Supreme Court of India
GHANSHYAM SARDAversusM/S. SHIV SHANKAR TRADING CO. & ORS.
- Citation
- 2014 INSC 775
- Decided
- 13 November 2014
- Disposal
- Appeal(s) allowed
- Bench
- ANIL R DAVE
Holding
The BIFR retains exclusive jurisdiction over a sick company until it is formally discharged, and civil courts lack authority to declare the company revived or grant injunctions, with recovery suits permissible only with BIFR's consent.
Summary
The Supreme Court examined a dispute concerning J.K. Jute Mill Company Ltd., a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), whose net worth had reportedly turned positive. The plaintiff sought a civil court declaration that the company was no longer a sick company, an injunction against the Board for Industrial and Financial Reconstruction (BIFR), and recovery of money without BIFR's consent. The Court held that SICA is a self‑contained code granting the BIFR exclusive supervisory control over a sick company from the reference stage until it is formally discharged, and that a positive net worth does not automatically divest the BIFR of jurisdiction. Consequently, civil courts cannot declare the company revived or grant injunctions, and any suit for recovery must obtain BIFR's consent under Section 22(1). The appeal was allowed, the High Court order and injunction were set aside, and the title suit was held non‑maintainable; the BIFR was directed to determine the net‑worth issue and complete the revival scheme within two months. Costs of Rs 5 lacs were imposed on the original plaintiff for non‑disclosure of seeking BIFR consent.
Issues considered
- The scope and ambit of Sections 22(1), 26 and 32(1) of SICA, 1985.
- Whether a civil court can declare a sick company revived when its net worth becomes positive.
- Whether the BIFR loses jurisdiction automatically upon a positive net worth.
- The maintainability of a title suit seeking declaration of non‑sick status and injunction.
- The requirement of BIFR consent for suits seeking recovery of money.
Legislation cited
- Sick Industrial Companies (Special Provisions) Act, 1985s. 16, s. 17, s. 18(3), s. 20, s. 22(1), s. 25, s. 26, s. 32(1)
Subjects
SICA 1985BIFR jurisdictionnet worthcivil court jurisdictioninjunctionrecovery suitrevival schemeSection 22Section 26Section 32
Judgment
[2014] 14 S.C.R. 556
A GHANSHYAM SARDA
v.
MIS. SHIV SHAN KAR TRADING CO. & ORS.
(Civil Appeal No .. 10221of2014)
B " NOVEMBER 13, 2014 t
[A~~L R. D~VE AND U~AY UMESH_ LAUT, JJ.]
Sick Industrial Companies (Special Provisions) Act,
1985-'ss. 22(1), 26, 32'- Scope and ambit of- Company
C registered as_ a sick company - Net worth having become
positive, jurisdiction of the Board for Industrial and Financial
Reconstruction (BIFR) over the company - Held: The Act
gives complete supervisory control to the BIFR over the
affairs of a sick Industrial Company from the stage of
~ . • , I
registration of reference and questions concerning status of
0
sickness of such company are in the exclusive domain of
the BIFR - Aspects of revival of such company b'eing
completely within its exclusive domain, BIFR alone
determines the issue whether such company nqw stands
revived or not - Thus, BIFR would continue to have
E jurisdiction over the sick company even if its net worth
become positive .'... BIFR alone is empowered to determine
whether net worth has become positive as a result of which it
would cease to liave such jurisdiction -Any inquiry into such
issue regarding net worth by anyone outside the Act including
F' civil court, would be against the express intent of the Act and
would lead to incongruous and undesired results - Suit as
framed seeking deCiaration that the c0mpany was no longer
a sick company within the meaning of the Act, not competent
and maintainable - Civil court not right and justified in issuing
G injunction.
Allowing.the appeals, the Court
HELD : 1.1 It is clear that after a reference is
registered by the Board, all throughout the subsequent
H stages, the BIFR has complete supervisory control over
556
GHANSHYAM SARDA v. M/S. SHIV SHAN KAR TRADING 557
. CO. &ORS.
the affairs of such company till it is revived or the decision A
to wind up such company is taken. The ambit and extent .
of such control means and includes determination of
such measures to achieve revival of the sick company
and to check whether by such measures the revival is
being achieved or not. This must cover the power to B
decide at any stage subsequent to the registration of
reference under Section 16 whether such company has
ceased to be sick company or not. Cessation of the
status as a sick company can be under Section 17(1) or
as a result of scheme for revival being implemented and C
determination of such.issue.is in the exclusive domain
of the BIFR. [Para 25)[580-A-D]
1.2. The Sick Industrial Companies (Special
Provisions) Act, 1985 is a self-contained Code in itself.
The Act gives complete supervisory control to the BIFR D
over the affairs of a sick Industrial Company from the
stage of registration of reference and questions
concerning status of sickness of such company are in
the exclusive domain of the BIFR. Any submission or
assertion by anyone including the Company that by E
certain developments the Company has revived itself
and/or that its net worth since the stage of registration
having become positive no such· scheme for revival
needs to be undertaken, must be and can only be dealt
with by the BIFR. Any such assertion or claim has to be F
made before the BIFR and only upon the satisfaction of
the BIFR that a sick company is no longer sick, that such
company could be .said to have ceased to be amenable
to its supervisory control under the Act. The aspects of
revival of such company being completely within its G
exclusive domain, it is the BIFR alone, which can
determine the issue whether such company now stands
revived or not. The jurisdiction of the civil court in
respect of these matters stands completely excluded.
[Paras 26, 27][580-G-H; 581-8-F] H
558 SUPREME COURT REPORTS [2014] 14 S.C.R.
A · 1.3 In the instant case, the.fact that the company
. was registered as· a sick company is not doubted nor
has it been contended that the BIFR had wrongly
assumed initial jurisdiction. But what is projected is that
the net worth having become positive the BIFR has now
8 lost.jurisdiction over the company. The BIFR having
correctly assumed jurisdiction and when all the financial
affairs of·such company were directly under the
supervisory control of the BIFR, the power to decide
whether it has since then lost the jurisdiction or not, is
c also in the exclusive domain of the BIFR. The BIFR alone
is empowered to determine whether net worth has
become positive as a result of whiCh it would cease. to
have such jurisdiction. Any inquiry,into such Issue
regarding net worth by anyone outside the Act including
D civil~court, would .be against the express intent of the
Act and would ,lead to incongruous and undesired
results. The .suit as framed seeking declaration that the
company was no longer a sick company within the
meaning of the _Act, was therefore not competent and
E maintainable. The Civil Court was not right and justified
in issuing injunction as; it di~. The counsel who ·
represented the company before the BIFR, correctly
submitted that before dis~harging the company the
BIFR can examine the audited balance sheet and satisfy
F itself whether the net worth had turned positive.
[Para 28)[581 ~G-H; 582-A-DL . , ·
• , · 1.4 As regards, the recovery of money, the matter is
completely covered by Section 22(1) of•the Act. The
language employed in Section 22(1) of the Act refers to
G the entirety of the period beginning from the inquiry
under Section 16 till the implementation of sanctioned
scheme for revival. Section 22(1) bars any 'suit for
recovery of money or for the enforcement of any security
against·the industrial company'without the express
H consent of the Board. Reference in Section 22(1) is to
GHANSHYAM SARDA v. MIS. SHIV SHANKAR TRADING 559
CO.&ORS.
