Thursday, July 31, 2008

STATE OF U.P. & ORS. v. M/S. SWADESHI PLYTEX LTD. & ORS.

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No.......................OF 2008 (arising out of SLP (Civil) No. 21002 of 2006) State of U.P. & Ors. ......Appellants M/s. Swadeshi Polytex Ltd. & Ors. .....Respondents WITH
C.A.No............/2008 @ SLP (C) No.3272/2006
HARJIT SINGH BEDI,J.

1. Leave granted.


2. Respondent No.1, M/s. Swadeshi Polytex Limited (hereinafter referred to as "SPL") a company registered under the Companies Act, 1956 and presently a sick unit has its registered Office at Kavi Nagar, Industrial Area, 2 Ghaziabad. Concededly approximately 33% of the shares of the SPL are held by Swadeshi Cotton Mills Limited, Kanpur (a unit of the National Textile Corporation, a Government Enterprise) about 28% and 15% by M/s.

Paharpur Cooling Towers Limited and some financial institutions respectively, and the remaining 23% or so by the general public. It is on record that the CMD of the National Textile Corporation Ltd. is holding the charge of SPL and steps are underway for the rehabilitation of the company. It appears that till year 1996-97, SPL was doing reasonably well whereafter a financial crisis seems to have set in, forcing its closure on 30th September 1998. As SPL was unable to pay the wages due to its employees, several applications were filed by its workmen under the provisions of the Uttar Pradesh Industrial Peace (Timely Payment of Wages) Act, 1978 (hereinafter called the 1978 Act). A recovery certificate was thereafter issued under sub-section (1) of Section 3 of the 1978 Act and pursuant thereto, the Company was called upon to make good the wages due to the workmen 3 and on its inability to do so, the authorities proceeded to recover the amounts due as arrears of land revenue. A report was thereafter submitted by the Amin on 7th January 2005 which was endorsed by the Sub-Divisional Magistrate, Ghaziabad in his communication dated 10th February 2005, whereupon an attachment notice in Form 73-D was issued and a proclamation for the sale of the property on 23rd February 2005 was also ordered.

The proclamation was however cancelled by the SDM, Ghaziabad and on re-consideration, an order dated 1st April 2005 was passed and the Tehsildar, Ghaziabad was directed to hold the auction on 2nd May 2005 after giving wide publicity and after the properties had been properly valued. A fresh proclamation was accordingly issued by the Sub-Divisional Magistrate, Ghaziabad on 1st April 2005 itself, without disclosing the details of the properties or their estimated value as also the date of the auction. An auction notice was, however, published in "Amar Ujala" on the 22nd April 2005 indicating that the estimate value of the properties was about 27 Crores and 4 that the transfer of the property pursuant to the auction would be made on the terms and conditions stipulated by the U.P. State Industrial Development Corporation (hereinafter called the UPSIDC) the present appellant. It is also the case of the appellant herein that the personal service of the sale proclamation was also made on the Chowkidar of the SPL on 21st April 2005. The auction was in fact held on the stipulated day i.e. 2nd May 2005 and the UPSIDC was found to be the highest bidder. The recovery certificate issued by the Deputy Labour Commissioner and the auction notice dated 22nd April 2005 was challenged by SPL by way of Writ Petition No.

35005 of 2005 referring to the irregularities in the issuance of the sale proclamation and the auction notice and it was prayed that the proceedings be quashed. A reply was filed in response to the Writ Petition but the petition was ultimately dismissed with the observation that repeated attempts to recover the dues had failed on account of the recalcitrant attitude of SPL and that the procedural defects which had been pointed out could be 5 challenged by filing objections under Rule 285 (i) of the Uttar Pradesh Zamindari Abolition & Land Reforms Rules, 1952 (hereinafter called the "Rules"). Several objections were accordingly filed with respect to the auction and the preceding events, but the Commissioner, Meerut Division, in his order dated 24th June 2005 dismissed the objections. Aggrieved by the order dated 24th June 2005, SPL preferred a revision petition before the Board of Revenue under section 293 of the U.P.

Zamindari Abolition and Land Reforms Act, 1950 (hereinafter called the "Act") read with Section 219 of the Land Revenue Act but this petition too was rejected by order dated 9th September 2005. This order was challenged before the Lucknow Bench of the Allahabad High Court in Writ Petition No.5160/2005 and it was prayed, inter-alia, that the aforesaid order and the order dated 24th June 2005 be set aside and that the entire auction proceedings dated 2nd May 2005 be quashed.

The High Court in its interim order dated 20th September 2005 directed the SPL to deposit a sum of Rs.50 Lacs 6 within a period of 30 days and in the meanwhile, directed that the sale be not confirmed. Aggrieved by the order dated 20th September 2005, the employees of the SPL filed a Special Leave Petition and in its order dated 5th December 2005, this Court directed that if the writ petition was not disposed of in the course of the week, the interim order passed by the High Court would stand vacated. The High Court, however, in its judgment dated 3rd January 2006 allowed the writ petition with costs of Rs.50,000/- and also passed strictures against the officers of the State Government who had been instrumental in arranging the auction. It is against this order that three Special Leave Petitions have been filed which are SLP (Civil) No.3272/2006 (U.P. State Swadeshi Plytex Ltd. & Ors.), SLP (Civil) No.2858/2006 (M/s. Swadeshi Polytex Ltd. Karamchari Kalyan Sangh vs. M/s. Swadeshi Polytex Ltd. & Ors.) and SLP (Civil) Polytex Ltd. & Ors). All these matters are being disposed 7 of by this judgment with the basic facts being taken from the first mentioned appeal.


3. The learned Single Judge, at the very first instance, dealt with the preliminary objections raised during the course of the hearing that in view of the Division Bench judgments of the High Court dated 13th January 2005, 4th May 2005 and 26th May 2005, it was not open to the SPL to contend at this stage that the recovery proceedings including the procedure adopted was not maintainable in law. The Court observed that W.P.

No.50571/2002 had been filed by M/s. Paharpur Cooling Towers Pvt. Ltd. and Ors. in which SPL had been arrayed as respondent No.6 and the proceedings relating to the issuance of the recovery certificates by the Deputy Labour Commissioner under sub-section (1) of Section 3 of the 1978 Act had been questioned, but the Division Bench had dismissed the Writ Petition observing that as the petitioner therein i.e. M/s. Paharpur Cooling Tower Pvt. Ltd. was pursuing the matter with the Company Law Board and had availed of an alternative remedy, the 8 writ petition was not maintainable. The Court also observed that the matter had been taken by M/s.

Paharpur Cooling Towers Ltd to the Supreme Court and an interim order dated 7th February 2005 had been made directing the petitioner to deposit a sum of Rs.5/- Crore in favour of the Registrar General of this Court, but this amount had not been deposited and the Special Leave Petition had been dismissed on 24th February 2005. The Court accordingly held that in this view of the matter, it was clear that no order against SPL had been made by this Court in the above mentioned SLP. The learned Judge then went into the scope and effect of W.P.No.35005/2005 filed by SPL impugning the auction notice dated 22nd April 2005 and observed that this petition had been dismissed with the observation that it would be open to SPL to avail of the alternative remedy available under rule 285(i) of the Rules. The Bench also noted that the third writ petition, filed by one Jitendra Khaitan (Writ Petition No.36736/2005) once again challenging the validity of the auction notice dated 22nd 9 April 2005 had been filed and this writ petition too had been dismissed with the observation, inter-alia, that in the light of the order in Writ Petition No.35005/2005, the petitioner herein could also avail the alternative remedy by filing objections under rule 285(i) of the Rules. The Court accordingly rejected the prayer of the respondents before it that in view of the aforesaid writ petitions, the writ petition was not maintainable. The Court then examined the submission as to whether the procedure envisaged for recovery of arrears under the Act and the Rules had been observed and in case they had been breached, the effect thereof and after examining the various provisions threadbare, held that the Act and Rules prescribed a procedure for the recovery of arrears of land revenue and that before a recovery certificate could be issued, the defaulter was required to be effectively served, that the Rules in question were mandatory and required strict compliance and in conclusion highlighted that there was no material on record to show that any attempt had been made to serve 10 the demand notice on SPL, and service on the Chowkidar was clearly not proper service on the defaulter. The Court also observed that auction sale was liable to set aside for the additional reason that a clear 30 days notice of the proposed auction had not been given even if the service on the Chowkidar was held to be appropriate.

The Court also held that the sale proclamation issued on 2nd May 2005 was not valid and did not comply with the provisions of rule 285, 286 and 283 of the Rules and that the proclamation that had been issued was only of Rs.1.10 Crores and did not provide for the full amount as envisaged under rule 245, which provided an opportunity to the defaulter to make good the payment so as to avoid the sale of the property. The Court also held that on facts, it was impossible for the auction- purchaser i.e., the UPSIDC to have procured the Bank Drafts from the Punjab National Bank, Kanpur on the day of the auction so as to make the deposit of the 25% of the sale price at the fall of the hammer as the auction had been conducted at Meerut, about 460 Kms. away 11 from Kanpur and that the balance 75% of the amount due on the auction had also been deposited late i.e. on 18th May 2005 which again was contrary to rule 285-D of the rules. The Court also observed that it appeared that the property had been sold at a price far below its market price and in conclusion, passed strictures against the district authorities which had conducted the auction and sale of the property in question thus quashing the order dated 9th September 2005 passed by the Board of Revenue, the order dated 24th June 2005 of the Commissioner as well as the auction sale proceedings dated 2nd May 2005 conducted by the Tehsildar, Ghaziabad with costs of Rs.50,000 and all consequential relief, and a direction that it would be open for the State Government to recover the costs from the salary of the officers who were responsible "for the auction of the property in question in such unruly manner" by holding an enquiry and that the Chief Secretary was advised to take appropriate action against the defaulting officers.

12

4. Before we embark on an examination of the contentions raised by the learned counsel for the parties, we deem it appropriate to refer to certain supervening and material factors. It is the admitted position that the workmen at whose instance the initial process of sale of the property had been initiated, have entered into an agreement dated 3rd January 2008 with SPL and the entire due amount due to them and something more has since been paid. It is also clear that the auction-purchaser is the UPSIDC, which is a Government agency and is the owner of the land over which the super-structure of SPL has been built.


5. In this background, the learned counsel for the appellants has submitted that the findings recorded by the High Court were erroneous as it was clear from the record that despite numerous opportunities given to SPL to make the payments due to their own workmen, no serious attempt had been made to do so and that on the contrary, every attempt had been to forestall the payment. It has been pointed out that the had suddenly 13 woken up to its obligations and made full payment after the decision in the writ petition to take advantage of the huge spurt in the price of real estate in Ghaziabad and the surrounding areas. It has been pleaded that there was absolutely no irregularity in the procedure relating to the auction and the finding of the High Court that the sale price appeared to be undervalued was also not based on any relevant material. It has also been pleaded that no substantial injury had been caused to SPL, as the recovery certificate initially had been issued in the year 2002 and had been challenged by the associates of SPL or by SPL itself and despite the fact that in the case of the SLP filed by M/s. Paharpur Cooling Towers Ltd., this Court had directed that a sum of Rs.5 Crore be deposited before the Registrar General, the order had not been complied with and the SLP had been dismissed proving a lack of intention on the part of the SPL or its associates to make the payment. It has finally been pleaded that the UPSIDC had deposited a sum of Rs.32.20 Crores in May 2005 and the sale had thereafter 14 been confirmed in its favour and the possession transferred, and that if this amount plus interest of 18% was taken into account, the amount now due to the appellant would be almost 48 Crores, in case the order was to be set aside.


6. The learned counsel for the respondents have, however, supported the judgment of the High Court. It has been especially emphasized that the workers due having been discharged by SPL, it did not lie on the State Government or a State Government undertaking, the appellant herein, to still pursue the matter doggedly in this Court.

It has been reiterated that the property in question had not been properly valued, as provided by rule 283 of the Rules and that the notice of the proclamation has also not been served on the SPL or on any of its functionaries and had in fact been served to the Chowkidar and that too, about a week before the auction whereas a minimum notice period of 30 days ought to have been given. It has further been pleaded that the auction purchaser i.e., the UPSIDC had not deposited 25% of the sale price and/or 15 the balance of 75% of the amount within 15 days, as required under rule 245 of the Rules and this too was a ground which was relevant in determining the propriety of the sale of the auction.


7. As would be clear, the arguments pressed by the learned counsel for both the sides pertain to the procedure adopted for the auction. Sub-section (1) of Section 3 of the 1978 Act provides that in case the occupier of an industrial establishment is in default of payment of wages in excess of Rs.50,000/-, the Labour Commissioner may forward to the Collector a certificate under his signatures specifying the wages due from the establishment concerned and that the Collector shall accordingly proceed to realize the amounts due as arrears of land revenue. Admittedly the recovery certificate had been issued and sent to the Collector, Ghaziabad by the Labour Commissioner under section 3 (1) and it is in this situation that the proceedings against the SPL had been set in motion. Section 279 of the Act provides for the recovery of arrears of land revenue by 16 various methods including an attachment and sale of the immovable property of the defaulter in respect of the arrears due. Section 280 stipulates that as soon as the land revenue had become due, a writ of demand may be issued by the Tehsildar calling upon the defaulter to pay the amount within a specified time and under section 284, the property of the defaulter may also be attached.

