Supreme Court of India
RAHEJA UNVIERSAL LIMITEDversusNRC LIMITED & ORS.
- Citation
- 2012 INSC 77
- Decided
- 7 February 2012
- Disposal
- Dismissed
- Bench
- S H KAPADIA
Holding
The BIFR possessed jurisdiction under Sections 22(3) and 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 to restrain the sale of the land, and the Act’s overriding effect prevails over the Transfer of Property Act, 1882, rendering the BIFR’s prohibitory order valid.
Summary
NRC Ltd, a sick industrial company, entered into a memorandum of understanding and subsequent agreements with K. Raheja Universal Ltd for the sale of 344 acres of land to raise funds for restructuring. The sale was only partially paid and the company later sought a corporate debt restructuring (CDR) scheme, which was approved by the consortium of banks. The BIFR, under the Sick Industrial Companies (Special Provisions) Act, 1985, adopted the rehabilitation scheme and directed that any sale of assets, including the land, required its prior approval. The parties executed a second supplementary agreement and transferred possession of the land without BIFR’s consent, leading the AAIFR to set aside the BIFR’s restriction, a decision later quashed by the High Court. The Supreme Court examined whether the BIFR had jurisdiction under Sections 22(3) and 22A to restrain the sale and whether the 1985 Act overrides the Transfer of Property Act, 1882. It held that the BIFR’s powers were valid, the 1985 Act has overriding effect over the 1882 Act, and the land sale was within the ambit of the rehabilitation scheme, so the BIFR’s prohibitory order stands. Consequently, the appeals were dismissed and the BIFR’s order was upheld.
Issues considered
- The scope and ambit of Section 22(3) of the Sick Industrial Companies (Special Provisions) Act, 1985 with respect to contracts entered into before and after the presentation of a rehabilitation scheme.
- The applicability of Section 22A of the 1985 Act to restrain disposal of assets during the scheme preparation and consideration.
- Whether the provisions of the 1985 Act override the Transfer of Property Act, 1882, particularly Sections 53A and 54, in restricting the transfer of the land.
- The jurisdiction of the BIFR to issue prohibitory orders and whether such orders were within its statutory powers.
- The validity of the AAIFR’s order permitting the sale without BIFR’s consent.
Legislation cited
- Companies Act, 1956
- Sick Industrial Companies (Special Provisions) Act, 1985s. 17(3), s. 22, s. 22(3), s. 22A, s. 26, s. 32
- Transfer of Property Act, 1882s. 14, s. 40, s. 53A, s. 54
Subjects
sick industrial companyBIFR jurisdictionSection 22(3)Section 22Aoverriding effectTransfer of Property Actrehabilitation schemeasset sale restrictioncorporate debt restructuring
Judgment
[2012] 3 S.C.R. 388
A RAHEJA UNVIERSAL LIMITED
v.
NRC LIMITED & ORS.
(Civil Appeal No. 1920 of 2012)
FEBRUARY 07, 2012
B
[S.H. KAPADIA, CJI., K.S. RADHAKRISHNAN AND
SWATANTER KUMAR, JJ.)
Sick Industrial Companies (Special Provisions) Act,
c 1985:
ss. 22, 22(3), 22A, 17(3) - Sale of assets of sick
company - Rehabilitation scheme - Determination of the
right of purchaser - Jurisdiction of BIFR to restrain transfer
D of sick industrial company's property - Respondent-Company
entered into memorandum of understanding and agreement
for sale of its land to appellant-Company to obtain funds for
financial restructuring and received part payment from the
appellant-Company - Failure of appellant-Company to pay
E third instalment and financial position of respondent-
Company not improved - Proposal by respondent-Company
to the consortium of banks for Corporate Debt Restructuring
(CDR) - Approval of scheme of rehabilitation - Prior to
implementation of the scheme, the respondent-Company
sought declaration from BIFR that it was a 'sick company' and
F for adoption of the rehabilitation scheme approved by creditor
banks ,... BIFR by order u/s. 17(3) adopted rehabilitation
Scheme and directed that the sale of assets including
investments would require prior approval of the BIFR -
Thereafter, execution of second Supplementary Agreement
0
G by respondent-Company and possession of land given to the
appellant-Company, without the· prior approval of the BIFR -
Appeal before AA/FR - AA/FR permitted the land to be sold
- High Court quashed the order of AA/FR - On appeal, held:
Memorandum of understanding and agreement to sell the
H 388
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 389
ORS.
land was signed prior to the presentation of the scheme before A
the BIFR - However, second supplementary agreement was
executed subsequent to the presentation of the scheme
before the BIFR as also after the BIFR had passed an order
uls. 17(3) - Asset of the company and/or its sale proceeds
received under the agreements had been integral part of the B
formation and finalization of the revival scheme, and as such
transaction cannot be stated to be beyond the ambit and
scope of s. 22(3) whereby all these instruments to which the
sick industrial company is a party, would be subject to the
orders of BIFR - Further, in view of the provisions of s. 53A, C
even if the part performance of the agreement is accepted,
yet no title is created in favour of the appellant-Company -
As regards the issue of jurisdiction, BIFR had the jurisdiction
to issue prohibitory order which was passed clearly at the
stage of the consideration of the revival scheme for the D
formulation of which asset was duly taken into consideration
- Prohibitory orders were issued by the BIFR within the ambit
and scope of ss. 22(1), 22(3) and 22A - Furthet; there was
no jurisdictional or other error in the order of the High Court
in restoring the order of the BIFR - Land being the primary E
asset of the respondent-Company, could not be permitted to
be dissolved by sale or otherwise without the consent and
approval of the BIFR - BIFR is the authority proprio vigore
and required to oversee the entire affairs of a sick industrial
company - Thus, order of the BIFR, which merged into the
F
order of the High Court upheld - Transfer of Property Act,
1882' - SS. 53A, 54.
ss. 22 and 22A - Scope and ambit of - Held: Section
22 deals with the suspension of legal proceedings, execution
and distress sale etc. against the assets of a sick company G !'
while Section 22A deals with restrictions and prohibitory orders
which the BIFR can pass, all for the purposes of preparation
of the scheme and proper implementation and effective
management of the revival of the sick industrial company -
Section 22 operates from the presentation of the scheme, its H
390 SUPREME COURT REPORTS [2012] 3 S.C.R.
A consideration, preparation, finalization and ultimately the
implementation of the said scheme and consequent
rehabilitation of .the sick industrial company, while Section
22A operates only during the preparation or consideration of
the scheme, or upto the commencement of the proceedings
B for winding up before the concerned High Court, in the event
the B/FR recommends winding up proceedings - These
provisions primarily ensure that the scheme prepared by the
BIFR does not get frustrated because of certain other legal
proceedings and to prevent untimely and unwarranted
c disposal of the assets of the sick industrial company - These
Sections operate at different stages and in different fields.
ss. 22 and 22A - Powers of BfFR under- Held: Sections
22 and 22A specify the complete jurisdiction and authority of
the BIFR in relation to preparation, consideration, finalization
D and implementation of a revival scheme in relation to a sick
industrial company - BIFR is vested with the power to issue
directions in the interest of the company or even in public
interest, tc prevent the disposal of assets of the company
during the period of preparation, consideration or
E implementation of the scheme - Also, BIFR is expected to
ensure proper implementation by appropriately monitoring the
scheme during the entire relevant period.
Overriding effect of the 1985 Act - Whether the provisions
F of the! 1985 Act would prevail over the provisions of the
Transfer of Property Act, 1882 - Held: Provisions of the 1985
Act would prevail over the provisions of the 1882 Act - 1882
Act is a general law controlling and operating in a very wide
field, enacted for and related to transfer of immovable property
G in India and to decide the disputes as well as to resolve the
confusion and conflict, in existence - It does not have
application to a particular situation or class of persons -
However, the 1985 Act is a special legislation providing for
imperative functioning of specialized bodies like the BIFR and
AA/FR and is intended to apply to a sick industrial company
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 391
ORS.
- It has no application even to other different kinds of A
companies within the purview of the Companies Act -
Legislature gave an overriding effect to the provisions of the
1985 Act and even the jurisdiction of the civil courts is
restricted - Transfer of Property Act, 1882.
Legislative scheme and object of - Held: Is to develop
8
the mechanism of revival and rehabilitation of sick industrial
units and channelization of the complete administrative-cum-
quasi judicial process within the framework of the Act -The
Act empowers the quasi-judicial body-Bl FR,. to take
appropriate measures for revival and rehabilitation of the C
potentially viable sick industrial companies and for liquidation
of non-viable companies within the time specified - It is
regulatory only to a limited extent - As regards matters
covered under the Act as also matters allied to the
formulation and sanction of the scheme, the jurisdiction of the D
civil courts is ousted and has to be decided by the BIFR itself.
Respondent-Company faced a financial crunch. The
consortium of banks sanctioned loan against the current
assets as well as fixed assets of the respondent- E
Company including the surplus land. Thereafter, the
respondent-Company sought to dispose of the surplus
land so as to bring in additional funds required for
financial restructuring. They entered into memorandum
of understanding and other agreements with appellant- F
Company for the sale of land and receiving payment of
the sale consideration in instalments from the appellants.
The appellant-Company failed to pay the third instalment
and as such the respondent-Company could not attain
the object of financial restructuring. The parties executed
Supplementary Agreement for pre-ponement of the G
instalments payable in terms of the agreement as well as
giving of possession of the land to the appellant-
Company. The respondent-Company then submitted a
proposal to the consortium of banks for Corporate Debt
Restructuring (CDR). The scheme of rehabilitation in H
392 SUPREME COURT REPORTS [2012] 3 S.C.R.
A relation to the sick industrial company was approved by
the CDR. Prior to the complete implementation of the
revival scheme, the respondent-Company applied to the
BIFR under Section 15 of the Sick Industrial Companies
(Special Provisions) Act, 1985 for being declared as a
B 'sick company' and for acceptance and adoption of the
rehabilitation scheme approved by the CDR. BIFR by an
order under Section 17(3) of the 1985 Act, adopted the
rehabilitation Scheme, appointed an operating agency,
fixed the cut-off date for financial revival and directed that
c the sale of assets including investments would require
prior approval of the BIFR. Thereafter, the parties
executed second Supplementary Agreement and
possession of the land was given to the appellant-
Company, without the prior approval of the BIFR.
Aggrieved, appellant-Company as well as the respondent-
0
Company filed appeal before the Appellate Authority for
Industrial and Financial Reconstruction (AAIFR). AAIFR
set aside the certain findings of the BIFR permitting the
land though an asset of the company to be sold. The
High Court quashed the order of the AAIFR holding that
E the order of the BIFR was within the scope of Section
22(3) of the 1985 Act; and that the order of the AAIFR
permitting the sale of the land in furtherance to the
agreement between the parties was not sustainable.
Therefore, the appellant-Company filed the instant
F appeals.
Dismissing the appeals, the Court
HElD: 1.1. The Sick Industrial Companies (Special
Provisions) Act, 1985 basically and predominantly is
G remedial and ameliorative in so far as it empowers the
quasi-judicial body, the BIFR, to take appropriate
measures for revival and rehabilitation of the potentially
viable sick industrial companies and for liquidation of
non-viable companies. It is regulatory only to a limited
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 393
ORS.
extent. The provisions of the Act of 1985 impose an A
obligation on the sick industrial companies and
potentially sick industrial companies to make references
to the BIFR within the time specified under the Act of
1985. Default thereof is punishable under the provisions
of the Act of 1985. Largely, the proceedings before the B
BIFR are specific to rehabilitation or winding up of the
sick company and the Act of 1985 hardly contemplates
adversarial proceedings. The bodies constituted under
the Act of 1985 would least exercise their jurisdiction to
a /is between any party or upon the rival interests of the C
parties. With regard to the matters covered under the Act
of 1985, the jurisdiction of the civil courts is ousted and
the matters which are even allied to. the formulation and
sanction of the scheme would have to be decided by the
BIFR itself. [Para 11) [420-E-H; 421-A]
D
1.2. The BIFR has been vested with wide powers and,
being an expert body, is required to perform duties and
functions of wide-ranged nature. If one looks into the
· legislative intent in relation to a sick industrial company,
it is obvious that the BIFR has to first make an effort to E
provide an opportunity to the sick industrial company to
make its net worth exceed the accumulated losses within
a reasonable time, failing which the BIFR has to formulate
a scheme for revival of the company, even by providing
financial assistance in cases wherein the BIFR in its F
wisdom deems it necessary and finally only when both
these options fail and the public interest so requires, the
BIFR may recommend winding up of the sick industrial
company. So long as the scheme is under consideration
before the BIFR or it is being implemented after being G
sanctioned and is made operational from a given date, it
is the legislative intent that such scheme should not be
interjected by any other judicial process or frustrated by
the impediments created by third parties and even by the
management of the sick industrial company, in relation H
394 SUPREME COURT REPORTS [2012] 3 S.C.R.
A to the assets of the company. In other words, the object
and purpose of the Act of the 1985 is to ensure smooth
sanctioning of the scheme and its due implementation.
Both these stages, i.e., pre and post sanctioning of the
scheme by the BIFR, are equally material stages where
B the provisions of Sections 22 and 22A read with Section
32 of the Act of 1985 would come into play. Such an
approach would also be acceptable as otherwise the
entire scheme under Chapter Ill of the Act of 1985 would
be frustrated. Doctrine of frustration envisages that an
C exerci~e of special jurisdiction in futility, is neither the
requirement of legislature nor judicial dictum. [Para 22]
[434-D-H; 435-A]
1.3. The relevant provisions of the Act of 1985 clearly
demonstrate that BIFR is vested with the power to issue
D directions in the interest of the company or even in public
interest, to prevent the disposal of assets of the company
during the period of preparation, consideration or
implementation of th~ scheme. Not only this, BIFR is
expected to ensure proper implementation by·
E appropriately monitoring the scheme during the entire
relevant r:>eriod ..Sections 22 and 22A thus, specify the
complete jurisdiction and authority of the BIFR in relation
to preparation, consideration, finalization and
implementation of a revival scheme in relation to a sick
F industrial company. [Para 30] [441-E-G]
1.4. The powers of the BIFR under Section 22(3) can
be segregated under two different heads. Firstly, the
power to suspend simplicitor the operation of all or any
G of the contracts, assurances of property, agreements,
settlements, awards, standing orders· or any other
instrument in force, to which the sick industrial company
is a party or which may be applicable to the sick industrial
company before the date of such order. Secondly, any
rights, privileges, obligations or liabilities accruing or
H arising before the said date, shall be enforceable with
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 395
ORS.
such adaptation and in such manner as may be specified A
by the BIFR. Section clearly demonstrates the intent of
the framers of law, that the BIFR has the power to even
make changes in such instruments, documents etc.
which create rights and liabilities vis-a-vis the sick
industrial company, and before permitting them to be B
enforced. Such an approach alone can be justified, as
otherwise the expression 'shall be enforceable with such
adaptation and in such manner as may be specified by
the BIFR would be meaningless. It is a settled principle
of interpretation of statutes that every word and c
expression used by the legislature has to be given its
proper and effective meaning as the legislature uses no
expression without purpose or meaning. The maxim Lex
Nil Frusta Jubet i.e. Law Commands nothing vainly
further elucidates this principle. Of course, the power to D
make this declaration is controlled by limitation of time
as specified in the p·roviso to the Section. Lifting of such
declaration by lapse of time or otherwise or in accordance
with the provisions of Section 22(4) shall bring the status
quo ante as if such declaration had never been made.
