Whether Registrar of BIFR can dismiss application for reference under SICA Act?

Regulation 19(5) extracted above, requires the
Registrar or the Secretary, as may be, to make an
endorsement of the date of receipt of the
Reference [Regulation 19(4)] and thereafter on
scrutiny thereof to register the same and place
before the Chairman for being referred to the
Bench. When the Regulations framed under the
statute vests in the Registrar or the Secretary of
the Board the power to “scrutinize” an application
prior to registration thereof and thereafter to
register and place the same before the Bench, we
do not see how such power of scrutiny can be
understood to be vesting in any of the said
authorities the power to adjudicate the question
as to whether a company is an industrial company
within the meaning of Section 3(e) read with 3(f)
and 3(n) of the SICA. A claim to come within the
ambit of the aforesaid provisions of the SICA i.e.
to be an industrial company, more often than not,
would be a contentious issue. In the present case,
it certainly was. The specific stand of the
respondent No. 1 company in this regard need not
detain the Court save and except to state that by
a detailed description of the manufacturing
process the respondent No. 1 company had sought to
contend that it is an industrial company. Surely,
the rejection of the above stand could have been
made only by a process of adjudication which power
and jurisdiction clearly and undoubtedly is vested
by the SICA and the Regulations framed thereunder
in a Bench of the Board and not in authorities
like the Registrar and the Secretary.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
 CIVIL APPEAL NO.3055 OF 2017
(Arising out of S.L.P.(C) No.1587 of 2015)
BANK OF NEW YORK MELLON
LONDON BRANCH 
V
ZENITH INFOTECH LIMITED.
Dated:FEBRUARY 21, 2017.
Citation: AIR 2017 SC 1735

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Whether arbitration proceeding is tenable even though reference made by sick company is pending with BIFR?

Hon'ble Apex Court in the case of San-A Tradubg Co. Ltd. v. I.C. Textiles Ltd. decided on 28.4.2006 has considered the same and held as under:

"Similarly, in Shree Chamundi Mopeds Ltd. v. Church of South India, MANU/SC/0501/1992 : AIR 1992 SC 1439, this Court explained the words 'or the like' as follows:

"The words 'or the like' have to be construed with reference to the preceding words, namely 'for execution', 'distress' which means that the proceedings which are contemplated in this category are proceedings whereby recovery of dues is sought to be made by way of execution, distress or similar proceedings against the property of the Company."

It is, thus, apparent from the wording of Section 22(1) and the above decisions of this Court that the proceedings covered under Section 22 are the proceedings of coercive nature, be that legal or otherwise, which would come within the purview of expression 'proceedings' as mentioned in the Section but it would not cover all proceedings. Section 22 (1) incorporated certain types of proceedings which would fall within its ambit and which are the proceedings for winding up of the industrial company or the proceedings for execution and distress against any of the properties of the industrial company or the proceedings for the appointment of a Receiver in respect of the properties of the industrial company. From the nature of the proceedings referred to in this Section, it is clear that only the proceedings which have the shape and effect of coercive nature would come within the ambit of Section 22(1) and for taking up such proceedings the permission of BIFR is required. By Act 12 of 1994, Section 22(1) was amended by insertion whereby a 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 advances granted to the industrial company would not be maintainable unless consent of BIFR is obtained. In Kailash Nath Agarwal and others v. Pradeshiya Industrial & Investment Corporation of U.P. Ltd. and another MANU/SC/0114/2003 : (2003) 4 SCC 305 : (AIR 2003 SC 1886), the question arose as to the scope of the protection afforded to the guarantors under Section 22(1) of SICA. The company was declared sick by BIFR in terms of Section 3(1)(o) of SICA. An operating agency was appointed under Section 17(3). While the proceedings before BIFR were pending, three separate notices of demand were served on the appellants as personal guarantors in respect of the loans granted to the company by the respondent Pradeshiya Industrial & Investment Corporation of U.P. Ltd. and it was said in the notices that the Corporation would take legal measures to recover its outstanding dues from each guarantor. It was contended by the guarantors that in view of Section 22(1) of SICA, the Corporation could not enforce its demand against the appellants under the permission of BIFR is obtained. This Court has drawn a distinction between the proceedings taken up under the U.P. Public Moneys (Recovery of Dues) Act, 1972 and a suit contemplated under Section 22 of SICA. This Court has held in Kailash Nath Agarwal (supra) that having regard to the judicial interpretation of the word 'suit', it is difficult to accede to the submission of the appellants that the word 'suit' in Section 22(1) of SICA means anything other than some form of curial process and the Court found it difficult to widen the scope of the word 'suit' so as to cover proceedings against the guarantor of an industrial company. By virtue of amendment to Section 22 of SICA, 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 advances granted to the industrial company, shall he and adjudication is prohibited of the liability of the industrial company or the guarantor. Section 22 further prohibits taking up of the proceedings of the nature which would be coercive for recovery of money against a sick undertaking. Proceeding in arbitration is neither a suit under sub-section (1) of Section 22 of SICA nor the proceedings thereunder and, therefore, there is no prohibition under Section 22 of SICA to take up the arbitration proceedings to adjudicate the liability of the parties to the arbitration proceedings. In my view, Section 22 of SICA does not debar the arbitration proceedings under the Arbitration and Conciliation Act, 1996. The objections to the arbitration proceedings raised by the respondent fail for the aforesaid reasons and are rejected."

