{"id":126830,"date":"2006-12-14T00:00:00","date_gmt":"2006-12-13T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/morgan-securities-and-credit-pvt-vs-modi-rubber-ltd-a-respondent-on-14-december-2006"},"modified":"2017-07-13T08:46:12","modified_gmt":"2017-07-13T03:16:12","slug":"morgan-securities-and-credit-pvt-vs-modi-rubber-ltd-a-respondent-on-14-december-2006","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/morgan-securities-and-credit-pvt-vs-modi-rubber-ltd-a-respondent-on-14-december-2006","title":{"rendered":"Morgan Securities And Credit Pvt. … vs Modi Rubber Ltd. \u00c3 Respondent on 14 December, 2006"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Morgan Securities And Credit Pvt. … vs Modi Rubber Ltd. \u00c3 Respondent on 14 December, 2006<\/div>\n
Author: S.B. Sinha<\/div>\n
Bench: S.B. Sinha<\/div>\n
           CASE NO.:\nAppeal (civil)  2572 of 2006\n\nPETITIONER:\nMorgan Securities and Credit Pvt. Ltd.\t\t\tAppellant\n\nRESPONDENT:\nModi Rubber Ltd.\t\t\t\t\t\t\tRespondent.\n\nDATE OF JUDGMENT: 14\/12\/2006\n\nBENCH:\nS.B. Sinha\n\nJUDGMENT:\n<\/pre>\n
J U D G M E N T<\/p>\n
S.B. SINHA,  J:\n<\/p>\n
Introduction :\n<\/p>\n
\tThe principal question involved in this appeal arising out of a
\njudgment and order dated 08.06.2005 passed by the  High Court of Delhi in
\nWrit Petition (Civil) No.10284 of 2005 revolves round a dispute as to
\nwhether the provisions of the Arbitration and Conciliation Act, 1996 (for
\nshort, ‘the 1996 Act’) would prevail over the provisions of the  Sick
\nIndustrial Companies (Special Provisions) Act, 1985 (for short, ‘SICA’).\n<\/p>\n
Background Facts :\n<\/p>\n
\tA sum of Rs.5,00,00,000 (Rupees five crores) by way of an Inter
\nCorporate Deposit (ICD) was advanced by Appellant to Respondent
\nCompany.  It committed a default in the payment thereof.  The agreement
\ncontained an arbitration clause which was invoked.  The learned Arbitrator
\nmade an award on or about 06.05.2004 in favour of the appellant for a sum
\nof   Rs.6,72,63,015\/- , directing :\n<\/p>\n
“I, therefore, in the circumstances, make the following
\nAward :\n<\/p>\n
i)\tThe claimant is entitled to receive from the
\nrespondents and the respondents are jointly and
\nseverally liable to pay Rs.6,72,63,015\/- up to the
\ndate of reference;\n<\/p>\n
ii)\tThe claimant will also be entitled to interest at the
\ncontractual rate of 21% p.a. from the date of
\nreference i.e. 15.4.2002 till the date of Award and
\nthereafter i.e. from the date of Award till the date
\nof payment with simple interest @ 18% p.a.
\nHowever, if the entire amount is paid within three
\nmonths from the date of the award, the rate of
\ninterest from the date of Award till the date of
\npayment shall stand reduced to 12% p.a. <\/p>\n
iii)\tThe claimant will also be entitled to costs of
\narbitration which are fixed at Rs.2,00,000\/-.\n<\/p>\n
In the course of the proceedings I had passed two
\ninterim orders restraining the respondent no.1 from
\ntransferring or alienating their fixed as well as movable
\nassets.  Both those orders  shall continue to operate till
\nthe full payment of the amount awarded under this
\nAward.”\n<\/p>\n
\tAppellant also filed an application before the High Court of Allahabad
\nfor winding up of the respondent Company.  The said application was
\nadmitted and an order of winding up was passed on 12.03.2004.\n<\/p>\n
\tApart from the Arbitrator, the Allahabad High Court also by order
\ndated 13.08.2001 passed in C.P. No.92 of 2000 and 13.03.2002 in C.P. No.1
\nof 2002 restrained the Respondent Company from dealing with or in any
\nway encumbering its assets without the permission of the court.  In a
\nproceeding before the AAIFR, that Authority had also passed an order of
\nrestraint against the respondent company.  The respondent in the meanwhile
\nmade a reference under Section 15 of SICA to the Board for Industrial and
\nFinancial Reconstruction (for short, ‘the Board’).  An appeal against the
\norder of winding up was preferred by the respondent before the Division
\nBench of the High Court. The High Court set aside the said order of winding
\nup by an order dated 20.05.2004 and directed to keep the winding up
\nproceedings in abeyance till the disposal of the said appeal under SICA.  An
\napplication for recalling of the said order is said to be pending before the
\nsaid Court.\n<\/p>\n
\tBefore the Board, an application was filed by the Respondent
\npurported to be under Section 19A read with Section 22(3) of SICA praying
\nfor  permission to dispose of the shares it held in M\/s Ambuja Cement