Section 22A is obviously a power over and above the E
wide powers vested in BIFR under the provisions of
Section 22 of the Act of 1985. [Paras 27 and 28] [439-B-
H; 440-A]
1.5. All these provisions which fall under Chapter Ill F
of the Act of 1985 have to be read conjointly and that too,
along with other relevant provisions and the scheme of
the Act of 1985. It is a settled canon of interpretation of
statutes that the statute should not be construed in its
entirety and a sub-section or a section therein should not G
be read and construed in isolation. Chapter Ill, in fact, is
the soul and essence of the Act of 1985 and it provides
for the methodology that is to be adopted for the
purposes of detecting, reviving or even winding up a sick
industrial company. Provisions under the Act of 1985 H
396 SUPREME COURT REPORTS [2012] 3 S.C.R.
A also provide for an appeal against the orders of the BIFR
before another specialised body, i.e., the AAIFR. This is
a self-contained code and because of the non obstante
provisions, contained therein, it has an overriding effect
over the other laws. As per Section 32 of the Act of 1985,
B the Act is required to be enforced with all its vigour and
in precedence to other laws. [Para 21] [433-G-H; 434-A·
C]
1.6. The intent of introducing Section 22A was to
empower the BIFR to issue any direction to the sick
C industll'ial company, its creditors and shareholders, in the
interest of the company or even in public interest,
directing the company not to dispose of any assets,
except with the consent of the BIFR. The directions so
issued are to remain in force during the preparation and
D consideration of the scheme. Section 22 is the reservoir
of the statutory powers empowering the BIFR to
determine a scheme, right from its presentation till its
complete implementation in accordance with law, free of
interjections and interference from other judicial
E processes. Section 22(1) deals with the execution,
distress or the like proceedings against the company's
properties, including appointment of a Receiver. It also
specifically provides that even a winding up petition
would not be instituted and no other proceedings shall
F lie or proceed further, except with the consent of the
BIFR. In contradistinction to this power, Section 22(3)
states that pending an enquiry or a scheme under the
provisions of the Act of 1985 and even where the scheme
is sanctioned, for the due implementation of such
G scheme, the BIFR may, by an order, declare with respect
to the sick industrial company concerned that the
operation of all or any of the contracts, assurances of
property, agreements, settlements, awards, standing
orders or other instruments in force to which such sick
H industrial company is a party or which may be applicable
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 397
ORS.
to such sick industrial company immediately before the A
date of such order, shall remain suspended or that all or
any of the rights or privileges, obligations and liabilities
accruing or arising thereunder befqre the said date, shall
remain suspended and shall be enforceable with such
adoption and in such a manner as may be specified by B
the BIFR. In other words, all those instruments to which
the sick industrial company is a party, will be subject to
the orders of the BIFR. Further, such proceedings can
even be modified by the BIFR, of course, for the limited
purpose of implementing the scheme. The declarations c
made by the BIFR under Section 22(3) are subject to the
restrictions of time as stated under the proviso to this
section. The maximum period for which such a
declaration in aggregate can continue is seven years. The
legislative intent of giving an over-riding effect to the
0
declarations of the BIFR, as contemplated under Section
22(3) of the Act of 1985, is further fortified by the language
of Section 22(4), which states that any declaration made
under Section 22(3) shall take effect notwithstanding
anythinQ contained in the Companies Act, 1956 or any E
other law, the memorandum and articles of association
of the company or any instrument, decree, order of a
court, settlement etc. Any remedy for enforcement of a
right which may be available to a third party and any such
proceedings before any court or tribunal shall remain
stayed or be continued subject to such declaration. F
Section 22(4)(b) brings status quo ante and in fact, makes
it clear that on cessation of such a declaration, the right,
privilege, obligation or liability which was suspended
shall become revived and enforceable as if the
declaration had never been made. The proceedings will G
continue from the stage at which they were stayed. It can
safely be perceived that the provisions of Section 22 of
the Act of 1985 are self-explanatory. They would cease
to operate within their own limitations and not by force
of any other law, agreement, memorandum or even H
398 SUPREME COURT REPORTS [2012] 3 S.C.R.
A articles of association of the company. The purpose is so·
very clear that during the examination, finalization and
implementation of the scheme, there should be no
impedliment caused to the smooth execution of the
scheme of revival of the sick industrial company. It is only
B when the specified period of restrictions and declarations
contemplated under the provisions of the Act of 1985 is
over, that the status quo ante as it existed at the time of
the consideration and finalization of the scheme, would
become operative. This is done primarily with the object
c that the assets of the company are not diverted, wasted,
taken away and/or disposed of in any manner, during the
relevant period. [Para 26] [437-B-H; 438-A-H; 439-A-B]
1.~7. Section 22A of the Act of 1985 empowers the
BIFR to pass injunctive or restraint orders in the interest
D of the sick industrial company or even in public interest
requiring the sick industrial company not to dispose of,
except with the consent of the BIFR, any asset during the
period of preparation or consideration of the scheme
under Section 18 of the Act of 1985 and during the period
E beginning with the recording of opinion for winsting up
of the 1::ompany under Section 20(1) of the Act of 1985 by
the Blf'R upto commencement of the proceedings relating
to winding up before the High Court. These injunctive
orders; are to be in operation during the period of
. F preparation or consideration of the scheme under
Section 18 of the Act of 1985. Section 22A, thus, has a
narrower scope than Section 22. Section 22 operates
from the presentation of the scheme, its consideration,
preparation, finalization and ultimately the
implementation of the said scheme and consequent
G rehabilitation of the sick industrial company, while
Section 22A operates only during the preparation or
consideration of the scheme, or upto the commencement
of the proceedings for winding up before the concerned
High Court, in the event the BIFR recommends winding
H up proceedings. [Paras 20, 29) [433-E-F: 440-C-El
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 399
ORS.
1.8. Section 22 and 22A of the Act of 1985 primarily A
ensure that the scheme prepared by the BIFR does not
get frustrated because of certain other legal proceedings
and to prevent untimely and unwarranted disposal of the
assets of the sick industrial company. These Sections
clearly state certain restrictions which would impact upon B
the implementation of the scheme as well as on the
assets of the c-ompany. These Sections operate at
different stages and in different fields. [Para 20) [432-G-
H]
1.9. Sections 22(1 ), (3) and 22A have to be read along C
with the provisions of Section 26 of the Act of 1985 which
ousts the jurisdiction of the civil courts and vests
exclusive jurisdiction for the specified purposes with the
BIFR. Section 32 of the Act of 1985, gives an overriding
effect to the provisions of the Act of 1985 over the other D
laws in force except the law specifically stated therein .
. Sections 22, 22A, 26 and 32 have to be read and
construed conjointly. A common thread of legislative
intent to treat this law as a special law, in contra-
distinction to the other laws except the laws stated in the E
provisions and to ensure its effective implementation with
utmost expeditiousness, runs through all these
provisions. It also mandates that no injunction shall be
granted by any court or authority in respect of an action
taken or to be taken in pursuance of the powers conferred F
to or by under this Act. [Para 31) [441-B-E]
1.10. The provisions of Sections 22(1) and 22(3) of the
Act are the provisions of wide connotation and would
normally bring the specified proceedings, contractual and
non-contractual liabilities, within the ambit and scope of G
the bar and restrictions contained in Sections 22(1) and
22(3) of the Act of 1985 respectively. The legislative intent
is explicit that the BIFR has wide powers to impose
restrictions in the form of declaration and even
H
400 SUPREME COURT REPORTS [2012] 3 S.C.R.
A prohibitory/injunctive orders right from the stage of
consideration of a scheme till its successful
implementation within the ambit and scope of Sections
22(3) and 22A of the Act. Section 22 of the Act of 1985 is·
very significant and of wide ramifications and application.
8 More often than not, the jurisdiction of the BIFR is being
invoked, necessitated by varied actions of third parties
against the sick industrial company. The proceedings,
taken by way of execution, distress or the like, may have
the effect of destabilizing the finalization and/or
implementation of the scheme of revival under
C consideration of the BIFR. It appears that, the Legislature
intended to ensure that no impediments are created to
obstruct the finalization of the scheme by the specialized
body. To protect the industrial growth and to ensure
revival, this preventive provision has been enacted. The
D provision has an overriding effect as it contains non
obstante clauses not only vis-a-vis the Companies Act
but even qua any other law, even the memorandum and
articles of association of the industrial company and/or
any other instrument having effect under any other Act
E or law. These proceedings cannot be permitted to be
taken out or continued without the consent of the BIFR
or the AAIFR, as the case may be. The expression 'no
proceedings' that finds place in Section 22(1) is of wide
spectrum but is certainly not free of exceptions. The
F framers of law have given a definite meaning to the
expression 'proceedings' appearing under Section 22(1)
of the Act of 1985. These proceedings are for winding up
of the industrial company or for execution, distress or the
like against any of the properties of the industrial
G company or for the appointment of a Receiver in respect
thereof. The expression 'the like' has to be read ejusdem
generis to the term 'proceedings'. The words 'execution,
distress or the like' have a definite connotation. These
proceedings can have the effect of nullifying or
H obstructing the sanctioning or implementation of the
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 401
ORS.
revival scheme, as contemplated under the provisions of A
the Act of 1985. This is what is required to be avoided for
effective implementation of the scheme. The other facet
of the same Section is that, no suit for recovery of money,
or for enforcement of any security against the industrial
company, or any guarantee in respect of any loan or B
advance granted to the industrial company shall lie, or be
proceeded with further without the consent of the BIFR. ·
Again, the intention is to protect the properties/assets of
the sick industrial company, which is the subject matter
of the scheme. It is difficult to state with precision the C
principle that would uniformly apply to all the
proceedings/suits falling under Section 22(1) of the Act
of 1985. Firstly, it will depend upon the facts and
circumstances of a given case, it must satisfy the
ingredients of Section 22(1) and fall under any of the D
various classes of proceedings stated thereunder.
Secondly, these proceedings should have the impact of
interfering with the formulation, consideration, finalization
or implementation of the scheme. Once these ingredients
are satisfied, normally the bar or limitation contained in E
Section 22(1) of the Act of 1985 would apply. [Para 35)
(443-C-H; 444-A-G]
Gram Panchayat & Anr. v. Shree Vallabh Glass Works
Ltd. & Ors. (1990) 2 SCC 440: 1990 (1) SCR 966; Deputy F
Commercial Tax Officer & Ors. v. Corromandal
Pharamaceuticals & Ors. (1997) 10 SCC 649: 1997 (2) SCR
1026; Jay Engineering Works Ltd. v. Industry Facilitation
Council & Anr. AIR 2006 SC 3252: 2006 (6) Suppl. SCR
189; Maharashtra Tubes Ltd. v. State Industrial and
Investment Corporation of Maharashtra (1993) 2 SCC 144: G
1993 (1) SCR 340; Tata Davy Ltd. v. State of Orissa AIR 1998
SC 2928: 1997 (3) Suppl. SCR 232 - referred to.
1.11. The land was one of the major assets of the
Respondent Company and in the event the said asset H
402 SUPREME COURT REPORTS [2012] 3 S.C.R.
A was kept outside the scope of the scheme or its sale was
permitted by the BIFR, probably the company could
never be revived and any effort in that direction de hors
such asset of the company would be in futility. Besides,
thE~ fact that the statutory protection contained in Section
B 22(3) was available to the company, it could be stated
with more emphasis that the BIFR could even adopt and
peU'mit the transaction with such adoption as it may have
deemed appropriate. The imperative nature of the
functions of the BIFR under the provisions of the Act of
c 1985 and the overriding effect of its provisions fully
support such a view. [Para 36) [445-E-G]
, 2.1. The provisions of the Act of 1985 shall normally
override the other laws except the laws which have been
specifically excluded by the Legislature under Section 32
D of ~he Act of 1985. The Act of 1985 has been held to be a
special statute vis-a-vis the other laws. [Para 39) [447-E]
2.2. The Act of 1882 is a general law and controls and
operates in a very wide field. It was an Act enacted for
E and related to transfer of immovable property in India and
to decide the disputes as well as to resolve the confusion
and conflict, which was in existence, as the courts were
forced to decide the disputes according to their own
notions of justice and fair play. The Act of 1882 does not
F have application to a particular situation or class of
persons. On the contrary, the Act of 1985 is a special
legislation providing for imperative functioning of
specialized bodies like the BIFR and AAIFR and is
intended to apply to a very specific situation, i.e., where
a company is a sick industrial company. It has no
G application even to other different kinds of companies
within the purview of the Companies Act, except sick
industrial companies. The Legislature has undoubtedly
given an overriding effect to the provisions of the Act of
1985 and even restricted the jurisdiction of the civil courts,
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 403
ORS.
as is demonstrated from the language of Sections 26 and A
32 of the Act of 1985. Thus, the provisions of the Act of
1985 shall prevail over the provisions of the Act of 1882.
[Para 40] [448-A-D]
Tata Davy Ltd. v. State of Orissa AIR 1998 SC 2928:
1997 (3) Suppl. SCR 232; Tata Motors Ltd. (2008) 7 SCC B
619: 2008 (9) SCR 267; NGEF Ltd. v. Chandra Developers
(P) Ltd. and Anr. (2005) 8 SCC 219: 2005 (3 ) Suppl. SCR
747- referred to.
3.1. The submission that in view of the provisions of C
Sections 53A and 54 of the Act of 1882, the title in the
property in question is vested in the Respondent-
Company and they are entitled to transfer of the property,
free from any restrictions or limitations, and as such, the
order of the High Court is liable to be set aside and that D
of the AAIFR be restored, cannot be accepted entirely or
even in part for that matter. Section 54 defines 'Sale' as
a transfer of ownership in exchange for price paid or
promised or part-paid and part-promised. Such a transfer
of tangible immovable property of the value of Rs.100/-
and upwards can be made only by a registered E
instrument. On a plain reading of Section 54, it is clear
that an agreement for sale or an agreement to sell itself
does not create any interest or charge in such property.
[Paras 43 and 44] [450-E-G; 451-C]
F
'Transfer of Property Act' by Mui/a, 9th Edn, p 181 -
referred to.
3.2. The provisions of Section 53A of the 1882 Act
recognize a right of a transferee, where a transferor has
given and the transferee has taken possession of the G
property or any part thereof. Even Section 53A does not
create title of the transferee in the property in question
but gives him a very limited right, that too, subject to the
satisfaction of the conditions as stated in Section 53A of
the Act of 1882 itself. Thus, even if the part performance H .
404 SUPREME COURT REPORTS (2012) 3 S.C.R.
A of the agreement is accepted, still no title is created in
favour of the Respondent-Company. Provisions of
Section 53A would also not, in any way, alter the position
of the Act of 1985 having an overriding effect vis-a-vis the
provisions of the Act of 1882. The provisions of Act of
B 1985 shall have precedence and overriding effect over the
provisions of the Act of 1882. [Paras 47, 48] [456-B, F]
State of UP. v. District Judge and Ors. AIR 1997 SC 53:
1996 (7) Suppl. SCR 513 - referred to.
C 3.3. The memorandum of understanding and
agreement to sell the land belonging to the company
between the appellant and the respondent-company was
signed prior to the presentation of the scheme before the
BIFR. However, second supplementary agreement was
executed not only subsequent to the presentation of the
D scheme before the BIFR but even after the BIFR had
passed an order under Section 17(3) of the Act of 1985•.
It cannot be disputed that even the sale proceeds
received under the agreements have been utilized for the
revival of the company to a large extent. The agreement
E with the workers dated 5th September, 2008 stands
testimony to this fact. Once the asset of the company and/
or its sale proceeds have been integral part of the
formation and finalization of the revival scheme, such
transaction by any stretch of imagination cannot be
F stated to be beyond the ambit and scope of Section 22(3)
of the Act of 1985. Thus, BIFR has the power to issue
declarations in relation to contracts, agreements,
settlements, awards, standing orders or even other
instruments in force to which the sick industrial company
G is a party. The power to suspend or power to enforce the
same subject to such adaptations as the BIFR may
consider appropriate is a power of great magnitude and
scope, the only restriction thereupon is as contemplated
in the proviso to Section 22(3) of the Act of 1985. [Para
H 46] [454-D; 455-A, G]
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 405
ORS.
