The Supreme Court recently in KSL and Industries Limited (“KSL”) v. M/s Arihant Threads Limited (“Arihant”) and Others1 has held that the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (“SICA”) shall prevail over the provision for the recovery of debts in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“RDDBFI”). It has been observed that the bar under Section 22 of the SICA is very much applicable to a recovery application filed under RDDBFI.
BACKGROUND
The appeal was placed before the three judge bench of the Supreme Court by way of reference made by a two judge bench of the Supreme Court speaking through C.K Thakker and Altamas Kabir JJ. In the two judge bench judgment under consideration, Justice Thakker had opined that in view of an overriding clause in Section 34 of RDDBFI, the provisions of RDDBFI is to be given priority and primacy over SICA as Section 34 has been inserted through a latter enactment. However, Justice Altamas Kabir observed that in view of a specific exception to Section 34 (1) carved out in Section 34 (2) which states that the provisions of RDDBFI Act shall be in addition to and not in derogation of SICA, it is clear that the intention of legislature was that SICA would prevail over RDDBFI.
FACTUAL MATRIX
Arihant had set up an export oriented spinning unit for manufacturing cotton yarn in Amritsar District in the State of Punjab. It had taken a loan by way of foreign currency and a working capital to the tune of INR 93.1 million from Industrial Development Bank of India (“IDBI”). IDBI filed an application before the Debt Recovery Tribunal, Chandigarh (“DRT”) for recovery of the debt when Arihant failed to repay loan installments. DRT ordered an ex-parte order in favour of IDBI directing a recovery of INR 252.6 million along with interest at the rate of 7.8 % per annum and in the event of failure on the part of Arihant to pay the aforementioned amount, IDBI was entitled to sell the mortgaged property of Arihant. Pursuant to the failure of Arihant to pay, the recovery officer fixed the reserve price of the mortgaged properties at INR 125 million and KSL was declared to be the highest bidder in the auction sale. Arihant filed an appeal before the DRT seeking to set aside the auction sale. DRT-I Delhi allowed the prayer of Arihant subject to Arihant making a payment of a certain amount.
Arihant inter alia filed an appeal before the Debt Recovery Appellate Tribunal, Delhi (“DRAT”) against the order of the DRT-I Delhi. In the meanwhile, Arihant invoked the provisions of SICA and applied for a reference to the Board of Industrial and Finance Reconstruction (“BIFR”). Subsequent to which the DRAT confirmed the auction sale in favor of KSL. Arihant moved the Delhi High Court vide writ petitions against the order of the DRAT which was allowed by the Delhi High Court on the ground that in view of the express bar of Section 22 of SICA, the recovery proceedings cannot be pursued against Arihant and no order ought to have been passed by the DRAT. The High Court’s Order was challenged in the Supreme Court by KSL.
ISSUES
Whether the bar under Section 22 of the SICA would be applicable in view of a non-obstante clause in Section 34 of the RDDBFI?
Whether the doctrine of generalia specialibus non derogant is to be made applicable while interpreting two special statutes containing non-obstante clauses?
JUDGMENT AND JUDICIAL REASONING
The three judge bench of the Supreme Court speaking though S.A Bobde J has held that the provisions of Section 22 of SICA would prevail over the provision for the recovery of debts in the RDDBFI and that the doctrine of generalia specialibus non derogant is not to be given a mechanical application; rather the interpretative rule of giving effect to the intention of the legislature is to be made applicable.
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BACKGROUND
The appeal was placed before the three judge bench of the Supreme Court by way of reference made by a two judge bench of the Supreme Court speaking through C.K Thakker and Altamas Kabir JJ. In the two judge bench judgment under consideration, Justice Thakker had opined that in view of an overriding clause in Section 34 of RDDBFI, the provisions of RDDBFI is to be given priority and primacy over SICA as Section 34 has been inserted through a latter enactment. However, Justice Altamas Kabir observed that in view of a specific exception to Section 34 (1) carved out in Section 34 (2) which states that the provisions of RDDBFI Act shall be in addition to and not in derogation of SICA, it is clear that the intention of legislature was that SICA would prevail over RDDBFI.
FACTUAL MATRIX
Arihant had set up an export oriented spinning unit for manufacturing cotton yarn in Amritsar District in the State of Punjab. It had taken a loan by way of foreign currency and a working capital to the tune of INR 93.1 million from Industrial Development Bank of India (“IDBI”). IDBI filed an application before the Debt Recovery Tribunal, Chandigarh (“DRT”) for recovery of the debt when Arihant failed to repay loan installments. DRT ordered an ex-parte order in favour of IDBI directing a recovery of INR 252.6 million along with interest at the rate of 7.8 % per annum and in the event of failure on the part of Arihant to pay the aforementioned amount, IDBI was entitled to sell the mortgaged property of Arihant. Pursuant to the failure of Arihant to pay, the recovery officer fixed the reserve price of the mortgaged properties at INR 125 million and KSL was declared to be the highest bidder in the auction sale. Arihant filed an appeal before the DRT seeking to set aside the auction sale. DRT-I Delhi allowed the prayer of Arihant subject to Arihant making a payment of a certain amount.
Arihant inter alia filed an appeal before the Debt Recovery Appellate Tribunal, Delhi (“DRAT”) against the order of the DRT-I Delhi. In the meanwhile, Arihant invoked the provisions of SICA and applied for a reference to the Board of Industrial and Finance Reconstruction (“BIFR”). Subsequent to which the DRAT confirmed the auction sale in favor of KSL. Arihant moved the Delhi High Court vide writ petitions against the order of the DRAT which was allowed by the Delhi High Court on the ground that in view of the express bar of Section 22 of SICA, the recovery proceedings cannot be pursued against Arihant and no order ought to have been passed by the DRAT. The High Court’s Order was challenged in the Supreme Court by KSL.
ISSUES
Whether the bar under Section 22 of the SICA would be applicable in view of a non-obstante clause in Section 34 of the RDDBFI?
Whether the doctrine of generalia specialibus non derogant is to be made applicable while interpreting two special statutes containing non-obstante clauses?
JUDGMENT AND JUDICIAL REASONING
The three judge bench of the Supreme Court speaking though S.A Bobde J has held that the provisions of Section 22 of SICA would prevail over the provision for the recovery of debts in the RDDBFI and that the doctrine of generalia specialibus non derogant is not to be given a mechanical application; rather the interpretative rule of giving effect to the intention of the legislature is to be made applicable.
Company Secretary GAURAV SHARMA+919990694230 Connect on Watts App with Gaurav Email us [email protected] Official Blog Fema India Experts Connect with our Facebook Page:- Click and Like our Page Subscribe our Email updates like other 15,000 Members, Free/Easy/Comfortableway