\nEastern Ltd. in pursuance of a public offer made by M\/s Holcim Cements
\nIndia Pvt.  Ltd. to purchase 5.92% of the shares of M\/s Ambuja Cement
\nEastern Ltd.  The Respondent Company held 23,10,000 equity shares of the
\nsaid company  constituting about 1.02% of its total share capital at Rs.70\/-
\nper share. In the said application a disclosure was made as regards the
\nrestraint order passed by the Allahabad High Court. The said application was
\ndismissed by the Board by an order dated 04.06.2005,  holding :\n<\/p>\n
“The injunction orders against sale of company’s
\nassets from various Courts\/Tribunals do not fall within
\nthe scheme of things envisaged u\/s 22, 26, & 32.  In fact,
\nSection 22A itself empowers the Board to give directions
\nnot to dispose of assets.  We do appreciate the
\ncircumstances regarding the offer for ACEL shares but in
\nview of the orders of the various Courts\/Tribunals
\nrestraining the company from disposing of its assets
\nincluding AAIFR’s order dated 13.5.2005 to maintain
\nstatus quo, the Board finds it difficult to agree to the
\nproposal to sell the shares as prayed by MRL.”\n<\/p>\n
Questioning the legality of the said order, a writ petition, which was
\nmarked as Writ Petition (Civil) No.10284 of 2005, was filed by the
\nRespondent before the Delhi High Court.  By reason of the impugned
\njudgment, a Division Bench of the High Court allowed the said writ petition.\n<\/p>\n
It is not in dispute that pursuant to or in furtherance of the said
\njudgment of the High Court, the shares had been sold and the sale proceeds
\nhad been deposited with the Board.\n<\/p>\n
Submissions :\n<\/p>\n
Mr. C.A. Sundaram, the learned Senior Counsel appearing on behalf
\nof the Appellant, inter alia, submitted that the provisions of SICA could not
\nhave been taken recourse to as no scheme had been framed and, thus, the
\nHigh Court committed a serious error in passing the impugned judgment
\nrelying, inter alia, on or on the basis of Section 22(3) of SICA.\n<\/p>\n
Section 5 of the 1996 Act having an overriding effect, the counsel
\nurged, even the Board could not have interfered with the award.  Contrasting
\nthe provision of sub-section (1) of Section 22 with sub-section (3) thereof, it
\nwas contended that the award under the 1996 Act did not fall within the
\nambit thereof, in view of the fact that in  terms of Section 36 thereof it
\nbecomes a decree.\n<\/p>\n
Mr. Neeraj Sharma, the learned counsel appearing on behalf of the
\nRespondent, on the other hand, submitted that the Board being not a judicial
\nauthority, Section 5 of the 1996 Act will have no application.  On a
\nconspectus of the provisions of  SICA, counsel contended, that the Board
\nhad the requisite jurisdiction to pass an appropriate order directing sale of
\nthe property even at the stage of inquiry.  For the aforementioned purpose,
\nMr. Sharma argued, all the provisions inserted by reason of Act  12 of 1994
\nof SICA Amendment Act, 1993, namely, Section 19A, Section 22A and
\nSection 22(1) as amended, must receive a harmonious construction.  Counsel
\nurged that the interim award having merged with the final award and
\nfurthermore in view of the fact that the award was yet to become a decree of
\nthe court, the question of its having become enforceable in law did not and
\ncould not arise.\n<\/p>\n
SICA :\n<\/p>\n
 SICA was enacted in order to afford maximum protection of
\nemployment, optimize the use of financial resources, salvaging the assets of
\nproduction, realizing the amounts due to the Banks and to replace the
\nexisting time consuming and inadequate machinery by   efficient machinery
\nfor expeditious determination and with a view to securing the timely
\ndetection of sick and potentially sick companies owning industrial
\nundertakings, the speedy determination by a Board of experts of the
\npreventive, ameliorative, remedial and other measures which need to be
\ntaken with respect to such companies and the expeditious enforcement of the
\nmeasure so determined and for matters connected therewith or incidental
\nthereto.\n<\/p>\n
It contains special provision.   The said Act was enacted for giving
\neffect to the policy of the State for securing principles specified in Article 39
\nof the Constitution of India.\n<\/p>\n
‘Sick industrial company’ has been defined in Section 2(o) to mean
\n“an industrial company which has at the end of any financial year
\naccumulated losses equal to or exceeding its entire net worth.\n<\/p>\n
Chapter III of SICA provides for references, inquires and schemes.
