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Judgment
K. Kannan, J.—Petition to wind up the company filed under Sections 433, 434 and 439 of the Companies Act, 1956, on the ground that the respondent-company was unable to pay its debts and making the statutory notice issued on December 3, 2007 (annexures P9 to P11) demanding repayment of the amount of Rs. 42,62,547 with interest as justification for the relief claimed in the petition. This Court had issued a notice on August 1, 2008, to show cause as to why the petition should not be admitted and set the case for hearing on September 18, 2008. At the hearing on September 18, 2008, the company was represented through counsel and stated that the company was before the BIFR and on a direction by the court that an appropriate application could be filed along with details, the company filed C.A. No. 875 of 2008 u/s 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, seeking stay of the proceedings on the ground that a reference u/s 15(1) of the SICA was being considered in Case No. 229 of 2004 and by order dated April 19, 2006, the respondent-company had been declared as a sick industrial company under the Act. Making reference to Section 22(1) of the Act, which states that no proceedings for winding up the industrial company or for execution, distress or the like against any of the properties of the industrial company or for appointment of a receiver in respect thereof, it has been contended on behalf of the respondent-company that the proceedings before this Court were liable to be stayed with immediate effect till the petitioners sought permission from the BIFR to proceed with the matter.
This application is contested by the petitioner pointing out the fact that the respondent-company had been taken over by M/s. Dhir & Dhir Asset Reconstruction and Securitisation Co. Ltd., u/s 13(2) and (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("the SARFAESI Act") on November 28, 2008 (possession notice as annexure R1). The contention of learned Counsel for the petitioner is that after invoking the provisions of the SARFAESI Act, the proceedings before the BIFR have abated and hence, the respondent-company cannot obtain any relief under the SICA. The petitioner makes pointed reference to Section 41 of the SARFAESI Act which introduced an amendment to Section 15 as per the Schedule that no reference shall be made to the BIFR after the SARFAESI Act where financial assets have been acquired by any securitisation company. If such a reference had already been pending by the time when the SARFAESI Act had been introduced, such reference shall abate if the securtisation company having control of not less than three-fourths value of the amount has taken measures to recover the secured debt u/s 13(4) of the Act. Admittedly such steps have been taken u/s 13(4) and therefore, I have no difficulty in finding that the application u/s 22 is not maintainable.
The petitioner immediately filed C.A. No. 95 of 2009 under Order 1, Rule 10 for impleadment of M/s. Dhir & Dhir Asset Reconstruction and Securitisation Co. Ltd. When the application for impleadment had been moved, this Court has issued an order on February 6, 2009, directing that the assets of the company shall not be sold by any party without leave of the court and issued notice. The party, which was sought to be impleaded moved C.A. No. 151 of 2009 for clarifications/modifications of the order dated February 6, 2009, stating that it had proceeded with the action u/s 13(2) of the SARFAESI Act and the company court shall not pass any orders which would jeopardise its right to proceed outside the scheme of winding up under the Companies Act. The reliance had been placed by the reconstruction company on Sections 35 and 37 of the SARFAESI Act to urge that the Act would have overriding effect to any other provisions of law contained in any other statute and making reference to Section 37 of the Act that states that provisions of the SARFAESI Act shall be in addition to, and not in derogation of the Companies Act, it is urged on behalf of the reconstruction company that Section 37 runs subservient to Section 35 of the SARFAESI Act, it shall be taken that the SARFAESI Act shall override the inconsistent provisions of the Companies Act.
Having regard to the fact that the contentions of the petitioner had been already disclosed in the petition for winding up and the conduct of the reconstruction company had already been referred to in its application for impleadment, counsel for the petitioner pleaded that the averments in the company petition itself could be taken as objection to the application filed by the reconstruction company seeking for modification of the order.
Before taking up the rival contentions, the application for impleadment of the reconstruction company is ordered and the reconstruction company shall be taken as arrayed as the second respondent. The application for stay of the proceedings sought by the respondent-company is dismissed as abated having regard to the fact that action is purported to have been taken u/s 13(2) and (4) of the SARFAESI Act. The respondent-company is given time to file its objection for winding up and the plea of learned Counsel for the petitioner that the order of winding up shall be issued forthwith is rejected.
This order shall, therefore, consider the order passed in C.A. No. 95 of 2009 read with C.A. No. 151 of 2009 seeking for modification of the order that the property of the company shall not be sold without leave of the court.
The issues regarding extent of operation of the SARFAESI Act and to what extent, the company court shall still retain jurisdiction are adverted to in extenso by the respective counsel for the petitioner and respondents. This matter has been considered by me at sufficient length in my decision dated March 20, 2009 in Pegasus Asset Reconstruction P. Ltd. Vs. Haryana Concast Ltd., , and other connected matters. I have held in that judgment that there is no inconsistency between the provisions of the SARFAESI Act and the Companies Act and it shall be the endeavour to administer the provisions and allow for the operation of provisions in the respective fields. I adopt the same reasoning here as well and the only modification in the order that I would make in the line of reasoning to conform to the facts of the case are that the operation of Section 446 of the Companies Act which talks about the procedure when a winding up order has been made or when the official liquidator has been appointed as the provisional liquidator, has not yet arrived and the reference to a bar against institution of suit and other proceedings would not operate for the present. I reject the contention placed by counsel for the petitioner that since the application has been filed before the purported act of the reconstruction company to take over the assets u/s 13(4), it shall be construed, with reference to Section 441(2) of the Companies Act, that the winding up of the company by the Tribunal (court) shall be deemed to commence at the time of presentation of the petition for winding up. In my view, if the order of winding up is made by virtue of Section 441(2), it would relate back to the time of presentation of the petition. The order of winding up has not yet been made and I have directed counter of the company to be filed after dismissal of its application u/s 22 of the SICA. The matter will be taken for consideration in future. As of now, it will be premature to pass any orders u/s 446.
As regards the direction that I have already made against alienation of assets, it shall stand modified to permit the reconstruction company to take further proceedings under the SARFAESI Act. However, by the construction that I have made in the decision referred to above in Pegasus Asset Reconstruction P. Ltd., which reasoning I adopt in this case as well, that the petitioner would be permitted to move this Court for appropriate directions if the petition for winding up is considered favourably. The ultimate directions shall follow on what is held on the outcome of petition for winding up. In the meanwhile, no appropriation or disbursal of the sale proceeds shall be undertaken by the asset reconstruction company without leave of this Court.
To sum up, C.A. No. 875 of 2008 for stay is dismissed. C.A. No. 95 of 2009 for impleadment is ordered. C.A. No. 151 of 2009 is disposed of with modification as explained above. To come up for hearing for filing counter of the respondent-company in the winding up petition on April 30, 2009.