petitions ·were filed on 26.3.2006 wherein
leave has since been granted.
12. It may be· significant to note at this stage that on
3.4.2006 the BIFR rejected the Reference made by.. the
Company and that on 15.9.2006 another Reference was filed
B by the respondent-Company which was registered as BIFR
Case No.18 of 2006. 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 a rehabilitation scheme.
c
13. Learned counsel for the appellant submitted that the
High Court had erred in law in holding that the~ recovery
proceedings initiated under the provisions of th_e RDDB Act
were barred by Section 22 of the SICA. It was submitted that
·o Section 22 of SICA was not attracted to the proceedings and
the High Court should have decided the matter on merits. It was
't·
also submitted on behalf of the appellant that Section 34 of the
RDDB Act had an overriding effect over the provisions of SICA
and that the High Court should have decided the matter on
merits on such grounds as well. It was further contended that
E the appeal preferred by the respondent-Company under Section
30 of the RDDB Act, against the order of the Recovery Officer
fixing the-reserve price at Rs.12.5 crores, wa$ not maintainable
and ought not to have been entertained by the DRT-1,Delhi.

F 14. As has been indicated by my learned Brother in his
judgment, it had been forcefully contended on behalf of the ......
appellant that when the respondent-Company had invoked the
discretionary and equitable jurisdiction of the High Court under
Article 226 of the Constitution, the High Court should have taken
into account the overall conduct of the party as the respondent-
G
Company had not come to the writ court with clean hands. Not
only had it not repaid the loan amount, but it did not appear ~--

before the ORT inspite of service of summons and the ex-pa rte
final order was, therefore, rightly passed on the Original
Application filed by the IDBI. The respondent- Company also
H
I.
KSL & INDUSTRIES LTD. v. M/S ARIHANT 757
THREADS LTD. & ORS. [AlTAMAS KABIR, J.]
.... .. filed an appeal against the order of the Recovery Officer before A
the DRT-1, Delhi, under Section 30 of the RDDB Act, and failed
to comply with the directions contained in the interim order
under which directions for payment were made, but no payment
was made as directed. To make matters worse, the respondent-
Company forcibly entered the property in question and B
dispossessed the Receiver appointed by the Tribunal and
removed machinery and other movable properties from the said
premises and created an unlawful tenancy in favour of a third
party. In such background it was submitted that even if the case
was covered under Section 22 of SICA, the High Court, in
exercise of its extra-ordinary jurisdiction, ought not to have
c
allowed the writ petition filed by the Company.
15. Learned counsel for the respondent No.1-company
submitted that the appeal preferred by the Company under
Section 30 of the RDDB Act against the order of the Recovery D
Officer fixing the reserve price, was maintainable since the
same was an order passed by the Recovery Officer under the
Act. It was contended that since such a course of action was
available to the respondent-Company it was not incumbent upon
the Company to deposit the amounts indicated in the order of E
the DRT-1, Delhi, while allowing appeal No.52 of 2004 as a pre-
condition for setting aside the auction sale. It was contended
that the High Court was fully justified in allowing the writ petitions
filed by the respondent-Company in keeping with the bar
imposed under Section 22 of SICA. F
.....
16. As has been pointed out by my learned Brother, the
writ petitions filed by the respondent-Company were allowed
by the High Court on the sole ground that the recovery
proceedings under the RDDB Act were barred under Section
22 of the SICA. Having once com~ to the conclusion that the G

--- proceedings were barred under Section 22 of the SICA, the
High Court did not go into any other question with regard to the
merits of the matter and set aside the o~der of the DRAT
confirming the auction sale on that one ground alone.
H
758 SUPREME COURT REPOFns [2008] 12 S.C.R.

A 17. My learned brother has discussed in detail the relevant
. ~

provisions of SICA and the RDDB Act and has observed that
Section 34 of the RDDB Act is of extreme importance since it
allows "overriding effect" to the provisions of the Act over other
laws. Inasmuch as my learned Brother's judgment is based on
B an interpretation of Section 34 of the RDDB Act in relation to
Section 22 of SICA, the same is reproduced hereinbelow to
consider the effect thereof :
"34. Act to have over-riding effect-(1) Save as other'ilvise
provided in sub-section (2), the provisions of this Act shall
c have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or in
any instrument have effect by virtue of any law other than
this Act
(2) The provisions of this act or the rules made thereunder
D
shall be in addition to, and not in derogation of, the Industrial
't
Finance Corporation Act, 1948 (15 of 1948), the State
Financial Corporations Act, 1951 (63of1951), the Unit Trust
of India Act, 1963 (52of1963), the Industrial Reconstruction
Bank of India Act, 1984 (62 of 1984), the Sick Industrial
E Companie (Special Provisions) Act; 1985 and the Small
Industries Development Bank of India Act, 1989."
18. My learned Brother has relied on the non-obstante
provision contained in Sub-section (1) of Section 34 in arriving
F at a finding that the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993, would have an overriding effect {'--
over other enactments. Since the Sick Industrial Companies
(Special Provisions) Act, 1985, also contains a s!mi!ar non-
obstante clause in Section 22, His Lordship has considered in
detail the effect of the tvvo non-obstante clauses in the two
G
separate enactments governing the same field and has held
that since the RDDB Act was a later Act it would prevail over the \~--

SICA which was an earlier Act
19. It is at this point that I am unable to trave! the same
H path which my learned Brother ha~> chosen to traverse.
KSL & INDUSTRIES LTD. v. M/S ARIHANT 759

~ .. THREADS LTD. & ORS. [ALTAMAS KABIR, J.]