\nSection 15 empowers the Board of Directors of a company to make a
\nreference to the Board for determination of the measures which shall be
\nadopted with respect to the company.  The Board  on receipt of such an
\napplication may make an inquiry into the working of the sick industrial
\ncompany in exercise of its power conferred under Section 16 thereof, for
\ndetermining whether the company has become a sick industrial company or
\nnot.  For the said purpose it may require an operating agency to inquire into
\nand to make a report to it.  The Board or the operating agency, as the case
\nmay be, is required to  complete the enquiry as expeditiously as possible and
\nan endeavour is to be made, to do so within sixty days from the
\ncommencement thereof.  The Board may during the pendency of the said
\ninquiry  appoint Special Directors.  Section 17 empowers the Board to make
\nsuitable orders on the completion of inquiry if it is found to be practicable
\nfor a sick industrial company to make  its net worth exceed the accumulated
\nlosses within a reasonable time.  The Board is also required to make an
\norder in writing and subject to such restrictions or conditions as may be
\nspecified therein, give such company as it may deem fit to make its net
\nworth exceed the accumulated losses.  However, in the event it comes to the
\nconclusion that it is not practicable for the sick industrial company to make
\nits net worth exceed the accumulated losses within a reasonable time, it may
\nby an order in writing direct any operating agency specified in the order to
\nprepare,  having regard to such guidelines as may be specified, a scheme in
\nrelation to such company.\n<\/p>\n
\tSection 18 empowers the Board to prepare and sanction a scheme in
\nterms whereof it is permissible for the operating agency, inter alia, to
\nprepare a scheme to direct sale or lease of a part or whole of any industrial
\nundertaking of the sick industrial company. Section 19 provides for
\nrehabilitation by giving financial assistance where the scheme relates to
\npreventive, ameliorative, remedial and other measures with respect to any
\nsick industrial company.  Section 19A of  SICA reads as under :\n<\/p>\n
“19A. Arrangement for continuing operations, etc. during
\ninquiry.-(1) At any time before completion of the inquiry
\nunder Section 16, the sick industrial company or the
\nCentral Government or the Reserve Bank or a State
\nGovernment or a public financial institution or a State
\nlevel institution or a scheduled bank or any other
\ninstitution, bank or authority providing or intending to
\nprovide any financial assistance by way of loans or
\nadvances or guarantees or reliefs or concessions to the
\nsick industrial company may make an application to the
\nBoard –\n<\/p>\n
(a)\tagreeing to an arrangement for continuing the
\noperations of the sick industrial company; or <\/p>\n
(b)\tsuggesting a scheme for the financial
\nreconstruction of the sick industrial company.
\n(2)\t\t***\t\t***\t\t\t***”\n<\/p>\n
Section 20 provides for winding up of sick industrial company;  sub-
\nsection (4) whereof reads as under :\n<\/p>\n
“(4) Notwithstanding anything contained in sub-section
\n(2) or sub-section (3), the Board may cause to be sold the
\nassets of the sick industrial company in such manner as it
\nmay deem fit and forward the sale proceeds to the High
\nCourt for orders for distribution in accordance with the
\nprovisions of section 529A, and other provisions of the
\nCompanies Act, 1956 (1 of 1956)”.\n<\/p>\n
Sub-sections (1) and (3) of Section 22 which are relevant for our
\npurpose read as under :\n<\/p>\n
“22. Suspension of legal proceedings, contracts, etc..- (1)
\nWhere in respect of an industrial company, an inquiry
\nunder section 16 is pending or any scheme  referred to
\nunder section 17 is under preparation or consideration or
\na sanctioned scheme is under implementation or where
\nan appeal under sections 25 relating to an industrial
\ncompany is pending, then, notwithstanding anything
\ncontained in the Companies Act, 1956 (1 of 1956), or any
\nother law or the memorandum and articles of association
\nof the industrial company or any other instrument having
\neffect under the said Act or other law, no proceedings for
\nthe winding up of the industrial company or for
\nexecution, distress or the like against any of the
\nproperties of the industrial company or for the
\nappointment of a receiver in respect thereof and no suit
\nfor the recovery of money or for the enforcement of any
\nsecurity against the industrial company or of any
\nguarantee in respect of any loans or advance granted to
\nthe industrial company shall lie or be proceeded with
\nfurther, except with the consent of the Board or, as the
\ncase may be, the Appellate Authority.”\n<\/p>\n
\t\t\txxx\t\txxx\t\txxx<\/p>\n
(3)\tWhere an inquiry under section 16 is
\npending or any scheme referred to in section 17 is under
\npreparation or during the period of consideration of any
\nscheme under section 18 or where any such scheme is
\nsanctioned thereunder, for due implementation of the