Section 327 provides for the modes of service of the notice on the defaulter and reads as under:

"327. Mode of service of notice.- Any notice or other document required or authorised to be served under this Act may be served either - (a) by delivering it to the person on whom it is to be served, or (b) by leaving it at the usual or last known place of abode of that person, or (c) by sending it in a registered letter addressed to that person at his usual or last known place of abode, or (d) in case of an incorporated company or body by delivering it or sending it in a registered letter addressed to the Secretary or other principal 17 functionary of the company or body at its principal office, or (e) in such other manner as may be laid down in the Code of Civil Procedure, 1908.


8. Section F of Chapter 10 of the Rules deals with the coercive procedure which can be adopted by the Collector to recover the amounts as arrears of land revenue.


9. Rules 235 and 236 authorize the Tehsildar to issue citations, writs and warrants etc. as per the prescribed form whereas Rules 241 and 245 provide as to how the citation is to be issued and writ of demand for the purpose of land revenue. Rule 246 provides for the service of the writ or citation shall, if possible, be made on the defaulter personally, but if service cannot be made on the defaulter, it can be made on the agent and sub-rule thereof further postulates that personal service shall be made by delivery to the defaulter or the agent of the foil of the writ of citation and with the sanction of the Collector such writs of demand may also be served as registered post. Rule 247-A also refers to a warrant of arrest which may be executed by a duly authorized person 18 for the recovery of the arrears and Rule 247-B (1) deals with the situation that where a defaulter at the time of his arrest pays the entire amount of arrears specified in the warrant of arrest to the process-server or to authorized officer, the defaulter will not be arrested. Rules 272, 272-A, 272-B, 273, 273-A, 278 and 285-C deal with the procedure for the attachment of the land which is proposed to be sold and Rule 273-A postulates that the procedure envisaged in Order XXI, Rule 54 of the Code of Civil Procedure must be followed at the time of attachment. Rule 285-C also provides that in case the defaulter pays the arrears of land revenue in respect of the land proposed to be sold on any day before the fixed day of the sale, the sale officer on being satisfied shall stay the sale.

Rules 282 and 283 when read together provide that in the proclamation of sale to be issued in Form Z.A. 74, it will be incumbent on the Collector to give the estimated value of the property calculated in accordance with the rules in Chapter XV of the Revenue Manual.


10. We now examine the primary arguments in the background of the above provisions. The 19 question arises as to whether the provisions for the attachment and sale of the property had been followed scrupulously, as would be necessary in such a case. We notice that the learned Single Judge has examined the matter and has concluded that there was no material on record to show that proper procedures had been adopted. A positive finding has been arrived at on facts that the Tehsildar or the Collector had even attempted to serve the demand notice personally or by registered post on SPL, as called upon under Section 327 of the Act and Rule 246, as the notice had been served on the Chowkidar who could not be said to be an agent of SPL. It must also be noticed from a bare reading of the Rule 246 that the notice can be served on the agent only if it is not possible to serve it on the actual defaulter. In the present case, we find that no attempt whatever had been made to serve the notice to the actual defaulter and had been served on the Chowkidar at the very initial stage.


11. There is yet another circumstance which indicates that the procedure for sale had not been followed. It appears from the record that the notice of citations for appearance and 20 demand had been issued on 11th January 2005 and on 1st April 2005, the Sub-Divisional Magistrate had passed an order for the valuation of the properties as well as for wide publicity of the auction and sale of the property in question and the Tehsildar, Ghaziabad had been appointed as the auction officer and the auction had been fixed for the 2nd May 2005. It is clear from the record that the sale proclamation had been issued on 1st April 2005 without any valuation of the properties and only the area of the vacant land had been specified therein and it was this notice that had been served on the Chowkidar on the 21st April 2005 and publication had been made in the newspaper "Amar Ujala" on the 22nd April 2005. There has, thus, been a clear violation of the Rules 283 and 285 ibid. Rule 283 provides for the estimated value of the property to be determined under the provisions contained in Chapter XV of the Revenue Manual. The said Chapter specifies the procedure for valuation of the property in terms of other similar properties. It is, however, clear from the record that the figure 27 Crores, the value of the property which is mentioned in the advertisement in the "Amar Ujala", 21 appears to have picked up without any basis as it is not the case of the UPSIDC that the property had been valued in accordance with the provisions of the Revenue Manual or by a valuer or expert in the field.


12. Moreover, Rule 273-A makes the provision under Order XXI, Rule 54 of the CPC applicable to proceedings for attachment and Rule 1-A of Rule 54 specifically provides for the judgment-debtor to attend court on a specified date to take notice of the date which is fixed for setting the proclamation of the sale. Concededly, this procedure had not been followed. The learned counsel for the respondent has also disputed the valuation of the property by the UPSIDC and has referred us to the pleadings in the writ petition and in particular to paragraphs 26 and 30 thereof. These paragraphs are reproduced below:

"That the auction was held on 2.5.2005 but in the furd neelam no time of auction was provided. Even the description of the land sought to be auctioned, has not been provided in the furd neelam. Six bidders, had participated in the auction, out of which only U.P. State Industrial Development Corporation was the major bidder in competition with one M/s. Suder Steel Pvt. Ltd. The property worth 22 Rs.56.00 Crores as per the rate list issued by the U.P. State Industrial Development Corporation has been auctioned for petty amount of Rs.32.00 Crores and odd. In the open market, rate of the property in question could fetch atleast Rs.100 Crores. This is apparent from the letter dated 26.4.2005 issued by Shri Mahak Singh, District Manager, UPSIDC. The circle rate of the land of the area fixed by UPSIDC is effective from 9.4.2005 is Rs.3000/- per sq.meter, by which calculation, cost of the land in question comes to Rs.56.42 Crores approx., whereas the same has been sold only @ Rs.1700/- per sq.meter, amounting to Rs. 32.20 Crores, to the UPSIDC. A true copy of the furd neelam letter dated 26.4.2005 issued by District Manager, UPSIDC are annexed herewith as Annexure No.23A & 24 to this Writ Petition.

That as per the newspaper clipping published in The Times of India property section, New Delhi edition dated 25.6.2005, the land price in Kavi Nagar, Ghaziabad is Rs.

11,000/- per sq.mt. The petitioner has suffered a substantial injury and loss in the auction held by the District Administration of a prime property situated at Kavi Nagar, Ghaziabad Industrial Area, Ghaziabad @ Rs.1700/- per sq.mt. a true copy of the newspaper clipping dated 25.6.2005 is annexed herewith as Annexure No.27 to this Writ Petition."

The replies to the paragraphs are given in SLP(C) No.3272 of 2006:

23 "That in reply to the contents of paras 23 to 25 of the writ petition which are not correct, hence denied. It is submitted that the petitioner had full knowledge about the auction, and the auction has not held much higher to the present circle rate. It is further submitted that the rate offered and accepted by the deponent is of developed land whereas, the present land is a lease land on 99 years of which already 35 years had expired and it is undeveloped area for which maximum rate has been got in the auction held on 2.5.2005."


13. Shri Nariman, the learned senior counsel for the respondents, therefore, appears to be right in contending that the specific averments made by SPL in the writ petition have not been denied by the respondent and it was therefore open to SPL to contend that the property had not been properly valued and that the sum of Rs.27 crores represents not even half the market price. In Gajraj Jain vs. State of Bihar (2004) 7 SCC 151 while dealing with a case under the State Financial Corporations Act, this is was what this Court had to say:

"In the light of the aforesaid judgment of this Court, the issue which arises for determination is - whether Respondent 2 Corporation acted reasonably and in accordance with Section 24 29 of the 1951 Act in transferring the assets of the Company on 19.3.2002 and in entering into agreement for sale with Respondent 4 on 26.4.2002. As stated above, Respondent 2 Corporation had a paramount first charge on the assets of the flour mill whereas Central Bank of India had the second charge thereon.

There is a difference between a charge and a mortgage. In the case of a charge under Section 100 of the TP Act, there is no transfer of interest in the property. A charge is not a jus in rem. It is jus ad rem.

It creates a right of payment out of the property/fund charged with the debt or out of proceeds of the realization of such property, a phrase used in Section 29(1) of the 1951 Act. A charge as defined under Section 100 of the TP Act may be enforced by sale [See Mulla: Civil Procedure Code (15th Edn.), p.2420]. We have discussed the concept of charge as it has a direct bearing on the interpretation of Section 29 of the 1951 Act.

In the present case, it has been urged that absence of valuation report and the reserved bid does not vitiate the sale. We do not find met in this argument. In the case of S.J.S. Business Enterprises (P) Ltd.

it has been held that the financial corporation, in the matter of sale under Section 29, must act in accordance with the statute and must not act unreasonably. In this case, the Corporation fails on both the counts. It has neither complied with the provisions of sub-sections (1) and (4) of Section 29, nor has it acted fairly. The test of 25 reasonableness has been laid down in the above judgment in which it is held that reasonableness to be tested against the dominant consideration to secure the best price. Value or price is fixed by the market.

In the case of a going concern, one has to value the assets shown in the balance sheet (Datta,S.: Valuation of Real Property,p.198). In our view, if the object of Section 29 of the Act is to obtain the best possible price then the Corporation ought to have called for the valuation report. This has not been done. There is no inventory of assets produced before us.

The mortgaged assets of the Company could be sold on itemized basis or as a whole, whichever is found on valuation to be more profitable. No particulars in that regard have been produced before us. If publicity and maximum participation is to be attained then the bidders should know the details of the assets (or itemized value).

In the absence of the proper mechanisam the auction-sale becomes only a pretence.

Further, in this case, the Corporation advanced Rs.90 Lakh to the Company. At that time, it must have valued the assets.

Nouch report has been produced. Lastly, in this case, the price of the assets is pegged to the dues of the Corporation and Central Bank of India. The assets are agreed to be sold to Respondent 4 not for the market price but against repayment of dues of the Corporation plus a promise to discharge the liability of Central Bank of India. Therefore, the Corporation, Respondent 2, has not acted reasonably.

It has not taken any steps to secure the best price. In fact, it has failed to protect 26 the interest of Central Bank of India, which is having the second charge on the assets transferred to Respondent 4 as well as the mortgagor which would be entitled to the balance of the sale proceeds, if any.

It was contended that as the bids were withdrawn, the offer of Respondent 4 was accepted. Even assuming for the sake of argument, that there were no offers except the offer of respondent 4, it shows that value of the assets was Rs.198.85 lakhs (i.e. Rs.28.85 lakhs + Rs.170 Lakhs). No reason has been given why Respondent 2 did not insist on downright payment of Rs.198.85 lakhs."


14. The question of valuation is to our mind of the utmost importance as it is designed to ensure the best price for the property and it is essential in this circumstance that wide publication and notice of the proposed sale should be given as per Rule 285-A which postulates a notice of 30 days between the date of issuance of the sale proclamation and the date of auction. It can hardly be over emphasized that the proper valuation of the property and wide publicity of the proposed auction is intimately linked with the price that the auction fetches. As already mentioned above, the auction had been held on 2nd May 2005. The sale proclamation had been issued 27 on the 1st April 2005, and served on the Chowkidar on the 21st April 2005, the publication made in "Amar Ujala" on 22nd April 2005 whereas rule 285 itself postulates a notice period of 30 days to be counted from the date of issuance of the sale proclamation. While dealing with a similar situation, this is was what this Court had to say in S.J.S.Business Enterprises (P) Ltd. vs. State of Bihar (2004) 7 SCC 166:

"We are of the view that the sale effected in favour of Respondent 6 cannot be sustained. It is axiomatic that the statutory powers vested in State financial corporation under the State Financial Corporations Act, must be exercised bona fide. The presumption that public officials will discharge their duties honestly and in accordance with the law may be rebutted by establishing circumstances which reasonably probabilise the abuse of that power. In such event it is for the officer concerned to explain the circumstances which are set up against him. If there is no credible explanation forthcoming the court can assume that the impugned action was improper. (See Pannalal Binjraj v. Union of India, AIR at p.409.) Doubtless some of the restrictions placed on State financial corporations exercising their powers under section 29 of the State Financial Corporations Act, as prescribed in Mahesh Chandra v. Regional Manager, U.P.Financial Corpn. Are no longer in place in view of the subsequent decision in Mills. However, in overruling the decision in 28 Mahesh Chandra this Court has affirmed the view taken in Chairman and managing Director, SIPCOT v. Contromic (P) Ltd. and said that in the matter of sale under section 29, State financial corporations must act in accordance with the statute and must not act unfairly i.e. unreasonably. If they do, their action can be called into question under Article 226. Reasonableness is to be tested against the dominant consideration to secure the best price for the property to be sold.

"This can be achieved only when there is a maximum public participation in the process of sale and everybody has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price."

Adequate publicity to ensure maximum participation of bidders in turn requires that a fair and practical period of time must be given to purchasers to effectively participate in the sale. Unless the subject-matter of sale is of such a nature which requires immediate disposal, an opportunity must be given to the possible purchaser who is required to purchase the property on "as-is-where-is basis" to inspect it and to give a considered offer with the necessary financial support to deposit the earnest money and pay the offered amount, if required."