"an Industrial Company" and not to "the sick Industrial A
Company" as found in·later sub-sections of the same
Section. The bar is during'the p'eriod contemplated in
said Section 22(1). Such bar is period specific a.nd sub-
section (5) of Section 22 entitles exclusion of such
period while computing limitation. During the entirety of B
that period the Act grants protection to the company and
leaves it to the discretion of the BIFR whether to permit
filing and maintaining of suit or other proceedings. In
the instant case, the BIFR was considering Draft
Rehabilitation Scheme which is a stage under Section c
18(3) and is completely covered by the period under
Section 22 of the Act. The suit as framed for recovery of
money filed without the consel")t of the BIFR was not
competent and maintainable. The suit could lie.or be
proceeded with only after express consent of the BIFR o
Wara 29][582-E-H; 583-A-B; 584~E-Fj . '
"
1.5 The Title Suit.pending on the file of.the civil court
is not maintainable insofar as it seeks declaration that
the company was no longer a sick company within the
meaning of the Act and that the BIFR ceased to have E
jurisdiction over the company and that all the
·proceedings in the BIFR after filing of the positive
balance-sheet wer!;l without jurisdiction ..Consequently
the order of injunction passed by the civil court is set
aside. Insofar as the said suit pertains to the claim for F
recovery of money from the Company, the suit could lie
and be proceeded with only after express consent of the
BIFR is received by the plaintiff. The Jute Mills Company
continues to be under the jurisdiction of the BIFR. It is
left to the BIFR to satisfy itself and determine the issues G
whether the riet worth of the company has turned
positive or not. If the BIFR is so satisfied, it would de-
register the company and upon such declaration the
company would be out of the supervisory jurisdiction
of the BIFR under the Act. If the BIFR is not satisfied that H
560 . SUPREME COURT REPORTS [2014] 14 S.C.R.
A the net worth of the company has turned positive, it
would go ahead and consider the scheme for revival of
the company. [Para 31][585-C-H] ...
•· 1.6 Since the company continues to be a sick
.company and it was not competent for anyone except
B the BIFR to determine whether'the·net worth of the
company had turned positive, the sale of property
effected by the company without express leave or
permission of the BIFR fo· be questionable. However;
since the transferee of that property is not before this
C Court the matter is relegated for appropriate assessment
by the BIFR after issuing due notice' to the transferee. It
is left to the BIFR to consider and assess whether there
was any necessity or expediency to sell the property in
question. [Para 32][586-B-E]
D 1.7 The original plaintiff sought consent of the BIFR
under Section 22(1) of the Act and was before the BIFR.
However, he did not disclose either the factum that he
had so 'sought such consent or that the BIFR was in
seisin of the matter and considering whether the net
E worth 'of the company· had turned positive. Non-
disclosure of these two essential facts, was not
accidental. Therefore~ costs of Rs.5 lacs is imposed on
the original plaintiff. Though the conduct of the company
as defendant before the Civil Court was of the same
F order, since it is a sick company, no cost is imposed on
the company. [Para 33][586-GcH;'587-A-C)
Managing Director Bhoruka Textiles Limited v.
Kashmiri Rice Industries 2009 (9).SCR 463: 2009 .
(7) SCC 521 ; Raheja Universal Limited v.. NRG
G
Limited & Ors. 2012 (2) SCC.148- referred to.
. . " .
, CASE LAW REFERENCE
2009 (9) SCR 463 · Referred to Para 19
2012 (2) sec 148 Referred to Para 19
H
GHANSHYAM SARDA v. M/S. SHIV SHANKARTRADING 561
CO.&ORS.
CIVILAPPELLATE JURISDICTION: Civil Appeal No. A
10221of2014.
From the Judgment and Order dated 06.01.2014 of the
High Court of Gauhati in FAQ No. 10 of 2013.
With
B
C. A. Nos. 10222, 10223, 10224-10225 & 10226 of
2014, Contempt Petition (C) No. 338 of2014 in SLP (C) No.
5249 of 2014 and Contempt Petition (C) No. 375 of 2014 in
SLP (C) No. 8610 of 2014.
Kapil Sibal, Sanjeev Sen, Krishnan K. Venugopal, C
Sr. Advs., Pradeep Aggarwal, Ashok Jain, Gaurav Kejriwal,
Atanu Mukherjee, Lal Pratap Singh, Umesh Pratap Singh, Ms.
Ruchi Kohli, Advs. for the Appellant.
C. U. Singh, S. Guru Krishna Kumar, Harin Rawal,
Sr. Advs., Shakil Ahmad, Arjun Garg, K. K. Mohan, Vikas D
Upadhyay, Umang Shankar, B. Ramana Murthy,Advs. forthe
Respondents.
The Judgment of the Court was delivered by
UDAY UMESH LALIT, J. E
1. Permission to file SLP granted· in SLP(C) Nos.8611-
12/2014. Leave to appeal granted in all Special Leave
Petitions.
2. All these Special Leave Petitions arise out of a
common judgment and order dt. 06.01.2014 passed by the F
High Court of Gauhati in FAQ No. 1Oof2013 and Writ Petition
Nos. 4303 of 2013 and 6286 of 2013 and are being disposed
by this common judgment and order. These petitions raise
questions regarding scope and ambit of Sections 22(1), 26
and 32(1) of the Sick Industrial Companies (Special G
Provisions) Act 1985, hereinafter referred to as the Act.
3. A company named J.K. Jute Mill Company Ltd .
. (hereinafter referred to as 'the company') having its registered
office at Kanpur, Uttar Pradesh filed Reference No. 149of1994
before the Board for Industrial and Financial Reconstruction H
562 SUPREME COURT REPORTS [2014] 14 S.C.R.
A ("BIFR" for short) under the provisions of the Act. Though the
scheme was initially sanctioned for reconstruction, the BIFR
subsequently held the scheme to have failed and directed the
company to be wound up. These orders were stayed t:iy the
Appellate Authority for Industrial and Financial Reconstruction
B ("AAIFR" for short) and further proceedings before the BIFR
continued. While the matter Was thus pending, "Sarda Group"
took over the Company through Rainey Park Suppliers Private
Ltd. (RPSPL) in 2007. BIFR by its order dated 17.12.2008
approved such take .over of the management: The
c management of the company was handed over to Shri Govind
Sarda. It appears that in 2009, Shri Goitind Sarda assigned
the debt held by RPSPL in favour of an entity named Libra
Retailer Pvt. Ltd. (LRPL) and he is stated to have handed over
Jute Mill of the company to a third party. As he failed to revive
D the company, show cause notice for winding up was issued by .
·the BIFR. This action was challenged by the Company by filing
Appeal No. 186 of 2009 before theAAIFR which appeal is still
pending.
11 ·~
4. At this stage, Shri Ghanshyam Sarda, .(hereinafter
E referred to as the present appella'nt) filed an application for
impleading himself in the proceedings which application was
accepted by AAIFR. Upon this order being challenged, the
High Court of Delhi in W.P. No.2839 of 2010 held the present
appellant to be entitled to present his point of view in. the form
F of proposal/scheme, which order was confirmed by this Court
by dismissing Special Leave Petition filed at the instance of
the Company. In· terms of the aforesaid orders'the BIFR
impleaded the present appellant who thereafter submitted a
proposal for revival of the company and also filed MA No.162
G · of 2012 in the BIFR for restoration of shareholding pattern.
On 18.02.2013 the BIFR iss'ued directions to the operating
agency to consider the scheme of the present management
and the scheme submitted by the present Appellant and
thereafter submit a fully tied up Draft Revival Scheme ("DRS"
H for short). The BIFR fixed the next date for hearing of MA 162
GHANSHYAM SARDA v. MIS. SHIV SHANKAR TRADING 563
CO. &ORS. [UDAY UMESH LAUT, J.]
of 2012 on 04.04.2013. In the proceedings dated 27.02.2013, A
it was decided that the DRS be circulated seeking objections
and suggestions from all the concerned.