3.4. The BIFR after declaring the Respondent- A
Company as a sick company and appointing the Punjab
National Bank as the Operating Agency, had fixed the cut
off date as 30th July, 2007, as indicated in the CDR
Scheme. The CDR scheme had been approved, after
taking into consideration the agreement to sell and the B
sale proceeds likely to be received therefrom. The BIFR
had passed certain directions/declarations in the order
passed under Section 17(3) of the Act of 1985 requiring
the company to state clearly the details of the land to be
sold including survey numbers as well as the remaining c
land with the company and confirming if the remaining
land was adequate for functioning and viability of the
company on long term basis. The BIFR raised the query
whether all the secured creditors who had charge over
the land, had approved the sale of 350 acres of land D
belonging to the respondent-company for a sum of
Rs.166.40 crore and for entering into memorandum of
understanding with the appellant company in that behalf.
Besides issuing a directive that assets including
investments would require prior approval of the BIFR as E
the company was under the purview of SICA, it also
issued a clear prohibitory order requiring the secured
creditors not to take any coercive steps against the
company without prior permission of the BIFR. This
order of the BIFR was therefore, passed clearly at the
stage of the consideration of the revival scheme which F
had been approved by the CDR Group as well as the
secured creditors. The scheme for revival of the company
on long term basis, thus, was primarily dependent upon
the sale proceeds of the land in question on the one hand
and the utility of the remaining land for revival of the G
company on the other. The land was the paramount asset
of the company for its revival and successful
implementation of the scheme in accordance with law.
The asset was duly taken into consideration in
formulation of the scheme as contemplated under H
406 SUPREME COURT REPORTS [2012] 3 S.C.R.,
A Sections 17 and ·18 of the Act of 1985 and appropriate
directions, prohibitory orders were issued within the
ambit and scope of Sections 22(1), 22(3) and 22A of the
Act of 1985. In view of the clear statement of law and facts
of the instant case, there is no merit in the submission
B of the Respondent-Company that the BIFR had no
jurisdiction to pass such directives. [Para 49] [457-B-H;
458-A]
3.5. AAIFR had disturbed the order of BIFR and held
that the contract between the parties could not be
C suspended under Section 22(3) and it was not in the
i111terest of the Respondent-Company. It had permitted the
sale to be completed without any restriction. The High
Court set aside the said order and restored the order of
the BIFR. There is no jurisdictional or other error in the
D order of the High Court in restoring the order of the BIFR.
The land being the primary asset of the Respondent-
Company, could not be permitted to be dissolved by sale
01· otherwise without the consent and approval of the
BIFR. The BIFR is the authority proprio vigore and
E required to oversee the entire affairs of a sick industrial
ce>mpany and to ensure that the same are within the
fr•:imework of the scheme formulated and approved by
the Board for revival of the company in accordance with
the provisions of the Act of 1985. On facts as well, neither
F the BIFR nor the High Court had exceeded its jurisdiction
in passing the impugned orders. It is not that the
RE~spondent-Company has been divested of its right by
the BIFR. All that has been done was to suspend the final
transfer of the property in its favour in accordance with
G the provisions of the Act and the limitations imposed
therein. Once the scheme is implemented or the period
specified under the provisions of Sections 22(3) and 22(4)
expires, the declaration would cease to exist and the
appellant would be entitled to enforce its rights in
accordance with law as if no such declaration or
H restriction ever existed. [Para 501 r458-C-G1
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 407
ORS.
3.6. The principle of law that emerges, which A
consistently has judicial benediction, is that a scheme for
rehabilitation or restructuring of a sick industrial
company undertaken by a specialized body like the BIFR/
AAIFR should, as far as legally permissible, remain
obstruction free and the events should take place as pre- B
ordained, during consideration and successful
implementation of the formulated scheme. Wide
jurisdiction is vested in BIFR/AAIFR to issue directives,
declarations and prohibitory orders within the
rationalized scope and limitations prescribed under c
Section 22(1), 22(3) and 22A of the Act of 1985. [Para 51]
[458-H;459-A-B]
3.7. The order of the BIFR dated 16th July, 2009
which _has merged into the order of the High Court dated
29th July, 2011 is maintained while that of the AAIFR D
dated 28th May, 2010 is set aside. The parties are directed
to appear before the BIFR which would proceed with the
matter in accordance with law. [Para 54] [459-F-G]
Shree Sajjan Mills Limited & Ors. v. Municipal E
Corporation, Rat/am (2009) 17 SCC 665; M/s. Shree
Chamundi Mopeds Ltd. v. Church of South India Trust
Association, Madras AIR 1992 SC1439: 1992 (2) SCR 999;
Rambaran Prosad vs. Ram Mohit Hazra AIR 1967 SC 744:.
1967 SCR 293; Dharma Naika v. Rama Naika AIR 2008 SC F
1276: 2008 (2) SCR 451; Mrs. Saradamani Kandappan vs.
Rajalakshmi & Ors. JT 2011 (8) SC 129; Shalini Shyam
Sheffy & Anr. v. Rajendra Shankar Patil (2010) 8 SCC 329:
2010 (8) SCR 836
Case Law Reference: G
1990 (1) SCR 966 Referred to Para 11, 13,
17, 23, 32
1997 (2) SCR 1026 Referred to Para 12, 23,
33 H
408 SUPREME COURT REPORTS [2012] 3 S.C.R.
A 2006 (6) Suppl. SCR 189 Referred to Para 14, 16,
23, 34, 37
(2009) 11 sec 665 Referred to Para 15
1993 (1) SCR 340 Referred to Para 32
B
1997 (3) Suppl. SCR 232 Referred to Para 32, 37
1992 (2) SCR 999 Referred to Para 35
2008 (9) SCR 267 Referred to Para 37
c 2005 (3) Suppl. SCR 747 Referred to Para 38
1967 SCR 293 Referred to Para 44
1996 (7) Suppl. SCR 513 Referred to Para 45
D 2008 (2) SCR 451 Referred to Para 45
JT 2011 (8) SC 129 Referred to Para 45
2010 (8 ) SCR 836 Referred to Para 53
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
E 1920 of 2012.
From the Judgment & Order dated 29.07.2011 of the High
Court of Judicature at Bombay in Civil Writ Petition No. 6450
of 2010.
F With
C.A" Nos. 1921, 1922 & 1923 of 2012.
H.N. Salve, Gopal Subramaniam, Mukul Rohotagi, S.
Ganesh Shyam Divan, Colin Gonsalves, Mahesh Agarwal,
G Rishi Agarwal, Bharat Zaveri, Gaurav Goel, E.C. Agrawala,
U.A. Rana, Devina Sehgal, Saurabh Sinha, S. Kumar, Rohit
Singh, Anuradha, Jayshree, Jyoti Mendiratta for the appearing
parties.
The Judgment
. I
of the Court was delivered by
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 409
ORS.
SWATANTER KUMAR, J. "Leave granted all cases." A
1. An interesting question of law as to the ambit and scope
of Section 22 of the Sick Industrial Companies (Special
Provisions) Act, 1985 (for short, the 'Act of 1985') and its
overriding application over the provisions of Transfer of B
Property Act, 1882 (for short, the 'Act of 1882'), with particular
reference to Section 53A and Section 54 of the latter Act, arises
for consideration in the present case.
Reference to the basic facts which give rise to this
proposition of law would be necessary and are as follows: C
Facts:
2. NRC Limited is a company which was originally
incorporated under the name and style of 'National Rayon
Corporation Limited' in the year 1946. However, subsequently, D
by an appropriate resolution of the Board of Directors, its name
was changed to 'NRC Limited' on 4th August, 1994 (hereinafter
referred to as the 'Respondent-Company'). The Respondent-
Company was engaged in the manufacture qf viscos filament
yarn, chemicals and allied products with its factory at Mohane, E
Kalyan, District Thane. As per the facts on record, the
Respondent-Company was declared a 'sick industrial company'
in the year 1987, but as its net worth turned positive, vide order
dated 10th January, 1994 passed by the Board for Industrial
and Financial Restructuring (for short, the 'BIFR'), it was F
discharged from the purview of the Act of 1985. The
Respondent-Company had arranged finances and invested
nearly Rs.86 crore in the financial year 2005-06 whereafter it
started incurring losses because reduction in the customs duty
seriously affected its business. Because of the financial crunch G
faced by the Respondent-Company, a consortium of five
nationalized banks comprising of Punjab National Bank, Dena
Bank, Canara Bank, Indian Overseas Bank and the Bank of
Baroda had sanctioned a term loan as well as a working capital
loan, secured by the current assets as well as the fixed assets H
410 SUPREME COURT REPORTS [2012] 3 S.C.R.
A of the Respondent-Company including the land in question. The
total outstanding amount of loan, as on 31st March, 2006, was
approximately Rs.147 crore. The Respondent-Company
intensified its efforts to dispose of the surplus land so as to
bring in additional funds required for financial restructuring. A
B Memorandum of Understanding was signed on 13th April, 2006
with 'K. Raheja Universal Limited' renamed as '.Raheja
Universal Limited' (hereinafter referred to as the 'Appellant-
Company') for sale of about 344 acres of land for a total
consideration of Rs.166.40 crore. After obtaining 'No Objection
c Certificates' from the lending banks, an agreement dated 1st
March, 2007 was signed between the parties and a sum of
Rs.25 crore was paid by the Appellant-Company to the
Respondent-Company. The balance consideration of Rs.141.40
crore was to be paid as per the terms of the agreement. In
terms of the said agreement, the Appellant-Company was to
0
pay the second instalment of Rs.25 crore, as and when required,
to be utilized only to remove the first charge on the saleable
land, the third instalment of Rs.48.90 crore was to be paid on
receipt of 'No Objection Certificate' from the labour, Kalyan
E Dombivli Municipal Corporation and, on completion of fencing
and the vacant possession of non-colony land and the fourth
and final instalment of Rs.72.50 crore was to be paid
subsequent thereto.
3. The Agreement dated 1st March, 2007 had postulated
F payment of the sale consideration in instalments. The parties
continued further negotiations in regard to payment of the
balance sale consideration. The Respondent-Company had
requested the Appellant-Company to advance the payment of
instalments. Thereafter, the parties came to an understanding
G and, in furtherance to such understanding, a SU,Pplementary
deed to the agreement was signed on 29th September, 2007.
As already noticed, the Appellant-Company had declined to
pay the third instalment of the consideration payable, causing
impediment to payments towards labour costs and other
H expenses of the Respondent-Company. Then, the parties, by
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 411
ORS. [SWATANTER KUMAR, J.]
mutual agreement, signed a second supplementary agreement A
dated 17th August, 2010. This agreement referred to the
principal agreement and besides advancing the payment of
instalments, the possession of the property was also given to
the Appellant-Company.
B
4. There is some dispute between the parties with regard
to the manner and time in which these payments were or were
not made. On failure to attain the object of restructuring, the
Respondent-Company submitted a proposal to the consortium
of banks for Corporate Debt Restructuring (CDR) and C
improving the performance and to achieve positive results
during the year 2006-07. The CDR mechanism used the land
sale proceeds. Upon making the proposal, the Respondent-
Company discontinued its production activity in the nylon plant.
The CDR Empowered Group approved the package for
restructuring of debts on 21st January, 2008 but still it could not D
improve the financial business position of the Respondent-
Company till the period ending on 30th June, 2008. On or about
24th September, 2008, the consortium banks released their
interest over the property. An agreement with the recognized
employees' unions was also entered into on 5th September, E
2008 but then it ran into problems, as it was contended by the
Labour Unions that their dues should be cleared first and on
transfer of land, Appellant-Company should provide 18 acres
of land for a proposed employee's colony. An early retirement
scheme was also introduced and out of the total strength of F
3725 employees, about 577 employees opted to take the
benefit of this scheme. The Respondent-Company then
negotiated with the Appellant-Company sometime in
September 2008 for payment of the third instalment of Rs.48.90
crore. However, simultaneously, the Labour Unions raised the G
question of payment of bonus which adversely affected the
revival plans. The chemical plant of the company was re-started.
On 3rd December, 2008, the Respondent-Company moved an
application before the BIFR in Case No. 55 of 2008 under
Section 15(1) of the Act of 1985. The Appellant-Company H
412 SUPREME COURT REPORTS [2012) 3 S.C.R.
A refused to release the third instalment and resultantly, even the
dues of 577 employees, who had taken the benefit of the early
retimment scheme, could not be cleared. The BIFR, vide its
order dated 16th July, 2009, fixed the cut-off date as 30th July,
2007. It directed that the sale of assets, including investments,
B will require prior approval of the BIFR. It also appointed the
Punjab National Bank as the Operating Agency under Section
17(3) of the Act of 1985.
5. As per Section 18(8) of the Act of 1985, the cut-off date
C is thi3 date of coming into operation of the sanctioned scheme,
or any provisions thereof. In other words, all matters relating to
the-company would, after this date, be within the ambit and
scope of the provisions of the Act of 1985 and, as already
noticed, the BIFR had declared the cut-off date to be 30th July,
200i'. Vide its order dated 16th July, 2009, which was passed
D unde!r Section 17(3) of the Act of 1985, the following directions
were! given:
· "(i) The Company shall submit a fully tied up DRS to the
OA (Punjab National Bank) (PNB) within a period of three
E months. The sale of 350 acres of land stated to be
approved by the CDR Empowered Group (EG) and the
secured creditors may form part of the DRS. The details
of the land to be sold including survey numbers should be
clearly specified. The company shall give similar details
F of the remaining land and conform that it is adequate for
the functioning and viability of the company on long term
basis. The. OA (PNB) shall convene a joint meeting of all
concerned and submit a fully \ied up DRs, if it emerges,
along with the minutes of the joint meeting within a further
period of one month.
G
(ii) Bank of Baroda (BOB) shall submit an authenticated
copy of the CDR scheme approved by consortium of
banks within a period of 15 days.
H (iii) PNB (QA) shall confirm to the Board within a period
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 413
ORS. [SWATANTER KUMAR, J.]
of 15 days under copy to the company that all the secured A
creditors who had charge over the land had approved sale
of 350 acres of land belonging to the company at Kalyan,
Thane Dist. To K. Raheja Universal Pvt. Ltd. For a sum of
Rs. 166.40 crore. The secured creditors who had charge
·over the land shall clearly indicate whether the company B
had obtained their approval before entering into MOU and
agreement for sale of 350 acres of land with K. Raheja
Universal Ltd. under copy to the company the OA (PNB).
and the Board. Secured creditors shall also similarly
submit copy of their approval for sale of investments, giving c
details of the investments. OA shall also submit copies of
the approvals given by the secured creditors for the sale
of the said land along with the copies of valuation report
and the details of the valuer and the procedure followed
based on which the sale consideration of Rs.166.40 crores D
was arrived at. OA shall also submit a copy of the approvals
by secured creditors for sale of investment giving details
of the investments. The company shall fully co-operate with
the OA in furnishing the documents/details required by
them.
E
(iv) The company shall submit within 15 days under copy
to the OA (PNB) copies of the No Objection Certificates
for sale of land and release of charge issued by all the
charge holder lenders and the State Government in respect
of 350 acres of land for which MOU and agreement of sale F
are stated to be entered into in 2006 and 2007
respectively with K. Raheja Universal Pvt. Ltd. under copy
to the PNB (OA). The company should also submit certified
copies of the Board resolutions of the company authorizing .
these transactions to the OA with a copy to the Board. The G
company shall similarly submit full details of the investments
to be sold under the CDR scheme. It is reiterated that sale
of assets including investments will require the prior
approval of BIFR as tbe company is now under the purview
of SICA. H
414 · SUPREME COURT REPORTS (2012] 3 S.CR.
A (v) The company shall submit a copy of the clearance
stated to have been received from Hon'ble High Court of
Bombay for sale of 350 acres of land under copy to the
OA (PNB).