29

15. We must, therefore, repel Mr. Dwivedi's argument that as SPL had suffered no prejudice in the auction proceedings, the sale should not be interfered with.

16. There is yet another circumstance which vitiates sale.

Rule 285-D of the Rules that 25% of the amount of the auction money shall be deposited at the fall of the hammer and the remaining 75% within 15 days. The case of the appellants is that the Bank draft for 7.80 Crores had been deposited by the auction purchasers on 2nd May 2005 i.e., the date of auction but the learned Single Judge has found that as the auction had been completed at 1.30 p.m., it would not have been possible to have received the Bank draft from Kanpur 460 km. away on that date. This finding appears to be correct. We also find that the balance 75% of the amount that had been deposited by various Bank drafts on 18th May 2005 was also beyond the 15 days permissible and the finding of the learned Single Judge based on the record is that though the drafts were dated 14th May 2005 but they had, in fact, had been handed over to the concerned authority only on the 18th 30 May 2005. This Court in M.M.Shah vs. S.S.A.S.Mahamad &

Anr. 1954 SCR 108 has held as under:

"Having examined the language of the relevant rules and the judicial decisions bearing upon the subject we are of opinion that the provisions of the rules requiring the deposit of 25% of the purchase-money immediately on the person being declared as a purchaser and the payment of the balance within 15 days of the sale are mandatory and upon non-compliance with these provisions there is no sale at all. The rules do not contemplate that there can be any sale in favour of a purchaser without depositing 25% of the purchase-money in the first instance and the balance within 15 days.

When there is no sale within the contemplation of these rules, there can be no question, of material irregularity in the conduct of the sale. Non-payment of the price on the part of the defaulting purchaser renders the sale proceedings as a complete nullity. The very fact that the Court is bound to re-sell the property in the event of a default shows that the previous proceedings for sale are completely wiped out as if they do not exist in the eye of law. We hold, therefore, that in the circumstances of the present case there was no sale and purchasers acquired no rights at all."


17. For this additional reason as well, the auction sale cannot be maintained.

31

18. In this view of the matter, we need not go into the argument raised by Mr. R.F. Nariman that in the facts of the case we should not entertain this matter in the exercise of the discretionary jurisdiction under Article 136 of the Constitution of India.


19. We also notice from the last paragraph of the judgment of the learned Single Judge appears to have been extremely annoyed with what he perceived to be gross irregularities on the part of the officers of the State Government connected with the sale of the property and he had accordingly directed as under:

"Subject to above writ petition is allowed with cost quantifies to Rs.50,000/- Petitioner shall be entitled to withdraw Rs.25,000/- and rest of Rs.25,000/- shall be remitted to U.P.

State Legal Services Authorities to utilize for providing legal aid to the litigants approaching Lucknow Bench of High Court. The cost shall be deposited within one month from today in this court by the District Magistrate, Ghaziabad.

Registrar to ensure compliance. It shall be open for the State Government to recover the cost from the salary of the office/officers who are responsible to auction the property in question in such unruly manner by holding an inquiry.

32 The Chief Secretary Government of U.P.

is further directed to take appropriate action against the officers or employees who had acted in arbitrary manner while proceeding with the auction and sale of the property in question.

Let a copy of the judgment be sent to the Chief Secretary, Govt. of U.P. by the office within a week for appropriate action."


20. We are of the opinion, however, that High Court's direction that action should be initiated against the concerned officers, is not justified and we accordingly expunge these directions more particularly as SPL's conduct as well does it no credit. We, however, maintain the directions in so far as the costs are concerned. With this minor modification, the appeals are dismissed.

........................................J.

(TARUN CHATTERJEE) .......................................J.

SUDARSHA AVASTHI v. SHIV PAL SINGH

CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6807 OF 2005 Sudarsha Avasthi Appellant Versus Shiv Pal Singh Respondent W I T H :
CIVIL APPEAL NO.1108 OF 2007.


A.K. MATHUR, J.


1. Both these appeals involve common question of fact and law, therefore, they are disposed of by this common order. For convenient disposal of both the case, the facts given in C.A.No.6807 of 2005 (Sudarsha Avasthi v.

Shiv Pal Singh) are taken into consideration.


2. This civil appeal is directed against the order passed by learned Single Judge of the High Court of Judicature at Allahabad, Lucknow Bench, Lucknow by which 1 three election petitions were disposed of one by the appellant, Jitendra Nath Pandey and Sharad Tiwari by the common order. The appellant before us, Sudarsha Avasthi filed an election petition being Election Petition No.3 of 2002 for declaration of Shiv Pal Singh's election to the Uttar Pradesh Legislative Council to be void on various grounds. The appellant was an elector in the Electoral Roll for election to the Legislative Council of Uttar Pradesh from Lucknow Division Graduates' Constituency and his name was mentioned at Serial No.1595 of Part No.190 Aliganj Ward Lucknow. The election was held on 2.5.2002 and the result was declared on 7.5.2002. The respondent - Shiv Pal Singh was declared elected. The election of the elected representative- respondent was challenged on the ground that the result of the election had been materially affected by improper acceptance of nomination paper of respondent. Respondent committed corrupt practice by giving money directly to Ram Pratap Singh and Pradeep Kumar with a view to induce them to contest as candidates in the said election. The respondent also committed corrupt practice by giving money to S.P.Singhal with the object of inducing him to withdraw his nomination. Lastly, the respondent committed corrupt practice of procuring assistance in furtherance of his prospects in the election from the Additional Commission (Administration) , Lucknow Division 2 who was the Assistant Returning Officer in the said election. A detailed affidavit was filed by the appellant disclosing the material facts of the corrupt practice. The Election petition was contested by the returned candidate- the respondent, Shiv Pal Singh. It was pleaded on behalf of the respondent that the election petition did not disclose any cause of action, pleadings are vague, frivolous and vexatious. The concise statement of material facts and the full particulars of the allegations of corrupt practices had not been disclosed. Therefore, the election petition was liable to be dismissed for non-compliance of the provisions of Sections 82 & 83 of the Representation of the People Act, 1951 ( hereinafter to be referred to as the Act). An application was also filed under Order VI Rule 16 read with Order VII Rule 11 of the Code of Civil Procedure ( hereinafter to be referred to as the C.P.C.) praying for dismissal of the election petition. The respondent moved an application and prayed that the preliminary issues pertaining to the maintainability of the election petition and the other that the election petition lacked material facts and disclosed no cause of action. Two issues were framed as preliminary issues which read as under:

" 1. Whether the election petition preferred by the petitioner is liable to be dismissed as it was 3 presented before the Registrar and not before the Judge of the High Court dealing with the election matter ?

2. Whether the election petition deserves to be dismissed as it does not disclose any cause of action and material facts and the particulars are lacking as alleged at this stage ? It was also referred by learned Single Judge that during the course of the proceedings, only learned counsel for the respondent- Shiv Pal Singh in Election Petition No.3 of 2002 and the appellant in person submitted their arguments on the preliminary issues as reproduced above. No issues were framed nor any arguments were advanced in the other two election petitions. Therefore, learned Single Judge observed that the order passed in election petition No.3 of 2002 will have no bearing on the other two election petitions.


3. So far as the issue No.1 was concerned, learned Single Judge after review of the pleadings, held that it was wrong to say that the election petition was not properly represented. So far as issue No.2 was concerned, learned Single Judge after review of pleadings and arguments made in the petition came to the following conclusion.

4 " The long and short of above discussions is that the petitioner suppressed the material facts which could disclose the cause of action and there being no cause of action, which might have accrued to him, I am of the decisive opinion that this election petition being devoid of merit deserves to be dismissed."


4. Incidentally, it may be mentioned that the tenure of the present office of Legislative Council has already expired and new election has already been ordered and they were held during the pendency of this petition and the results are awaited. Therefore, it was contended on behalf of the respondent that it is purely an academic issue as the fresh election has already been held and the term of the present office is already over. Therefore, no useful purpose will be served in going into the merit of the case.

The appellant submitted that he has made serious allegations of corrupt practice and in case he succeeds in establishing that there was corrupt practice then the incumbent could be debarred from contesting the election.

Therefore, the appellant insisted that the civil appeal should be decided on merits.

5

5. We have heard the appellant in person and learned counsel for the respondent and perused the record.

So far as issue No.2 is concerned, whether the election petition deserves to be dismissed as it does not disclose any cause of action and material facts and the particulars are lacking. In order to appreciate the contention we may refer to necessary provisions of he Act pertaining to pleadings. Section 83 of the Act says what should be the contents of the election petition. Section 83 of the Act reads as under :

" 83. Contents of petition.- (1) An election petition- (a) shall contain a concise statement of the material facts on which the petitioner relies;

(b) shall set forth full particulars of any corrupt practice that the petitioner alleges including as full a statement as possible of the names of the parties alleged to have committed such corrupt practice and the date and place of the commission of each such practice; and ) shall be signed by the petitioner and verified in the manner laid don in the Code of Civil Procedure, 1908 (5 of 1908) for the verification of pleadings:

6 Provided that where the petitioner alleges any corrupt practice, the petition shall also be accompanied by an affidavit in the prescribed form in support of the allegation of such corrupt practice and the particulars thereof.

(2) Any schedule or annexure to be petition shall also be signed by the petitioner and verified in the same manner as the petition."

As per Section 83 of the Act, it is the duty of the person who files the election petition and levels the allegation of corrupt practice, he has to disclose the material facts on which he relies and that should set forth the full particulars of a corrupt practice that the petitioner alleges including the full statement as far as possible disclosing the names of the parties alleged to have committed such corrupt practice and the date and place of commission of each such practice and the same shall be filed by the petitioner and verified in the manner as laid down in the Code of Civil Procedure. Apart from this, he has to file an affidavit in prescribed form in support of the allegation of such corrupt practice and he should disclose the particulars thereof. If he wants to rely on any document then it should be annexed to the petition signed by the petitioner and verified in the same manner as 7 the petition. Section 123 of the Act deals with the corrupt practice. What shall be the corrupt practice have been enumerated in Section 123 of the Act, like; bribery which has been defined that any gift, offer or promise by a candidate or his agent or by any other person with the consent of a candidate or his election agent of any gratification, to any person whomsoever, with the object, directly or indirectly of including a person to stand or not to stand as, or to withdraw or not to withdraw from being a candidate at an election or an elector to vote or refrain from voting at an election, or as a reward to a person for having so stood or not stood, or for having withdrawn or not having withdrawn his candidature; or an elector for having voted or refrained from voting.

Therefore, the detailed particulars are required to be given that how a person is being bribed by various modes.

All these particulars have to be given in the manner provided in Section 83 of the Act.


6. Now, keeping in background these provisions we may advert to the facts that what were the pleadings made by the appellant in his election petition and disclosure made therein. So far as the question of nomination is concerned, the appellant in person has not seriously agitated because he submitted that the election was held 8 and that the term has almost come to an end. Therefore, he concentrated primarily on the question of corrupt practice disclosed by him in his election petition. The appellant tried to persuade us that sufficient material particulars have been disclosed and the view taken by learned Single Judge that sufficient material particulars were not disclosed was not correct. Therefore, what are the material particulars disclosed by the appellant in his election petition have to be considered. So far as the allegation of corrupt practice is concerned, the same are contained in paragraph 5 B, C & D of the election which read as under :

" 5 B Because the Returned Candidate Respondent No.1 committed the corrupt practice of Bribery for gratification ( i.e. giving money) directly to induce Respondent No.2 and 3 to stand as candidates in the aforesaid election.

C. Because the Returned candidate, Respondent No.1 committed the corrupt practice of Bribery by giving money to Respondent No.4 with object of inducing directly the Respondent No.4 to withdraw from the contest from the aforesaid election.

D. Because the Returned Candidate the Respondent No.1 committed 9 the corrupt practice of procuring assistance for the furtherance of his prospects in the aforesaid election, from the Additional Commissioner (Administration), Lucknow Division, Shri A.K.Mishra, who was also the Assistant Returning Officer in the aforesaid election, and wrongly allowed an application of the Respondent No.1 for correction of his name on the ballot paper in violation of the applicable statutory provision and disallowed, with utter disregard to the directions given by the Election Commission of India to the Returning Officers for dealing with such applicants, a similar application of Km. Vibha Avasthi, another candidate to the aforesaid election, on the basis of extraneous material privately supplied by the Respondent No.1 to the said Assistant Returning Officer."

So far as the ground B is concerned, the allegations have been set out in paragraph 16 and the relevant allegations start from paragraphs 19 and 20 which read as under :

" 19. The Respondent No.2 Ram Pratap Singh. S/o Late Ram Lal Singh is real brother of the Respondent No.1.

The Respondent inducing directly Respondent No.2 to stand as a candidate in the aforesaid election. On 11.04.2002 10 at about 12.45 p.m. gave Rupees Ten Thousahd (Rs.10,000.00) to Respondent No.2 inside the Court room of the Commissioner Lucknow Division, for filing his (i.e. of Respondent No.2) nomination papers to become a candidate in the aforesaid election to U.P.Legislative Council from Lucknow Division Graduates' Constituency. The Respondent No.2 thereafter deposited the security money and filed his nomination papers before the Assistant Returning Officer in the Court room of the Commissioner, Lucknow, in presence of the Respondent No.1.


