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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL     APPEAL     NO.       1920      OF     2012   (Arising out of SLP (C) No.26149 of 2011)

Raheja Universal Limited  … Appellant

Versus

NRC Limited & Ors. … Respondents

WITH

CIVIL     APPEAL     NO.      1921      OF     2012      [Arising out of SLP (C) Nos. 5360 / 2012 (CC  15948/2011)],

CIVIL     APPEAL     NO.      1922      OF     2012   (Arising out of SLP (C) No.26624 of 2011)

CIVIL     APPEAL     NO.      1923      OF     2012   (Arising out of SLP (C) No.26964 of 2011

J     U     D     G     M     E     N     T   

Swatanter     Kumar,     J  .

Leave granted in all cases.

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  

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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:

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, 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 of viscos filament yarn, chemicals and allied  

products with its factory at Mohane, 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 discharged from  

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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 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 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 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 Certificates’  from the lending banks, an agreement  

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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  

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 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  

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  

and, in furtherance to such understanding, a supplementary  

deed to the agreement was signed on 29th September, 2007.  

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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  

expenses of the Respondent-Company.  Then, the parties, by  

mutual agreement, signed a second supplementary agreement  

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.

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  

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 improve the financial business position of the Respondent-

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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, 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 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 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 refused to release the third  

instalment and resultantly, even the dues of 577 employees,  

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who had taken the benefit of the early retirement 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, 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 is  

the 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,  

2007.  Vide its order dated 16th July, 2009, which was passed  

under 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 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  

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similar details 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 tied up DRs, if it  emerges, along with the minutes of the joint  meeting within a further period of one  month.  

(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.   

(iii) PNB (OA) shall confirm to the Board  within a period of 15 days under copy to the  company that all the secured 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 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 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 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  

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in furnishing the documents/details  required by them.  

(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 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 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 the company is now  under the purview of SICA.  

(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 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  

restrictions thereupon, including that of sale of assets, which  

required the prior approval of BIFR as the Respondent-

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Company was under the purview of the Act of 1985.  With  

reference to the land, it was directed that Capacity Valuation  

Report should be placed on record to show how the sale  

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  

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 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 by the AAIFR in its order which are as  

under:

“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  

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prior to the filing of reference when the  company was not a sick entity.  If the BIFR  was of the view that the agreement for sale  of land was not in the interest the company,  it could have suspended the contract under  Section 22(3) of SICA 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 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 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 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 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 parties to the sale  

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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:   

“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;

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;

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 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 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 require the prior approval of the BIFR.  

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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 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  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 sanction of the  scheme, The issue can be resolved by  determining a prospective cut off date.  Section 17(4)(b) 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.”

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 the land, though an asset of the company, to be  

sold.  The correctness and legality of this order of the AAIFR  

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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 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 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 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, 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  nature would not impact pre existing  

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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 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 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  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 of 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 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 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 alleviate the hardships of the workers.”

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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.  It  

held that the order of the AAIFR permitting the sale of the land  

in furtherance to the agreement between the parties was not  

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 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  

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would be 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  

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, 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 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 required to make a reference to the  

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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 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 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.

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  

remedial and ameliorative in so far as it empowers the quasi- 18

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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 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 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 lis between any party or upon the rival interests of the  

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.  

Even this aspect has been a matter of judicial divergence.  In  

the case of Gram Panchayat & Anr.  v.  Shree Vallabh Glass  

Works Ltd. & Ors. [(1990) 2 SCC 440], this Court was  

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concerned with a company which had been declared ‘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 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 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 16 and 17 of the Act,  no proceedings for 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 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.

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distinguished the same by stating that the facts in that case  

were distinct.

14. The above two judgments covered the field of law in 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 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 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  

Section 22 of the Act of 1985 shall take over and such award  

would not be executable against the sick company,  

particularly when the party in whose favour the award was  

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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 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  determined and for matters connected  therewith or incidental thereto.”