20. The opening words of Sub-section (1) of Section 34 A
of the RDDB Act clearly make the provisions thereof subject to
..j the provisions of Sub-section (2) which in unambiguous term
f provides that the provisions of the Act or the Rules made
-<
1 thereunder would be in addition to and not in derogation of,
certain statutes indicated therein, including the Sick Industrial B
11 Companies (Special Provisions) Act, 1985. It is, therefore, clear
that while the RDDB Act would have an over-riding effect over
other 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, c
if it is held that the situation in this case is covered by the
provisions of SICA, then the view taken 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 judgment of the High Court would have to be
0
~ set aside.
21. During the course of arguments, counsel for the parties
did make submissions with regard to the merits of the matter,
which may have to be considered in the light of the view which
I am inclined to take in the matter. Furthermore, if it is found that E
the provisions of SICA, and consequently Section 22 thereof,
are not attracted to the facts of this case, the discussion with
regard to the RDDB Act being a later Act having an overriding
effect over the SICA becomes redundant for the purposes of
deciding this appeal. For the aforesaid purpose it would be
... necessary to consider a few dates which have been mentioned
F

herein before .

. 22. The first date which is relevant for our purpose is
15.7.2003 when the ex-parte final order was passed· by the
ORT, Chandigarh, for recovery of the ·sum claimed by IDBI, G
--· along with interest@ 7.8% per annum, and a Recovery Officer
was appointed.

23. The second relevant date is 9.9.2003 when the
.Recovery Officer issued a demand notice under Rule 2 of the
H
-,· ~-~ - --

760 SUPREME COURT REPORTS [2008] 12 S.C.R.

A Second Schedule of the Income Tax Act, 1961, to the
respondent-Company for payment of a sum of Rs.25,26,60,836/
• ,..
- as directed by the ORT, Chandigarh, in its final order. It is only
after the Recovery Officer fixed the reserve price for the auction
sale of the Company's assets that the respondent-Company
B filed an appeal before the ORT on 18.10.2004 under Section
30 of the RDDB Act against the said order of the Recovery
~
Officer. It has also to be noted that on 27 .10.2004 the ORT
allowed the auction sale to proceed but directed that the sale
should not be confirmed until further orders.
c 24. The next relevant date is 30.10.2004when the auction
was concluded and the appellant was declared to be the highest
· bidder and the entire sale price was deposited by the appeliant
auction purchaser on 11.11.2004.
25. It is significant to note that in the appeal, being Appeal
0
No.52 of 2004 under Section 30 of the RDDB Act, an application t
was moved by the respondent-Company on 15.12.2004 for 1.-
setting aside the ex-parte final order passed on 15.7.2003 and
the appellant also filed an application for impleadment to enable 't-
it to oppose the prayer for setting aside the final order.
E
26. The next date of significance is 26. 7 .2005 when Appeal
No.52 of 2004 filed by the respondent-Company under Section
30 of the RDDB Act against the order of the Recovery Officer
fixing the reserve price of the Company's assets was allowed
by DRT-1, Delhi, subject to the Company fulfilling certain terms
F
and conditions as indicated in the order. ~
.
I

27. It is only thereafter on 21.12.2005 that the respondent-
Company filed a Reference before the BIFR which was
registered as BIFR case No.4 of 2006 and the same came to
G be dismissed on 3.4.2006.
~- .....
28. In the meantime, the appeal preferred by the
respondent-Company before the Debts r(ecovery AppeHate
Tribunal against the order of ORT-I, D~!hi, allowing the
Cornpany's Appeal No.52 of 2004 was dismisGed and the sale
i-i
KSL & INDUSTRIES LTD. v. M/S ARI HANT 761
THREADS LTD. & ORS. [ALTAMAS KABIR, J.]

in favour of the appellant herein was confirmed, subject to A
deposit of the entire sale price.
29. It will be of interest to note that the proceedings taken
by the respondent-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 B
~ Appeal No.52 an application was made by the Company for
setting aside the final order passed by the ORT Chandigarh.
The same was however, of no 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, C
which, in any event, could not have been challenged in the said
proceedings. 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 respondent No.1-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 responc::Jent-Company. Instead, it chose to
adopt a path restricted to the setting aside of the auction sale E
on the ground that the reserve price of the Company's assets
had not been correctly fixed by the Recovery Officer prior to the
auction sale.
30. Consequently, the scope of the appeal preferred by
the respondent-Company was confined only to the question as F
~
to whether the reserve price had been correctJy,,fixed by the
Recovery Officer. ·
31. This brings us to the next question regarding the
applicability of Section 22 of SICA in the proceedings initiated G
by IDBI for recovery of its dues under the provisions of the
RDDB Act, 1993.
32. As will be seen from what has been indicated
hereinabove, the final order was passed on 15.7.2003 by ORT,
Chandigarh, at a point of time when no Reference had at all H
r
,,.f-