'
(vi) The secured creditors are directed u/s 22(1) of SICA
B
not to take any coercive action against the company
without prior permission of BIFR."
6. As is evident from the above-noted directions, the BIFR
treated the land as an investment and has put certain
C restrictions thereupon, including that of sale of assets, which
required the prior approval of BIFR as the Respondent-
Company was under the purview of the Act of 1985. With
reference to the land, it was directed that Capacity Valuation
Repo11 should be placed on record to show how the sale
D consideration of Rs.166.40 crore was arrived at. Aggrieved
from this order, the Appellant-Company as well as the
Respondent-Company, both have preferred\an appeal before
the Appellate Authority for Industrial and Financial
Reconstruction (for short the 'AAIFR') under Section 25 of the
E Act of 1985. The AAIFR made major variations in the order of
the BIFR. Firstly, it held that BIFR should not have fixed 30th
July, 2007 as the cut-off date and secondly, that the provisions
of Section 22A would not apply to an agreement for sale which
had already been entered into, registered, acted upon and was
F in the process of completion. While dealing with the order of
the BIFR, AAIFR vide its order dated 28th May, 2010, set aside
certain findings of the BIFR as well as passed certain other
directions. It is useful to refer to some of the findings recorded
t:?y the AAIFR in its order which are as under:
G "22 .......... The BIFR has also not considered the impact
of Section 22A or the transactions, contracts/agreements
entered into between the company and third parties prior
to the filing of reference when the company was not a sick
entity. If the BIFR was of the viei that the agreement for
H sale of land was not in the interest the company, it could
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 415
ORS. [SWATANTER KUMAR, J.]
have suspended the contract under Section 22(3) of SICA A
as it was a pre-existing contract. Despite arguments to the
contrary, the BIFR has not given any reasons to justify how
Section 22A of SICA applies to a pre-existing agreement
for sale entered into between the company and a third party
prior to filing of the reference. In fact, the agreement for B
sale is a clog on the absolute ownership of the property
of the appellant company and the property cannot be said
to be free from encumbrance unless the registered
agreement for sale is cancelled. The property under
agreement cannot be sold to others during the subsistence c
of agreement for sale.
xxx xxx xxx
24. In view of the aforesaid discussion and considering the
various provisions of the MOU dated 13.4.06, agreement D
for sale dated 01.3.07 and supplementary agreement
dated 21.9.07, we are of the view that the provisions of
Section 22A will not apply to the agreement for sale
already entered into, registered, and acted upon and in the
process of completion. Had it been the intention of the E
legislature to cover the past transactions within the ambit
of Section 22A, the provisions for suspension of existing
contracts etc. would not have been provided under Sub-
section (3) of Section 2 of SICA under which the BIFR has
not passed any order. Readiness and willingness of the F
parties to the sale agreement to honour the contract is also
a paramount consideration."
7. AAIFR summed up its conclusion in paragraphs 41 and
42 which read as under:
G
"41. To sum up:
The sale-purchase agreement dated 30.6.2009 was
signed after the reference was filed and 15 days before·
the BIFR passed the restraint order under section 22A;
H
416 SUPREME COURT REPORTS [2012] 3 S.C.R.
A There is no evidence to show whether various provisions
of SEBI Take Over Code have been complied with;
The company has violated the amended terms and
conditions of STL dated 29.6.2009 by not paying to PNB
one instalment of Rs.2.78 crores before 30.6.2009;
B
Consequently, PNB ha not released the shares of AOL for
re-pledge by ISG Traders Ltd.:
. According to PNB, however, the company has shown the
c entire shares of AOL as sold:
There is no evidence to show that sale consideration has
been paid; and
The ISG Traders Ltd. is neither a party before the BTR nor
D before this Authority.
In these circumstances, the BIFR was fully justified in
.seeking full details of the investments to be sold in the
CDR scheme and to direct that the sale of investments will
E require the prior approval of the BIFR. We find no reasons
.to interfere with the aforesaid order of the BIFR regarding
sale of investments.
: 42. We observed that the BIFR has fixed the cutoff date
as 30.07.2007 on the basis of the CDR scheme while
F passing the order under Section 17(3). The fixation of cut
off date implies that the liabilities and the dues of the
creditors will be determined as on that date and the
repayment obligations will commence during the year
following the cut oil date. if there is a substantial gap
G between the cut off date fixed and the date of sanction of
the scheme, the scheme will become a non starter
because the sick industrial company will be unable to fulfill
its repayment obligations for the period between the cut
off date as stipulated in the impugned order and date of
H sanction of the scheme, The issue can be resolved by
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 417
ORS. [SWATANTER KUMAR, J.]
determining a prospective cut off date. Section 17(4)(b) A
of SICA vests in the BIFR the necessary power to review
and modify its orders under Section 17(3) of SICA.
Therefore, in our view the cut off date fixed by the BIFR in
the impugned order is required to be suitably modified by
the BIFR." . B
8. With the above findings, the AAIFR recorded that the
scheme could be approved but subject to pre-payment of the
entire remaining consideration of Rs.124.64 crores, as per its
directions, for setting off labour dues. In other words, it permitted C
the land, though an asset of the company, to be sold. The
correctness and legality of this order of the AAIFR was
questioned by the Appellant-Company, the Respondent-
Company and the NRC Mazdoor Sangh before the High Court.
These Writ Petitions, along with other connected Writ Petitions,
were disposed of by the High Court by a common judgment D
dated 29th July, 2011. The High Court, primarily, framed two
questions for discussion: firstly, whether the land covered by the
agreement of sale dated 1st March, 2007 and supplementary
agreement signed on 29th September, 2007, was an existing
asset of the Respondent-Company and secondly, what was the E
scope of the powers of the BIFR under Section 22(3) of the Act
of 1985. The High Court quashed the order of the AAIFR and
confirmed the order passed by the BIFR holding as under:
"(8) .................. The AIFR further held that prior to the filing F
of the reference under Section 15 of SICA, a debt
restructuring scheme under the CDR mechanism on 12/
12/2007 and 21/1/2008, the CDR package envisaged sale
of surplus land as well as sale of investments of the
appellant company. Any restraint order on the sale of land, G
under the agreements for sale, would not only complicate
the matter but would hamper the revival process and would
also lead to a prolonged litigation between the parties and
this will not be in the interest of revival of the sick company.
The provisions of Section 22A which are prospective in
H
418 SUPREME COURT REPORTS [2012] 3 S.C.R.
A nature would not impact pre existing contract for sale
entered into by the company before it filed reference under
Section 15(1) of SICA and, therefore, the directions given
under Section 22A will not apply to the agreement for sale
deed 1/3/2007. The restraint order passed by the BIFR
B would apply to any subsequent proposals for disposal of
assets of the company, if any. But these agreements will
,be subject to interim orders and final orders to be passed
by the High Court in the pending writ petition challenging
the settlement dated 5/9/2008. For all these reasons, the
c AIFR held that the agreement for sale cannot be part of
DRS under Section 18(d) of SICA as the same is under
transfer and unencumbered and legally enforceable
contract exists between the appellant company and
respondent no.13. However, the AIFR held that the balance
D
sale consideration in respect of the land to the tune of
Rs.124.64 crores receivable by the company from
respondent no.13 should form part 0f the means of finance
in the DRS to be formulated by the BIFR for rehabilitation
of the company. One payment of balance sale
consideration by respondent no.13, the same shall be
E
deposited with an interest bearing NLA with the operating
agency for utilisation as per the rehabilitation scheme to
be sanctioned by the BIFR. The said scheme was for
· workers dues including Rs.45 crores for ERS and
appropriately crystallized amount for ex-employees dues
F as per the settlement dated 5/9/2008 with NRC Mazdoor
Sangh. The AIFR further observed that if the BIFR
considers it necessary to make payment to the workers
as provided for in the agreement with the workers, before
the sanction of the revival scheme, it could do so to
G alleviate the hardships of the workers."
9. After dealing with these two questions at length, the High
Court was of the opinion that BIFR order dated 16th July, 2009
was within the scope of Section 22(3) of the Act of 1985. llt held
H that the order of the AAIFR permitting the sale of the land in
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 419
ORS. [SWATANTER KUMAR, J.]
furtherance to the agreement between the parties was not A
sustainable as it was part of the scheme and sale had been
permitted subject to the final orders of the BIFR. This judgment
of the High Court is impugned by the Appellant-Company
before us.
Legislative Scheme of the Act of 1985 :
10. The framers of law felt that the existing institutional
arrangements and procedure for revival and rehabilitation of
potentially viable sick industrial companies are both inadequate
and time consuming. Multiplicity of law and the regulatory C
agencies makes the adoption of a coordinated approach for
dealing with sick industrial companies difficult. Thus, a need
was felt to enact, in public interest, a legislation to provide for
timely determination, by a body of experts, of the preventive,
ameliorative, remedial and other measures that would be D
needed to be adopted with respect to such companies and for
enforcement of the appropriate measures with utmost
practicable despatch. The ill-effects of sickness in industrial
companies, such as cessation of production, loss of
employment, loss of revenue to the Central and State E
Governments and blocking up of investible funds of the banks
and financial institutions, were of serious concern to the
Government as well as the society at large. It had repercussions
on the industrial growth of the country. With the passage of time
the number of sick industrial units increased rapidly. Therefore, F
it was imperative to salvage the productive assets and release,
to the extent possible, the amounts due to the banks and
financial institutions from non-viable sick industrial debtor
companies by liquidation of those companies or through
formulation of rehabilitation schemes. With these objects, the G
Bill was introduced with the salient features inter alia of
identification of sickness in the industrial companies, on the
basis of symptomatic indices of cash losses for the specified
periods. Wherever the Government or the Reserve Bank were
satisfied that an industrial company has become sick, they were H
420 SUPREME COURT REPORTS [2012] 3 S.C.R.
A required to make a reference to the BIFR. The BIFR consists
of experts, in various relevant fields, with powers to inquire into
and determine the incidences of sickness in the industrial
companies and devise suitable measures through appropriate
schemes to revive them. An appeal lies from the order of BIFR
B to an appellate authority (the AAIFR) consisting of members
selected from amongst Supreme Court or High Court Judges
or Secretaries to the Government of India. With this
background, objects and reasons, this Bill was passed by the
Indian Parliament and it received the assent of the President
c of India on 8th January, 1986. Thus, it became an Act of the
Parliament intended to revolutionize the mechanism of revival
or liquidation of sick industrial units and channelization of the
complete administrative-cum-quasi judicial process within the
framework of the Act of 1985.
D Nature and Scope of the Act of 1985
. 11. Having dealt with the legislative history and object of
the Act of 1985, we may now examine the very nature of this
legislation. The Act of 1985 basically and predominantly is
E remedial and ameliorative in so far as it empowers the quasi-
judicial body, the BIFR, to take appropriate measures for revival
and rehabilitation of the potentially viable sick industrial
companies and for liquidation of non-viable companies. It is
regulatory only to a limited extent. The provisions of the Act of
F 1985 impose an obligation on the sick industrial companies
and potentially sick industrial companies to make references
to the BIFR within the time specified under the Act of 1985.
Default thereof is punishable under the provisions of the Act of
1985. Largely, the proceedings before the BIFR are specific
G to rehabilitation or winding up of the sick company and the Act
of 1985 hardly contemplates adversarial proceedings. The
bodies constituted under the Act of 1985 would least exercise
their jurisdiction to a tis between any party or upon the rival
interests of the parties. With regard to the matters covered
H under the Act of 1985, the jurisdiction of the civil courts is
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 421
ORS. [SWATANTER KUMAR, J.]
ousted and the matters which are even allied to the formulation A
and sanction of the scheme would have to be decided by the
BIFR itself. Even this aspect has been a matter of judicial
divergence. In the case of Gram Panchayat & Anr. v. Shree
Va/labh Glass Works Ltd. & Ors. [(1990) 2 SCC 440], this
Court was concerned with a company which had been declared B
'sick' within the meaning and scope of clause (o) of Sub-section
(1) of Section 3 of the Act of 1985. The Gram Panchayat had
initiated coercive proceedings as per Section 129 of the
Bombay Village Panchayat Act, 1959 to recover a sum of
Rs.9,47,539/- stated to be the property tax and other amounts c
due from the company. This demand was challenged. The
Bombay High Court quashed the demand and the recovery
proceedings. This Court, while dealing with the scope of
Section 22 read with Sections 16 and 17 of the Act of 1985,
took the view that all proceedings for execution, distress or the D
like against the properties of the company would automatically
be suspended and could not continue without the consent of
the BIFR. This Court held as under: -
"10. In the light of the steps taken by the Board under
Sections .1Q. and 1l of the Act, no proceedings for E
execution, distress or the like proceedings against any of
the properties of the company shall lie or be proceeded
further except with the consent of the Board. Indeed, there
would be automatic suspension of such proceedings
against the company's properties. As soon as the inquiry F
under Section 16 is ordered by the Board, the various
proceedings set out under sub-section (1) of Section 22
would be deemed to have been suspended.
11. It may be against the principles of equity if the creditors G
are not allowed to recover their dues from the company,
but such creditors may approach the Board for permission
to proceed against the company for the recovery of their
dues/outstandings/overdues or arrears by whatever name
it is called. The Board at its discretion may accord its H
422 SUPREME COURT REPORTS [2012] 3 S.C.R.
A ·approval for proceeding against the company. If the
approval is not granted, the remedy is not extinguished. lt
is only postponed. Sub-section (5) of Section 22 provides
· for exclusion of the period during which the remedy is
suspended while computing the period of limitation for
B recovering the dues."
12. This Court in the case of Deputy Commercial Tax
Officer & Ors. v. Corromandal Pharamaceuticals & Ors.
[(1997) 10 sec 649] had taken a somewhat divergent view to
the view taken in Shree Vallabh Glass Works (supra). In this
C case, this Court, while examining the language of Section 22
of the Act of 1985, came to the conclusion that it was certainly
a wide provision. In the totality of the circumstances, the
safeguards stated under Section 22 of the Act of 1985 are only
against any impediment that .is likely to be caused in the
D implementation of the scheme. If the matter falls outside the
purview of the scheme and the dues are not reckoned or
included in the sanctioned scheme of rehabilitation, recovery
of sales tax dues would not be covered under this provision and
as such the bar of Section 22(1) of the Act of 1985 would not
· E operate. This Court held as under: -
"..... The language of Section 22 of the Act is certainly wide.
But, in the totality of the circumstances, the safeguard is
only against the impediment, that is likely to be caused in
F the implementation of the scheme. If that be so, only the
liability or amounts covered by the scheme will be taken
in, by Section 22 of the Act. So, we are of the view that
though the language of Section 22 of the Act is of wide
import regarding suspension of legal proceedings from the
moment an inquiry is started, till after the implementation
G
of the scheme or the disposal of an appeal under Section
25 of the Act, it will be reasonable to hold that the bar or
embargo envisaged in Section 22( 1) of the Act can apply
only to such of those dues reckoned or included in the"
sanctioned scheme. Such amounts like sales tax, etc.
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 423
ORS. [SWATANTER KUMAR, J.]
· which the sick industrial company is enabled to collect after A
the date of the sanctioned scheme legitimately belonging
to the Revenue, cannot be and could not have been
intended to be covered within Section 22 of the Act. Any
other construction will be unreasonable and unfair and will
lead to a state of affairs enabling the sick industrial unit to s
collect amounts due to the Revenue and withhold it
indefinitely and unreasonably. Such a construction which
is unfair, unreasonable and against spirit of the statutes
in a business sense, should be avoided."
13. While taking the above view, this Court also noticed C
the judgment in Shree Val/abh Glass Works (supra) but
distinguished the same by stating that the facts in that case
were distinct.