15. Furthermore, in a recent judgment of this Court in the  

case of Shree Sajjan Mills Limited & Ors. v. Municipal  

Corporation, Ratlam  [(2009) 17 SCC 665], this Court was  

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,  

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  

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even winding up of sick industrial companies and wherever  

necessary, providing them with financial assistance. The  

provisions contained in Chapter III 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 of that 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 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 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  

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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 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  

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  

the company has become sick and upon considering all  

relevant facts and circumstances of the case in exercise of its  

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  

1985.  Further, where the BIFR decides that it is not  

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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 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 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 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 sub-clauses (a)  

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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 has to be  

examined by the BIFR in terms of Section 18(3) of the Act of  

1985 and if the BIFR 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 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 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 the Act of 1985.  This scheme does not attain finality  

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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  

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 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 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 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  

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scheme.  Where the scheme relates to preventive, ameliorative,  

remedial and other measures with respect to any sick  

industrial company, the scheme may provide for financial  

assistance by way of loans, advances or guarantees from the  

Government or financial institutions.  Before 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 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  

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 company shall be wound up in accordance with  

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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 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:  

“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 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 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 industrial company or for  the appointment of a receiver in respect thereof  [and no suit for the recovery of money or for the  enforcement of any security against the  industrial company or of any guarantee in  respect of any loans or advance granted to the  industrial company] shall lie or be proceeded  

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with further, except with the consent of the  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 contained  in the Companies Act, 1956 (1 of 1956), or any  other law or in the memorandum and articles of  association of such company or any instrument  having effect under the said Act or other law -

(a) it shall not be lawful for the  shareholders of such 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.

(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  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 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 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 may be specified by the Board:  

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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 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 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, -

(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  continued subject to such declaration; and

(b) on the declaration ceasing to have effect  -

(i) any right, privilege, obligation or  liability so 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 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  

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liability, the period 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 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 -

(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 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 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  

frustrated because of certain other legal proceedings and to  

prevent untimely and unwarranted disposal of the assets of  

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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 sections operate at different stages and in  

different fields.  Section 22(3) of the Act of 1985 contemplates  

that 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  

thereunder for due implementation of the scheme, the BIFR  

may, by order, declare that with respect 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  

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  

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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 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 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 III 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 be read and construed  

in isolation.  Chapter III, in fact, is the soul and essence of the  

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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 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 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 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 its wisdom deems it necessary and finally only when  

both these options fail and the public interest so requires, the  

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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 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 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 would come into play.  Such an  

approach would also be acceptable as otherwise the entire  

scheme under Chapter III 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  

taken a general view that in the light of Sections 16 and 19 of  

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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 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 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 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  

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was due 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 this Court was  

that the Act of 1985 is a complete code in itself and the  

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 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 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 decidendi of the respective judgments to make both of  

them legal and binding precedents.  Despite these judgments  

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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  

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 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 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 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  

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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 successful completion, where demand  

from the Revenue with regard to the sick industrial company  

is allowed, this can render 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 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 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 is the reservoir of the statutory powers  

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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 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) 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 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 all or any of the  

rights or privileges, obligations and liabilities accruing or  

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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  

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  

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 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 enforcement of a right which may be available to a  

third party and any such proceedings before any court or  

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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, obligation or liability which was suspended  

shall become 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 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 company.  It is only  

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 that the  

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assets of the company are not diverted, wasted, taken away  

and/or disposed of in any manner, during the relevant period.  

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 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 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 and liabilities vis-à-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  48

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principle of interpretation of statutes that every word and  

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 make this declaration as  

already noticed 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 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 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  

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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 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.  

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 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 to preparation, consideration, finalization and  

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implementation of a revival scheme in relation to a sick  

industrial company.

31. Where Section 22(1) deals with the restrictions and  

limitations vis-à-vis the court proceedings while Section 22(3)  

of the Act of 1985 deals with the agreement, intents or other  

obligations as stated in that provision and declarations which  

will be made by the BIFR for the purposes of finalization and  

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 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 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  

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contradistinction to the other laws except the laws stated in  

the 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 to or by under this Act.  

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  

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 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  

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and even the 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 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 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 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  

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course, by the Revenue and protection of Section 22(1) was  

not available.