IN THE HIGH COURT OF MADHYA PRADESH (INDORE BENCH)

A.C. No. 18 of 2015

Decided On: 01.12.2016

TDB Spinners Pvt. Ltd.

Vs.

 Parasram Puria Internatin

Hon'ble Judges/Coram:

J.K. Maheshwari, J.

Citation:AIR 2017 MP 1

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When arbitration award is executable against sick industry?

This would bring me to the next objection raised by the
petitioner that the petitioner industry has been declared as a
sick industry under the provisions of the SIC Act. Therefore,
by virtue of the provisions contained in Section 22(3) of the SIC
Act, the award is not executable and the execution proceeding
deserves to be dropped. The award of the Facilitation Council
being an award deemed to have been made under the Act of
1996, is executable under Section 36 of the said Act.
29. The Supreme Court in the matter of Jay Engineering Works
Ltd. v. Industry Facilitation Council and another (2006) 8 SCC 677 has held
that once the awarded amount is included in the scheme

approved by the Board, Section 22 of the SIC Act would apply.
30. Very recently, in the matter of Ghanshyam Sarda v. Shiv
Shankar Trading Company and others (2015) 1 SCC 298, the Supreme Court
has held that the SIC Act is a self-contained code and has
conferred upon BIFR complete supervisory control over a sick
industrial company to adopt such methodology as provided in
Chapter III for detecting, reviving or winding up such sick
company. The authority to determine the existence and extent
of sickness of such company and to adopt methodology for its
revival are, in the exclusive domain of BIFR and by virtue of
Section 26 there is an express exclusion of the jurisdiction of
the civil court in that behalf. The Supreme Court further held
as under in paragraph 30: -
“30. As laid down by this Court the Act is a
complete code in itself. The Act gives complete
supervisory control to BIFR over the affairs of a
sick industrial company from the stage of
registration of reference and questions concerning
status of sickness of such company are in the
exclusive domain of BIFR. Any submission or
assertion by anyone including the company that by
certain developments the company has revived
itself and/or that its net worth since the stage of
registration having become positive no such
scheme for revival needs to be undertaken, must
be and can only be dealt with by BIFR. Any such
assertion or claim has to be made before BIFR
and only upon the satisfaction of BIFR that a sick