14. The above two judgments covered the field of law in D
this regard for a considerable time, till the judgment of this
Court was rendered in the case of Jay Engineering Works Ltd.
v. Industry Facilitation Council & Anr. [AIR 2006 SC 3252]. In
the said judgment, this Court was dealing with a question as
to whether the award made under Interest on Delayed E
Payments to Small Scale and Ancillary Industrial Undertakings
Act, 1993 was covered under Section 22 of the Act of 1985 or
despite the pendency of such proceedings before the BIFR the
award could be executed. This Court also discussed the issue
as to which of the above two Acts would prevail. Dealing with F
the language of Section 22 of the Act of 1985, this Court took
the view that the said Act shall prevail and though the
adjudicatory process of making an award under the 1993 Act
would not come under the purview of the Act of 1985, once an
award is made and sought to be executed, the provisions of G
Section 22 of the Act of 1985 shall take over and such award
Vl(Ould not be executable against the sick company, particularly
when the party in whose favour the award was made was, as
in the present case, included in the category of dormant
creditors of the sick company. This Court in the said judgment H
held as under: -
424 SUPREME COURT REPORTS [2012] 3 S.C.R.
A "17. The said provision, thus, mandates that no proceeding
inter alia for execution, distress or the like against any of
the properties of the industrial company and no suit for
recovery of money or for the enforcement of any security,
shall lie or be proceeded with further, except with the
B . consent of the Board or as the case may be, the Appellate
Authority. The said statutory injunction will operate when
an inquiry had been initiated under Section 16 or a scheme
referred to under Section 17 is under preparation and/ or
inter alia a sanctioned scheme is under implementation.
It is not disputed before us that the amount awarded in
c favour of the Respondent by the Council finds specific
mention in the sanctioned scheme which is under
implementation.
18. The award of the Council being an award, deemed to
·D have been made under the provisions of the 1996 Act,
indisputably is being executed before a Civil Court.
Execution of an award, beyond any cavil of doubt, would
attract the provisions of Section 22 of the 1985 Act.
Whereas an adjudicatory process of making an award
E under the 1993 Act may not come within the purview of the
1985 Act but once an award made is sought to be
executed, it shall come into play. Once the awarded amount
has been included in the Scheme approved by the Board,
in our opinion, Section 22 of the 1985 Act would apply.
F
xxx xxx xxx
21. The 1985 Act was enacted in public interest. It contains
special provisions. The said special provisions had been
made with a view to secure the timely detection of sick and
G potentially sick companies owning industrial undertakings,
the speedy determination by a Board of 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
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 425
ORS. [SWATANTER KUMAR, J.]
determined and for matters connected therewith or A
incidental thereto."
15. Furthermore, in a recent judgment of this Court in the
case of Shree Sajjan Mills Limited & Ors. v. Municipal
Corporation, Rat/am [(2009) 17 SCC 665], this Court was B
dealing with a company which had approached the BIFR for
being registered as a sick company and was so declared on
21st November, 1989. The BIFR had recommended the
winding up of the sick company but the AAIFR had taken the
view that the company could be rehabilitated and, therefore, C
framed the scheme for its revival. For the purpose of revival,
an Assets Sales Committee was constituted for selling, via
tender process, the surplus land belonging to the appellant-
company. The issue under consideration was that when the 20
per cent of the purchase price deposited by the tenderer as
earnest money as per the terms and conditions of the sale was D
forfeited, whether the same could be challenged only before the
BIFR or the civil courts could determine the dispute and
whether the bar contained under Section 26 of the Act of 1985
would operate. This Court took the view as under: -
E
"12. We agree with the view expressed by the High Court
that the forfeiture of the earnest money by the Assets Sale
Committee could not have been the subject-matter of a
dispute within the meaning of Section 26 which either BIFR
or AAIFR has the jurisdiction to determine. Accordingly, we F
see no reason to interfere with the judgment and order of
the High Court impugned in this appeal."
16. We may notice that though the Bench had noticed the
view taken in the case of Jay Engineering (supra), no detailed
reasoning was recorded for rejecting the said view. G
17. In order to affirmatively answer whether the view of this
Court expressed in Shree Va/labh Glass Works (supra) is the
correct and acceptable exposition of law, it is but necessary
for this Court to examine the scheme of the Act of 1985 and H
426 SUPREME COURT REPORTS [2012] 3 S.C.R.
A some of its relevant provisions. As already noticed, the Act of
1985 was enacted by the Legislature, primarily with the object
of establishing a specialized body for revival, rehabilitation and
even winding up of sick industrial companies and wherever
necessary, providing them with financial assistance. The
B provisions contained in Chapter Ill of the Act of 1985, which
deals with References, Inquiries and Schemes, are the relevant
provisions which can throw some light on the matter and issues
before us. Section 15 of the Act of 1985 places an obligation
. upon an industrial company, which has become sick in terms
c ofthat provision, to make a reference to the BIFR established
under Section 4 of the Act of 1985 within the period of limitation
prescribed. While under Section 15(2) where the Central
Government
'
or Reserve Bank of India or a State Government .
or a Public Financial Institution has sufficient reasons to believe
that any industrial company has become, for the purpose of the
0
Act of 1985, a sick industrial company, would also make a
reference of such company to the Board for determination of
the measures which may be adopted with regard to such
company. Section 16 of the Act of 1985 deals with the conduct
E of an inquiry by the BIFR and the manner in which the BIFR is
expected to deal with the matter upon receipt of a reference
under Section 15 of the Act of 1985. Section 16 vests the BIFR
with very wide powers of inquiry and passing appropriate
orders. Section 16(2) empowers the BIFR to pass an order, in
its discretion, directing any operating agency to inquire into and
F to make a report with regard to the matters as may be specified
in the order. Such operating agency is expected to complete
the inquiry expeditiously and preferably within 60 days from the
date of commencement of inquiry. The BIFR is vested with
powers such as appointing special directors for the sick
G company and issuing directions to the special directors in
relation to discharge of their duties and to improve the
performance of any or all of the functions postulated under
Section 16(6) of the Act of 1985. After the inquiry by the BIFR
or by the operating agency is completed, BIFR if satisfied that
H the company has become sick and upon considering all
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 427
ORS. [SWATANTER KUMAR, J.]
relevant facts and circumstances of the case in exercise of its A
powers under Section 17 of the Act of 1985, may pass orders
requiring the company to make its net worth exceed the
accumulated losses within a reasonable time and for that
purpose it may impose such restrictions or conditions as may
specified in the order in terms of Section 17(2) of the Act of B
1985. Further, where the BIFR decides that it is not practicable
for a sick industrial company to make its net worth exceed the
accumulated losses within a reasonable time and that it is
otherwise necessary or expedient in public interest to adopt all
or any of the measures specified in Section 18 of the Act of c
1985 in relation to the said company, it may, having regard to
the guidelines, as may be specified, pass an order formulating
a scheme providing for such measures in relation to the sick
industrial company. In the event of non-compliance of the
restrictions or conditions specified in the order of the BIFR or
0
where the company fails to revive itself in pursuance to the
order, the BIFR can pass any of the directions/orders as
required under Section 17(4) of the Act of 1985. Section 18 of
the Act of 1985 again is a remedial provision which contains
specified guidelines for the preparation and sanction of the
schemes for the revival of the sick industrial company. Where E
an order is made under Section 17(3) in relation to a sick
industrial company, the operating agency is required to prepare,
as expeditiously as possible, ordinarily within 90 days from the
date of such order, a scheme with respect to such company
providing for any one or more of the measures stated under F
sub-clauses (a) to (f) of Section 18(1) of the Act of 1985. The
scheme so framed may provide for any one or more of the
measures stated under clauses (a) to (m) of Section 18(2) of
the Act of 1985. The scheme which has been prepared in
consonance with the provisions of Section 18(1) and 18(2) then G
has to be examined by the BIFR in terms of Section 18(3) of
the Act of 1985 and if the Bl FR makes any modifications to the
scheme, the same draft scheme, in brief, shall be published or
caused to be published in such daily newspapers as the BIFR
may consider necessary, for receipt of suggestions and H
428 SUPREME COURT REPORTS [2012) 3 S.C.R.
A objections, if any. In light of the suggestions and objections
received in response to such publication, the BIFR may still
make further modifications. Also, where the scheme relates to
amalgamation of the companies, the procedures specified
therein shall be followed. In such cases, the shareholders of the
8 company, other than the sick industrial company, are expected
to pass a resolution of approval of the scheme. The scheme
thereafter shall be sanctioned by the BIFR and shall come into
force on such date as the BIFR may specify in this behalf and
in exercise of the powers vested in it under Section 18(4) of
c the Act of 1985. This scheme does not attain finality which is
unalterable. Once the scheme is sanctioned and comes into
force even then, on the recommendation of the operating
agency, the BIFR can consider further modifications or even
prepare a fresh scheme providing for such measures as the
operating agency may consider it necessary and
0
recommended in terms of Section 18(5) of the Act of 1985.
18. Section 18(7) of the Act of 1985 is an important
provision which provides that the sanction accorded by the BIFR
shall be conclusive evidence that all the requirements of the
E scheme relating to reconstruction or amalgamation or any
measure specified therein have been complied with and a copy
of the sanctioned scheme certified in writing by an officer of
the BIFR to be a true copy thereof shall be admissible as
evidence in all legal proceedings. To resolve the difficulties that
F may arise in giving effect to the provisions to the sanctioned
scheme, the BIFR may, on the recommendation of the operating
agency or otherwise, by order do anything, not inconsistent with
such provisions, which appears to it to be necessary or
expedient for the purpose of removing difficulty in terms of
G Section 18(9) of the Act of 1985. The role of the BIFR does
not end here and it may even periodically monitor the
implementation of the scheme. Where the scheme relates to
preventive, ameliorative, remedial and other measures with
respect to any sick industrial company, the scheme may
H provide for financial assistance by way of loans, advances or
RAHEJA UNVIERSAL LIMITED v. NRG LIMITED & 429
ORS. [SWATANTER KUMAR, J.]
guarantees from the Government or financial institutions. Before A
any financial institution is called upon to proceed to release the
financial assistance to the sick industrial company in fulfilment
of the requirements in that regard, the procedure contemplated
under the provisions of Section 19 of the Act of 1985 has to
be followed. Where the BIFR, after making inquiry under B
Section 16 of the Act of 1985, considering all relevant facts and
circumstances and giving an opportunity of being heard to all
concerned parties, is of the opinion that the sick industrial
company is not likely to make its net worth exceed the
accumulated losses within a reasonable time while meeting all c
its financial obligations and that the company as a result thereof
is not likely to become viable in future and that it is just and
equitable that the company should be wound up, it may record
and forward its opinion to the concerned High Court as per the
provisions of Section 20 of the Act of 1985 whereafter the D
company shall be wound up in accordance with the provisions
of the Companies Act, 1956. The High Court may even appoint
any officer of the operating agency as the liquidator of the sick
industrial company. Section 21 of the Act of 1985 requires the
operating agency to prepare an inventory, if so directed by the E
BIFR.
19. Sections 22 and 22A have a significant bearing upon
the controversy that arises for consideration of the Court in the
present case and it will be useful to refer to those provisions
at this stage itself: F
"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 sections 25 relating to an industrial
company is pending, then, notwithstanding anything
contained in the Companies Act, 1956 (1 of 1956), or any
other law or the memorandum and articles of association H
430 SUPREME COURT REPORTS [2012) 3 S.C.R.
A of the industrial company or any other instrument having
effect under the said Act or other law, no proceedings for
the winding up of the industrial company or for execution,
distress or the like against any of the properties of the
rndustrial company or for the appointment of a receiver in
B respect thereof [and no suit for the recovery of money or
for the enforcement of any security against the industrial
·company or of any guarantee in respect of any loans or
advance granted to the industrial company] shall lie or be
proceeded with further, except with the consent of the
c Board or, as the case may be, the Appellate Authority.
(2) Where the management of the sick industrial company
is taken over or changed, in pursuance of any scheme
sanctioned under section 18, notwithstanding anything
containeC:t in the Companies Act, 1956 (1 of 1956), or any
D other law or in the memorandum and articles of
association of su·ch company or any instrument having
effect under the said Act or other law -
(a) it shall not be lawful for the shareholders of such
E company or any other person to nominate or
appoint any person to be a director of the company;
(b) no resolution passed at any meeting of the
shareholders of such company shall be given effect
to unless approved by the Board.
F
(3) Where an inquiry under section 16 is pending or any
scheme referred to in section 17 is under preparation or
during the period of consideration of any scheme under
section 18 or where any such scheme is sanctioned
G thereunder, for due implementation of the scheme, the
Board may by order declare with respect to the sick
industrial company concerned that the operation of all or
any of the contracts, assurances of property, agreements,
settlements, awards, standing orders or other instruments
H in force, to which such sick industrial company is a party
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 431
ORS. [SWATANTER KUMAR, J.]
or which may be applicable to such sick industrial A
company immediately before the date of such order, shall
remain suspended or that all or any of the rights, privileges,
obligations and liabilities accruing or arising thereunder
before the said date, shall remain suspended or shall be
enforceable with such adoptions and in such manner as B
may be specified by the Board:
Provided that such declaration shall not be made for
a period exceeding two years which may be extended by
one year at a time so, however, that the total period shall C
not exceed seven years in the aggregate.
(4) Any declaration made under sub-section (3) with
respect to a sick industrial company shall have effect
notwithstanding anything contained in the Companies Act,
1956 (1 of 1956), or any other law, the memorandum and D
articles of association of the company or any instrument
having effect under the said Act or other law or any
agreement or any decree or order of a court, tribunal,
officer or other authority or of any submission, settlement
or standing order and accordingly, - E
(a) any remedy for the enforcement of any right,
privilege, obligation and liability suspended or
modified by such declaration, and all proceedings
relating thereto pending before any court, tribunal,
officer or other authority shall remain stayed or be F
continued subject to such declaration; and
(b) on the declaration ceasing to have .effect -
(i) any right, privilege, obligation or liability so G
remaining suspended or modified, shall
become revived and enforceable as if the
declaration had never been made; and
(ii) any proceeding so remaining stayed shall
be proceeded with, subject to the provisions H
432 SUPREME COURT REPORTS [2012] 3 S.C.R.
A of any law which may then be in force, from
the stage which had been reached when the
proceedings became stayed.
(5) In computing the period of limitation for the enforcement
.of any right, privilege, obligation or liability, the period
B
during which it or the remedy for the enforcement thereof
remains suspended under this section shall be excluded.
22A. Direction not to dispose of assets - The Board
may, if it is of opinion that any direction is necessary in
c the interest of the sick industrial company or creditors or
shareholders or in the public interest, by order in writing
direct the sick industrial company not to dispose of, except
with the consent of the Board, any of its assets -
D (a) during the period of preparation or consideration
of the scheme under section 18; and
(b) during the period beginning with the recording
of opinion by the Board for winding up of the
company under sub-section (1) of section 20 and
E up to commencement of the proceedings relating
to the winding up before the concerned High Court.
20. A bare reading of the above provision shows that
Section 22 of the Act of 1985 is concerned with the suspension
F of legal proceedings, execution and distress sale etc. against
the assets of a sick company while Section 22A deals with
power of the Board to issue directions restraining the disposal
of assets of such companies. These two provisions primarily
ensure that the scheme prepared by the BIFR does not get
G frustrated because of certain other legal proceedings and to
prevent untimely and unwarranted disposal of the assets of the
sick industrial company. These sections clearly state certain
restrictions which will impact upon the implementation of the
scheme as well as on 'the assets of the company. These
H sections operate at different stages and in different fields.
RAHEJA UNVIERSA~ LIMITED v. NRC LIMITED & 433
ORS. [SWATANTER KUMAR, J.]
