MORGAN SECURITIES AND CREDIT PVT.LTD versus MODI RUBBER LTD.

Citation: [2006] SUPP. 10 S.C.R. 1022 · Decided: 14-12-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

A 
MORGAN SECURITIES AND CREDIT PVT.LTD. 
\·: 
MODI RUBBER LTD. 
DECEMBER 14. 2006 
B 
[S.B. SINHA AND P.K. BALASUBRAMANY AN, JJ.] 
Company Law: 
Sick Industrial Companies (Special Provisions) Act, 1985: Section 
c 22(3). 
Suspension of legal proceedings, contracts etc.-Arbitration and 
Conciliation Act and SICA-Interrelation between-Predominance of the 
former over the latter-Inter Corpora/e Deposit-Default in paymenl of-An 
D arbi1ra1ion a\rard was made in favour of a creditor for a certain sum- The 
credilor also filed an applicalion before !he High Court for ll'inding up of' 
!he deb1or-co111pany. irhich was allowed- The High Courl res/ruined the 
debtor-company from dealing wilh ils assets ll'ilhout 1he permission of the 
Court-The debtor-company made a reference under S. 15 of SICA to the 
Board for Industrial and Financial Reconslruction-The Division Bench of 
E the High Court set aside the order of winding up and directed to keep the 
winding up proceedings in abeyance till the disposal of the appeal under 
SICA-The debtor-company filed an application before the Board under S. 
19-A read with S. 22(3) of SICA for permission to dispose of its shares, which 
was dismissed-A writ petition filed against the aforesaid order before another 
F 
High Court was allowed-Pursuant lo or in furtherance of the said judgment 
of' that High Court, the shares had been sold and the sale proceeds had been 
deposited with the Board-Validity of-Held: During the pendency of an 
inquil)' before the Board. the debtor-company could sell its shares -It, however, 
could not do so because of' the restraint order passed against it-It was, 
therefore. 11ot p£rmissible for the High Court to direct sale of the shares 
G despite ref'uscil 011 the part of the Board to do so-The Board has the power 
to suspend the operation of an award if any occasion arises therefor-
Arbitralion and Conciliation Act, 1996, Ss. 5 & 36. 
The appellant advanced a certain sum by way of an Inter Corporate 
Deposit to the respondent-company. The respondent-company defaulted in the 
fl 
1022 
MORGAN SECURITIES AND CREDIT PVT. LTD.'" MODI RUBBER LTD. 
1023 
payment thereof. An arbitration award was made in favour of the appellant for A 
a certain sum under the Arbitration and Conciliation Act, 1996. The appellant 
also filed an application before the High Court for winding up of the 
respondent-company, which was allowed. The High Court restrained the 
respondent-company from dealing with its assets without the permission of 
the Court. The respondent, in the meanwhile, made a reference under Section 
15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) B 
to the Board for Industrial and Financial Reconstruction (Board). 
An appeal against the order of winding up was preferred by the 
respondent before the Division Bench of the High Court The Court set aside 
the order of winding up and directed to keep the winding up proceedings in C 
abeyance till the disposal of the appeal under SICA. The respondent filed an 
application before the Board under Section 19-A read with Section 22(3) of 
SICA for permission to dispose of its shares, which was dismissed. 
A writ petition filed against the aforesaid order before another High 
Court was allowed. Pursuant to or in furtherance of the said judgment of that D 
High Court, the shares had been sold and the sale proceeds had been deposited 
with the Board. Hence the appeal. 
The followirg question arose before the Court:-
Whether the provisions of the Arbitration and Conciliation Act, 1996 E 
would prevail over the provisions of the Skk Industrial Companies (Special 
Provisions) Act, 1985? 
Dismissing the appeals, the Court 
HELD: (Per Sinha, J.) 1. The Arbitration and Conciliation Act, 1996 is F 
a complete Code by itself. It lays down the machinery for making an arbitral 
award enforceable. In terms of section 36 of the 1996 Act, an award becomes 
enforceable as if it were a decree where the time for making the application 
for setting it aside under Section 34 has expired, for such application having 
been made, has been refused. (1036-F] 
McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 6 
SCALE 220, referred to. 
2. It is not in dispute that during the pendency of an inquiry before the 
Board for Industrial and Financial Reconstruction (Board), the respondent 
G 
H 
1024 
SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R. 
A could sell its shares. It, however, could not do so because of the res

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