Skip to main content

SARFAESI Act prevails over SICA

In the matter of M/S MADRAS PETROCHEM LTD. & ANR.  Vs BIFR & ORS., by  a judgment dated 29 Jan 2016, the Hon'ble Supreme Court opined that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 prevails over the Sick Industrial Companies (Special Provisions) Act, 1985 to the extent of inconsistency therewith.

The judgment has given in the context of a rather convoluted matter wherein petitions and appeals have been filed before several High Courts, DRTs and DRAT, primarily due to the difference in the opinion of various courts of law on primacy of several important Acts having Non Obstante clauses.

The Hon'ble court in a 32 page judgement, the court stated that the following two questions which arise on the facts of this case::-

(1) Whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 prevails over the Sick Industrial Companies (Special Provisions) Act, 1985; and (2) Whether the expression “where a reference is pending” in Section 15 (1) proviso 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 would include all proceedings before the BIFR or only proceedings at the initial reference stage.

The hon'ble court after deliberating on the issue to some extent finally concluded that :-

.......54. The resultant position may be stated thus:

Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to apply in the case of unsecured creditors seeking to recover their debts from a sick industrial company. This is for the reason that the Sick Industrial Companies (Special Provisions) Act, 1985 overrides the provisions of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993.

Where a secured creditor of a sick industrial company seeks to recover its debt in the manner provided by Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, such secured creditor may realise such secured debt under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, notwithstanding the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

In a situation where there are more than one secured creditor of a sick industrial company or it has been jointly financed by secured creditors, and at least 60 per cent of such secured creditors in value of the amount outstanding as on a record date do not agree upon exercise of the right to realise their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 will continue to have full play.

Where, under Section 13(9) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the case of a sick industrial company having more than one secured creditor or being jointly financed by secured creditors representing 60 per cent or more in value of the amount outstanding as on a record date wish to exercise their rights to enforce their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, being inconsistent with the exercise of such rights, will have no play.

Where secured creditors representing not less than 75 per cent in value of the amount outstanding against financial assistance decide to enforce their security under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, any reference pending under the Sick Industrial Companies (Special Provisions) Act, 1985 cannot be proceeded with further – the proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 will abate.

Comments

Post a Comment

Most viewed this month

Amendment of plaint under Order VI Rule 17 of the CPC explained

Cause Title :  Ganesh Prasad vs Rajeshwar Prasad, SLP (C) NO. 28377 OF 2018, Supreme Court Of India Date of Judgment/Order : 14/3/2023 Corum : J. B. Pardiwala, J. Citied:  Revajeetu Builders and Developers v. Narayanaswamy & Sons and Others reported in (2009) 10 SCC 84 North Eastern Railway Administration, Gorakhpur v. Bhagwan Das reported in (2008) 8 SCC 511 P.A. Jayalakshmi v. H. Saradha and Others reported in (2009) 14 SCC 525 B.K. Narayana Pillai v. Parameswaran Pillai and Another reported in (2000) 1 SCC 712 A.K. Gupta and Sons Ltd. v. Damodar Valley Corporation reported in AIR 1967 SC 96 Life Insurance Corporation of India v. Sanjeev Builders Private Limited and Another, Civil Appeal No. 5909 of 2022 dated 01.09.2022 Firm Sriniwas Ram Kumar v. Mahabir Prasad and Others reported in AIR 1951 SC 177 G. Nagamma and Another v. Siromanamma and Another reported in (1996) 2 SCC 25 Praful Manohar Rele v. Krishnabai Narayan Ghosalkar and Others reported in (2014...
Post a Comment
Read more

Even An Unregistered Partnership Firm Can Maintain ‘Cheque Bounce’ Complaint

In M/s Uttam Traders Ranghri vs. Tule Ram alias Tula Ram, an appeal was filed before the Himachal Pradesh High Court solely on the ground that one of the partners of the complainant-firm which is an unregistered partnership concern, had failed to prove that he was one of the partners of the complainant-firm and duly authorised by it to file the complaint and acquitted the respondent. The High Court decided that two questions arise for consideration in this matter :- 1) Whether acquittal by the magistrate solely on the ground that the managing partner of the appellant having failed to establish that he was one of the partners of the complainant-firm and duly authorised by it to file the complaint was correct 2) Whether a partner of an unregistered partnership firm can maintain a complaint under Section 138 of the Negotiable Instruments Act. For the first issue, the High Court referred to M/s Haryana State Co.Op., Supply and Marketing Federation Ltd. vs. M/s Jayam Text...
2 comments
Read more

Interim order staying the operation of an impugned order vs quashment of an impugned order

In Deific Abode LLP vs Union of India & Ors., while discussing on the issue of interim order staying the operation of an impugned order and the quashment of an impugned order, the Calcutta High Court observed that :- These salient principles emerge: i. As per the law laid down in Shree Chamundi Mopeds Ltd (supra) by the Supreme Court, the effect of an interim order staying the operation of an impugned order and the quashment of an impugned order are considerably different from one another. While the former merely ensures that the order impugned would not be operative from the date of the passing of the order of stay, without annihilating the said impugned order from existence, the latter ensures that such quashment results in the restoration of the position as it stood on the date the impugned order was passed, with the impugned order ceasing to exist in the eyes of the law. ii. Quashment of such impugned order would revive the appeal before the appellate authority and would be con...
Post a Comment
Read more