company is no longer sick, that such company
could be said to have ceased to be amenable to its
supervisory control under the Act. The aspects of
revival of such company being completely within
its exclusive domain, it is BIFR alone, which can
determine the issue whether such company now
stands revived or not. The jurisdiction of the civil
court in respect of these matters stands
completely excluded.”
31. In light of the principles laid down herein-above, if the facts of
the present case are examined, it is quite vivid that the
petitioner has simply said that the petitioner industry is a sick
industry, it has not been demonstrated that whether the
awarded amount has been included in the scheme approved
by the BIFR. Section 26 of the SIC Act bars the jurisdiction of
the civil court, as held by the Supreme Court in Ghanshyam
Sarda (supra).
32. Therefore, the petitioner's plea in regard to applicability of the
SIC Act is not complete in itself, rather halfhearted, it has
neither been established that the awarded amount has been
included in the scheme approved by the BIFR nor it has been
shown how the civil court has jurisdiction in view of Section 26
of the SIC Act and the judgment rendered by the Supreme
Court in Ghanshyam Sarda (supra).
33. As a fallout and consequence of aforesaid discussion, I hold
that the learned executing court is absolutely justified in
rejecting the objections raised by the petitioner herein in
execution and no error of jurisdiction has been committed while
rejecting those objections raised by way of applications.
HIGH COURT OF CHHATTISGARH, BILASPUR
Writ Petition (Art. 227) No.699 of 2015

Order delivered on: 25-11-2016
M/s. I.C.S.A. (India Limited), 
V
M/s. Swastik Wires,

Hon'ble Shri Justice Sanjay K. Agrawal
Citation: AIR 2017 Chhatisgarh 70

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Whether permission of BIFR is required for continuation of civil suit against sick industries?

This is an application filed by defendant no.1-company seeking leave to defend. I
have already passed an order today that the suit has to continue and no permission is required
under Section 22 of the SICA in view of the Division Bench judgment of this Court in the
case of Saketh India Ltd (supra) and more importantly of the Supreme Court in Raheja
Universal’s case. The only defence which is raised in the application for leave to defend by
defendant no.1 is that it is a sick company. There is no credible denial of the dues which are
payable under the subject suit. The relevant paras of this leave to defend application are paras
3 to 13 and which only talk of defendant no.1-company being a sick company or with respect
to prior proceedings under Section 138 of the Negotiable Instrument Act, 1881 or allegedly
that of all material documents having been suppressed from the record. The defence is
therefore quite clearly only a moonshine, and since as already stated above, Section 22 of
SICA does not apply, the application for leave to defend is dismissed and the suit is decreed
against the defendant no.1 for the reasons given hereinafter. I may however clarify that for
execution of the decree or like proceedings against defendant No.1 prior permission will
have to be taken under Section 22 of SICA.
I (2013) BC 10 (CN)
DELHI HIGH COURT
Valmiki J. Mehta, J.
FMI INVESTMENT P. LTD.—Plaintiff
versus
MONTARI INDUSTRIES LTD. & ANR.—Defendants
CS (OS) No. 2373 of 2001—Decided on 11.10.2012

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Whether suit for recovery of money is maintainable against sick industry without consent of BIFR ?

 Insofar as the recovery of money is concerned, the matter

is completely covered by Section 22(1) of the Act. The language

employed in Section 22(1) of the Act refers to the entirety of the

period beginning from the inquiry under Section 16 till the

implementation of sanctioned scheme for revival. Section 22(1)

bars any suit for recovery of money or for the enforcement of any

security against the industrial company without the express

consent of the Board. Reference in Section 22(1) is to “an

Industrial Company” and not to “the sick Industrial Company” as

found in later sub-sections of the same Section. This also throws

light that the bar is during the period contemplated in said

Section 22(1). Such bar is period specific and sub-section (5) of

Section 22 entitles exclusion of such period while computing

limitation. During the entirety of that period the Act grants

protection to the company and leaves it to the discretion of the

BIFR whether to permit filing and maintaining of suit or other

proceedings. In the present case the BIFR was considering Draft

Rehabilitation Scheme which is a stage under Section 18(3) and

is completely covered by the period under Section 22 of the Act.

The suit in the instant case as framed for recovery of money filed

without the consent of the BIFR was not competent and

maintainable. We may at this stage refer to the decisions

rendered by this Court with regard to Section 22(1) of the Act. In

Managing Director, Bhoruka Textiles Limited Vs. Kashmiri

Rice Industries1

, after quoting sub-section (1) of Section 22 of

the Act, it was observed:-

“A plain reading of the aforementioned provision

would clearly go to show that a suit is barred when

an enquiry under Section 16 is pending. It is also

not in dispute that prior to institution of the suit,

the respondent did not obtain consent of the Board.