5. On 03.04.2013, two applications were filed before the
BIFR by M/S Shyam Jute Supplier, Chindwara M.P. and M/S
Shiv ShankarTranding Co. & Ors, GauhatiAssam (hereinafter B
referred to as 'SSTC') signed by the same person through
same Counsel stating that they were unsecured creditors and
sought permission from the BIFR to institute Civil Suit for
recovery of money stated to be recoverable from the company.
On 04.04.2013 the BIFR held a hearing to consider the change C
in the share holding pattern of the company without due
permission from BIFR. At that stage Counsel appearing for
the Company submitted thatApplication No. 162 of2012.could
not be considered as the BIFR no longer retained jurisdiction
over the Company. It was submitted that in the Audited D
Balance-Sheet for the period of nine months i.e. 01.04.2012
to 31.12.2012 the net worth of the Company having turned
positive, the Company ought to be discharged from the BIFR.
Learned counsel appearing for Shyam Jute Supplier and
SSTC supported such submissions. E
6. Paragraphs (4.1, 4.3,4.4, 4.8, 4.12 and 4.13) of the
proceedings dated 04.04.2013 are quoted here under which
are self eloquent.
"4.1. Today's hearing (04.04.2013) was fixed for F
consideration of MA No. 162/BC/2012 filed by Shri
Ghanshyam Sarda praying as under: ·
a) Declare that the change in shareholding pattern to the
extent the same reduces the shareholding of RPSPL from
86:23% to 5.34% without approval of BIFR as null and G
void;
b) Restore the management and the shareholding pattern
of JKJMCL as approved by the learned BIFR vide its
order dated 18.09.2008.
H
564 SUPREME COURT REPORTS [2014) 14 S.C.R.
A c) Initiate action Linder section 33 read with section 34
against the management for changing the shareholding
pattern of the sick· company without seeking permission
from BIFR; and
d) Appoint a special director (BIFR Nominee) in the
B Board of the Company to look into and monitor its ·affairs;
e) Pass such other further order(s) as this Hon'ble BIFR
may deem fit and proper in the facts and circumstances
of the case;
c 4.3. Shri Sudhansu Batra, Sr. Advocate appearing on
behalf of the Sick Company intervened and stated the
MA NO. 162/BC/2012 cannot be considered today since
BIFR no longer retains jurisdiction over the company. Shri
Batra, Sr. Advocate stated that the Balance sheet as on
D 31.12.2012 has been audited which shows that the
networth of the company has turned positive and the
company has to be discharged from BIFR. Upon a query
from the Bench, Shri Sudhansu Batra, Sr. Advocate
stated that the company has already filed a letter dated
25.03.2013 with the BIFR informing that the networth of
E
the company as on 31.12.2012 has turned positive. Upon
a query_from the Bench, Shri Sudhansu Batra, Sr.
Advocate stated that the financial period of the company
is normally for 12 months but this year the accounts have
been closed by auditing the balance sheet for 9 months
F
period from 01.04.2012 to 31.12.2012. The Ld. Senior
Advocate prayed that in view of the networth turning
positive the company should be discharged from the
BIFR. The Ld. Senior advocate argued th.at there are no
provision under SICA for deregistration of a reference
G
when the net worth becomes positive and the Sick
Company is not required to make a formal application
to the BIFR for discharge when the company's net worth
becomes positive. The Ld. Advocate further stated that
the sickness of the company is to be decided ex facie
H
GHANSHYAM SARDA v. M/S. SHIV SHANKAR TRADING 565
CO. & ORS. [UDAY UMESH LAUT, J.)
on the basis of the audited Balance Sheet and as the A
Audited Balance Sheet as at 31.12.2012 is showing
positive Networth, BIFR ceases to have any jurisdiction.
The Ld. Senior Advocate to support of this submissions
referred to and relied upon the judgment passed by
Hon'ble Delhi High Court in the case of: Cahtolic Syrian B
Bank V/s BIFR ~ Ors. On a query from the bench that
assuming the networth has turned positive whether BIFR
would automatically lose its jurisdiction or BIFR still has
the powers to examine the audited balance sheet and
formally pass an order of discharge, Shri Sudhansu Batra C
Sr. Advocate agreed and in fairness conceded that
before discharging the company, the BIFR can examine
the audited balance sheet as on 31.12.2012 by all means
and methods and satisfy itself. Shri Sudnansu Batra, Sr.
o
Advocate stated that his clients is not required to file an
application seeking discharge and BIFR on its own may
. examine the audited Balance Sheet and discharge the
company from BIFR.
4.4. Shri Ashish Mohan, Advocate appearing for an
unsecured creditor stated that his clients have filed E
application seeking impleadment as well as permission
under section 22(1) of SICA to file recovery proceedings
against the management of the company; but in view of
the networth of the company turning positive the company
may be discharged from BIFR so that his clients may file F
recovery suit against the company. The learned Advocate
stated that since the networth of the Sick Company has
turned positive, he would not be pressing any of his
application (s) and would take legal recourse against the
-company iri court of law. G
4.8 The representatives of IDBI (OA) stated that they
are not in a position to comment upon the Audited
Balance Sheet as on 31.12. 2012without examining the
same. The OA further stated that the ASC is going ahead
H
•
566 SUPREME COURT REPORTS . [2014) 14 S.C.R.
A as per its schedule and the next meeting of the ASC is
on 16.04.2013. The Bench observed thattheASC inay
go ahead with its schedule and that ASC should do
nothing more at present except opening and evaluating
the bids and submit its report on such evaluation to the
B BIFR and that BIFR shall~ake a final view upon the bids
r• ·and the sale of assets at the time of approval of DRS.
The bench further observed that DRS has already been
circulated on 26.02.2013 and the objections &
suggestions shall be considered on 20. 05.2013. Till such
c time either the Ben'ch considers the DRS or.discharge
the company from SICA; the Bench shall safeguard the
assets of the company a·nd retain its jurisdiction over the
ccimpany/its assets.
'
4.12. The Bench stated that they would consider the
D arguments of the parties including the arguments of Mr.
.i
Aggarwal on the next date of hearing. The Bench also
. ~
observed that as per the Company's ABS as on
31.03.2012, (12 months) the networth of the company is
Rs. 5.71 crores and the accumulated losses are Rs.
E 36.23 crores and it wciuld like to satisfy itself about the
Balance Sheet as'at 31.12.2012 to which Mr. Batra
agreed that the BIFR could undertake such an exercise.
Since the issue of lack of jurisdiction has been raised;
the Bench would decide the said issue alongwith MA No.
F 162/BC/2012. ·
4.13. Having considered the submissions made in the
hearing, materials on record, the Bench issued the
following directions:
(i)T-he company to submit certified copy of its ABS as on
G
31.12.2012 along with all relevant papers &documents
in support of its netWorth within one week from today.with
copy to the iDBI (QA) and all concerned parties alongwith
' documentary evidehce;
H
•
GHANSHYAM SARDA v. MIS. SHIV SHANKAR TRADING 567
CO. & ORS. [UDAY UMESH LAUT, J.]
(ii) The ASC would go-ahead as per its schedule and A
confirmation of sell, if any will take place upon approval
of DRS on 20.05.2013, with the consent of.Bench.
(iii) The Bench fixed the next date of hearing on
26.04.2013 at 11.30 AM for considering the submission
of the Company that its networth has turned positive as B
on 31.12.2012 and also hearthe MA No. 162/BC/2012
on the said date."