20. That Respondent No.1, while inducing Respondent No.3 directly to stand as a candidate in the aforesaid elect6ion, on 11.04.2002 at about 1.00 PM gave Rupees Ten Thousand (Rs.10,000.00) to Respondent No.3 Pradeep Kimar,S/o Late Behari Lal in the Verandah which is outside the court room of the Commissioner, Lucknow Division, for filing his (i.e. of Respondent No.3) nomination papers to become a candidate in the aforesaid election to the Uttar Pradesh Legislative Council from the Lucknow Division Graduates' Constituency. The Respondent No.1, thereafter, delivered the nomination papers to the Respondent No.3 and made him to put his signature on them at the table inside the court room of the Commissioner, Lucknow Division, while the Respondent No.1 was 11 standing by his side indicating the places for putting the signatures. The Respondent No.3 thereafter deposited the security money and filed his nomination papers before the Assistant Returning Officer in the courtroom of Commissioner, Lucknow Division. "

So far as the allegations contained in Paragraph 5 C are concerned, those are contained in paragraph 21 onwards.

Relevant allegations are in paragraphs 23 and 24 which read as under :

" 23. That Respondent No.4 S.P.Singhal S/o Ram Chandar Singhal had filed his nomination paper on 06.04.2002 in the aforesaid election and his nomination papers were found valid and accepted by the Returning Officer on 12.04.2002.


24. That Respondent No.1 gave Rupees Thirty Thousand (Rs.30,000.00) to Respondent No.4 inside the compound of the Commissioner's Office (Lucknow Division) near the exit gate, on 15.04.2002 at about 2.00 p.m. to withdraw from being a candidate at the aforesaid election. Thereafter, the Respondent No.4 withdraw his candidature by giving Notice in writing addressed to the Returning Officer on 15.4.2002."

12 So far as the allegations contained in Paragraph 5 D, those are set out at paragraph 25 onwards. Relevant portions contained in paragraphs 27 to 29 which read as under :

" 27. That on 15.04.2002 at 2.25 P.M. the petitioner had submitted an application from Km.Vibha Avasthi, a candidate in the aforesaid election, for addition of her popular name on the ballot paper, by also including her alias"Dr.Vibha Harikrishna Avasthi", and at that time the Respondent No.1 and his counsel were pleading before the Assistant Returning Officer Shri A.K.Mishra for allowing to move a third application for correction of his name in a manner as to distance/distinguish it on the ballot paper from the other two candidates with similar name viz. Shiv Pal Singh and the Petitioner tried to object to such a request, which was improper and beyond the scope of the provision in this regard, but a visibly annoyed Assistant Returning Officer Shri A.K.Mishra advised the Petitioner to confine his submissions on the application moved by the petitioner, but when requested to inform the objection, if any, or the reasons of dissatisfaction of the Returning Officer as to the genuineness of the request, the said Assistant Returning Officer announced 13 that time for withdrawing the nominations and making applications was over, and left the room without pronouncing any decision on the applications before him.


28. That at about 3.45 p.m. on the same day, the petitioner went to the chamber of the Assistant Returning Officer Shri A.K.Mishrpa, the doors of his room were half closed, and the petitioner was not allowed entry by the home guard on duty outside the room, informing that the Additional Commissioner was busy with another candidate and while the petitioner was waiting outside his room he could hear a conversation inside the room, with Mr.A.K.Mishra inquiring from Mr.Raees, the genuineness of a sample ballot paper given by S.P.Singh, and the reply was in affirmative.


29. That thereafter the doors of the room opened and the Petitioner saw the Respondent No.1 and his counsel coming out of room bowing and profusely thanking the ARO Shri A.K.Mishra; and then the petitioner was allowed entry inside the room of Shri A.K.Mishra and saw Mr.Raees Ahmad, the Senior Clerk of Lucknow District Election Office sitting inside the room and when the Petitioner asked the fate of the application moved by him on behalf of Km.Vibha Avasthi, Shri A.K.Mishra the ARO replied that the 14 same was rejected, but refused to give reasons for his decision, even on asking by the Petitioner."

Learned Single Judge has taken into consideration these grounds of corrupt practice along with the allegations contained in the election petition as reproduced above and came to the finding that these all appear to be cock and bull story. It was observed that it is not believable that Ram Pratap Singh who is the real brother of the respondent would accept illegal gratification in public view, that too inside the Court room of the Commissioner. It was further observed that the appellant did not disclose the name of any witness who was present inside the court room or outside when the money was handed over to the brother of the respondent. Similarly on the analogy that the theory of giving Rs.30,000/- as bribe to the Respondent No.4 in office of Commissioner appears to be nothing but figment of imagination. Lastly regarding ground D it was observed that Ku. Vibha Avasthi wanted some alteration in her name.

She did not move any application for addition of surname of her father. But the copy of this application for alteration of the name was not filed and it was deliberately concealed that he was the agent of Kumari Vibha Avasthi and it was also found that it is difficult to understand when the Office of the Assistant Commissioner cum Returning Officer, Shri A.K.Mishra was cordoned of by the Home Guards how did 15 he enter inside the room of Shri A.K.Mishra and it is unbelievable that the respondent went inside the room of Shri A.K.Mishra and influenced him in one way or the other and secondly it was also held that it was not wrong on the part of the candidate to have entered the office of Shri A.K.Mishra and it is difficult to believe that other person standing outside could know what transpired between the Officer and the person inside. Therefore, learned Single Judge found that this is nothing but a cock and bull story. On the basis of these pleadings learned Single Judge ultimately concluded that there was no material facts disclosing the cause of action and consequently, dismissed the election petition.


7. The election petition is a serious matter and it cannot be treated lightly or in fanciful manner nor is it given to a person who uses this as a handle for vexatious purpose. The allegations made in the petition as disclosed in the election petition appear to us to be totally a cock and bull story. We are in agreement with the view taken by the learned Single Judge that a brother will give a sum of Rs.10,000/- in the office of the Returning Officer i.e.

Assistant Commissioner for appearing in the election or contesting the election or a sum of Rs.30,000/- to another candidate for withdrawing in full public view of all and 16 sundry. On the face of it appears to be unbelievable and these allegations have been alleged in order to make a ground for some how or the other to put pressure on the respondent. Learned Single Judge after review of the allegations contained therein has rightly concluded that these allegations are not precise allegations so as to show that these are serious allegations to be tried in the election petition. Learned Single Judge has gone through all these allegations and it also appears to us to be most unbelievable and impracticable sequence of events. It is easy to allege without giving the detail particulars whether the whole thing transpired in a hearing distance.

We are in full agreement with the view taken by learned Single Judge and we are of opinion that the learned Single Judge has correctly appreciated that this case lacks in particularity any allegation of bribery as contained in Section 123 read with Section 83 of the Act.


8. The appellant in person has taken us through various decisions of this Court. The followings are the list of cases cited by the appellant.

i) AIR 1982 SC 1559 Roop Lal Sathi v. Machhattar Singh ii) (1991) 3 SCC 375 F.A.Sapa & Ors. v. Singora & Ors.

17 iii) (1999) 4 SCC 274 T.M.Jacob v. C.Poulose & Ors.

iv) (2004) 11 SCC 196 Sardar Harcharan Singh Brar v.

Sukh Darshan Singh & Ors.

v) (2005) 13 SCC 511 Harkirat Singh v. Amrinder Singh

9. No useful purpose will be served by referring to all these cases. The ratio of all these cases is the election petition should contain the allegation of bribery in a concise manner with material particulars. Material particulars disclosed in the present as mentioned above, are not sufficient to be gone into for trial. We are in full agreement with the view taken by learned Single Judge.

Therefore, we find no merit in the appeal and the same is dismissed. No order as to costs.

Civil Appeal No.1108 of 2007

10. The election petition before the High Court was dismissed for want of prosecution as nobody appeared. The learned Judge has recorded in his order that the matter was adjourned number of times and nobody appeared. Therefore, it is not necessary to restore this petition as petitioner was not serious and present term has already expired. This appeal is dismissed with no order as to costs.

18 .....................................J [A.K.MATHUR] ..............................

......J New Delhi, [ALTAMAS KABIR] May 16, 2008.

SULOCHANA v. RAJINDRA SINGH

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELALTE JURISDICTION CIVIL APPEAL NO._3636____ OF 2008 (Arising out of SLP (C) No. 21407 of 2006) Sulochana .... Appellant Versus Rajinder Singh ..... Respondent
S.B. SINHA, J.

1. Leave granted.


2. Whether the civil court has jurisdiction to entertain a composite suit filed by the appellant herein for eviction of the tenant is the question involved in this appeal which arises out of a judgment and order dated 28th September, 2006 passed by a learned Single Judge of the High Court of Madhya Pradesh at Indore in Second Appeal No. 260 of 2004, whereby and whereunder while allowing the appeal filed by the 2 respondent, the suit filed by the appellant for eviction of the respondent was dismissed.

3. The basic fact of the matter is not in dispute.


4. The premises in dispute is a shop located on the ground floor of House No.370-D, Parasi Mohalla, Neemuch Cantt, in the State of Madhya Pradesh. Appellant purchased the property in question on 23rd March, 1996 from Smt. Anntu Jenra w/o Sh. Turab Bhai. Respondent was a tenant under the predecessor-in-interest of the appellant on a monthly rent of Rs.200/- per month. By a letter dated 29th July, 1996 the appellant informed the respondent in regard to the purchase of the property by her and requested the respondent for payment of monthly rent to her. Since, despite the service of the said letter, the respondent failed and/or neglected to make payment of rent, the appellant terminated the tenancy of the respondent and requested him to vacate the tenanted premises. It was also mentioned that the shop in question was required by the appellant bona fide so as to enable her son to carry out business therein. Respondent, while denying any liability to pay any rent to the appellant, also denied her title contending that he has not been informed 3 of the sale of the property by the original landlord in favour of the appellant.


5. Appellant thereafter filed a composite suit for eviction of the respondent on the grounds of :- (i) default in payment of rent, (ii) her bona fide requirement; and (iii) denial of her title on the part of the respondent.


6. The trial court considered the merit of the suit for passing a decree on the ground of bona fide requirement as also on arrears of rent. A decree for mesne profits was also passed. In regard to denial of title, the trial court noticed that since the earlier landlord did not give any notice of transfer to the respondent, the title of the appellant was although denied at that time but the tenant now accepted his title.

It was furthermore held that since the court had condoned the delay for deposit/payment of rent and allowed the respondent time to pay the rent, the delay in deposit of the same cannot form the basis for grant of a decree for eviction on that count. However, as stated earlier, the court decreed the suit on the ground of bona fide requirement on the part of the landlord and directed the respondent to handover vacant possession within two months.

4

7. An appeal, being Regular Civil Appeal No.1A of 2004 filed by the respondent before the District Judge was dismissed by a judgment and order dated 17th February, 2004.


8. Respondent preferred a second appeal before the High Court of Madhya Pradesh, which as stated earlier, was allowed by reason of the impugned judgment and the suit filed by the appellant was dismissed on that ground alone.


9. The High Court in its judgment, relying on or on the basis Nandlal v. Nangibai [2006 (1) M.P.L.J. 231], held that the civil court has no jurisdiction as the suit was decreed only on the ground of bona fide requirement on the part of the appellant. Nandlal (supra) relied on two decisions of this Court in Dhannalal vs. Kalawatibai and others, [(2002) 6 SCC 16] and Ashok Kumar Gupta vs. Vijay Kumar Agarwal, [(2002) 3 SCC 717].


10. Mr. Sushil Kumar Jain, leaned counsel appearing on behalf of the appellant, would submit that keeping in view the pleadings of the parties as also the findings of the learned trial judge, the High Court must be held to have committed a serious error in holding that the 5 civil court had no jurisdiction to pass a decree for eviction. It was pointed out that the respondent-tenant was inducted as a tenant in the suit premises as far as back in 1978 by the previous owner and as the appellant purchased the suit property on 23rd March, 1996 whereas she became a widow, much earlier, i.e., on 9th July, 1990 and in that view of the matter Chapter IIIA of Madhya Pradesh Accommodation Control Act, 1961 (in short, `the Act') will not be applicable.


11. Mr. Pramit Saxena, learned counsel appearing on behalf of the respondent, on the other hand, drew our attention to the provisions of Section 45 of Act to contend that the civil court's jurisdiction is completely ousted.


12. Before adverting to the rival contentions raised, we would notice some of the provisions of the said Act.

The Act was enacted for giving protection to tenants belonging to the weaker section of society who were incapable of 6 building their own houses. Tenant has been defined in section 2(i) to mean :- " `tenant' means a person by whom or on whose account or behalf the rent of any accommodation is, or, but for a contract express is, or, but for a contact express or implied, would be payable for any accommodation and includes any person occupying the accommodation as a sub- tenant and also, any person continuing in possession after the termination of his tenancy whether before or after the commencement of this Act ; but shall not include any person against whom any order or decree for eviction has been made."

13. Eviction of the tenant is governed by Chapter III of the Act.

Section 11-A of the Act excludes applicability to certain categories of landlords as specified in Chapter III-A of the Act and as defined in Section 23-J. Section 12, however, starts with a non obstante clause; it specifies the grounds only on the basis whereof the landlord may file a suit for eviction of tenant from any accommodation.

