LexTATA MOTORS LTD. versus PHARMACEUTICAL PRODUCTS OF INDIA LTD. & ANR.
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• [2008] 9 S.C.R. 267 ~ TATA MOTORS LTD. A v. PHARMACEUTICAL PRODUCTS OF INDIA LTD. & ANR. (Civil Appeal No. 3640 of 2008) MAY 16, 2008 B [S.B. SINHA, LOKESHWAR SINGH PANTA AND - ~. MARKANDEY KAT JU, JJ] Companies Act, 1956; s. 391/Sick Industrial Companies (Special Provisions) Act, 1984; Ss. 15-20, 26 and 32: c Liability of sick Company to pay to secured and unse- cured creditors - Interpretation of provisions of 1956 Act and 1984 Act- Reference by sick company to Board for Industrial and Financial Reconstruction - Board while recommending ... for winding up of the company appointed an operating agency D -4 - Appellate Authority staying operation of the order of Board - Framing of schemes by operating agency for settling dues pf selective creditors excluding the appellant-company and other creditors - Approval of - Company Judge approving the Scheme - Letters Patent Appeal dismissed by High Court - E Correctness of - Held: Incorrect - Provisions under Special Act override the provisions of a general Act - S.26 of SICA bars the jurisdiction of Civil Courts in respect of any matter, the Board or AA/FR is empowered to determine - Thus, juris- ~ diction of the High Court in a case of this nature is limited - F Order of the Board not appeared to be fair and reasonable to meet the requirements of law - Hence, not only the impugned judgment but also the order of the Board as also the Appel- late Authority cannot be sustained and set aside - Matter re- miffed to the Board for consideration afresh in accordance G with the provisions of SICA - Interpretation of Statutes. -+ Respondent No.1, a company took loan from another company, the predecessor-in-interest of the appellant. Re- spondent No. 1, being unable to pay the dues to appel- 267 H 268 SUPREME COURT REPORTS [2008] 9 S.C.R. A lant and other secured and unsecured creditors made a reference before the Board for Industrial and Financial Reconstruction. The Board appointed Industrial Devel- opment Bank of India (IDBI) as an operating agency and recommended winding up of the respondent-company. B An appeal was preferred thereagainst by the appellant- creditor before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). The Appellate author- ity stayed the operation of the order of the Board. Before the Appellate authority two separate Schemes were C framed, one of them related to an arrangement between respondent No. 1 and one Mis. Wanbury Ltd. for settling of dues. Respondent No. 1, however, filed an application before the High Court in terms of Section 391 of the Com- panies Act, during the pendency of the appeal, a Scheme was presented before the Company Judge purported to D be settling of dues of about 80 percent of the creditors. 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. E Before the Company Judge, the appellant filed an appli- cation for intervention objecting the scheme on certain grounds. Rejecting objections, the scheme was approved by the High Court. Letters Patent Appeal preferred there- against by the appellant was dismissed by the High Court. F Hence, the present appeal. Appellant contended that SICA being a special stat- ute, the provision thereof shall prevail over the provisions of the 1956 Act; that the High Court committed a manifest G 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; that 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 by this Court that H TATA MOTORS v, PHARMACEUTICAL PRODUCTS 269 OF INDIA SICA will prevail over the 1956 Act; that Section 26 of the A SICA bars the jurisdiction of the company Judge; and that the Division Bench of the High Court has failed to con- sider that the Company Judge had no jurisdiction to en- tertain such a proceeding. Respondent No. 1 submitted that the operation of B the order of BIFR having been stayed, the Company Peti- ~ tion was maintainable; that Section 19 of SICA will have no application as it speaks of financial assistance by the persons specified therein; that Section 22 of SICA must c be read in the context
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