7. At this stage some of the other proceedings need a
mention. J.K. Jute Mazdoor Sabha filed Writ Petition No. C
22897 of 2013 before the Allahabad High Court on 25.04.2013
challenging the BIFR's order dated 04.04.2013. Said Writ
Petition having been dismissed by a Single Judge, in an
appeal therefrom. the Division Bench in its order dated
01.05.2013 observed that the BIFR would be in a better
position to assess the net worth position of the company, In D
the meantime, Shyam Jute Suppliers approached the High
Court of Madhya Pradesh by filing Writ Petition No.7534 of
2013 questioning the order dated 04.04.2013 of the BIFR. The
petition was dismissed by a Single Judge on the ground of
lack of territorial jurisdiction which order was approved in E
appeal by the Division Bench of the High Court.
8. On 22.04.2013, SSTC filed Title Suit No. 166 of2013
in Civil Court at Kamroop, Gauhati against the Company
adding BIFR as proforma defendant. It was inter alia averred F
".. . . Now it appears fror:n the balance sheet of the
defendant company filed before the proforma defendant
that its net worth had become positive. In view of the said
admission on the part of the defendant No. 2 it is no longer
a sick establishment under the Sick Industrial Companies G
(Special Provisions) Act, 1985 and consequently the
proforma defendant No. 2 has ceased to have jurisdiction
over the defendant No. 1 and as such the defendant No.
1 is no longer entitled to any benefit under the Sick
Industrial Companies (Special Provisions) Act, 1985. H
568 SUPREME COURT REPORTS . (2014] 14 S.C.R.
A Thus the defendant No: 1 under the aforesaid facts and
circumstances has become liable to be sued in a Civil
Court of competent jurisdiction with effect from the date
the 2012 balance sheet as submitted by it before the
proforma defendant No. 2 and the proforma defendant
B ceased to have any jurisdiction whatsoeveL--" ·
The plaintiff prayed for declaration, inter alia, that the
company was no longer a sick company within the meaning of
the Act and that the BIFR ceased to have jurisdiction over the
company and all the proceedings in BIFR after filing of positive
C balance-sheet be declared without jurisdiction. The Civil Court
by its order dated 23.04.2014 while issuing notices to the
defendants directed that status-quo be maintained in respect
of the BIFR case till the next date of hearing.
9. Th_e company filed its written objections on 13.05.2013.
D Though the claim of the plaintiff and its entitlement to recover
the sum stated to be due was denied, the company accepted
that it was no longer a sick company. The relevant averments
were to the following effect.
" ....... That the answering opposite party humbly states
that the statements made in paragraph number 1 of Misc.
(J) Case No. 254/13 are to the extent that the opposite
party is no longer a sick establishment is not denied."
" .... That the answering opposite party admits the
F statement made in paragraph number 10 and admit that
on and from the financial year 2012-2013 it is no longer
a sick company. The balance sheet is also admitted. The
rest of the statements regard jurisdiction is a matter of
fact and law and the opposite party has no comment to
G offer." ·
10. The matter came up before the Civil Court on
13.05.2013. It noted the aforementioned stand and in view of
such admitted position held that the BIFR ceased to have any
jurisdiction over the defendant company. It was observed:-
H
GHANSHYAM SARDA v. MIS. SHIV SHANKAR TRADING 569 .
CO. & ORS. [UDAY UMESH LAUT, J.]
" .... But a question that is still required to be answered A
at this juncture is as to whether this Court has the
jurisdiction to grant the relief of temporary injunction as
sought for in the instant case. Section 26 of the SICA,
which provides inter a/ia that no injunction shall be granted
by any court or other authority in respect of any action B
taken or to be taken in pursuance of any power conferred
by or under this Act, shall not be applicable to the
opposite party no. 1 company any more as it is no more
a sick industrial company admittedly and the provisions
of the SICA are not applicable to it anymore, and, C
therefore, the civil court will definitely have jurisdiction
over it. Hence, this Court has jurisdiction to grantthe relief
as sought for in the instant case .... "
In the premises, the Civil Court restrained the defendants
including the BIFR from proceeding with BIFR case no. 149 of D
1994. Neither ttie Plaintiff nor the Company at any stage
placed on record before the Civil Court the proceedings dated
04.04.2013 of the BIFR nor was the Civil Court appraised of
the fact that the Plaintiff had sought leave under Section 22 (1)
of the Act from the BIFR to file the Civil Suit. E
11. In the meantime while dealing with appeals preferred
against the orders of the BIFR including one dated 27 .02.2013,
the AAIFR was appraised that the issue of Net worth was under
consideration of the BIFR, so vide its order dt.16.05.2013 it
preferred to await such decision. In the subsequent F
proceedings of the same day i.e. 16.05.2013 the aforesaid
order of the Civil Court was placed before the BIFR which
observed that it had not given any permission under Section
22 ( 1) of the Act to SSTC to file any recovery suit against the
company and the matter was adjourned in the presence of the G
counsel concerned for considering the submission of the
parties on the issue of net worth as on 31.12.2012. It was.
further observed that in the absence of permission under
Section 22 (1) the suit filed by SSTC was not competent and
that, the company had not yet been de-registered from BIFR H
570 'SUPREME COURT REPORTS [2014] 14 S.C.R
. '
A and a filing of Civil Suit without taking permission was violative
of the Act. Taking note of the order of the AAIFR dated
16.05.2013 and the order passed by the High Court of
Allahabad dated 01.05.2013, it was observed that it had to
decide the issue whether the net worth of the company had
B , turned positive or not. The BIFR thus directed the parties to
file their written submission on the aspect of the net worth of
the company as on 31.12.2012. ·~
. 12. On 30.05.2013, the present appellant filed an
application for impleadment as defendant in the aforesaid'Suit.
C ·Adverting
-
to -the orders'
•. f
passed by the BIFR and AAIFR
impleading him in the proceedings before the BIFR and the
subsequent orders passed by the Division Bench of the High
Court of Delhi and this Court on his impleadment and the fact
that he had submitted a proposal for revival, the present .
D appellant prayed that he be impleaded in said suit as a
defendant. The present appellant thereafter filed FAO No.10
of'2013 before Gauhati High Court challenging the Civil Court's
order dated 13:05.2013. A learned Single Judge after
preliminary hearing by his order dated 14.06.2013 admitted
E - the appeal for hearing and also passed interim order to the
effect that no third party rights in respect of the.property of the
respondents/defendants be created during the p1mdency of
the appeal. , ·
13·. In the meantime, the matter appeared before the BIFR
F on 01.07 .2013. It primafacie was of the view that the Audited
Balance-Sheet as on 31.12.2012 of the company did not reflect
true and fairview and that the matter required examination as
to how the net worth of the company, all of a sudden, turned
positive. It was observed that SSTC was not granted any
G - permission by the BIFR under Section 22 (1) of the Act and
the suit of SSTC was not competent,· that SSTC ·had
suppressed the fact from the Civil Court and that the order
passed by the Civil Court being without jurisdiction was a nullity
in the eyes of law and not binding upon the BIFR. It was further
H observed that the .SIFR had to satisfy itself whether the net
GHANSHYAM SARDA v. M/S. SHIV SHANKAR TRADING 571
CO. &ORS. [UDAY UMESH LAUT, J.)
worth had turned positive due to some positive development A
and not merely by manipulation of the accounts. In the premises
it .directed the State Bank ·of India to appoint independent
auditor for Special Investigative Audit and to file its report about
net worth position of the company as on -. 31.12.2012.