762 SUPREME COURT REPORTS [2008] 12 S.C.R.

•
L
~
A been made by the respondent-Company to the BIFR for being
declared a "sick company". The auction was held and concluded
on 30.10.2004, again before a Reference had been made by
the respondent-Company to the BIFR. It is only on 21.12.2005
~
that the Company filed a Reference before the BIFR which was
B rejected on 3.4.2006. In bet\tVeen, the appeal preferred by the
respondent-Company (No.52 of 2004) before the DRT 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
c herein against the order of the DRT allowing 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 herein. It is only on 15.9.2006, after all the aforesaid
D
orders had been passed that a second Reference was filed by
'r
the respondent-Company before the BIFR on 15.9.2006 and
on 22.2.2007 the Company was declared to be a "sick
company" by the BIFR.
r
"'

E 33. The above dates will amply show that the proceedings
\
had.been taken by the IDBI under Section 19 of the RDDB Act '
and the final order had been passed therein long before the
BIFR came on to the scene. Even the auction sale was
concluded in favour of the appellant before the first Reference
F was made by the Company to the BIFR. The sale was confirmed
by the DRAT before the writ petitions were allowed by the High ,.. ~·

Court on the ground that the recovery proceedings were barred •t
under Section 22 of· SICA. Ultimately, the Company's first
Reference was rejected by the BIFR and only upon a second ..
(

reference filed by the respondent-Company on 15.9-200!3 was
G
the Company declared by the BIFR to be a ''.sick company" on
22.2.2007. . ,
.....- '
1.
. .....

34. In other words, the final order in the recovery
proceedings under Section ·19 of the RDDB Act was passed
H ~nd the auction sale was concluded before the first Reference
KSL & INDUSTRIES LTD. v. M/S ARIHANT 763
THREADS LTD. & ORS. [ALTAMAS KABIR, J.]

~
.... was filed by the respondent-Company with the BIFR and long A
before the respondent-Company was declared to be a sick
Company on 22.2.2007. It is, therefore, clear that the provisions
of the Sick Industrial Companies (Special Provisions) Act, 1985,
were sought to be invoked by the respondent No.1-Company
after the recovery proceedings had been concluded in favour of B
the appellant who had also deposited the sale price in respect
of his offer which had been accepted by the Recovery Officer.
35. For reasons which are obvious, the respondent-
Company chose not to take recourse either to Section 20 of the
RDDB Act or Rule 60 of the Second Schedule of the Income c
Tax Act, 1961, and took a chance of filing an 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. D

1 36. Since the respondent-Company did not challenge the
final order of the ORT, Chandigarh, the same continued to be
in force and was carried to its logical conclusion by the holding
of auction sale and confirmation thereof in favour of the appellant
herein. E

37. The order passed by the DRAT on 10.2.2006
confirming the sale in favour 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 F
in applying the provisions of Section 22 of the SICA when the

' sale had already been confirmed in favour of the appellant and
the purchase price had already been deposited. Furthermore,
the first Reference made by the respondent-Company was also
rejected by the BIFR on 3.4.2006.
G
38. Apart from the above, even on merits, the conduct of
~
_,) the respondent No.1-company leaves much to be desired.
Without challenging the final order passed by the ORT,
Chandigarh, allowing the Bank's· claim of Rs.25,26,60,836/-
together with interest@ 7.8% per annum, the said respondent H
764 SUPREME COURT REPORTS _ [2008] 12 S.C.R.

A questioned the order of the Recovery Officer, fixing the reserve
price of the Company's assets for the purposes of the .auc!tion
sale, under Section 30 of the RDDB Act, havin9 f~ll knowledge
of the fact that the final order of the ORT, Chandigarh, coli Id not
be challenged in such appeaLThe steps taken bY,me respondent
B No.1, Company were far from bona fide. and. were only aimed ·
at stalling the auction sale. Even at· the time of auction of the
company's assets, no attempt was made by the Respondent
No; 1-Company to secure a bid higher thah thalof the appellant.

· 39. Having regard to the above, in my view nothing further
C remains to be decided by the High Court.

40. The appeal is accordingly allowed and the order of the
High Court impugned in the appei:ll is set aside with costs
asses.sed at Rs.50,000/-. ·
D ORDE.R
' ' '

Although, both ofus·held that the appeal deserves to be
allowed and .the order of the High Court is to be set aside, _in
view of the difference of opinion on interpretation of S.ection 34
of the Recovery of Debts Due to Banks and f:'inancial Institutions
E Act, 1993, the Registry is directed to place the papers before
the Hon'ble the Chief Justice of India for taking appropriate
action in c;iccordance· with law.

S.K.S. Matter referred.