9. the provision of the Act and, in particular,

Chapter III thereof, provides for a complete code.

The Board has a wide power in terms of the

provisions of the Act, although it is not a court.

Sub-section (4) of Section 20 as also Section 32 of

the Act provides for non obstante caluses. It

envisages speedy disposal of the enquiry and

preferably within the time framed provided for

thereafter. Section 17 empowers the court to make

suitable orders on the completion of enquiry.

Preparation and sanction of the scheme is also

contemplated under the Act.”

In para 12 of the said decision, it was further

stated:

“If the civil court’s jurisdiction was ousted in

terms of the provisions of Section 22 of the Act,

any judgment rendered by it would be coram non

judice. It is a well settled principle of law that a

judgment and decree passed by a court or tribunal

lacking inherent jurisdiction would be a nullity.”

Similarly, in Raheja Universal Limited Vs. NRC

Limited2

 it was observed as under:

“49. 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 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 BIFR has to formulate a

scheme for revival of the company, even by

providing financial assistance in cases wherein

BIFR in its wisdom deems it necessary and finally

only when both these options fail and the public

interest so requires, BIFR may recommend

winding up of the sick industrial company. So long

as the scheme is under consideration before 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.”

The suit in the instant case, insofar as it relates to the claim

for recovery of money, could lie or be proceeded with only after

express consent of the BIFR.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.10221 OF 2014 @

(SPECIAL LEAVE PETITION (C) NO.5249 OF 2014)

GHANSHYAM SARDA 

V

M/S SHIV SHANKAR

TRADING CO. & ORS. 

UDAY UMESH LALIT, J.

Citation: AIR 2015 SC 403

Dated:November 13, 2014

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Whether mere registration of reference by BIFR would result in automatic cessation of all proceedings pending in civil courts?

The point which has, in this context, been raised in several High Courts is that the mere registration of a reference by the BIFR under the Act, would not result in the automatic cessation of all proceedings which are pending either in civil courts or in the Company Court etc. as against its assets. It is argued that in order that section 22 of the Act can come into operation, the BIFR must -subsequent to the registration of the reference under Section 15 - apply its mind and consider it necessary under Section 16 to make an inquiry and issue notices on the reference to the affected parties who are required to be heard, and that only then it can be said that an 'inquiry', is pending. Unless an inquiry is pending there cannot be a statutory stay of proceedings etc. as contemplated by section 22 of the Act.

20. For the purpose of understanding the above point, it is necessary to refer to Sub-clauses (1) to (4) of Section 16 and section 22(1) of the Act. They read as follows:

"Section 16: Inquiry into working of sick industrial companies - (1) The Board may make such inquiry as it may deem fit for determining whether any industrial company has become a sick industrial company-

(a) upon receipt of a reference with respect to such company under Section 15; or
(b) upon information received with respect to such company or upon its own knowledge as to the financial condition of the company.

(2) The Board may, if it deems necessary or expedient so to do for the expeditious disposal of an inquiry under Sub-section (1), require by order any operating agency to enquire into and make a report with respect to such matters as may be specified in the order.
(3) The Board or as the case may be, the operating agency shall complete its inquiry as expeditiously as possible and endeavour shall be made to complete the inquiry within sixty days from the commencement of the inquiry.
Explanation - For the purposes of this sub-section, an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon its own knowledge reduced to writing by the Board.
(4) Where the Board deems it fit to make an inquiry or to cause an inquiry to be made into any industrial company under Sub-section (1) or, as the case may be, under Sub-section (2), it may appoint one or more persons to be a special director or special directors of the company for safeguarding the financial and other interests of the company or in the public interest.

"Section 22(1): suspension of legal proceedings, contracts etc.: 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 section 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 with further, except with the consent of the Board or, as the case may be, the Appellate Authority."