14. SSTC who was the original plaintiff in the aforesaid B
Suit filed Writ Petition No. 4303 of 2013 in Gauhati High Court
challenging the orders dated 16.05.2013 and 01.07.2013 of
the BIFR. Said Writ Petition came up before the Single Judge
who by his order dated 01.08.2013 impleaded the present
appellant as Respondent No. 3 in the Writ Petition and further C
directed that till the next date of hearing further proceedings in
BIFR case No. 149 of2014 shall remain stayed. Subsequently,
the matter appeared before the Single Judge again who, on
14.08.2013 directed that the matter be placed before Hon'ble
the Chief Justice for directions whether the Writ Petition could D
be heard along with FAO No.10 of 2013.
15. On 04.09.2013, State Bank of India as directed by
the BIFR submittEld the Report of the Special Investigative Audit
pointing out the manipulation in the balance-sheet submitted
by the company and that the net worth of the company as on E
31.12.2012 was in fact on the negative side by Rs.36 crores
in nine months. In the proceedings before the BIFR dated
05.09.2013, the aforesaid Report was taken on record and
comments from the parties were invited.
F
16. Immediately the company filed Writ Petition No.4286
of 2013 before Gauhati High Court questioning the order dated
05.09.2013 of the BIFR. The matter came up before a Single
Judge on 30.09.2013 who issued rule in the Writ Petition and
by way of interim order directed that further proceedings in G
BIFR case No.194 of 1994 shall remain stayed. This order
was vacated by Division Bench of the High Court in Writ
Appeals vide its order dated 14.11.2013. These three matters
namely FAQ No.10 of 2013 and Writ Petition Nos.4303 and
6286 of 2013 were thereafter clubbed and posted before the H
572 SUPREME COURT REPORTS (2014) 14 S.G.R.
A Single Judge on 21.11.2013, who adj~urned the matters to
04. ~ 2.2013 and observed that. since the Court was in seisin
of the matter it was expected that the BIFR may not proceed
further with th~ case till conclusion of the hearing before the
learned Single Judge. In def~rence to the aforesaid order
B dated 21.11.20,13, the BIFR adjourned the case.
.. ~ ' .
17. These three matters then came up before the High
Court which observed that FAO No.10 of2013 was filed by
the prese,nt appellant who was not yet a party before the Civil
Court and that said FAO which was filed without seeking
C appropriate leave _of the Appellate Court was not maintainable
and as such it was not necessary to enter upon deliberations
on merits of the matter. The High Court was of the view that
since the application for impleadment was still pending before
the Civil Court, as.and when the present appellant was
D impleaded as defendant in the suit, it.would then be open to
him to file such application for variation or setting aside of the
order of injunction. It was held that in the absence of any
challenge, the order of injun_ction was Still in operation and that
" • . • I~· .
until and unless such orde~. v:as vacated and recalled by
E appropriate judicial forum, the same had to be respected and
given effect to. The High Court also disposed of Writ Petitions
on the ground
~ •
that since all the proceedings
I -
before BIFR stood
.
stayed, further proceeding
,. - in
'-
BIFR would be of
.
no legal
consequence. It was further observed that one of the members
F of BIFR having recused himself from hearing the case on the
earlier occasions as noted in.the order dated 31:01.2013, of
the BIFR, said member ought not to have participated in any
further proceedings. '
18. This common order pas.sed by the High Court has
G given rise to six Special. Leave Petitions, three by present
appellant namely' SLP No. 5249, 5897 and 6412 challenging
the order of the High Court in respect of FAQ No.10 of 2013,
Writ Petition No.4303 of2013'and Writ Petition No.6286 of
H
GHANSHYAM SARDA v. M/S. SHIV SHANKAR TRADING 573
CO. & ORS. [UDAY UMESH LAUT, J.]
2013 respectively. The other three petitions are by J.K. Jute A
Mill Mazdur Ekta Unions beirig Special Leave Petition Nos.
8610, 8611 and 8612 of 2014 against the aforesaid order in
respect of three proceedings as stated above respectively.
This Court issued notice in the matter on 24.03.2014 on which
date the company had appeared on caveat. By order dated B
08.05.2014, it was directed that till further orders the capital
assets ofthe Company shall not be disposed of without taking
permission of this court. Soon thereafter Civil Contempt
Petition Nos.338 and 375 of 2014 were filed by the present
appellant and J.K. Jute Mills Mazdoor Union contending inter C
a/iathat in violation of order dated 08.05.2014, the contemnors
in the petition had caused certain properties of the Company
to be transferred .. During the pendency of these matters SSTC
assigned in favour of M/s Good life Merchants Pvt. Ltd. all the
. rights in respect of the debt of the Company. D
19. All the aforesaid matters were taken up for hearing
together by this Court. Appearing for the present appellant,
Mr. Kapil Sibal, learned Senior Counsel submitted that the Act
is a complete code in itself and given the true scope and purport
of Sections 22 , 26 and· 32 of the Act, the jurisdiction of the E
BIFR over any company in question would continue till its formal
discharge by BIFR either after the net worth of the company
turned positive by successful implementation of the scheme
or by the order of winding up passed in respect of such
company.. It was further submitted that the BIFR alone will F
have competence and jurisdiction to declare a company which
was once a sick company, to be no longer sick and discharge
it from the purview of the Act and that the Civil Court will not
have jurisdiction or competence to decide these questions. It
was further submitted that the Civil Court is not the appropriate G
forum and lacks jurisdiction to examine the correctness of the
annual accounts and conclude whether the company in question
was no longer amenable to be dealt with under the Act. In
support of his submissions, reliance was placed on the
H
574 SUPREME COURTREPORTS [2014) 14 S.C.R.
A decisions of this Court in Managing Direc.tor ~Bhoruka
Textiles Limited Vs. Kashmiri Rice lndustries1 and Raheja
Universal Limited Vs. NRC l.:imited & Ors. 2 Appearing for
J.K. Jute Mill Mazdur Ekta·Union, Shri Krishnan Venugopal
and Shri R.P. Bhatt, learned Senior Counsel adopted the
B submissions of ShriSibal. Shri Venugopal, learned Senior
Counsel also invited the attention of this Court to the report of
the State Bank of India to show how the net worth of the
companywas still on the negative siqe. Shri Kapil Sibal and
Shri Sanjeev Sen, learned Senior·counsel also invited the
c ·attention of the Court and submitted that the alleged
contemnors in aforementioned Contempt Petitions had
flagrantly violated· orders of this Court.
20. Shri Guru Krishna Kumar, learned Senior Counsel
appearing for SSTC original plaintiff and the transfree Mis
D Goodlife Merchants.Pvt. Ltd. in all the matters submitted that
since the audited balance-sheet as on 31.12.2012 showed
· the net worth of the company on positive side; the company
was out of the purview of the provisions of the Act and it was
competent forthe company to claim itself to be no longer
E amenable to the jurisdiction of the BIFR. It was submitted that
· it was open to assert, upon the net worth being pbsitive, that
the. company ipso facto was no longer amenable to the
jurisdiction of the ..BIFR. In support, reliance was placed on the
view taken by the High Courts of Calcutta 3 , Madras• and
F Delhi 5 . Dr. A.M. Singhvi and Shri Harin Rawal, learned Senior
Counsel appearing for the company submitted inter alia that
1
2009(7) sec 521
22012 (2)SCC.148
G 'Dat('!d 08.08. J 995 in ZuariAgro Chemicals Ltd. &AnrVs. The Industrial
Credit and Investment Corporation of India. & Ors. in Matter No.362 of
1995 (OS). . '
'Dated 19.12.2007 in Dunlop India Ltd. Vs, Container Corporation of India
Ltd. & Anr. in Writ Petition No.24422 of 2006.