. Section 22(3) of the Act of 1985 contemplates that where an A
inquiry under Section 16 is pending or any scheme referred to
in Section 17 is under preparation or during the period of
consideration of any scheme under Section 18 or where any
such scheme is sanctioned thereunder for due implementation
of the scheme, the BIFR may, by order, declare that with respect B
to the sick industrial company concerned, the operation of all
or any of the contracts, assurances of property, agreements,
settlements, awards, standing orders or other instruments in
force, to which such sick industrial company is a party or which
may be applicable to such sick industrial company immediately c
before the date of such order, shall remain suspended or that
all or any of the rights, privileges, obligations 'or liabilities
accruing or arising thereunder before the said date, shall
remain suspended or shall be enforceable with such adoptions
and in such manner as may be specified by the BIFR. This D
power of the BIFR is subject to the proviso which states that
the declaration made under this provision shall not be for a
period exceeding two years and which may be extended by one
year at a time, but the total period shall not exceed seven years
in aggregate. Section 22A of the Act of 1985 empowers the E
BIFR to pass orders in the interest of the sick industrial
company or even in public interest requiring the sick industrial
company not to dispose of, except with the consent of the BIFR,
any asset during the period of preparation or consideration of
the scheme under Section 18 of the Act of 1985 and during
the period beginning with the recording of opinion for winding F
up of the company under Section 20(1) of the Act of 1985 by
the BIFR upto commencement of the proceedings relating to
winding up before the High Court.
21. All these provisions which fall under Chapter Ill of the G
Act of 1985 have to be read conjointly and that too, along with
other relevant provisions and the scheme of the Act of 1985. It
is a settled canon of interpretation of statutes that the statute
should not be construed in its entirety and a sub-section or a
section therein should not be read and construed in isolation. H
434 SUPREME COURT REPORTS [2012] 3 S.C.R.
A Chapter Ill, in fact, is the soul and essence of the Act of 1985
and it provides for the methodology that is to be adopted for
the purposes of detecting, reviving or even winding up a sick
industrial company. Provisions under the Act of 1985 also
provide for an appeal against the orders of the BIFR before
B another specialised body, i.e., the AAIFR. To put it simply, this
is a self-contained code and because of the non obstante
provisions, contained therein, it has an overriding effect over
the other laws. As per Section 32 of the Act of 1985, the Act is
required to be enforced with all its vigour and in precedence
c to other laws.
22. The BIFR has been vested with wide powers and,
being an expert body, is required to perform duties and
functions of wide-ranged nature. If one looks into the legislative
intent in relation to a sick industrial company, it is obvious that
D the BIFR has to first make an effort to provide an opportunity
to the sick industrial company to make its net worth exceed the
accumulated losses within a reasonable time, failing which the
BIFR has to formulate a scheme for revival of the company, even
by providing financial assistance in cases wherein the BIFR in
E its wisdom deems it necessary and finally only when both these
options fail and the public interest so requires, the BIFR may
recommend winding up of the sick industrial company. So long
as the scheme is under consideration before the BIFR or it is
being implemented after being sanctioned and is made
F operational from a given date, it is the legislative intent that such
scheme should not be interjected by any other judicial process
or frustrated by the impediments created by third parties and
even by the management of the sick industrial company, in
relation to the assets of the company. In other words, the object
G and purpose of the Act of the 1985 is to ensure smooth
sanctioning of the scheme and its due implementation. Both
these stages, i.e., pre and post sanctioning of the scheme by
the BIFR, are equally material stages where. the provisions of
Sections 22 and 22A read with Section 32 of the Act of 1985
H would come into play. Such an approach would also be
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 435
ORS. [SWATANTER KUMAR, J.]
acceptable as otherwise the entire scheme under Chapter Ill A
of the Act of 1985 would be frustrated: Doctrine of frustration
envisages that an exercise of special jurisdiction in futility, is
neither the requirement of legislature nor judicial dictum.
23. In Shree Vallabh Glass Works (supra), this Court had B
taken a general view that in the light of Sections 16 and 19 of
the Act of 1985, no proceedings for execution, distress or the
like against any of the property of the company shall be allowed
to be proceeded further except with the consent of the BIFR.
Reference in this regard was made to the provisions of the C
Section 22(1) of the Act of 1985. Despite non-obstante
language of Section 22(1) and the prohibition contained therein,
there is no absolute bar for institution and continuation of legal
proceedings against a sick industrial company or its assets.
The same can continue only after obtaining the consent of the
BIFR or the AAIFR, as the case may be. Once permission is D
granted, the proceedings can continue and decree can be
executed. In the case of Corromandal Pharmaceuticals & Ors.
(supra), the scope of Section 22 of the Act of 1985 was sought
to be restricted only to the items which have been reckoned or
included in the scheme for rehabilitation failing which the E
recovery or proceedings in relation to that particular liability
would continue despite the provisions of the Act of 1985. In that
case the Court was concerned with the recovery of sales tax
dues, which the sick industrial company was enabled to collect
after the date of sanction of the scheme. The revenue was due F
to the department and the recovery of such amount was held
to be beyond the purview of the Act of 1985.
24. In Jay Engineering (supra), the dictum of ttiis Court
was that the Act of 1985 is a complete code in itself and the G
provisions of Section 22 of the Act of 1985 would apply to an
award made under the Interest on Delayed Payments to Small
Scale and Ancillary Industries Undertaking Act, 1993, which
would be governed by the provisions of the Arbitration and
Conciliation Act, 1996. This Court also stated the principle that H
436 SUPREME COURT REPORTS [2012] 3 S.C.R.
A the Act of 1985 would. have an overriding effect over other
statutes, i.e. the 1993 Act in that case. However, the question
whether the BIFR, while implementing the scheme, could
reduce the quantum of liability of the creditors was left open.
25. Firstly, the facts of these cases are different and
8
distinct and, therefore, conclusions of the Court have to be read
with reference to the facts of the respective cases only and not
de hors thereof. Once the dictum of this Court is read with
reference to the facts of the respective cases, it would be
evident that there is no conflict of views within the ambit of ratio
C decidendi of the respective judgments to make both of them
legal and binding precedents. Despite these judgments and
with an intention to clarify the law, we would state that the
matters which are connected with the sanctioning and
implementation of the scheme right from the date on which it
D is presented or the date from which the scheme is made
effective, whichever is earlier, would be the matters which
squarely fall within the ambit and scope of Section 22 of the
Act of 1989 subject to their satisfying the ingredients stated
under that provision. This would include the proceedings before
E the civil court, revenue authorities and/or any other competent
forum in the form of execution or distress in relation to recovery
of amount by sale or otherwise of the assets of the sick
industrial company. It is difficult for us to hold that merely
because a demand by a creditor had not been made a part of
F the scheme, pre or post-sanctioning of the same for that reason
alone, it would fall outside the ambit of protection of Section
22 of the Act of 1985. The BIFR, being a specialised body
which is .required to act as per the legislative intent indicated·
above, has jurisdiction to examine the matter and grant or refuse
G its consent for institution, continuation and recovery of dues
payable to a particular creditor, whatever the nature of such
dues may be. If such an interpretation is not given, the very
purpose of the Act of 1985 may stand defeated. For instance,
a scheme is sanctioned by the BIFR and is at the stage of
H successful completion, where demand from the Revenue with
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 437
ORS. [SWATANTER KUMAR, J.]
regard to the sick industrial company is allowed, this can render A
the scheme ineffective and impossible to be executed, if
permitted to be enforced against such company without
approval/consent of the specialised body like the BIFR.
26. Section 22A was introduced by the Amending Act 12
B
of 1994. The obvious intent of introducing the said provision
was to empower the BIFR to issue any direction to the sick
industrial company, its creditors and shareholders, in the interest
of the company or even in public interest, directing the
company not to dispose of any assets, except with the consent
of the BIFR. The directions so issued are to remain in force C
during the preparation and consideration of the scheme. BIFR
is also vested with similar powers where it recommends to the
High Court for winding up of a company. The directive issued
by BIFR would remain in force upto the commencement of the
proceedings for winding up before the High Court. Section 22 D
is the reservoir of the statutory powers empowering the BIFR
to determine a scheme, right from its presentation till its
complete implementation in accordance with law, free of
interjections and interference from other judicial processes.
Section 22(1) deals with the execution, distress or the like E
proceedings against the company's properties, including
appointment of a Receiver. It also specifically provides that
even a winding up petition would not be instituted and no other
proceedings shall lie or proceed further, except with the consent
of the BIFR. In contradistinction to this power, Section 22(3) F
states that pending an enquiry or a scheme under the
provisions of the Act of 1985 and even where the scheme is
sanctioned, for the due implementation of such scheme, the
BIFR may, by an order, declare with respect to the sick
industrial company concerned that the operation of all or any G
of the contracts, assurances of property, agreements,
settlements, awards, standing orders or other instruments in
force to which such sick industrial company is a party or which
may be applicable to such sick industrial company immediately
before the date of such order, shall remain suspended or that H
438 SUPREME COURT REPORTS [2012] 3 S.C.R.
A all or any of the rights or privileges, obligations and liabilities
accruing or arising thereunder before the said date, shall
remain suspended and shall be enforceable with such adoption
and in such a manner as may be specified by the BIFR. In other
words, all those instruments to which the sick industrial
B company is a party, will be subject to the orders of the BIFR.
Further, such proceedings can even be modified by the BIFR,
of course, for the limited purpose of implementing the scheme.
The declarations made by the BIFR under Section 22(3) are
subject to the restrictions of time as stated under the proviso
c to this section. The maximum period for which such a
declaration in aggregate can continue is seven years. The
legislative intent of giving an over-riding effect to the
declarations of the BIFR, as contemplated under Section 22(3)
of the Act of 1985, is further fortified by the language of Section
22(4), which states that any declaration made under Section
0
22(3) shall take effect notwithstanding anything contained in the
Companies Act, 1956 or any other law, the memorandum and
articles of association of the company or any instrument,
decree, order of a court, settlement etc. Any remedy for
E enforcement of a right which may be available to a third party
and any such proceedings before any court or tribunal shall
remain stayed or be continued subject to such declaration.
Section 22(4){b) brings status quo ante and in fact, makes it
clear that on cessation of such a declaration, the right, privilege,
obli~1ation or liability which was suspended shall become
F revived and enforceable as if the declaration had never been
made. The proceedings will continue from the stage at which
they were stayed. It can safely be perceived that the provisions
of Section 22 of the Act of 1985 are self-explanatory. They
would cease to operate within their own limitations and not by
G force of any other law, agreement, memorandum or even articles
of association of the company. The purpose is so very clear
that during the examination, finalization and implementation of
the scheme, there should be no impediment caused to the
smooth execution of the scheme of revival of the sick industrial
H company. It is only when the specified period of restrictions and
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 439
ORS. [SWATANTER KUMAR, J.]
declarations contemplated under the provisions of the Act of A
1985 is over, that the status quo ante as it existed at the time
of the consideration and finalization of the scheme, would
become operative. This is done primarily with the object that
the assets of the company are not diverted, wasted, taken away
and/or disposed of in any manner, during the relevant period. B
27. The powers of the BIFR under Section 22(3) can be
segregated under two different heads. Firstly, the power to
suspend simplicitor the operation of all or any of the contracts,
assurances of property, agreements, settlements, awards,
standing orders or any other instrument in force, to which the C
sick industrial company is a party or which may be applicable
to the sick industrial company before the date of such order.
Secondly, any rights, privileges, obligations or liabilities accruing
or arising before the said date, shall be enforceable with such
adaptation and in such manner as may be specified by the D
BIFR.
28. This dissection clearly demonstrates the intent of the
framers of law, that the BIFR has the power to even make
changes in such instruments, documents etc. which create rights E
and liabilities vis-a-vis the sick industrial company, and before
permitting them to be enforced. Such an approach alone can
be justified, as otherwise the expression 'shall be enforceable
with such adaptation and in such manner as may be specified
by the BIFR would be meaningless. It is a settled principle of
interpretation of statutes that every word and expression used F
by the legislature has to be given its proper and effective
meaning as the legislature uses no expression without purpose
or meaning. The maxim Lex Nil Frusta Jubet i.e. Law
Commands nothing vainly further elucidates this principle. Of
course, the power to make this declaration as already noticed G
is controlled by limitation of time as specified in the proviso to
the Section. Lifting of such declaration by lapse of time or
otherwise or in accordance with the provisions of Section 22(4)
shall bring the status quo ante as if such declaration had never
been made. Section 22A is obviously a power over and above H
440 SUPREME COURT REPORTS [2012] 3 S.C.R.
A the wide powers vested in BIFR under the provisions of Section
22 of the Act of 1985. Section 22 is the reservoir of the statutory
powers empowering the BIFR to deal with the scheme, right
from its presentation till its complete implementation in
accordance with law, free of interjections and interference from
B other judicial processes.
29. Section 22A of the Act of 1985 empowers the BIFR
to pass injunctive or restraint orders in relation to the assets of
the sick industrial company. These injunctive orders are to be
in operation during the period of preparation or consideration
C of the scheme under Section 18 of the Act of 1985. Section
22A, thus, has a narrower scope than Section 22. Section 22
operates from the presentation of the scheme, its consideration,
preparation, finalization and ultimately the implementation of the
said scheme and consequent rehabilitation of the sick industrial
D company, while Section 22A operates only during the
preparation or consideration of the scheme, or upto the
commencement of the proceedings for winding up before the
concerned High Court, in the event the BIFR recommends
winding up proceedings.
E
30. The relevant provisions of the Act of 1985 clearly
demonstrate that BIFR is vested with the power to issue
- directions in the interest of the company or even in public
interest, to prevent the disposal of assets of the company during
F the period of preparation, consideration or implementation of
the scheme. Not only this, BIFR is expected to ensure proper
implementation by appropriately monitoring the scheme during
the entire relevant period. Sections 22 and 22A thus specify
the complete jurisdiction and authority of the BIFR in relation
G to preparation, consideration, finalization and implementation
of a revival scheme in relation to a sick industrial company.
31. Where Section 22(1) deals with the restrictions and
limitations vis-a-vis the court proceedings while Section 22(3)
of the Act of 1985 deals with the agreement, intents or other
H obligations as stated in that provision and declarations which
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 441
ORS. [SWATANTER KUMAR, J.]
will be made by the BIFR for the purposes of finalization and A
effective implementation of the scheme. There, Section 22A
deals with restrictions and prohibitory orders which the BIFR
can pass, all for the purposes of preparation of the scheme and
proper implementation and effective management of the revival
of the sick industrial company. These provisions have to be B
read along with the provisions of Section 26 of the Act of 1985
which ousts the jurisdiction of the civil courts and vests exclusive
jurisdiction for the specified purposes with the BIFR. Another
relevant provision in this regard is Section 32 of the Act of 1985,
which gives an overriding effect to the provisions of the Act of c
1985 over the other laws in force except the law specifically
stated therein. Sections 22, 22A, 26 and 32 have to be read
and construed conjointly. A common thread of legislative intent
to treat this law as a special law, in contradistinction to the other
laws except the laws stated in the provisions and to ensure its 0
effective implementation with utmost expeditiousness, runs
through all these provisions. It also mandates that no injunction
shall be granted by any court or authority in respect of an action
taken or to be taken in pursuance of the powers conferred to
or by under this Act.
E
CASE LAW
32. In the case of Shree Vallabh Glass Works Ltd. (supra),
as already noticed, this Court had taken a very wide view and
given liberal constructions to the provisions of Section 22 and
F
held that no proceedings for execution or distress or like
proceedings against any of the properties of the company shall
lie or be proceeded, except with the consent of the BIFR. The
Court also held that the BIFR, at its discretion, may accord its
approval for proceeding against the company. This view of wide
interpretation was accepted by another Bench of this Court in G
the case of Maharashtra Tubes Ltd. v. State Industrial and
Investment Corporation of Maharashtra ((1993) 2 SCC 144],
wherein this Court took the view that the word 'proceedings'
under Section 22(1) cannot be given a narrower or restricted
meaning to limit the same to a legal proceeding and even the H
442 SUPREME COURT REPORTS [2012] 3 S.C.R.
A proceedings invoked by a financial institution under the State
Financial Corporation Act were held to be covered within the
ambit of Section 22(1) of the Act of 1985. A similar view was
also taken in the case of Tata Davy Ltd. v. State of Orissa [AIR
1998 SC 2928]. Answering the question that steps to recover
B the sales tax under Section 13A of the said Act were in the
nature of proceedings by way of execution, distress or the like
contemplated by Section 22(1) of the Act, this Court followed
its earlier view and held that even the proceedings for recovery
of tax under the State Act were covered within the scope of
c Section 22(1) of the Act of 1985, and thus, could not be given
effect to without approval/consent of the BIFR.
