Case Note & Summary
The appeal arose from an order of the learned Single Judge dated 21 October 2010 admitting a company petition for winding up and directing advertisement. The respondent, Phoenix ARC Pvt. Ltd., a securitisation and reconstruction company registered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act), had acquired a debt from DBS Bank Limited. DBS Bank had granted a factoring/overdraft facility of Rs. 2.50 Crores to the appellant company under a letter of offer dated 18 July 2007. The company defaulted, and DBS Bank issued a demand notice on 15 September 2008 and moved the Debt Recovery Tribunal for recovery of Rs. 2.46 Crores. DBS Bank assigned the debt to the respondent by a deed of assignment dated 9 December 2009. The respondent issued a statutory notice under Sections 433 and 434 of the Companies Act, 1956 on 15 April 2010. The company petition was heard on diverse dates; no reply was filed, and the company only contended that Rs. 20 Lakhs was due. The learned Company Judge admitted the petition and ordered advertisement. In appeal, the appellant argued that it had moved a reference before the BIFR under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), and that Section 22 of SICA barred the proceedings. The Court noted that the BIFR reference was rejected on 4 June 2012, and an appeal was pending before the AAIFR. The Court examined the amendment to SICA by the Securitisation Act, which added two provisos to Section 15(1) of SICA. The second proviso bars a reference to BIFR after the commencement of the Securitisation Act where financial assets have been acquired by a securitisation or reconstruction company under Section 5(1) of that Act. Since the respondent had acquired the debt from DBS Bank, the reference to BIFR was invalid. Consequently, Section 22 of SICA did not apply, and the appeal before AAIFR could not revive the bar. The Court dismissed the appeal, upholding the winding up order.
Headnote
A) Sick Industrial Companies - Bar under Section 22 SICA - Applicability to Securitisation Companies - Section 22 of SICA, 1985 read with Section 41 and Schedule of Securitisation Act, 2002 - The Court held that the amendment to Section 15 of SICA by the Securitisation Act bars a reference to BIFR where financial assets have been acquired by a securitisation company. Consequently, Section 22 of SICA does not apply to proceedings initiated by such a company. The appeal against the winding up order was dismissed as the BIFR reference was invalid and the appeal before AAIFR did not revive the bar. (Paras 5-7)
Issue of Consideration
Whether the pendency of a reference under SICA, 1985 before BIFR or an appeal before AAIFR bars the hearing of a winding up petition filed by a securitisation company under the Securitisation Act, 2002.
Final Decision
Appeal dismissed. The order of the learned Single Judge admitting the winding up petition and directing advertisement is upheld.
Law Points
- Securitisation Act
- 2002 overrides SICA
- 1985
- Section 22 SICA not applicable to proceedings by securitisation company
- winding up petition maintainable despite BIFR reference
Case Details
2012 LawText (BOM) (07) 65
Appeal No. 38 of 2011 in Company Petition No. 243 of 2010
Dr. D.Y. Chandrachud, R.D. Dhanuka
Mr. Hemang Engineer with Ms. Archana Singh i/b. M/s. Gordhandas & Fozdar for the Appellant; Mr. Rafeeq Peermohiddeen with Mr. Shakib Dhorajiwala i/b. Vidhi Partners for Respondent
Paper Prints (India) Pvt. Ltd.
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Appeal against order admitting company petition for winding up and directing advertisement.
Remedy Sought
Appellant sought to set aside the winding up order on the ground that a reference under SICA was pending before BIFR and Section 22 barred proceedings.
Filing Reason
Respondent, a securitisation company, filed winding up petition for non-payment of debt assigned by DBS Bank.
Previous Decisions
Learned Single Judge admitted the winding up petition and ordered advertisement on 21 October 2010.
Issues
Whether the pendency of a reference under SICA before BIFR or an appeal before AAIFR bars the hearing of a winding up petition filed by a securitisation company under the Securitisation Act, 2002.
Submissions/Arguments
Appellant argued that the company had moved a reference before BIFR under Section 15 of SICA, and Section 22 of SICA bars proceedings for winding up.
Respondent contended that the amendment to SICA by the Securitisation Act bars a reference to BIFR where financial assets have been acquired by a securitisation company, and thus Section 22 does not apply.
Ratio Decidendi
The amendment to Section 15 of SICA by the Securitisation Act, 2002 bars a reference to BIFR where financial assets have been acquired by a securitisation or reconstruction company under Section 5(1) of that Act. Consequently, Section 22 of SICA does not apply to proceedings initiated by such a company, and the pendency of an appeal before AAIFR does not revive the bar.
Judgment Excerpts
Provided further that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where financial assets have been acquired by any securitisation company or reconstruction company under sub-section (1) of section 5 of that Act.
The amendment to Section 15 of SICA by the Securitisation Act bars a reference to BIFR where financial assets have been acquired by a securitisation company. Consequently, Section 22 of SICA does not apply to proceedings initiated by such a company.
Procedural History
DBS Bank granted facility to appellant in 2007; default occurred; DBS Bank issued demand notice on 15 September 2008 and moved DRT; debt assigned to respondent on 9 December 2009; respondent issued statutory notice on 15 April 2010; company petition filed; learned Single Judge admitted petition and ordered advertisement on 21 October 2010; appellant filed appeal; BIFR reference rejected on 4 June 2012; appeal before AAIFR pending; present appeal dismissed on 20 July 2012.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 3, Section 5(1), Section 41
- Sick Industrial Companies (Special Provisions) Act, 1985: Section 15, Section 22
- Companies Act, 1956: Section 433, Section 434