7

14. Admittedly, denial of relationship of landlord and tenant, arrears of rent and the bona fide requirement are some of the grounds on the basis whereof a suit for eviction can be filed.


15. Section 45 of the Act excludes the jurisdiction of the civil court stating :- "45. Jurisdiction of Civil Courts barred in respect of certain matters.- (1) Save as otherwise expressly provided in this Act, no Civil Court shall entertain any suit or proceeding in so far as it relates to the fixation of standards rent in relation to any accommodation to which this Act applies or to any other matter which the Rent Controlling Authority is empowered by or under this Act to decide, and no injunction in respect of any action taken or to be taken by the Rent Controlling Authority under this Act shall be granted by any Civil Court or other authority.

(2) Nothing in sub-section (1) shall be construed as preventing a Civil Court from entertaining any suit or proceeding for the decision of any question of title to any accommodation to which this Act applies or any question as to the person or persons who are entitled to receive the rent of such accommodation."

8 Sub-section (6) of Section 13 of the Act, however, provides for the benefit of protection against eviction, stating :- "13. When tenant can get benefit of protection against eviction.- (6) If a tenant fails to deposit or pay any amount as required by this Section, the Court may order the defence against eviction to be struck out and shall proceed with the hearing of the suit, appeal or proceeding, as the case may be."


16. Chapter III-A provides for special provisions. It is confined to eviction of tenants on grounds of bona fide requirement of different classes of landlords specified therein. A summary procedure is provided for. Recourse thereto can be taken only by the specified landlord within the meaning of the provision of Section 23-J of the Act which means a `landlord who is a widow or divorced wife' amongst others. Amongst others a servant of any Government including a member of defence services, would also fall within the purview of the said definition. Only a landlord who comes within 9 the purview of the said definition is entitled to file suit on the ground of his or her bona fide requirement.


17. Section 23-H provides for deposit of rent pending proceedings for eviction or for revision.


18. The jurisdiction of the civil court can thus be excluded only if the matter comes within the purview of Section 45 of the Act of Chapter III thereof. It is beyond any cavil that the application for eviction contemplated by Chapter III-A relates to an eviction of the tenant by the landlord as defined in Section 23-J of the Act.


19. Ex facie Section 45 of the Act has no application to the facts and circumstances of this case. Section 45 is subject to the other provisions contained therein; one of them, indisputably is Section 12 which confers jurisdiction upon the civil court to entertain a suit for eviction of the tenants subject, of course, to the case falling under one or more grounds specified therein.


20. It is now well settled that the provision excluding jurisdiction of the civil court are to be strictly construed. They are not to be 10 inferred readily. [See Swamy Atmananda and Others v. Sri Ramakrishna Tapovanam and Others (2005) 10 SCC 51]

21. The jurisdiction of civil court is also to be determined having regard to the averments contained in the plaint. Appellant did not proceed on the basis that she was a `specified landlord' within the meaning of Section 23-J of the Act. Furthermore a composite suit for eviction was filed, i.e., not only on the ground of bona fide requirement but also on the ground of default of payment of rent as also denial of relationship of landlord and tenant.


22. It was explained as to why the civil court had the requisite jurisdiction.


23. Requisite averment as regards the cause of action for the said suit was made in paragraph 10 of the plaint which reads as under :- "(10) That, despite communicating information through notice to the defendant about having purchased the disputed shop by the plaintiff, and about bona fide and reasonable necessity of the suit/disputed shop along with possession of excess area than that of tenanted portion, along with the arrears of the rent thereof, for opening of the 11 shop for medicines by her son Rajesh Kumar, and because of denying by the defendant to recognize the plaintiff as the owner of the disputed shop, as also because of denial by the defendant to pay the arrears of the rent as well as handing over possession of the shop, the plaintiff has been compelled to file this suit."


24. It is also relevant to notice the prayers made in the said suit, which are :- "13) That the plaintiff prays for the following relief against the defendant :- a) That a decree of eviction may be passed in favour of the plaintiff and against the defendant, to vacate the municipal house No.370-D, in whose north is public road, in south is the house no.370-F; in east is the house No.370-D; and in west is joint gali and house No.370-E are located, and in which the defendant is in occupation against rent & is carrying on his business by the name & style of M/s. Rathore & Sons; and its vacant possession be peacefully awarded to the plaintiff from the defendant.

b) That, the plaintiff be awarded arrears of the rent from the defendant amounting to Rs.3000/- and decree may be passed in favour of the plaintiff and against the defendant, and from the date of institution of the suit till the date of its remittance interest at the rate of Rs.2/- per hundred per month 12 may also be awarded by way of compensation &

belated payment against use & utilization.

c) That, from the date of the institution of the suit till receipt of vacant possession of the disputed premise, compensation be awarded at the rate of Rs.200/- per month against the use and utilization of the disputed premises by the defendant.

d) That, the total expenses of the suit be awarded to the plaintiff from the defendant along with interest at the rate of Rs. 2/- per hundred per month, from the date of the insituttion of the suit till its recovery.

e) That, any other justified relief which may be considered to be eligible by the plaintiff may also be awarded from the defendant."


25. Respondent in his written statement not only denied and disputed the title of the appellant but also denied and disputed that he was in default, apart from the contention raised as regards the bona fide requirement of the appellant, inter alia stating :- "1) That the contents of paragraph 1 of the plaint are not admitted. The ex- owner/landlord of the hosue Antu Jehara wife of Shri Turab Bhai (H.M. Fazal Hussain) resident of Bombay has not communicated any information uptill today 13 to the defendant about transfer of proprietorship of the disputed premises; nor has appraised about this fact that presently the defendant has become tenant of the plaintiff. In the notice issued by the plaintiff, the date of purchase of the disputed premises has been shown as 29th of March, 1996 whereas in the plaint, the date of purchase has been shown as 23rd of March, 1996, and due to this reason it is not known as to on which date the plaintiff has become the owner/landlord of the disputed premises. The plaintiff has mentioned entire contents in paragraph No.1 of the plaint as false and illusionary. The plaintiff should prove the proprietorship of the disputed premises."


26. Indisputably, the issue as regards title over a property can be decided only by a civil court and, therefore, there cannot be any doubt whatsoever hat the suit as framed was maintainable. Learned trial judge however, in regard to the issue of denial of relationship of landlord and tenant opined :- "20) But, the defendant has revealed the reason about denial of the title of the plaintiff due to non-communication of any information by his ex landlord Antu Jehara;

and it has been made clear in para 26 of his cross-examination that when he had received 14 the notice of the plaintiff, then he was not admitting the plaintiff as its landlord. But now he admits the plaintiff to be the landlord and is also remitting the rent.

Therefore, in such a circumstance, the defendant has disclosed the reason about the denial of the title of the plaintiff. Therefore, in this case, he is not found liable to be evicted on the basis of denial of title, when he is accepting the title of the plaintiff.

As regards the ground of default, the trial court held :- "21) The plaintiff has also advanced an argument that the defendant has not deposited the rent within the prescribed period. He has not deposited the rent within a period of one (month) since receipt of the notice, then any benefit would not be accruable to the defendant by depositing the rent later on, and simply on the basis of having withdrawn and having received the rent through court, it would not be an abdication by the plaintiff to have left the ground under Section 12(A); whereas the plaintiff himself does not abdicate this right of her own self. On the aforesaid point, following ruling have been cited on behalf of the plaintiff:- i) Hiralal v/s. Harisingh - 1990 M.P.A.C.J. 88 ;

ii) R.C. Tambrakar & Others v/s. Nidhi Lekha - 2002 (1) L.S.C. (2) 22.

15 iii) Sushil Srivastava v/s. Nafis Ahamad - 2002 (1) M.P.S. 5 ; and iv) Kalyansingh v/s. Ramswarup - 1982 M.P.R.C.J.

62.

But in these citations it is also mentioned that if permission is granted by the court for depositing the rent belatedly, i.e. delay is condoned, then simply on this ground, eviction should not be allowed."

It was, therefore, not a case that no cause of action had arisen to file the suit for eviction on the ground of default or denial of title, but they were negatived having regard to the subsequent events.


27. One of issues which arose for consideration of the learned trial judge was the jurisdiction of the civil court. The learned Judge held:

"24) During the course of the arguments, the defendant has also raised an objection to the effect that the plaintiff being a woman is widowed and on the basis of necessity, proper forum is not a civil court, but is the Rent Control Authority, and in support of this argument has cited the ruling of Narayan Rao v/s. Parvatibai - 1998 M.P.A.C.J. 162.

25) In the aforesaid ruling, the suit was filed for eviction simply on the ground of bona fide necessity i.e. was filed for obtaining 16 possession, in which the point about the arrears of the rent was not found; but in the present case the plaintiff has since beginning has instituted this suit for recovery of arrears of the rent amounting to Rs.3000/- and for eviction;

and this issue has been framed being disputed amongst the rival parties, and therefore, in such a situation the facts of this case and the citation being different, any relief is not available to the defendant from the aforesaid ruling, and in this respect the objection of the defendant is rejected."


28. So far as the ground of bona fide necessity on the part of the appellant is concerned, it was admittedly held in her favour.


29. The reliefs granted by the civil courts in favour of the appellant are as under :- "a) The defendant should hand over the vacant possession of the disputed premises of House No.370-D, Parsi Mohalla, Neemuch Cantt. to the plaintiff within two months of the date of the judgment.

b) The defendant should pay rent to the plaintiff in respect of the disputed premises from 23rd of March, 1996 to 22nd of June, 1997 at the rate of Rs.200/- per month, and thereafter uptil handing over vacant possession, should pay at the rate 17 of Rs.200/- per month against its use &

utilization. In this context, the plaintiff would be entitled to recover the rent deposited by the defendant in the court."


30. It is, therefore, evident that not only a decree for eviction was passed, a decree for payment of arrears of rent, which otherwise could not have been granted by the Rent Controller, was also passed.


31. Before the first appellate court, inter alia, an application was filed for rejection of the plaint. It was rejected. The first appellate court held :- "43. Because the plaintiff has filed the suit apart from the necessity for the business of her son, on the grounds of denial of title and default in payment of rent; therefore such a suit falls within the jurisdiction of a civil court. Therefore, the amendment which has been proposed by the plaintiff, the same is unnecessary and is not bona fide. Due to the reason of such a situation, there is no necessity to dismiss the suit also."

18

32. In the second appeal, however, a purported substantial question of law was framed which reads, thus :- "Whether, in the facts and circumstances of the case, Civil Court had the jurisdiction to entertain a composite eviction suit filed by a landlord covered by section 23(J) on various grounds including 12 (1)(f) of the Act."


33. As noticed hereinbefore the said substantial question of law has been answered in favour of the respondent.


34. The High Court proceeded on the basis that the civil court's jurisdiction would stand ousted if the provisions contained in Sections 11, 12, 23-A, 23-J and 45 of the Act are conjointly read stating :- " After having herd learned counsel and going through material available on record, we do not think that learned counsel for the appellant is right in submitting that courts below had the jurisdiction to entertaining the composite suit for eviction in the facts of the present case. The point and controversy raised in this appeal stands decided by this court in Nandlal case supra. No contrary view of larger bench or Supreme Court was 19 brought to notice. No doubt as a general rule, in all types of civil disputes, civil courts have jurisdiction unless a part of cause of action is craved out from such jurisdiction, expressly or by implication. In such a situation, it does not amount to splitting of cause of action. On a conjoint reading of relevant provisions of the Act and Code of Civil Procedure, to us it is clear that Civil Court's jurisdiction is barred in respect of composite claim for eviction on bona fide need set up by the special category landlord covered by Section 23(J) of the Act. In view of the above discussions, we have no hesitation in holding that in the facts of the case in hand, civil court acted without jurisdiction while granting an eviction decree on the grounds of bona fide need set up by the plaintiff who is indisputably covered by Section 23-J of the Act."


35. With respect, the learned Single Judge failed to notice that the definition of `landlord' as contained in Section 2(b) and Section 23-J are different. The learned Judge furthermore failed to notice the limited application of Chapter III-A of the Act. Some decisions have been noticed by the learned Single Judge, including Ashok Kumar Gupta vs. Vijay Kumar Agarwal, [ (2002) 3 SCC 717 ] to which we would refer to a little later.

20

36. The definition of `specified landlord' as contained in Section 23-J of the Act is not as broad as the definition of the same term as contained in Section 2(b) thereof. A statute must be read, keeping in view the constitutional scheme of equality as adumbrated in Article 14 of the Constitution of India. Once a special benefit has been conferred on a special category of landlord, the same must receive strict construction. Even otherwise, it is well settled, that an exclusion provision must be construed strictly. A statute ousting jurisdiction of the civil court should also be strictly construed.


37. Appellant has purchased the premises on 23rd March, 1996 whereas the respondent was inducted as tenant of the premises way back in 1978. It is, therefore, not a case where the respondent was inducted as a tenant by the appellant. She was, thus, not a landlord within the meaning of Section 23-J of the Act. The relevant date for claiming the special benefit of Chapter III-A was the date of her becoming a widow.