'Dated 21. 10.2009 in Catholic Syrian Bank Vs. BIFR & Ors. in W.P. (C)
No.8361of2008. ·
H
GHANSHYAM SAR DA v. M/S. "SHIV SHAN KAR TRADING 575
CO. & ORS. [UDAY UMESH LAUT, J.]
while the matters were pending before this Court, the Trial A
Court by its order dated 29.08.2014 had allowed the
application for impleadment filed by present appellant in Title
Suit No.166 of 2013 and that it was now open to the present
appellant to go before the Trial Court and ask for variation and
modification of the order of injunction passed by it. It was B
submitted that BIFR which is a Tribunal with limited jurisdiction
could not have disobeyed the order of the Civil Court. Relying
on the views taken by the High Courts of Calcutta, Madras
and Delhi in the aforestated cases it was submitted that there
was no provision in the Act under which BIFR could pass an C
order discharging a company under the Act and as such the
matter could lie in the domain of the Civil Court. Shri C.U.
Singh, learned Senior Counsel appearing for LRPL, one of·
the secured creditors, adopted the submissions and further
submitted that various proceedings before the BIFR actually o
showed that the members of the BIFR were biased against
the Company.
21. Before we .deal with the legal issues involved in the
matter certain factual facets of the matter need clarification
and assessment. During the course of submissions, it was E
submitted that the Counsel appearing for the company had
never agreed before the BIFR on 04.04.2013 that the BIFR
could examine the audited balance sheet itself to satisfy
whether the net worth of the company had turned positive or
not. In support, reliance was placed on letter dated 18.04.2013 F
stated to have been written on behalf of the company to the
Secretary Bench 3, BIFR, copy of which letter was also placed
on record. Said letter purportedly stated that the recording of
such submission was wrong and that the learned counsel had
never submitted that before discharging the company the BIFR G
could examine the audited balance sheet and satisfy itself.
Be it noted that the letter was not written by the learned counsel
nor any affidavit was sworn by the learned counsel denying
such factum. Furthermore, in none of the subsequent
proceedings after 04.04.2013, as per the record of the BIFR, H
576 SUPREME COURT REPORTS [2014] 14 S.C.R.
A any argument disputing or denying such submission appears
to have been made, .nor is there any reference in tlie
subsequent proceedings to the letter dated 18.04.2013. In
the circumstances we deem it appropriate to proceed on the
basis that the submission was in fact made by the learned
B counsel and it was so rightly recorded by the BIFR in its
proceedings dated 04.04.2013.
· Secondly, it has been accepted by the company that
property at Saif Ganj, Katihar belonging to the company has
in fact been sold. At this stage, it may be useful to quote from
C the written submissions filed on behalf of the company and the
relevant portion reads as under: ·
"A sale deed of the Kathihar property was executed on
2.4.2013 for Rs.3.55 crores in favour of Thapar Herbs &
spices Ltd. and the sale consideration was received on
D 4.4.2013. On 16.4.2013, the constructive possession
was handed over and registration fee of Rs.35.00 lacs
was paid by the Purchaser. As per the Revenue
Department, the stamp duty was higher than affixed and
<> the matter was pending adjudication and thereafter, final
E registration was done on 16.4.2014. Under the Bihar
local stamp laws, since over a year had lapsed, a fresh
sale deed was presented. The difference of registration
fee was paid by the purchaser on 16.6.2014. On
2.7.2014, the sale deed was presented which act of
F presentation was only ministerial."
This would mean that even before the hearing of the
matter before the BIFR on 04.04.2013 the property was sold.
The record does not indicate anywhere that the factum of such
sale was ever brought to the notice of the BIFR on 04.04.2013
G or thereafter nor'was it disclosed that the Rs.3.55 crores were
reqeived by way of consideration. Furthermore, when this Court
issued notice on 24.03.2014 when the company had appeared
on caveat and subsequently passed interim order on
H
GHANSHYAM SARDA v. MIS. SHIV SHANKAR TRADING 577
CO. & ORS. [UDAY UMESH LALIT, J.]
08.05.2014, nothing was disclosed to this Court that the A
property had been sold .
. 22. We may also at this stage deal with submission
regarding effect of order dated 29.08.2014 of the Civil Court
impleading the present appellant as defendant. Confining
itself to the question of competence of the present appellant B
to file the appeal without leave of the court, the High Court had
not dealt with legal issues, namely what shall be the effect of
sections 22, 26 and 32 of the Act insofar as the present
controversy is concerned. It was therefore submitted on behalf
of the company that since the appellant now stands impleaded, C
he be left to pursue appropriate remedies before the Trial
Court. We are not persuaded to agree with \his submission to
relegate the matter to the Trial Court and we proceed to deal
with the legal issues involved in the matter inasmuch as the
matter raises basic issues concerning jurisdiction of the Civil D
Court itself. The learned Counsel appearing for the Original
Plaintiff as well as the company have also advanced
submissions on the legal issues in question and we therefore
'
deem it appropriate to deal with such issues.
23. At this juncture the question regarding maintainability E
of the appeal before the High Court needs to be dealt with. As
the facts indicate, FAO was admitted after hearing the
respondents. Neither at that stage nor at any subsequent stage
anything was filed by way of formal opposition to the filing of
such appeal without the leave of the Court. Further the status F
of the present appellant to present his point of view in the form
of proposal or scheme before the BIFR was accepted right up
to this Court and he had thereafter been represented before
the BIFR. The proceedings dated 04.04.2013 also indicate
that the BIFR was in seisin of MA N0.162 of 2012 preferred' G
by him. He was also impleaded as respondent in the writ
petitions which were dealt with along with the said FAO. The
present appellant was thus not a stranger to the controversy.
There is nothing in Order XLlll Rule 1 of the Code of Civil
H
578 SUPREME COURT REPORTS [2014] 14 S.C.R.
A Procedure that leave to appeal has to be applied for in any
particular format. In the circumstances, the High Court was
not justified in dismissing the appeal on a technical ground
and it ought to have considered the merits of the matter. We
hold the appeal preferred by the present. appellant to be
B maintainable· and proceed to consider the basic issues
involved in the matter.
24. Sections 22(1), 26 and 32(1) of the Act, the ambit
and scope of which fall for our consideration are quoted
hereunder:
c · 22. Suspension of legal proceedings, contracts,
lli'1 etc.-
1) Where in respect of an industrial company, an inquiry
'
under Section 16 is pending or any scheme r-eferred to
D under section 17 is underpreparation or consideration
or a sanctioned scheme is under implementation or
where an appeal under section 25 relating to an industrial
company is pending, then, notwithstanding anything
I contained in the Companies Act, 1956 (1 of 1956), or
any other law or the memorandum and articles of
E
association of the industrial company or nay other
instrument having effect under the said Act or other law,
no proceedings for the winding up of the industrial
company or for execution, distress or the like .against
any of the properties of the industrial company or for the
F
appointment of a receiver in respectthereof and no suit
for the recovery of money or for the enforcement of any
security against the industrial company or of any
guarantee in respect of any loans or advance granted to
the industrial company shall lie or be proceeded with
G
further, except with the consent of the Board or, as the
case may be, theAppellateAuthority.