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  

passed under the Interest on Delayed Payments to Small Scale  

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 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 at the hands of the BIFR is inherent in the  

scheme of the Act.  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  

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exercise of its incidental power for sale of assets where the  

matter was pending before the BIFR.

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  

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 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  

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  

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finalization and/or implementation of the scheme of revival  

under 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 provision has an overriding effect as it contains non  

obstante clauses not only vis-à-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 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 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 company or for  

the appointment of a Receiver in respect thereof.  The  

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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 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  

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/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 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  

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the 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 Section  

22(1) of the Act of 1985 would apply.  For instance, execution  

of a decree against the assets of a company, if permitted, is  

bound to result in disturbing the scheme, which has or may  

be framed by the BIFR.  The sale of an asset during 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, 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 interest as a statutory tenant.  Such  

interest was neither assignable nor transferable.  This Court  

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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. 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 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  

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.

Overriding     effect     of     the     Act     of     1985   :-

37. This Court has taken the view in Tata Motors Ltd. [(2008)  

7 SCC 619] that the Act of 1985 has been enacted to secure  

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the principles specified in Article 359 of the Constitution 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)  

read with Section 32 of the Act, giving overriding effect vis-à-

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. 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 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  

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effect.  In the case of Tata Motors Ltd. v.  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 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  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  orders passed under SICA but also any  matter which BIFR is empowered to  determine.

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.”

38. Even in the case of NGEF Ltd.  v.  Chandra Developers (P)  

Ltd. and Anr. [(2005) 8 SCC 219], this Court specifically  

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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  

jurisdiction of the Company Court in such matters would arise  

only when AAIFR 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.

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 1985 has been held to be a special statute vis-à-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 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  

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question.  It was contended that as their interests were duly  

protected under the provisions of the Act of 1882, the  

BIFR/AAIFR, in exercise of 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-à-vis the Act of 1985,  

the provisions of the Act of 1882 shall prevail.   

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 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 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  

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Legislature has undoubtedly given an overriding effect to the  

provisions of the Act of 1985 and even restricted the  

jurisdiction 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.

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 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 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  

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on 1st March, 2007 between the parties.  As certain amounts  

were found to have been incorrectly stated in the Principal  

Agreement and parties 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 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.   

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  

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  

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15 of the Act of 1985 for being declared as a ‘sick company’ on  

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  

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 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 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  

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was executed subsequent 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 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  

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  

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  

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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 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 ‘contract for sale’  has been  

explained under this very provision as follows: -

“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 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  

on ‘Transfer of Property Act’, 9th Edition, page 181, clearly  

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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 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 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 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:  

"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 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  might extend beyond the expiration of  the proper period."  

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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 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 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 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 BIFR had passed an order under Section  

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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 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 declarations in relation to contracts,  

agreements, settlements, awards, standing orders or even  

other instruments in force to which 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 of great magnitude and scope,  

the only restriction thereupon 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  

thereof.  Even this provision does not create title of the  

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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 U.P. v. District Judge (supra), this Court,  

while deliberating upon the rights emerging from Section 53A  

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 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 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  

way, alter the position of the Act of 1985 having an overriding  

effect vis-à-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.

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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 in it under Section 22(3) of the Act of 1985 and,  

if answer to the above is in the affirmative, whether the order  

dated 16th 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 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) 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  

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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 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 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 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 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  

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consideration in formulation of the scheme as contemplated  

under 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, as afore-recorded, and  

facts of the present case, we are unable to find any merit in  

the submission of the Respondent-Company that 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  

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 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  

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within the framework 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 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 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 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, 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-

ordained, during consideration and successful implementation  

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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 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  

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.   

53. Reliance has been placed in this regard to the case of  

Shalini Shyam Shetty & 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  

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.

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54. For the reasons afore-recorded, the present appeals are  

dismissed.  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 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 the BIFR  

would deal with and dispose of the matter expeditiously.

….................................CJI.                     (S.H. Kapadia)

……..............................J.  (K.S. Radhakrishnan)

……..............................J.      (Swatanter Kumar)

New Delhi; February 7, 2012

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