38. An identical question came up for consideration in Winifred Ross and another vs. Evi Fonseca and others, [ (1984) 1 SCC 288 wherein 21 application of a pari materia provision contained in Section 13-A1 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 fell for consideration of this Court.

Plaintiff therein was an officer of the armed forces. This Court while lauding the object of the Act, however, held :- "Even the widows of such landlords may under clause (b) of Section 13-A1 can recover possession of such buildings if they satisfied the conditions mentioned therein. An analysis of clause (a) of Section 13-A1 shows that the person who wishes to claim the benefit of that section should be a landlord of the premises while he is a member of the armed forces of the Union and that he may recover possession of the premises on the ground that the premises are bona fide required by him for occupation by himself or any member of his family on the production of the required certificate either while he is still in service or after his retirement. The essential requirement is that he should have leased out the building while he was a member of the armed forces. His widow can also recover the premises of which she is or has become the landlord under clause (b) subject to fulfilment of the conditions. Having regard to the object and purposes of the Act and in particular Section 13-A1 it is difficult to hold that Section 13-A1 can be availed of by an ex- member of the armed forces to recover from a tenant possession of a building which he acquires after his retirement. Acceptance of this argument will expose the very Section 13-A1 of the Act to a successful challenge on the ground of violation of Article 14 of the Constitution for if that were so, a retired military officer who has no house of his own can purchase any building in the occupation of a tenant after his 22 retirement, successfully evict a tenant living in it on the ground that he needs it for his use, then sell it for a fancy price and again because he has no house of his own, he can again acquire another building and deal with it in the same way. There appears to be no restriction on the number of times he can do so. It was argued that he would not be able to get the requisite certificate under the Act more than once. A reading of Section 13-A1 of the Act shows that the certificate should show that the person concerned has been a member of the armed forces and that he does not possess any other suitable residence in the local area where he or members of his family can reside. Those conditions being satisfied the certificate cannot be refused. A liberal construction of Section 13-A1 of the Act as it is being pressed upon us would also enable unscrupulous landlords who cannot get rid of tenants to transfer their premises to ex-military men, as it has been done in this case in order to avail of the benefit of the said section with a private arrangement between them. It is also possible that a person who has retired from the armed forces may after retirement lease out a premises belonging to him in favour of a tenant and then seek his eviction at his will under Section 13-A1 of the Act."


39. Winfred Ross and various other decisions came up for consideration again before this Court in Dr. D.N. Malhtora vs. Kartar Singh, [ (1988) 1 SCC 656 ]. Following Winfred Ross (supra), it was held :- "12. On a conspectus of the decisions referred to hereinbefore more particularly the decision rendered by this Court in the case of Mrs Winifred Ross v. Mrs Ivy Fonseca it is well settled that in order to get the benefit of 23 eviction of the tenant in a summary way the ex- serviceman must be a landlord qua the premises as well as the tenant at the time of his retirement from service. The ex-serviceman is not competent to make an application to the Rent Controller to get possession of his house by evicting the tenant in a summary way unless and until he satisfies the test that he is a landlord qua the premises and the tenant at the time of his retirement or discharge from service."


40. The question yet again came up for consideration before a three Judge Bench of this Court in Bhagwat Dutt Rishi vs. Raj Kumar, [ (1990) 1 SCC 324 ]. The ratio laid down in Winfred Ross (supra) and Dr. D.N. Malhotra (supra) was upheld stating :- "10. In Malhotra case, this Court was called upon to consider Section 13-A1 of the very Act with which we are now concerned. On the basis of the ratio in Winifred Ross case, this Court came to the conclusion that until the landlord satisfied the test that he was a landlord qua the premises and the tenant at the time of his retirement or discharge from service, he would not be entitled to the benefit of Section 13-A of the Act.


11. It is not disputed that the appellant retired on September 30, 1981. On the finding the appellant is right in his submission that this was not a case of transfer with an oblique motive but as the property belonged to a Mitakshara father, upon his death the property has come to his hands. This feature which is different from the facts appearing in the two reported decisions, however, would not persuade us to 24 give a different meaning to the definition in Section 2 (hh). In both the cases, for good reason this Court came to the conclusion that the public officer should have been a landlord of the premises in question while in service.

Admittedly, the appellant was not the landlord before he superannuated."


41. We may now examine the decision whereupon reliance has been placed by the High Court, i.e., Dhannalal (supra). In Dhannalal (supra) the question which arose for consideration was as to whether a specified landlord could file a composite suit alongwith others for whose bona fide requirement the eviction of the tenant was sought for. Holding that in such a case even a suit by a co-owner alone would be maintainable, it was opined :- "17. It follows that a widow, who is a co-owner and landlady of the premises can in her own right initiate proceedings for eviction under Section 23-A(b), as analysed hereinbefore, without joining other co-owners/co-landlords as party to the proceedings if they do not object to the initiation of proceedings by such landlady, because she is the owner of the property and requires the tenanted accommodation for the purpose of continuing or starting the business of any of her major sons. The major sons though co-owners/co- landlords may not have been joined as party to the proceedings but it would not adversely affect the maintainability of the proceedings. It 25 would also not make any difference if they are also joined as party to the proceedings. Their presence in the proceedings is suggestive of their concurrence with the widow landlady maintaining the proceedings in her own right."

On the aforementioned narrow context of the factual matrix involved therein, it was held:- "19. ....The requirement pleaded is the requirement of a widow landlady for continuing or starting the business of her major sons. In proceedings for eviction of a tenant it is permissible for all the co-owner landlords to join as plaintiffs. Rather, this is normally done.

Now, if they all file a claim before the civil court, an objection may possibly be raised on behalf of the defendant tenant that the widow landlady being one of the claimants for eviction she must go to the Rent Controlling Authority under Chapter III-A. If they collectively join in initiating the proceedings for eviction of the tenant before the Rent Controlling Authority under Chapter III-A the defendant tenant may object that the requirement being that of the major sons who are themselves applicant landlords the claim should have been filed before the civil court, as is the plea before us.

How can such dilemma be resolved?

20. Both the learned Senior Counsel for the parties stated that there is no specific statutory provision nor a binding precedent available providing resolution to the problem posed.

Procedural law cannot betray the substantive law by submitting to subordination of complexity. Courts equipped with power to interpret law are often posed with queries which may be ultimate. The judicial steps of the Judge then do stir to solve novel problems by neat innovations. When the statute does not provide the path and precedents abstain to lead, then they are the sound logic, rational 26 reasoning, common sense and urge for public good which play as guides of those who decide.

Wrong must not be left unredeemed and right not left unenforced. Forum ought to be revealed when it does not clearly exist or when it is doubted where it exists. When the law -- procedural or substantive -- does not debar any two seekers of justice from joining hands and moving together, they must have a common path. Multiplicity of proceedings should be avoided and same cause of action available to two at a time must not be forced to split and tried in two different fora as far as practicable and permissible."

The said decision, therefore, in our opinion, cannot be said to have any application to the present case.


42. Ashok Kumar Gupta (supra) in fact runs counter to the contention of the respondent. Noticing Section 12, 23-A, 23-J and Section 45 of the Act it was held :

"10. The position after 16-1-1985 is that only in respect of the aforementioned categories of the landlords the Rent Controlling Authority has jurisdiction to order eviction of a tenant on grounds of bona fide requirement under Section 23-A. A conjoint reading of Sections 11-A, 12, 23-A, 23-J and Section 45 would show that in regard to the bona fide personal requirement of the landlord who does not fall within the specified categories in Section 23-J, the civil court has jurisdiction to entertain a suit and pass decree under clause (e) of sub-section (1) of Section 12 of the Act. It follows that the civil court rightly entertained counter-claim under Section 12(1)(e) of the Act so the decree passed by it is not vitiated for want of jurisdiction."

27

43. Thus, any matter which stricto sensu does not come within the purview of Chapter III-A would be entertainable by a civil court. This ratio of the decisions, in our opinion, was wrongly applied.


44. We have, therefore, no hesitation to hold that the decision of the High Court is unsustainable. The same is set aside accordingly. The appeal is allowed with no order as to costs.

......................................J.

(S.B. Sinha) ......................................J.

TATA MOTORS LTD. v. PHARMACEUTICAL PRODUCTS OF INDIA LTD.

IN THE SUPREME COURT OF IDNIA CIVIL APPELALTE JURISDICTION CIVIL APPEAL NO. __3640________OF 2008 (Arising out of SLP (C) No. 20289 of 2006) Tata Motors Ltd. .... Appellant Versus Pharmaceutical Products of India Ltd. & Anr. .... Respondents
S.B. SINHA, J.


1. Leave granted Introduction

2. Interpretation/application of the provisions of the Sick Industrial Companies (Special provisions) Act, 1984 (SICA) vis-`-vis the Companies Act, 1956 (1956 Act) is in question in this appeal which arises out of a 1 judgment and order dated 16th October, 2006 passed by a Division Bench of the High Court of Judicature at Bombay in Appeal No.725 of 2006 arising out of a judgment and order dated 13th February, 2006 passed by a learned Single Judge of the Bombay High Court approving a Scheme filed by the respondent herein in Company Petition No.470 of 2005 which was under Section 391 of the 1956 Act.

Background Facts:


3. First respondent is a company registered and incorporated under the 1956 Act. It took loan from Tata Finance Ltd, predecessor-in-interest of the appellant on interest @ 18% per annum. Disputes and differences arose between the parties, which were referred to arbitral tribunal. An award was passed on 30th July, 2002 in the Arbitration proceedings for a sum of Rs.1,51,36,795/- together with interest @ 18% per annum till payment and/or realization. It is stated that the total amount due to the appellant from the respondent would be near about 5.7 crores of rupees. There were other secured and unsecured creditors also.

Proceedings under SICA 2

4. Respondent being unable to pay the dues made a reference in terms of Section 15 of SICA before the Board for Industrial and Financial Reconstruction (BIFR). The BIFR appointed Industrial Development Bank of India (IDBI) as an operating agency. It purported to have considered various schemes. However, as Unit Trust of India (UTI) raised an objection for giving up any of its dues and there were six secured creditors and large number of unsecured creditors, BIFR on or about 27th October, 2004 passed an order recommending winding up of the respondent. An appeal was preferred thereagainst before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).


5. The AAIFR granted stay of operation of the order of BIFR dated 27th October, 2004 by an order dated 13th September, 2005. Before the AAIFR two separate Schemes were framed, one of them related to an arrangement between the respondent and M/s. Wanbury Ltd. It agreed to settle the outstanding dues of the creditors of PPIL. But before doing so, it thought it fit to settle all the large creditors being Financial Institutions and Banks.

The scheme envisaged payment to a class of creditors.

3 It was also envisaged:

" In addition, two immovable properties of the company (which were its primary and main assets) were to be sold and the unsecured creditors were to be paid a proportion of the sale proceeds. The balance of the sale proceeds were to be paid over to the secured creditors.

Upon payment of the cash consideration, Wanbury was to get complete control over the Respondent including all its assets subject to the approval of the merger before the appropriate forum.

The scheme was to become effective upon approval of overall settlement including an order for merger or any other mode of acquisition of assets of PPIL by Wanbury or such scheme of PPIL by BIFR/AAIFR."

Appellant was kept outside the said Scheme. The scheme involved some selective secured creditors and some selective unsecured creditors.

Company Court Proceedings

6. Respondent, however, filed an application before the High Court of Judicature at Bombay purported to be in terms of Section 391 of the 1956 Act during the pendency of the said appeal on or about 29th April, 2005. A Scheme was presented before the Company Judge purported to be involving 4 about 80 percent of the creditors, most of them being banks, financial institutions. Allegedly, even at that stage, it was not disclosed before the Company Court that unsecured creditors listed in the Scheme were only a selected few creditors, as a result whereof a large number of creditors had been excluded.


7. Before the Company Judge, the appellant filed an application for intervention. It filed an objection to the said Scheme primarily on the grounds:- "That the revival/rehabilitation of the company was under consideration of a specialized body formed under the Sick Industries Act which is a special legislation and would prevail over the provisions of the Companies Act.

That the non-obstante clause contained in the Sick Industries Act will have the effect of overriding and excluding the provisions of the Companies more so where there is an overlapping between the two Act.

That considering the scheme of the Sick Industries Act, the revival/restructing of the company cannot be considered by two separate forums separately.

That the scheme involved financial reconstruction, sale of assets of the company and merger/take over by Wanbury. These issues expressly fall within the domain of the BIFR under Section 18 of the Sick Industries Act.

5 That a scheme could not be presented only in respect of selected unsecured creditors to the exclusion of the other similarly placed unsecured creditors such as the Petitioners.

That the entire scheme was nothing but a fraud which was being played whereby the company and its assets were being transferred to Wanbury which was associated with the company itself."

UTI also filed an objection.


8. The said contentions of the appellant, however, were rejected by a learned Single Judge of the High Court by his order dated 13th April, 2006 and the Scheme was approved.

Order of the AAIFR

9. In view of the aforementioned order of the High Court, AAIFR also on or about 1st June, 2006 approved the said Scheme opining :- "5. Learned counsel for the Appellant Company states that the scheme of Compromise and Arrangement approve by the Bombay High Court have been incorporated in the scheme of revival cum merger submitted to IDBI (Operating Agency) in pursuance of direction given by us on 9.11.2005.