21. It is to be noticed that according to section 22, in case an "inquiry under Section 16" is pending, then, notwithstanding anything in the Companies Act or any other instrument etc., no proceedings for the winding up of the company or for execution or distress or the like against the property of the company or for the appointment of a receiver and no suit for recovery of money or enforcement of any security or of any guarantee - shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, by the appellate authority. Section 22A permits the Board to pass certain conditional orders.

IN THE SUPREME COURT OF INDIA

C.A. No. 2572/1998 (Arising out of S.L.P. (C) No. 14327/1997) 

Decided On: 05.05.1998

Appellants: Real Value Appliances Ltd.
Vs.
Respondent: Canara Bank & Ors.

Hon'ble Judges/Coram:
Saiyed Saghir Ahmad and M. Jagannadha Rao, JJ.

Citation:(1998) 5 SCC 544

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When jurisdiction of civil court will be barred in case of sick company?

 What has to be examined is whether this purely literal
rendering of the expression “where a reference is pending” is
correct or not. First and foremost, it is important to note that the
third proviso to Section 15(1) uses the words “is pending”. A
reference has been held to be pending the moment it is
received by the Board. In Real Value Appliances Ltd. v.
Canara Bank & Ors., (1998) 5 SCC 554, this Court had to
decide whether the mere registration of a reference by the BIFR
would result in the automatic cessation of all proceedings which
are pending in civil courts and the company court against its
assets. It was argued that in order that Section 22 of the Act
can come into operation, the BIFR must, subsequent to the
registration of the reference under Section 15, apply its mind
and consider whether it is necessary under Section 16 to make
an inquiry. Unless an inquiry is pending, the provisions of
Section 22 of the Act do not get attracted. It was held that once
the reference is registered after a preliminary scrutiny, it is
mandatory for the BIFR to conduct an inquiry. This being so, it

is in furtherance of the legislative intention to see that no
proceedings against the assets are taken before the BIFR
decides, after the inquiry, to continue with the reference. It was
thus held, having particular regard to Section 16(3) explanation,
that an inquiry shall be deemed to have commenced upon the
receipt by the Board of any reference or information or upon its
knowledge reduced to writing by the Board. This being the
case, this Court held that once the reference is registered and
once it is mandatory to simultaneously call for
information/documents from the informant, then an inquiry
under Section 16 must be deemed to have commenced. In that
view of the matter, Section 22 would immediately come into
play. It is clear, therefore, that if a literal meaning were to be
applied to the expression “where a reference is pending”, the
third proviso to Section 15(1) of the Sick Industrial Companies
(Special Provisions) Act, 1985 would be rendered otiose and
the purpose for which it was inserted would completely fail. On
a literal reading of the provision, such reference shall abate on
steps being taken by the secured creditors to recover their
secured debts under Section 13(4) of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002, the moment a reference is registered. And
this Court has held that the moment the reference is registered,
an inquiry as contemplated by Section 16 shall be deemed to
commence. If that is so, then a reference can never be said to
be pending after an inquiry commences, if learned counsel for
the Appellants is correct. This can never be the case. It is clear,
therefore, that the expression “where a reference is pending”
would necessarily include the inquiry stage before the Board
under Section 16 of the Act. If this be the case, then the
reference can be said to be pending not only when an inquiry is
instituted, but also after preparation and sanction of a scheme
right till the stage the scheme has worked out successfully or till
the BIFR gives its opinion to wind up the company.
49. The expression “reference” used in Section 15(1) proviso
3 is used in contra distinction to the expression “proceedings” in
Section 22. “Proceedings” under Section 22 are actions taken
against the sick company, whereas “references” are actions
initiated by a sick company – it is perhaps for this reason that

the third proviso to Section 15(1) uses the expression
“reference” instead of the expression “proceedings”.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS._614-615 OF 2016
(ARISING OUT OF SLP(CIVIL) NOS. 26170-26171 OF 2008)
M/S MADRAS PETROCHEM LTD.
& ANR. … APPELLANTS
VERSUS
BIFR & ORS. … RESPONDENTS
Citation:(2016) 4 SCC 1

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