26. Bar of Jurisdiction-No order passed or
proposal made under this Act shall be appealable except
H as provided therein and no civil court shall. have
GHANSHYAM SARDA v. M/S. SHIV SHAN KAR TRADING 579
CO. & ORS. [UDAY UMESH LALIT, J.]
jurisdiction in respect of any matter which the Appellate A
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. B
32.Effect of the Act on other laws.-(1) Th.e
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 provisons of the Foregin Exchange Regulation Act, C
1973 (46 of 1973) and the Urban Land (Ceiling and
Regulation) Act, 1976(33of1976) 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. D
25. Chapter Ill of the Act details out various stages at
which inquiry into the working and status of sick industrial
companies and the scheme for revival is undertaken. Upon a
reference to the Board or upon information received with
respect to financial conditions of any industrial company, the E
Board is empowered under Section 16 to conduct such inquiry
as it may deem fit for determining whether such company has
become a sick industrial company. After being so satisfied,
the measures which could be taken up to enable the company
to make its net worth exceed the accumulated losses that is to F
say to make it positive are postulated in Section 17. Under
Section 17(1) the Board may by order in writing allow an
industrial company to revive itself, if it is practicable so to do
within a reasonable time. If it is not so practicable, it may direct
any operating agency to prepare a scheme for the revival of G
such company. In other words, once the reference is registered,
it is the BIFR which supervises the aspects leading to the revival
of such company. Subsequent sections deal with the
preparation and sanction of scheme for revival of such
H
580 SUPREME COURT REPORTS . [2014] 14 S.C.R.
A company and empower the Board to have dominion over such
company to enable the revival of that Company and in cases
where such revival is not possible, to recommend the winding
up of such company. It is clear that after a reference is
registered by the Board, all throughout the subsequent stages,
B the Bl FR has complete supervisory control over the affairs of
such company till it is revived or the decision to wind up such
company is taken. In our view, the ambit and extent of such
control means and includes determination of such measures -
to achieve revival of the sick company and to check whether
c by such measures the revival is being achieved or not This
must cover the power to decide at any stage subsequent to
the registration of reference under Section 16 whether such
company has ceased to be sick company or not Cessation
of the status as a sick company can be under Section 17(1) or
o as a result of scheme for revival being implemented and
determination of such issue, in our view, is in the exclusive
domain of the BIFR.
26. In Raheja Universal Limited Vs. NRC Limited 2 , it
was observed in para 48 thus:
E "Chapter Ill, in fact, is the soul and essence of SICA 1985
and it provides for the methodology that is to be adopted
for the purpose of detecting, reviving or even winding up
a sick industrial company. Provisions under SICA 1985
also provide for an appeal against the orders of BIFR
F before another specialized body i.e. AAIFR. To put it
simply, this is a self-contained code and because of the
non obstnace provisions, contained therein, it has an
overriding effect· over the either laws .. As per Section 32
of SICA 1985, the Act is required to be enforced with all
G its vigour and in precedence to other laws."
The Act is a self-contained Code and has conferred upon
the BIFR complete supervisory control over a sick industrial ·
company to adopt such methodology as provided in Chapter
Ill for detecting, reviving or winding up such sick company. The
H
GHANSHYAM SARDA v. MIS. SHIV SHANKAR TRADING 581
CO. &ORS. [UDAY UMESH LALIT, J.] •
authority to determine the existence and extent of sickness of A
such company and to adopt methodology for its revival are, in
the exclusive domain of the BIFR and by virtue of Section 26
there is an express exclusion of the jurisdiction of the Civil Court
in that behalf.
27. As laid down by this Court the Act is a complete Code B
in itself. The Act gives complete supervisory control to the
BIFR over the affairs of a sick Industrial Company from the
stage of registration of reference and questions concerning
status of sickness of such company are in the exclusive domain
of the BIFR. Any submission or assertion by anyone including C
· the Company that by certain developments the Company has
revived itself and/or that its net worth since the stage of
registration having become positive no such scheme for revival
needs to be undertaken, must be and can only be dealt with by
the BIFR. Any such assertion or claim has to be made before D
the BIFR and only upon the satisfaction of the BIFR that a sick
company is no longer sick, that such company could be said
to have ceased to be amenable to its supervisory control under
the Act. The aspects of revival of such company being
completely within its exclusive domain, it is the BIFR alone, E
which can determine the issue whether such company now
stands revived or not. The jurisdiction of the civil court in respect
of these matters stands completely excluded.
28. Unlike cases where the existence of jurisdictional fact
or facts, on the basis of which alone a Tribunal can invoke and F
exercis·e jurisdiction, is or are doubted, stand on a different
footing .from the one where invocation and exercise of
jurisdiction at the initial stage is not disputed but what is
projected is that by subsequent or supervening circumstances
the concerned Tribunal has lost jurisdiction. In the present case G
the fact that the company was registered as a sick company
is not doubted nor has it been contended that the BIFR had
wrongly assumed initial jurisdiction. But what is projected is
that the net worth having become positive the BIFR has now
H
,
582 SUPREME COURT REPORTS [2014] 14 S.C.R.
•
A lost jurisdiction over the company. In our view, the BIFR having
correctly assumed jurisdiction and when all the financial affairs
of such company were directly under the supervisory control
of the BIFR, the power to decide whether it has since then lost
the jurisdiction or not, is also in the exclusive domain of the
B · BIFR. The BIFR alone is empowered to determine whether
net worth has become positive as a result of which it would
cease to have such jurisdiction. Any inquiry into such issue
regarding net worth by anyone outside the Act including civil
court, would be against the express intent of the Act and would
c lead to incongruous and undesired results: The suit as framed
seeking declaration that the company was no longer a sick
company within the meaning of the Act, was therefore not
competent and maintainable. The Civil Court was not right
and justified in issuing injunction as it did. The counsel who
o represented the company before the BIFR on 04.04.2013,
correctly submitted that before discharging the company the
BIFR can examine the audited balance sheet and satisfy itself
whether the net worth had turned positive.
29. Insofar as the recovery of rnoney is concerned, the
E matter is completely covered by Section 22(1) of the Act. The
language employed in Section 22(1) of the Act refers to the
entirety of the period beginning from the inquiry under Section
16 till the implementation of sanctioned scheme for revival.
Section 22(1) bars any suit for recovery of money or for the
F enforcement of any security against the industrial company
without the express consent of the Board. Reference in
Section 22(1) is to "an Industrial Company" and not to "the
sick Industrial Company" as found in later sub-sections of the
same Section. This also throws light that the bar is during the
G period contemplated in said Section 22(1 ). Such bar is period
specific and sub-section (5) of Section 22 entitles exclusion
of such period while computing limitation. During the entirety
of that period the Act grants protection to the company and
leaves it to the discretion of the BIFR whether to permit filing
H
GHANSHYAM SARDA v. M/S. SHIV SHAN KAR TRADING 583
CO & ORS. [UDAY UMESH LAUT, J.]
and maintaining of suit or other proceedings. In the present A
case the BIFR was considering Draft Rehabilitation Scheme
which is a stage under Section 18(3) and is completely covered
by the period under Section 22 of the Act. The suit in the instant
case as framed for recovery of money filed without the consent
of the BIFR was not competent and maintainable. We may at B
this stage refer to the decisions rendered by this Court with
regard to Section 22(1) of the Act. In Managing Director,
Bhoruka Textiles Limited Vs. Kashmiri Rice Industries',
after quoting sub-sectiori (1) of Section 22 of the Act, it was
observed:- C
"A plain reading of.the aforementioned provision would
cleqrly go to show that a suit is barred when an enquiry
under Section 16 is pending. It is also not in dispute that
prior to institution of the suit, the respondent did not obtain
consent of the Board. D
9. the provision of the Act and, in particular, Chapter Ill
thereof, provides for a complete code. The Board has a
wide power in terms of the provisions of the Act, although
it is not a court. Sub-section "(4) of Section 20 as also
Section 32 of the Act provides for non obstante caluses. E
It envisages speedy disposal of the enquiry and
preferably within the time framed provided for thereafter.