6

6. In view of IDBI's recommendation of the revival cum merger proposal submitted by PPIL, which is in accordance with Bombay High Court's order dated 13.2.2006, we set aside the impugned order dated 27.10.2004 and direct BIFR to consider the scheme vetted by the OA within a period of three months from the date of this order and take necessary further steps for the revival of the appellant company in accordance with law."


10. An intra court appeal was preferred thereagainst by the appellant on or about 3rd August, 2006. By reason of the impugned judgment the said Letters Patent Appeal has been dismissed, stating:- "2. The Appellant claims to be an unsecured creditor to the extent of Rs.1.51 crores as set out in the award dated 30.7.2002 with further interest at the rate of 18% per annum. It is not in dispute that the Scheme of Arrangement approved by the learned Company Judge between Pharmaceutical Products of India Ltd. and its unsecured creditors and Wanbury does not affect the rights of the appellant as the appellant, though an unsecured creditor, is not specified in Schedule-I, appended to the Scheme. In this backdrop, the impugned order cannot be faulted. However, it is clarified that whatever objections the appellant may have against the revival scheme pending before the BIFR, pursuant to the order dated 1.6.2006 passed by the AAIFR, they may place their objections before the BIFR and obviously upon such objections being placed the BIFR shall consider the revival scheme of the respondent-Company on is own merits, keeping in view all relevant fact and circumstances, including the objections of the appellant."

7 Subsequent Events

11. We may also take note of some subsequent events. In view of the order of AAIFR dated 1st June, 2006, BIFR issued notice on 1st February, 2007 to consider the Scheme-cum-merger with M/s. Wanbury Ltd.

propounded by the respondent company returnable on 29th March, 2007. On the said date, all the interested parties including the appellant were heard.

By an order dated 1st May, 2007, BIFR is said to have sanctioned the Scheme-cum-merger of M/s. Wanbury Ltd. with the respondent.


12. We may also place on record that inter alia on the premise that the said Scheme of merger was approved in gross violation of this Court's order dated 15th December, 2006, a contempt petition was filed. We are not concerned with the said Contempt Petition herein.

Contentions

13. Mr. R.F. Nariman, learned Senior Counsel appearing on behalf of the appellant, in support of this appeal would submit :- 8

1. SICA being a special statute, the provision thereof shall prevail over the provisions of the 1956 Act.


2. The High Court committed a manifest error in entertaining the respondent's application for merger under Sections 391 to 394 of the Act, although the matter was pending before the AAIFR.


3. The High Court failed to notice the binding precedent of this Court in NGEF Ltd. vs. Chandra Developers (P) Ltd. : (2005) 8 SCC 219 wherein it has clearly been held that SICA will prevail over the 1956 Act.


4. The Division Bench of the High Court has failed to consider that the Company Judge had no jurisdiction to entertain any proceeding.

5. Section 26 of the SICA bars the jurisdiction of the Company Judge.


14. Mr. C.A. Sundaram, learned senior counsel appearing on behalf of the respondent, on the other hand would urge :-

1. The operation of the order of BIFR having been stayed, the Company Petition was maintainable at the instance of the respondent.


2. Section 19 of SICA will have no application as it speaks of financial assistance by the persons specified therein.

9 3. Section 22 of SICA must be read in the context of Section 19 thereof.


4. Section 26 or any other provision of SICA do not oust the jurisdiction of the Company Court.


5. SICA as interpreted by this Court in NGEF Ltd. (supra) would prevail over 1956 Act only if the provisions of the latter are inconsistent with the provisions of SICA and not otherwise.


6. The Scheme in question being subject to approval by BIFR and that BIFR by a reason of its order dated 1st May, 2007 had granted approval thereof, the legal requirements must be held to have been complied with.

STATUTORY PROVISIONS SICA

15. SICA was enacted to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the 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.

10

16. Section 15 of SICA provides for making reference by the Board of Directors of the Company on becoming an industrial company, a sick industrial company, to the Board for determination of the measures to be adopted with respect to the company. Section 16 provides for making inquiry into the working of sick industrial company by the Board after receiving reference. Section 17 provides for powers of Board to make suitable order on the completion of inquiry. Sub-section (3) thereof reads as under:- " 17. Powers of Board to make suitable order on the completion of inquiry.

(3) If the Board decides under sub-section (1) that it is not practicable for a sick industrial company to make its net worth exceed the accumulated losses within a reasonable time and that it is necessary or expedient in the public interest to adopt all or any of the measures specified in section 18 in relation to the said company it may, as soon as may be, by order in writing, direct any operating agency specified in the order to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to such company."

11

17. Section 18 provides for preparation and sanction of Scheme. Sections 18(1)(c), 18(3) and 18(6A) read as under :- "Section 18 - Preparation and sanction of Schemes (1) Where an order is made under sub-section (3) of section 17 in relation to any sick industrial company, the operating agency specified in the order shall prepare, as expeditiously as possible and ordinarily within a period of ninety days from the date of such order, a scheme with respect to such company providing for any one or more of the following measures, namely:-- (c) the amalgamation of-- (i) the sick industrial company with any other company, or (ii) any other company with the sick industrial company;

(hereafter in this section, in the case of sub-clause (i), the other company, and in the case of sub- clause (ii), the sick industrial company, referred to as "transferee company");

(3) (a) The Scheme prepared by the operating agency shall be examined by the Board and a copy of the scheme with modification, if any, made by the Board shall be sent, in draft, to the sick industrial company and the operating agency and in the case of amalgamation, also to any other company concerned, and the Board shall publish or cause to be published the draft scheme in brief 12 in such daily newspapers as the Board may consider necessary, for suggestions and objections, if any, within such period as the Board may specify.

(b) The Board may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the sick industrial company and the operating agency and also from the transferee industrial company and any other company concerned in the amalgamation and from any shareholder or any creditors or employees of such companies:

Provided that where the scheme relates to amalgamation the said scheme shall be laid before the company other than the sick industrial company in the general meeting for the approval of the scheme by its shareholders and no such scheme shall be proceeded with unless it has been approved, with or without modification, by a special resolution passed by the shareholders of the company other than the sick industrial company.

(6A) Where a sanctioned scheme provides for the transfer of any property or liability of the sick industrial company in favour of any other company or person or where such scheme provides for the transfer of any property or liability of any other company or person in favour of the sick industrial company, then, by virtue of, and to the extent provided in, the scheme, on and from the date of coming into operation of the sanctioned scheme or any provision thereof, the property shall be transferred to, and vest in, and the liability shall become the liability of, such other company or 13 person or, as the case may be, the sick industrial company."

18. Section 19 provides for rehabilitation by giving financial assistance;

sub-sections (1), (2) and (4) whereof reads as under :- "Section 19 - Rehabilitation by giving financial assistance. -(1) 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 or reliefs or concessions or sacrifices from the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority (any Government, bank, institution or other authority required by a scheme to provide for such financial assistance being hereafter in this section referred to as the person required by the scheme to provide financial assistance) to the sick industrial company.

(2) Every scheme referred to in sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of sixty days from the date of such circulation or within such further period, not exceeding sixty days, as may be allowed by the Board, and if no consent is received within such period or further period, it shall be deemed that consent has been given.

14 (4) Where in respect of any scheme consent under sub-section (2) is not given by any person required by the scheme to provide financial assistance, the Board may adopt such other measures, including the winding up of the sick industrial company, as it may deem fit."

Sections 20, 26 and 32 of SICA read as under :- "Section 20 - Winding up of sick industrial company. - (1) Where the Board, after making inquiry under section 16 and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of 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.

(2) The High Court shall, on the basis of the opinion of the Board, order winding up of the sick industrial company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956 (1 of 1956).

(3) For the purpose of winding up of the sick industrial company, the High Court may appoint any officer of the operating agency, if the operating agency gives its consent, as the liquidator of the sick industrial company and the officer so appointed shall for the purposes of the 15 winding up of the sick industrial company be deemed to be, and have all the powers of, the official liquidator under the Companies Act, 1956 (1 of 1956).

(4) Notwithstanding anything contained in sub- section (2) or sub-section (3), the Board may cause to be sold the assets of the sick industrial company in such manner as it may deem fit and forward the sale proceeds to the High Court for orders for distribution in accordance with the provisions of section 529A, and other provisions of the Companies Act, 1956 (1 of 1956).

Section 26 - Bar of jurisdiction. - No order passed or proposal made under this Act shall be appealable except as provided therein and no civil court shall have jurisdiction in respect of any matter which the Appellate Authority or the Board is empowered by, or under, this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

Section 32 - Effect of the Act on other laws. - (1) The provisions of this Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973)and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any law other than this Act.

16 (2) Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of section 72A of the Income-tax Act, 1961 (43 of 1961), shall, subject to the modifications that the power of the Central Government under that section may be exercised by the Board without the Central Government under that section may be exercised by the Board without any recommendation by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company."

The Companies Act, 1956 Section 391 of the Companies Act, 1956 reads as under :- Section 391 - Power to compromise or make arrangements with creditors and members .- (1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them, the Tribunal may, on the application of the company or of any creditor or member of the company or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be to be called, held and conducted in such manner as the Tribunal directs.

17 (2) If a majority in number representing three- fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed under the rules made under section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company:

Provided that no order sanctioning any compromise or arrangement shall be made by the Tribunal unless the Tribunal is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 351, and the like.

(3) An order made by the Tribunal under sub- section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.

(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so 18 issued of the instrument constituting or defining the constitution of the company.

(5) If default is made in complying with sub- section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each copy in respect of which default is made.

(6) The Tribunal may, at any time after an application has been made to it under this section stay the commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of."

Interpretation of the Statutory Provisions

19. It was conceded by Mr. Sundaram SICA being a special law vis.-a-vis the 1956 Act, it shall prevail over the latter. The learned counsel, however, qualifies his submission by contending that SICA only excludes the provisions of the Companies Act when they are inconsistent with each other.

19 The provisions of a special Act will override the provisions of a general Act. A later of it will override an earlier Act. 1956 Act is a general Act. It consolidates and restates the law relating to companies and certain other associations. It is prior in point of time to SICA.

Wherever any inconstancy is seen in the provisions of the two Acts, SICA would prevail. SICA furthermore is a complete code. It contains a non-obstante clause in Section 32.


20. SICA is a special statute. It is a self contained Code. The jurisdiction of the Company Judge in a case where reference had been made to BIFR would be subject to the provisions of SICA.

We may, at this stage, notice the effect of SICA vis-`-vis the other Acts, as has been noticed by this Court in some of its judgments

21. In NGEF Ltd. vs. Chandra Developers (P) Ltd. : (2005) 8 SCC 219, in regard to the jurisdiction of the Company Court it was held :- 20 "20. Mr K.K. Venugopal, the learned Senior Counsel, would submit that having regard to sub- section (2) of Section 536 of the Companies Act, the High Court has the jurisdiction to permit sale of assets of the Company even before passing of the winding-up order, in relation whereto Section 20(4) of SICA will have no application.


23. The provisions relating to winding up by the courts occur in Chapter II of the Companies Act, 1956. Section 433 of the Act enumerates the circumstances in which the company may be wound up by the court including the inability on the part of the company to pay its debts. Section 441 of the Act specifies as to when the proceeding for winding up of a company by the court shall commence at the time of the presentation of the petition for the winding up.

In a case, however, where winding-up proceedings are initiated in terms of recommendations made by BIFR or AAIFR, as the case may be, no such petition is required to be presented. Section 443 lays down the power of a court on hearing petition; clause (d) of sub-section (1) whereof provides for a power to make an order for winding up of the company with or without costs or any other order that it thinks fit. Section 444 lays down the consequences of the winding- up order. In terms of Section 446 of the Act, in the event of passing of a winding-up order or appointment of liquidator as Provisional Liquidator, no suit or legal proceeding would commence or if pending at the date of the winding-up order, shall not be proceeded with against the company except by leave of the court and subject to such terms as the court may impose.

Sub-section (2) of Section 446 provides for a non obstante clause, in terms whereof the Company Court shall have jurisdiction to entertain or dispose of any suit or proceedings specified therein. Section 451 lays down general provisions as to liquidators. Section 457 specifies the power of the liquidator which is required to be exercised 21 with the sanction of the court. Sub-section (2) of Section 536 reads as under:

"536. Avoidance of transfers, etc., after commencement of winding up.--(1) * * * (2) In the case of a winding up by the Tribunal, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the Tribunal otherwise orders, be void."

In regard to jurisdiction of the Company Court it was held :- "39. The provisions of SICA contain non obstante clauses. It is a special statute. It is a complete code in itself. The jurisdiction of the Company Court in such matters would arise only when BIFR or AAAIFR, as the case may be, has exercised its jurisdiction under Section 20 of SICA recommending winding up of the Company upon arriving at a finding that there does not exist any chance of revival of the Company."

It was furthermore held:

"40. Mr Venugopal has placed reliance upon a decision of a learned Single Judge of the Karnataka High Court in Karnataka State Industrial Investment and Development Corpn. Ltd. v. Intermodel Transport Technology Systems for the proposition that despite the fact BIFR retains jurisdiction to get the assets of a sick company sold in terms of sub-section (4) of Section 20 of SICA; still the leave of the Company Court, therefor would be required. The said decision, however, has been reversed by the Division Bench of the Karnataka High Court in BPL Ltd. v. Intermodal Transport Technology Systems (Karnataka) Ltd. holding that the Company 22 Court has no such jurisdiction. We generally accept the views of the Division Bench.