33. As already noticed above, in the case of Corromandal
Pharmaceuticals (supra), this Court had taken the view that the
bar or embargo envisaged in Section 22(1 ). can apply only to
D such of those cases where it is reckoned or included in the sub-
judice schemes. Amounts like the sales tax which the sick
industry is enabled to collect after the date of the sanction of
the scheme, had to be recovered in the normal course, by the
Revenue and protection of Section 22(1) was not available.
E
34. This view, however, was not clearly adopted by this
Court in subsequent judgments of Jay Engineering (supra),
where this Court accepted the wider connotation of the words
'proceedings' appearing in Section 22(1) where an award
F passed under the Interest on Delayed Payments to Small Seate
and Ancillary Industries Undertaking Act, 1993 was being
executed, the Court took the view that the award could not be
executed against the sick industry without the leave of the BIFR
as the Act of 1985 would override the provisions of the 1993
G Act and approval of the BIFR was essential. Still in another
case, Morgan Securities and Credit Pvt. Ltd. (supra), this Court
had held that the Act of 1985 has an overriding effect and
Section 22(3) of the Act even covers the execution of non-
contractual liabilities like enforcement of an arbitral award. The
Court further held that the imperative character of an enquiry
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 443
ORS. [SWATANTER KUMAR, J.]
at the hands of the BIFR is inherent in the scheme of the Act. A
The Court also expressed doubt as to whether the courts of
limited jurisdiction, vested with the power of passing interim
orders, could pass interim orders in exercise of its incidental
power for sale of assets where the matter was pending before
the BIFR. B
35. On the analytical analysis of the above-stated dictum
of this Court and the legislative purpose and object of the Act,
it has to be held that on its plain reading the provisions of
Sections 22(1) and 22(3) of the Act are the provisions of wide C
connotation and would normally bring the specified
proceedings, contractual and non-contractual liabilities, within
.the ambit and scope of the bar and restrictions contained in
Sections 22(1) and 22(3) of the Act of 1985 respectively. The
legislative intent is explicit that the BIFR has wide powers to
impose restrictions in the form of declaration and even D
prohibitory/injunctive orders right from the stage of
consideration of a scheme till its successful implementation
within the ambit and scope of Sections 22(3) and 22A of the
Act. Section 22 of the Act of 1985 is very significant and of
wide ramifications and application. More often than not, the E
jurisdiction of the BIFR is being invoked, necessitated by varied
actions of third parties against the sick industrial company. The
proceedings, taken by way of execution, distress or the like,
may have the effect of destabilizing the finalization and/or
implementation of the scheme of revival under consideration F
of the BIFR. It appears that, the Legislature intended to ensure
that no impediments are created to obstruct the finalization of
the scheme by the specialized body. To protect the industrial
growth and to ensure revival, this preventive provision has been
enacted. The provision has an overriding effect as it contains G
non obstante clauses not only vis-a-vis the Companies Act but
even qua any other law, even the memorandum and articles of
association of the industrial company and/or any other
instrument having effect under any other Act or law. These
proceedings <'.annot be permitted to be taken out or continued H
444 SUPREME COURT REPORTS [2012] 3 S.C.R.
A without the consent of the BIFR or the AAIFR, as the case may
be. The expression 'no proceedings' that finds place in Section
22(1) is of wide spectrum but is certainly not free of exceptions.
The framers of law have given a definite meaning to the
expression 'proceedings' appearing under Section 22(1) of the
8 Act of 1985. These proceedings are for winding up of the
industrial company or for execution, distress or the like against
any of the properties of the industrial company or for the
appointment of a Receiver in respect thereof. The expression
'the like' has to be read ejusdem generis to the term
c 'proceedings'. The words 'execution, distress or the like' have
a definite connotation. These proceedings can have the effect
of nullifying or obstructing the sanctioning or implementation of
the revival scheme, as contemplated under the provisions of
the Act of 1985. This is what is required to be avoided for
effective implementation of the scheme. The other facet of the
0
same Section is that, no suit for recovery of money, or for
enforcement of any security against the industrial company, or
any guarantee in respect of any loan or advance granted to the
industrial company shall lie, or be proceeded with further without
the consent of the BIFR. In other words, a suit for recovery and/
E or for the stated kind of reliefs cannot lie or be proceeded
further without the leave of the BIFR. Again, the intention is to
protect the properties/assets of the sick industrial company,
which is the subject matter of the scheme. It is difficult to state
with precision the principle that would uniformly apply to all the
F proceedings/suits falling under Section 22(1) of the Act of 1985.
Firstly, it will depend upon the facts and circumstances of a
given case, it must satisfy the ingredients of Section 22(1) and
fall under any of the various classes of proceedings stated
thereunder. Secondly, these proceedings should have the
G impact of interfering with the formulation, consideration,
finalization or implementation of the scheme. Once these
ingredients are satisfied, normally the bar or limitation contained
in Section 22(1) of the Act of 1985 would apply. For instance,
execution of a decree against the assets of a company, if
H permitted, is bound to result in disturbing the scheme, which
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 445
ORS. [SWATANTER KUMAR, J.]
has or may be framed by the BIFR. The sale of an asset during A
such execution or even withdrawing the money from the bank
account of the company would certainly defeat the very purpose
of the protection sought to be created by the Legislature under
Section 22(1) of the Act of 1985. On the other hand, a
proceeding taken out for possession of the tenanted premises, B
under the provisions of Karnataka Rent Control Act, have been
held to be proceedings not falling within the ambit and scope
of Section 22(1) of the Act of 1985. This was for the reason
that the contractual tenancy between the company and the
owner had been terminated and the company only had an c
interest as a statutory tenant. Such interest was neither
assignable nor transferable. This Court held that it could not be
regarded as 'property' of the sick company for the purposes
of the provisions of Section 22( 1) and as such, these provisions
were not attracted. (M/s. Shree Chamundi Mopeds Ltd. v.
0
Church of South India Trust Association, Madras [AIR 1992
SC1439]).
36. Referring to the facts of the present case, the land was
one of the major assets of the Respondent Company and in
the event the said asset was kept outside the scope of the E
scheme or its sale was permitted by the BIFR, probably the
company could never be revived and any effort in that direction
de hors such asset of the company would be in futility. Besides,
the fact that the statutory protection contained in Section 22(3)
was available to the company, it could be stated with more F
emphasis that the BIFR could even adopt and permit the
transaction with such adoption as it may have deemed
appropriate. The imperative nature of the functions of the BIFR
under the provisions of the Act of 1985 and the overriding effect
of its provisions fully support such a view. G
Overriding effect of the Act of 1985 :-
37. This Court has taken the view in Tata Motors Ltd.
[(2008) 7 sec 619] that the Act of 1985 has been enacted to
secure the principles specified in Article 359 of the Constitution H
446 SUPREME COURT REPORTS [2012] 3 S.C.R.
A of India. It seeks to give effect to the larger public interest. It
should be given primacy because of its higher public purpose.
As the Act of 1985 is a special law and on the principle that a
special law will prevail over a general law, it is permissible to
contend that even if the provisions contained in Section 22(1)
B read with Section 32 of the Act, giving overriding effect vis-a-
vis the other laws, other than the Foreign Exchange Regulation
Act, 1973 and the Urban Land Ceiling and Regulation Act, 1976
had not been there, the provisions of the general law like the
Companies Act, for regulation, incorporation, winding-up etc.
c of the companies would have still been overridden to the extent
of inconsistency. We have already seen that this Court had, in
the case of Jay Engineering (supra), taken the view that the
Interest on Delayed Payments to Small Scale and Ancillary
Industries Undertaking Act, 1993 shall have to give way for
enforcement of the provisions of the Act of 1985. In the case
0
of Tata Davy (supra) also, the Court took the view that the State
Sales Tax Act would have to be read and construed in comity
to the provisions of the Act of 1985 which shall have the
overriding effect. In the case of Tata Motors Ltd. v.
E Pharmaceuticals Product of India Ltd. (supra), this Court was
concerned with the provisions of mismanagement and
oppression contained in Sections 391 and 394 of the
Companies Act and whether the Company Court will have the
jurisdiction to pass orders in preference to the proceedings
pending before the Court under the Act of 1985. The Court
F while holding the primacy of the Act of 1985 held as under: -
"SICA furthermore was enacted to secure the principles
specified in Article 39 of the Constitution of India. It seeks
to give effect to the larger public interest. It should be given
G primacy because of its higher public purpose. Section 26
of SICA bars the jurisdiction of the civil Courts.
What scheme should be prepared by the operating agency
for revival and rehabilitation of the sick industrial company
is within the domain of BIFR. Section 26 not only covers
H orders passed under SICA but also any matter which BIFR
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 447
ORS. [SWATANTER KUMAR, J.]
is empowered to determine. A
23. The jurisdiction of civil court is, thus, barred in respect
of any matter for which the appellate authority or the Board
is empowered. The High Court may not be a civil court but
its jurisdiction in a case of this nature is limited."
B
38. Even in the case of NGEF Ltd. v. Chandra Developers
(P) Ltd. and Anr. [(2005) 8 SCC 219], this Court specifically
reiterated and with emphasis the principle that the provisions
of the Act of 1985 contained non-obstante clauses: it is a
special statute which is a complete code in itself and that the C
jurisdiction of the Company Court in such matters would arise
only when MIFR and BIFR have exercised their jurisdiction
under Section 20 and 25 respectively of the Act of 1985. The
provisions of SICA would prevail over the provisions of the
Companies Act. D
39. From the above judgments of this Court, the
unambiguous principle of law that emerges is that the provisions
of the Act of 1985 shall normally override the other laws except
the laws which have been specifically excluded by the
Legislature under Section 32 of the Act of 1985. The Act of E
1985 has been held to be a special statute vis-a-vis the other
laws, most of which have been indicated above. In the present
case, we are concerned with the provisions of the Act of 1882.
It is the case of the respondent-company before us that they
have got an interest in the immovable property by virtue of the F
Memorandum of Understanding, Agreements dated 1st March,
2007 and 17th August, 2010 and by part performance, as they
had been given possession of the land in question. It was
contended that as their interests were duly protected under the
provisions of the Act of 1882, the BIFR/MIFR, in exercise of G
its powers under Sections 22(1), 22(3) and 22A of the Act of
1985, cannot place any restriction upon their title or interest in
the immovable property. In other words, the contention is that
vis-a-vis the Act of 1985, the provisions of the Act of 1882 shall
prevail. H
448 SUPREME COURT REPORTS [2012) 3 S.C.R.
A 40. The Act of 1882 is a general law and controls and
operates in a very wide field. It was an Act enacted for and
related to transfer of immovable property in India and to decide
the disputes as well as to resolve the confusion and conflict,
which was in existence, as the courts were forced to decide
8 the disputes according to their own notions of justice and fair
play. The Act of 1882 does not have application to a particular
situation or class of persons. On the contrary, the Act of 1985
is a special legislation providing for imperative functioning of
specialized bodies like the BIFR and AAIFR and is intended
C to apply to a very specific situation, i.e., where a company is a
sick industrial company. It has no application even to other
different kinds of companies within the purview of the
Companies Act, except sick industrial companies. The
Legislature has undoubtedly given an overriding effect to the
provisions of the Act of 1985 and even restricted the jurisdiction
D of the civil courts, as is demonstrated from the language of
Sections 26 and 32 of the Act of 1985. Thus, we have no
hesitation in holding that the provisions of the Act of 1985 shall
prevail over the provisions of the Act of 1882.
E Discussion on Merits with reference to Factual Matrix of
the Case
41. Having dealt with the basic legal questions arising for
consideration of this Court in the facts of the present case, now
F we will now proceed to examine the issues of facts and law with
reference to the present case. The Respondent-Company,
upon some negotiations had executed a Memorandum of
Understanding with the appellant-company on 13th April, 2006.
A land admeasuring about 344 acres, situated in the revenue
estate of villages Ambivali, Mohone, Wadavli, Atalee and
G Galegaon in taluk Kalyan, District Thane was agreed to be sold
on the conditions which were stated therein and it had also
postulated the execution of a proper Agreement to Sell.
Principal Agreement of Sale was executed on 1st March, 2007
between the parties. As certain amounts were found to have
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 449
ORS. [SWATANTER KUMAR, J.]
been incorrectly stated in the Principal Agreement and parties A
intended to pre-pone the payment of instalments as per the
terms of that agreement, they executed First Supplementary
Agreement dated 29th September, 2007. It may be noticed
here that the Respondent Company, in the meanwhile, had
financial crisis and was not able to pay off its debt of nearly B
Rs.147 crore as on 31st March, 2006. The company itself had
approached the BIFR for declaring the company as a 'sick
industrial company' and to examine the possibility of its revival
through a scheme, in accordance with the provisions of the Act
of 1985. c
42. The scheme of rehabilitation in relation to the sick
industrial company was presented before the Corporate Debt
Restructuring (CDR) Empowered Group which was appointed
by the consortium of the banks to whom large sums were due
from the said company on 13th June, 2007. The scheme was D
approved by the CDR on 12th December, 2007 which resulted
in issuance of a letter of approval dated 21st January, 2008.
Prior to the complete implementation of the revival scheme, the
Respondent Company applied to the BIFR under Section 15
of the Act of 1985 for being declared as a 'sick company' on E
3rd December, 2008. During the consideration of this
application, the rehabilitation scheme approved by the CDR
was placed before the BIFR for its acceptance and adoption.
Vide its order dated 16th July, 2009, passed under Section
17(3) of the Act of 1985, the Scheme was adopted and for the F
purposes of implementation of the Scheme, the cut-off date was
declared as 30th July, 2007 by the BIFR. As already noticed,
the parties had entered into a Memorandum of Understanding
dated 13th April, 2006 and the Agreement to Sell dated 1st
March, 2007 for sale of the land belonging to the company. The G
BIFR, while approving the scheme, had taken into consideration
these events in relation to the sale of the land. Thereafter, the
parties executed Supplementary Agreements dated 29th
September, 2007 and 17th August, 2010. The Agreements
provided for pre-ponement of the instalments payable in terms H
450 SUPREME COURT REPORTS [2012] 3 S.C.R.
A of the Agreements as well as giving of possession of the land
to the Appellant Company. The Agreement dated 29th
September, 2007 was executed when the rehabilitation scheme
was pending consideration before the BIFR, while the
Agreement dated 17th August, 2010 was executed subsequent
B to the adoption of the Scheme by the BIFR. It appears from the
record that the Second Supplementary Agreement dated 17th
August, 2010 was not executed between the parties with prior
approval of the BIFR. The BIFR, vide its order dated 16th July,
2009, had placed certain restrictions and had not permitted the
c transfer of the land without its prior approval. It had also raised
certain other queries including valuation, etc. This order was
set aside by the AAIFR, which had permitted the sale of the
land in favour of the Appellant Company, even during the
consideration and implementation of the revival scheme. This
order of the AAIFR dated 28th May, 2010 was disturbed by the
0
High Court vide its order dated 29th July, 2011. The High Court
practically restored the order of BIFR, giving rise to the present
appeal.