Section 17 empowers the court to make suitable orders
on the completion of enquiry. Preparation and sanction
of the scheme is also contemplated under the Act." F·
In para 12 of the said decision, it was further stated:
"If the civil court's jurisdiction was ousted in terms of the
provisions of Section 22 of the Act, any judgment
rendered by it wou Id be coram non Judice. It is a well G
settled principle of law that a judgment and decree
passed by a court or tribunal lacking inherent jurisdiction
would be a nullity."
H
584 SUPREME COURT REPORTS [2014] 14 S.C.R.
A Similarly, in Raheja Universal Limited Vs. NRC
Limited' it was observed as under:
"49. BIFR has been vested with wide powers and, being
an expert body, is required to perform duties and
functions of wide-ranged nature. If one looks into the
B legislative intent in relation to a sick industrial company, ·
it is obvious that BIFR has to first make an effort to provide
an opportunity to the sick industrial company to make its
net worth exceed the accu_mulated losses within a
reasonable time, failing which BJFR has to formulate a
c scheme for revival of the company, even by providing
financial assistance in cases w.herein BIFR in its wisdom
deems it necessary and finally only when b.oth .these
options fail and the public interest so requires, BIFR may
recommend winding up of the sick industrial company.
D So long as the scheme is under consideration before
BIFR or it is being implemented after being sanctioned
and is made operational from a given date, it is the
legislative intent that such scheme should not be
interjected by any other judicial process or frustrated by
E the impediments created by third parties and even by
the management of the sick industrial company, in
relation to the assets of the company."
The suit in the instant case, insofar as it relates to the
claim for recovery of money, could lie or be proceeded with
F only after express consent of the BJFR.
30. We now deal with the decisions of the High Courts of
Calcutta, Madras and Delhi. All these decisions were rendered
while considering writ petitions under Article 226 of the
G Constitution of India. Jn the first of these three cases the High
Court took the view that there is no express provision in the ·
Act which indicates when the BJFR loses its jurisdiction with
regard to a company which was once sick and proceeded to
declare the company in question not amenable to the
H jurisdiction of the Bl FR from and with effect from the date the
GHANSHYAM SARDA v. MIS. SHIV SHANKAR TRADING 585
CO. &ORS. [UDAY UMESH LAUT, J.]
Balance Sheet showed the Net Worth to be positive. In the A
second case the High Court was of the view that sickness of
an industrial company is to be decided ex-facie on the basis
of the audited balance sheet and when the Net Worth becomes
positive the BIFR ceases to have any jurisdiction. The last
case arose from the same BIFR matter and Delhi High Court B
followed the view taken by Madras High Court. Said decisions
must now be read in the light of the above discussion and view
that we have taken.
31. In the circumstances, we allow the present appeals
and set aside the order dated 06.01.2014 passed by the High C
Court of Gauhati in FAO No.10 of 2013 and Writ Petition
Nos.4303 of 2013 and 6286 of 2013. It is held that the Title
Suit No.166 of 2013 pending on the file of the learned Civil
Court at Kamroop, Gauhati is not maintainable insofar as it
seeks declaration that the company was no longer a sick D
company within the meaning of the Act and that the BIF~
ceased to have jurisdiction over the company and that all the
proceedings in the BIFR after filing of the positive balance-
sheet were without jurisdiction. Consequently the order of
injunction passed by the Civil Court is set aside. Insofar as E
the said Suit pertains to the claim for recovery of money from
the Company, the Suit could lie and be proceeded with only
after express consent of the BIFR is received by the plaintiff.
We direct that the company i.e., J.K. Jute Mills Company Ltd.
having its registered office at Kanpur U.P. continues to be under F
the jurisdiction of the BIFR. We leave it to the BIFR to satisfy
itself and determine the issues whether the net worth of the
company has turned positive or not. If the BIFR is so satisfied,
it shall de-register the company and upon such declaration
the company will be out of the supervisory jurisdiction of the G
BIFR under the Act. Needless to say that if the BIFR is not
satisfied that the net worth of the company has turned positive,
ii shall go ahead and consider the scheme for revival of the
company. We direct the BIFR to complete this exercise within
two months from date of receipt of this order. We have refrained H
586 SUPREME COURT REPORTS (2014] 14 S.C.R.
A from dealing with the matter concerning the merits or de-merits
of the claim that the net worth has turned positive nor have we
dealt with the report made by the State Bank of India in its
Special Investigative Audit. We leave these issues to be
considered by the BIFR at an appropriate stage. We have
B also not dealt with the submissions alleging bias as the matters
in. that behalf are still pending consideration before the
authorities and we leave these issues to be dealt with at an
appropriate stage.
32. Since in our view the company continues to be a sick
C company and it was not competent for anyone except the BIFR
to determine whether the net worth of the company had turned
positive, we hold the sale of Katihar property effected by the
company without express leave or permission of the BIFR to
be questionable'. However, since the transferee of that
D property is not before this Court we relegate this matter for
appropriate assessment by the BIFR after issuing due notice
fo the transferee. We also leave it to the BIFR to consider and
assess whether there was any necessity or expediency to sell
the property in question. If in its opinion such expediency and
E necessity are established, the BIFR may also consider whether
the value that the property has fetched is adequate or not. If
the value is adequate it may confirm the sale in favour of the
transferee. However, ifthe value in its opinion is inadequate,
it shall give offer and adequate time to the transferee to make
F good the deficit. In any case if the sale is held to be bad or if
the transferee is not willing to make good the deficit, the entire
consideration for the transaction be returned to the transferee.
In such eventuality whatever the transferee has paid in excess
of the consideration money towards stamp duty and
G registration shall be recovered from the Directors and persons
responsible for effecting such sale on behalf of the company.
33. Now we turn to the filing of the civil suit in the instant
case and its conduct. The original plaintiff had sought consent
of the BIFR under Section 22(1) of the Act and was before the
H
GHANSHYAM SARDA v. M/S. SHIV SHANKAR TRADING 587
CO & ORS. [UDAY UMESH LALIT, J.]
BIFR on 04.04.2013. However, he did not disclose eitherthe A
factum that he had so sought such consent or that the BIFR
was in seisin of the matter and considering whether Hie net
worth of the company had turned positive. Non-disclosure of
these two essential facts, in our view, was not accidental. We
therefore impose costs of Rs.5 lacs on the original plaintiff B
which shall be deposited within three months from the date of
this order, failing which action in contempt shall be initiated
against the original plaintiff. The costs shall be deposited to
the account of the Supreme Court Legal Services Authority.
Though the conduct of the company as defendant before the c
Civil Court was of the same order, since it is a sick company ·
we refrain from imposing any costs on the company. No other
order as to costs.
34. The appeals are allowed in the aforesaid terms. FAQ
No.10 of 2013 thus stands allowed and Writ Petition N.os.4303 D
of 2013 and 6286 of 2013 are dismissed. As regards
Contempt Petition Nos.338 and 375 of 2014, since this Court
had not issued any notice to the alleged contemnors, we have
not dealt with said petitions. By a separate order we issue
appropriate notice to the alleged contemnors. E
Nidhi Jain Appeals allowed.
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