41. It is difficult to accept the submission of the learned counsel appearing on behalf of the respondents that both the Company Court and BIFR exercise concurrent jurisdiction. If such a construction is upheld, there shall be chaos and confusion. A company declared to be sick in terms of the provisions of SICA, continues to be sick unless it is directed to be wound up. Till the company remains a sick company having regard to the provisions of sub-section (4) of Section 20, BIFR alone shall have jurisdiction as regards sale of its assets till an order of winding up is passed by a Company Court.


42. Apart from the fact that sub-section (4) of Section 20 contains a non obstante clause and, thus, it shall prevail over the provisions contained in sub-section (2).

The said Act is also a latter statute.


43. The provisions of SICA would prevail over the provisions of the Companies Act. Section 20 of SICA relates to winding up of the sick industrial company.

Before BIFR or AAIFR, as the case may be, makes a recommendation for winding up of the Company, an enquiry is made in terms of Section 16 thereof wherefor all relevant facts and circumstances are required to be taken into consideration. Before an opinion is arrived at in that behalf, the parties are given an opportunity of hearing. The satisfaction arrived at by BIFR that the Company is not likely to become viable in future and it is just and equitable that the Company should be wound up must be based on objective criteria. The High Court indisputably on receipt of such recommendation of BIFR would initiate a proceeding for winding up in terms of Section 433 of the Companies Act. Sub-section (2) of Section 536 ipso facto does not confer any jurisdiction upon the Company Court to direct sale of the assets of the sick company. It has to exercise its power thereunder subject to the provisions of the special statute governing the field. Despite the fact that the procedures laid down under the Companies Act would be applicable therefor but they must be read with sub-section (4) of Section 20 of SICA which contains a non obstante clause and in terms thereof, BIFR is authorised to sell the assets of the sick industrial company in such a manner as it may deem fit. By reason of the said provision, BIFR is also empowered to forward the sale proceeds to the High 23 Court for orders for distribution in accordance with Section 529-A and other provisions of the Companies Act which in no uncertain terms would mean that the distribution of the sale proceeds would be for the purpose of meeting the claims of the creditors in the manner laid down therein. The intention of Parliament in enacting the said provision becomes clear as in terms of Section 22-A of SICA, BIFR is empowered to issue any direction in the interest of the sick industrial company or its creditors or shareholders and direct the sick industrial company not to dispose of its assets except with its assent. Section 32, as noticed hereinbefore, again contains a non obstante clause. The scheme suggests that BIFR retains control over the assets of the Company and in terms of the aforementioned provisions may either prevent any sale or permit any sale of the assets of the sick industrial company. Such a power in BIFR remains till a winding-up order is passed by the High Court and a stage arrives for the High Court for issuing orders for distribution of the sale proceeds.


44. SICA was furthermore enacted subsequent to the provisions of the Companies Act. It is not, thus, possible to accept the submission that the High Court exercises a concurrent jurisdiction."

It was ruled that the Company Court and the BIFR do not exercise concurrent jurisdiction, holding:- "45. It may be true that the High Court's jurisdiction is that of the Appellate Authority but keeping in view the terminology contained in sub- section (4) of Section 20 read with Section 32 of the Act, it leaves no manner of doubt that the provisions of SICA shall prevail over the provisions of the Companies Act. For the aforementioned purpose, it was not necessary for Parliament to mention specifically the provisions of sub-section (4) of Section 20 that the same shall prevail over Section 536 of the Companies Act, as was suggested by the learned counsel appearing for the first respondent. The construction of the 24 provisions of both the Acts, as suggested by the learned counsel, that both the provisions of sub- section (4) of Section 20 and Section 536 should be read conjointly so as to enable an applicant to obtain a sanction of both BIFR and the Company Court, thus, do not appeal to us."

The Court noticed the non obstante clause contained in clause (4) of Section 20 as also Section 32 of SICA to hold that the High Court does not exercise concurrent jurisdiction with BIFR. The fact that SICA was enacted in 1984 had also been taken into consideration.

The Court considered in details the exercise of the jurisdiction of the Company Court vis-`-vis the BIFR to opine :- "69. BIFR admittedly had the power to sell the assets of the Company but the High Court until a winding-up order is issued does not have the same.

BIFR in its order dated 24-8-2002 might have made an observation to the effect that the Company may approach the High Court in case it intended to dispose of its property by private negotiation but the same would not mean that BIFR could delegate its power in favour of the High Court. BIFR being a statutory authority, in the absence of any provision empowering it to delegate its power in favour of any other authority had no jurisdiction to do so. "Delegatus non potest delegare" is a well-known maxim which means unless expressly authorised a delegatee cannot sub-delegate its power. Moreover, the said observations of BIFR would only mean that the Company Court could exercise its power in 25 accordance with law and not dehors it. If the Company Court had no jurisdiction to pass the impugned order, it could not derive any jurisdiction only because BIFR said so."

(See also Morgan Securities and Credit Pvt. Ltd. v. Modi Rubber Ltd. [AIR 2007 SC 683]

22. The principle laid down therein has been reiterated in Bombay Dyeing & Manufacturing Co. Ltd. vs. Bombay Environmental Action Group : (2006) 3 SCC 434 stating :

"13. The 1993 Act was enacted to provide for and regulate the payment of interest on delayed payments to small-scale and ancillary industrial undertakings and for matters connected therewith.


14. The provisions of the 1993 Act, therefore, do not envisage a situation where an industrial company becomes sick and requires framing of a scheme for its revival.


15. It is no doubt true that an award in relation to a claim of a small-scale industry if made by the Council would be governed by the provisions of the Arbitration and Conciliation Act, 1996 (for short "the 1996 Act")."

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.

26 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.


24. Our attention has been drawn to the decision of this Court in Jyoti Bhushan Gupta v. Banaras Bank Ltd, [ (1962) Supp 1 SCR 73 ] where the question which arose for consideration was as to whether Article 183 of the Limitation Act shall have any application in regard to the applicability of the provisions of the Limitation Act, it was stated :- "By the Companies Act of 1913, the High Court was invested with jurisdiction to order payment of the amounts due by debtors of companies ordered to be wound up. This jurisdiction may be invoked as of right against all persons whose names are placed on the list of contributories. The jurisdiction is ordinary : it does not depend on any extraordinary action on the part of the High Court.

27 The jurisdiction is also original in character because the petition for exercise of the jurisdiction is entertainable by the High Court as a court of first instance and not in exercise of its appellate jurisdiction. Again by s. 187 no special jurisdiction is conferred. The High Court adjudicates upon the liability of the debtor to pay debts due by him to the Company : the jurisdiction is therefore civil. Normally, a creditor has to file a suit to enforce liability for payment of a debt due to him from his debtor. The Legislature has by s.

187 of the Companies Act empowered the High Court in a summary proceeding to determine the liability and to pass an order for payment but on that account the real character of the jurisdiction exercised by the High Court is not altered. Nor is there any substance in the contention that the authority to order payment of a debt under s. 187 is merely a power of the High Court and not its jurisdiction. By s. 3 read with s. 187 of the Companies Act the High Court has jurisdiction to direct payment of the amount due by a contributory : and an order passed for payment manifestly is an order passed in exercise of the jurisdiction vested in the High Court by s. 3 read with s. 187 of the Companies Act. "

It was furthermore observed:- "The jurisdiction to deal with the claims of companies ordered to be wound up is conferred by the Indian Companies Act and to that extent the Letters Patent are modified. There is, however, no difference in the character of the original civil jurisdiction which is conferred upon the High Court by Letters Patent and the jurisdiction conferred by special Acts. When in exercise of its authority conferred by a special statute the High 28 Court in an application presented to it as a court of first instance declares liability to pay a debt, the jurisdiction exercised is original and civil and if the exercise of that jurisdiction does not depend upon any preliminary step invoking exercise of discretion of the High Court, the jurisdiction is ordinary."


25. In Damji Valli Shah v. Life Insurance Corporation of India, [(1965) 2 SCR 665 ], the question which arose for consideration was as to whether a similar provision made in the Life Insurance Corporation Act, 1956 shall bar the jurisdiction of the Company Court in terms of Section 446 (1) of the Companies Act. Referring to Section 41 of the Life Insurance Corporation Act, 1956 it was stated that the Tribunal constituted under the LIC Act will have exclusive jurisdiction. It was opined :- "20. It is in view of the exclusive jurisdiction which sub-s. (2) of s. 446 of the Companies Act confers on the company Court to entertain or dispose of any suit or proceeding by or against a company or any claim made by or against it that the restriction referred to in sub-s. (1) has been imposed on the commencement of the proceedings or proceeding with such proceedings against a company after a winding-up order has been made.

In view of s. 41 of the LIC Act the company Court has no jurisdiction to entertain and adjudicate upon any matter which the Tribunal is empowered to decide or determine under that Act. It is not disputed that the Tribunal has jurisdiction under the Act to entertain and decide matters raised in 29 the petition filed by the Corporation under s. 15 of the LIC Act. It must follow that the consequential provisions of sub-s. (1) of s. 446 of the Companies Act will not operate on the proceedings which be pending before the Tribunal or which may be sought to be commenced before it."


26. What in this case, however, has been contended is that BIFR had no jurisdiction to make a scheme as envisaged under Section 391 of the Act.

Even otherwise, `civil court' has a definite connotation. The jurisdiction of the Company Court is now vested in the Tribunal. Therefore, it will be difficult to hold, in view of a changed situation, that Section 26 ousts the jurisdiction of the Company Court in totality. The decision, however, also says that the special statute shall prevail over the general rule.

Although it may not be very relevant, we may notice that this Court in Dwarka Prasad Agarwal v. Ramesh Chander Agarwal, [(2003) 6 SCC 220] opined as under :- "22. The dispute between the parties was eminently a civil dispute and not a dispute under the provisions of the Companies Act. Section 9 of the Code of Civil Procedure confers jurisdiction upon the civil courts to determine all disputes of civil nature unless the same is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is 30 not to be readily inferred. A provision seeking to bar jurisdiction of a civil court requires strict interpretation. The court, it is well settled, would normally lean in favour of construction, which would uphold retention of jurisdiction of the civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is ousted. (See Sahebgouda v.

Ogeppa) Even otherwise, the civil court's jurisdiction is not completely ousted under the Companies Act, 1956."

We are, therefore, of the opinion that the judgment of the High Court cannot be sustained. We may furthermore notice that the decision of the learned single judge has been overruled by a Division Bench of the Bombay High Court in Ashok Organics Industries Ltd. v. Dena Bank (Company Petition No. 108 of 2006, disposed of on 25.1.2008).

It is also not possible to harmonize the provisions of Sections 391 to 394 of the 1956 Act with the provisions of SICA.

For the views we have taken, it is not necessary to consider the other contentions raised at the bar.


27. The question, however, is what relief should be granted in view of the subsequent events. Various intervention applications have been filed. We 31 do not intend to make any observation in regard thereto. We are, however, of the opinion that it is a fit case where we should exercise our jurisdiction under Section 142 of the Constitution of India to meet the object for which the Act has been enacted.


28. We have been taken through the Scheme. The Scheme provides for not only entering into an arrangement as regards repayment of debts to secured creditors and unsecured creditors but also provides for a merger, subject of course, to an appropriate order being passed by BIFR. The question is as to whether such a Scheme could be placed for approval before BIFR. We are of the view that it could not be. Before BIFR could approve a scheme, the same must be drawn in terms of the provisions of the Act and not de hors the scheme. It is required to apply its own mind. The operating agency is supposed to make a scheme. The operating agency before the AAIFR took one stand; before us it has taken another. According to it, it was not involved in the preparation of the Scheme. It had no occasion to apply its own mind. Furthermore, after the learned Single Judge passed its order, AAIFR disposed of the appeal only in terms of the order of the High Court stating :- 32 "In view of IDBI's recommendation of the revival cum merger proposal submitted by PPIL, which is in accordance with Bombay High Court's order dated 13.2.2006, we set aside the impugned order dated 27.10.2004 and direct BIFR to consider the scheme vetted by the OA within a period of three months from the date of this order and take necessary further steps for the revival of the appellant company in accordance with law."


29. The order of BIFR dated 1st May, 2007 also clearly show that it has granted its approval in view of the observations made by the appellate authority. It might have done so keeping in view the doctrine of judicial discipline in mind.

30. The order of BIFR is not an outcome of any pre-application of mind.

There is no finding that it has taken into consideration all the relevant facts.

There is nothing to show that such an order is fair or reasonable or meets the requirements of law.


31. We are, therefore, of the opinion that not only the judgment of the High Court but also the orders of BIFR as also the AAIFR should be set 33 aside and the matter should be remitted to the BIFR so as to enable it to proceed in accordance with the provisions of SICA afresh.


32. The appeal is allowed with the aforementioned observations and directions. In the facts and circumstances of the case, there shall be no order as to costs.

...............................J.

[S.B. Sinha] ................................J.

[ Lokeshwar Singh Panta] ................................J.

[ Markandey Katju ] New Delhi;