43. The contention raised before us is that in view of the
E provisions of Sections 53A and 54 of the Act of 1882, the title
in the property in question is vested in the Respondent-
Company and they are entitled to transfer of the property, free
from any restrictions or limitations. As such, the order of the
High Court is liable to be set aside and that of the AAIFR be
F restored. In view of our afore-stated discussion and the
reasons to follow, we are unable to accept this contention
entirely or even in part for that matter. Firstly, we may examine
whether an agreement to sell in relation to an immovable
property transfers or creates any right or title in the immovable
G property itself in favour of the purchaser. Section 54 defines
'Sale' as a transfer of ownership in exchange for price paid or
promised or part-paid and part-promised. Such a transfer of
tangible immovable property of the value of Rs.100/- and
upwards can be made only by a registered instrument. The
H 'contract for sale' has been explained under this very provision
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 451
ORS. [SWATANTER KUMAR. J.]
as follows: - A
"Contract for sale:- A contract for the sale of immoveable
property is a contract that a sale of such property shall take
place on terms settled between the parties.
It does not, of itself, create any interest in or charge on such B
property."
44. Thus, on a plain reading of the statutory provisions, it
is clear that an agreement for sale or an agreement to sell itself
does not create any interest or charge in such property. Mulla c
on 'Transfer of Property Act', 9th Edition, page 181, clearly
states that Section 54 enacts that an agreement for the sale of
land does not itself create an interest in land. There was a
considerable conflict of decisions as to the application of the
rule against perpetuity to such agreements. This conflict has D
been resolved by judgment of this Court in the case of
Rambaran Prosad vs. Ram Mohit Hazra [AIR 1967 SC 744]
where this Court held that a mere contract for sale of immovable
property does not create any interest in the immovable property.
In this case, this Court-held as under:-
E
"10. In the case of an agreement for sale entered into prior
to the passing of the Transfer of Property Act, it was the
accepted doctrine in India that the agreement created an
interest in the land itself in favour of the purchaser. For
instance, in Fati Chand Sahu v. Li/ambar Sing Das (1871) F
9 B.L.R. 433 a suit for specific performance of a contract
for sale was dismissed on the ground that the agreement,
which was held to create an interest in the land, was not
registered under s. 17, clause(2) of the Indian Registration
Act of 1866. Following this principle, Markby J. in Tripoota G
Soonduree v. Juggur Nath Dutt (1875) 24 W.R. 321
expressed the opinion that a covenant for pre~emption
contained in a deed of partition, which was unlimited in
point of time, was not enforceable in law. The same view
was taken by Baker J. in Allibhai Mahomed Akuji v. Dada H
452 SUPREME COURT REPORTS [2012] 3 S.C.R.
A Alli /sap A.L.R. 1931 Born. 578 where the option of
purchase was contained in a contract entered into before
the passing of the Transfer of Property Act. The decision
of the Judicial Committee in Maharaj Bahadur Singh v.
Bal Chanad 48 I.A. 376 was also a decision relating to a
B contract of the year 1872. In that case, the proprietor of a
hill entered into an agreement with a society of Jains that,
if the latter would require a site thereon for the erection of
. a temple, he and his heirs would grant the site free of cost.
The proprietor afterwards alienated the hill. The society,
through their representatives, sued the alienees for
c possession of a site defined by boundaries, alleging notice
to the proprietor requiring that site and that they had taken
possession, but been dispossessed. It was held by the
Judicial Committee that the suit must fail. The Judicial
Committee was of the opinion that the agreement
D conferred on the society no present estate or interest in
the site, and was unenforceable as a covenant, since it did
not run with the land, and infringed the rule against
perpetuity. Lord Buckmaster who pronounced the opinion
of the Judicial Committee observes as follows:
E
"Further, if the case be regarded in another light -
namely, an agreement to grant in the future
whatever land might be selected as a site for a
temple - as the only interest created would be one
F to take effect by entry at a later date, and as this
date is uncertain, the provision is obviously bad as
offending the rule against perpetuities, for the
interest would not then vest in present, but would
vest at the expiration of an indefinite time which
G might extend beyond the expiration of the proper
period."
(11) But there has been a change in the legal position in
India since the passing of the Transfer of Property Act.
Section 54 of the Act states that a contract for sale of
H immovable property "does not, of itself, create any interest
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 453
ORS. [SWATANTER KUMAR, J.]
in or charge on such property". Section 40 of the Act is A
also important and reads as follows:
"40. Where, for the more beneficial enjoyment of his
own immovable property, a third person has,
independently of any interest in the immovable
8
property of another or of any easement thereon, a
right to restrain the enjoyment in a particular manner
of the latter property, or
Where a third person is entitled to the benefit of an
obligation arising out of contract, and annexed to C
the ownership of immovable property, but not
amounting to an interest therein or easement
thereon, such right or obligation may be enforced
against a transferee with notice thereof or a
gratuitous transferee of the property affected D
thereby, but not against a transferee for
consideration and without notice of the right or
obligation nor against such property in his hands."
The second paragraph of s. 40 taken with the
illustration establishes two propositions: ( 1) that a E
contract for sale does not create any interest in the
land, but is annexed to the ownership of the land
and (2) that the obligation can be enforced against
a subsequent gratuitous transferee from the vendor
or a transferee for value but with notice. Section 14 F
of the Act states as follows:
"14. No transfer of property can operate to
create an interest which is to take effect after the
lifetime of one or more persons living at the date G
of such transfer, and the minority of some person
who shall be in existence at the expiration of that
. period, and to whom, if he attains full age, the
interest created is to belong."
Reading S. 14 along with S. 54 of the Transfer of Property H
454 SUPREME COURT REPORTS [2012] 3 S.C.R.
A Act its manifest that a mere contract for sale of immovable
property does not create any interest in the immovable
property and it therefore follows that the rule of perpetuity
cannot be applied to a covenant of pre-emption even
though there is no time limit within which the option has to
B be exercised. It is true that the second paragraph of s. 40
of the Transfer of Property Act make a substantial
departure from the English law, for an obligation under a
contract which creates no interest in land but which
concerns land is made enforceable against an assignee
c of the land who takes from the promiser either gratuitously
or takes for value but with notice. A contract of this nature
does not stand on the same footing as a mere personal
contract, for it can be enforced against an assignee with
notice. There is a superficial kind of resemblance between
the personal obligation created by the contract of sale
D
described under s. 40 of the Act which arises out of the
contract, and annexed to the ownership of immovable
property, but not amounting to an interest therein or
easement thereon and the equitable interest of the person
purchasing under the English Law; in that both these rights
E are liable to be defeated by a purchaser for value without
, notice. But the analogy cannot be carried further and the
rule against perpetuity which applies to equitable estates
in English law cannot be applied to a covenant of pre-
emption because s. 40 of the statute does not make the
F covenant enforceable against the assignee on the footing
that it creates an interest in the land."
45. This very view was reiterated by this Court in the cases
of State of UP. v. District Judge and Ors. [AIR 1997 SC 53[;
G Dharma Naika v. Rama Naika [AIR 2008 SC 1276] and Mrs.
Saradamani Kandappan vs. Rajalakshmi & Ors. [JT 2011 (8)
SC 129].
46. Heavy reliance was placed by the learned counsel
appearing for the Respondent-Company, upon the provisions
H
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 455
ORS. [SWATANTER KUMAR, J.]
of Section 53A of the Act of 1882 to substantiate his argument A
that in part performance of the contract, possession of the
property having been given, the execution of the title documents
and transfer of the property in its favour could not be hampered
or controlled by the BIFR in exercise of its powers under
Section 22(3) of the Act of 1985. We are not called upon in B
this case to adjudicate upon the merits or otherwise the rights
and liabilities of the parties arising out of the agreement dated
1st March, 2007 or the agreements entered into subsequent
thereto. We would also not like to venture upon and decide
whether the second supplementary agreement dated 17th c
August, 2010 vide which the payment of intallments was pre-
poned and the possession of the land in question is alleged to
have been given to the Appellant-Company is a valid,
enforceable and its consequences in law. Suffices it to note that
memorandum of understanding and agreement to sell the land D
belonging to the company between the appellant and the
respondent-company was signed prior to the presentation of
the scheme before the BIFR. However, second supplementary
agreement was executed not only subsequent to the
presentation of the scheme before the BIFR but even after the E.
BIFR had passed an order under Section 17(3) of the Act of
1985. It cannot be disputed that even the sale proceeds
received under the agreements have been utilized for the revival
of the company to a large extent. The agreement with the
workers dated 5th September, 2008 stands testimony to this
fact. Once the asset of the company and/or its sale proceeds F
have been integral part of the formation and finalization of the
revival scheme, such transaction by any stretch of imagination
cannot be stated to be beyond the ambit and scope of Section
22(3) of the Act of 1985. Thus BIFR has the power to issue
jeclarations in relation to contracts, agreements, settlements, G
awards, standing orders or even other instruments in force to
iNhich the sick industrial company is a party. The power to
suspend or power to enforce the same subject to such
adaptations as the BIFR may consider appropriate is a power
:>f great magnitude and scope, the only restriction thereupon H
456 SUPREME COURT REPORTS [2012] 3 S.C.R.
A is as contemplated in the proviso to Section 22(3) of the Act
of 1985.
47. The provisions of Section 53A of 1882 Act recognize
a right of a transferee, where a transferor has given and the
transferee has taken possession of the property or any part
8
thereof. Even this provision does not create title of the transferee
in the property in question but gives him a very limited right,
that too, subject to the satisfaction of the conditions as stated
in Section 53A of the Act of 1882 itself. In the case of State of
C UP. v. District Judge (supra), this Court, while deliberating upon
the rights emerging from Section ~3A of the Act of 1882, held
as under:
" ... That protection is available as a shield only against the
transferor, the proposed vendor, and would disentitle him
D from disturbing the possession of the proposed
transferees who are put in possession pursuant to such an
agreement. But that has nothing to do with the ownership
of the proposed transferor who remains full owner of the
said land till they are legally conveyed by Sale Deed to the
E proposed transferees."
48. Thus, even if the part performance of the agreement
is accepted, still no title is created in favour of the Respondent-
Company. Provisions of Section 53A would also not, in any
F way, alter the position of the Act of 1985 having an overriding
effect vis-a-vis the provisions of the Act of 1882. We have
already held that the provisions of Act of 1985 shall have
precedence and overriding effect over the provisions of the Act
of 1882.
G 49. This brings us to the last and final question arising for
consideration of this Court in the present case, that is, whether
in the facts and circumstances of the case, the BIFR had the
jurisdiction to issue a direction or make a declaration in relation
to the agreement in question in exercise of the powers vested.
H in it under Section 22(3) of the Act of 1985 and, if answer to
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 457
ORS. [SWATANTER KUMAR, J.]
the above is in the affirmative, whether the order dated 16th A
July, 2009 of the BIFR and that of the High Court dated 29th
July, 2011 are unsustainable on facts? The BIFR vide its order
dated 16th July, 2009, after declaring the Respondent-
Company as a sick company and appointing the Punjab
National Bank as the Operating Agency, had fixed the cut off B
date as 30th July, 2007, as indicated in the CDR Scheme. The
CDR scheme had been approved, after taking into
consideration the agreement to sell and the sale proceeds likely
to be received therefrom. The BIFR had passed certain
directions/declarations in the order passed under Section 17(3) c
of the Act of 1985 requiring the company to state clearly the
details of the land to be sold including survey numbers as well
as the remaining land with the company and confirming if the
remaining land was adequate for functioning and viability of the
company on long term basis. The BIFR raised the query D
whether all the secured creditors who had charge over the land,
had approved the sale of 350 acres of land belonging to the
respondent-company at Kalyan, Thane for a sum of Rs.166.40
crore and for entering into memorandum of understanding with
the appellant company in that behalf. Besides issuing a directive
that assets including investments will require prior approval of E
the BIFR as the company was under the purview of SICA, it also
issued a clear prohibitory order requiring the secured creditors
not to take any coercive steps against the company without prior
permission of the BIFR. This order of the BIFR was therefore
passed clearly at the stage of the consideration of the revival F
scheme which had been approved by the CDR Group as well
as the secured creditors. The scheme for revival of the
company on long term basis, thus, was primarily dependent
upon the sale proceeds of the land in question on the one hand
and the utility of the remaining land for revival of the company G
on the other. To put it simply, the land was the paramount asset
of the company for its revival and successful implementation
of the scheme in accordance with law. The asset was duly
taken into consideration in formulation of the scheme as
contemplated under Sections 17 and 18 of the Act of 1985 and H
458 SUPREME COURT REPORTS [2012] 3 S.C.R.
A appropriate directions, prohibitory orders were issued within
the ambit and scope of Sections 22(1), 22(3) and 22A of the
Act of 1985. In view of the clear statement of law, as afore-
recorded, and facts of the present case, we are unable to find
any merit in the submission of the Respondent-Company that
B the BIFR had no jurisdiction to pass such directives.
50. AAIFR had disturbed the above order and held that the
contract between the parties could not be suspended under
Section 22(3) and it was not in the interest of the Respondent-
Company. In other words, it had permitted the sale to be
C completed without any restriction. This order was set aside and
the order of the BIFR was restored by the High Court. We find
no jurisdictional or other error in the order of the High Court in
restoring the order of the BIFR. The land being the primary
asset of the Respondent-Company, could not be permitted to
D be dissolved by sale or otherwise without the consent and
approval of the BIFR. The BIFR is the authority proprio vigore
and required to oversee the entire affairs of a sick industrial
company and to ensure that the same are within the framework
of the scheme formulated and approved by the Board for revival
E of the company in accordance with the provisions of the Act of
1985. On facts as well, neither the BIFR nor the High Court had
exceeded its jurisdiction in passing the impugned orders. It is
not that the Respondent-Company has been divested of its right
by the BIFR. All that has been done is to suspend the final
F transfer of the property in its favour in accordance with the
provisions of the Act and the limitations imposed therein. Once
the scheme is implemented or the period specified under the
provisions of Sections 22(3) and 22(4) expires, the declaration
would cease to exist and the appellant would be entitled to
G enforce its rights in accordance with law as if no such
declaration or restriction ever existed.
51. The principle of law that emerges from the afore-
referred discussion, which consistently has judicial benediction,
H is that a scheme for rehabilitation or restructuring of a sick
RAHEJA UNVIERSAL LIMITED v. NRC LIMITED & 459
ORS. [SWATANTER KUMAR, J.]
industrial company undertaken by a specialized body like the A
BIFR/AAIFR should, as far as legally permissible, remain
obstruction free and the events should take place as pre-
ordained, during consideration and successful implementation
of the formulated scheme. Wide jurisdiction is vested in BIFR/
AAIFR to issue directives, declarations and prohibitory orders B
within the rationalized scope and limitations prescribed under
Section 22(1), 22(3) and 22A of the Act of 1985.
52. An objection to the maintainability of a composite
petition, taken before the High Court, has been reiterated
before this Court, of course, half-heartedly. Argument is that C
Article 227 vests the High Court with supervisory powers while
Article 226 is the reservoir of extra-ordinary jurisdiction of the
High Courts to issue prerogative writs and orders and, as such,
a joint petition under both these Articles could not be
maintainable. D
53. Reliance has been placed in this regard to the case
of Sha/ini Shyam Sheffy & Anr. v. Rajendra Shankar Patil
[(2010) 8 SCC 329]. This objection was neither pressed before
us during the course of arguments nor do we consider it E
necessary to decide this issue in view of the facts and ·
circumstances of the present case and the fact that we have
decided the entire matter on merits.
54. For the reasons afore-recorded, the present appeals
are dismissed. The order of the BIFR dated 16th July, 2009 F
which has merged into the order of the High Court dated 29th
July, 2011 is maintained while that of the AAIFR dated 28th
May, 2010 is set aside. The parties are directed to appear
before the BIFR which shall proceed with the matter in
accordance with law. However, we express a poised hope that G
the BIFR would deal with and dispose of the matter
expeditiously.
N.J. Appeals dismissed.
H
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