\nscheme, the Board may by order declare with respect to
\nthe sick industrial company concerned that the operation
\nof all or any of the contracts, assurances of property,
\nagreements, settlement, awards, standing orders or other
\ninstruments in force, to which such sick industrial
\ncompany is a party or which may be applicable to such
\nsick industrial company immediately before the date of
\nsuch order, shall remain suspended or that all or any of
\nthe rights, privileges, obligations and liabilities accruing
\nor arising thereunder before the said date, shall remain
\nsuspended or shall be enforceable with such adoptions
\nand in such manner as may be specified by the Board.\n<\/p>\n
Provided that such declaration shall not be made
\nfor a period exceeding two years which may be extended
\nby one year at a time so, however, that the total period
\nshall not exceed seven years in the aggregate.”\n<\/p>\n
Sub-section (5) of Section 22 mandates that in computing the period
\nof limitation for the enforcement of any right, privilege, obligation or
\nliability, the period during which it or the remedy for the enforcement
\nthereof remains suspended under the said Section shall be excluded.\n<\/p>\n
Section 22A reads as under :\n<\/p>\n
“22A. Directions not to dispose of assets.- The Board
\nmay, if it is of opinion that any direction is necessary in
\nthe interest of the sick industrial company or creditors or
\nshareholders or in the public interest, by order in writing
\ndirect the sick industrial company not to dispose of,
\nexcept with the consent of the Board, any of its assets <\/p>\n
(a)\tduring the period of preparation or
\nconsideration of the scheme under section
\n18; and<\/p>\n
(b) \tduring the period beginning with the
\nrecording of opinion by the Board for
\nwinding up of the company under sub-\n<\/p>\n
section (1) of section 20 and up to
\ncommencement of the proceedings relating
\nto the winding up before the concerned High
\nCourt.”\n<\/p>\n
Section 32 provides for a non-obstante clause.\n<\/p>\n
 The Board in exercise of its rule making power made regulations,
\nknown as ‘Board for Industrial and Financial Reconstruction Regulations,
\n1987’.  Chapters IV to Chapter VIII thereof provide for various measures
\nwhich are required to be taken by the Board during the inquiry or thereafter.\n<\/p>\n
1996 Act :\n<\/p>\n
\tThe 1996 Act was enacted to consolidate and amend the law relating
\nto domestic, international and commercial arbitration and enforcement of the
\narbitral awards.\n<\/p>\n
 \t1996 Act is in four parts.   Part I provides for the matter relating to
\ndomestic arbitration; whereas Part II refers to enforcement of certain foreign
\nawards.  Part III provides for conciliation; whereas Part IV provides for
\nsupplementary provisions.  We are concerned with the provisions contained
\nin Part I of the Act.  Chapter I, which begins with the interpretation clause,
\nprovides for the general provisions.  Section 2(c) defines “arbitration award”
\nto include an interim award.  Section 5 provides for a non-obstante clause in
\nthe matters governed by Part I stating that no judicial authority shall
\nintervene except where so provided for therein.  Section 16 provides for the
\npower of arbitral tribunal to rule on its own jurisdiction.\n<\/p>\n
\tChapter VII provides for recourses available against the arbitral
\nawards.  Section 34 of the Act provides that the Court may be approached
\nagainst an arbitral award by way of an application for setting aside the same
\nin terms of sub-section (2) or sub-section (3) thereunder.  Section 36
\nprovides for enforcement of award in the following terms:\n<\/p>\n
“36. Enforcement. – Where the time for making an
\napplication to set aside the arbitral award under section
\n34 has expired, or such application having been made, it
\nhas been refused, the award shall be enforced under the
\nCode of Civil Procedure, 1908 (5 of 1908) in the same
\nmanner as if it were a decree of the Court.”\n<\/p>\n
In Mcdermot International Inc. v. Burn Standard Co. Ltd.<\/a> [2006 (6)
\nSCALE 220], this Court noticing  the changes made in the 1996 Act  vis-`-
\nvis the 1940 Act, observed :\n<\/p>\n
“The 1996 Act makes a radical departure from the
\n1940 Act. It has embodied the relevant rules of the
\nmodern law but does not contain all the provisions
\nthereof.  The 1996 Act, however, is not as extensive as
\nthe English Arbitration Act.\n<\/p>\n
Different statutes operated in the field in respect of
\na domestic award and a foreign award prior to coming
\ninto force of the 1996 Act, namely, the 1940 Act, the
\nArbitration (Protocol and Convention) Act, 1937 and the
\nForeign Awards (Recognition and Enforcement) Act,
\n1961.  All the aforementioned statutes have been
\nrepealed by the 1996 Act and make provisions in two
\ndifferent parts, namely, matters relating to domestic
\naward and foreign award respectively.”\n<\/p>\n
The 1996 Act is a complete Code by itself.  It lays down the
\nmachinery for making an arbitral award enforceable.   In terms of Section 36
\nof the 1996 Act, an award becomes enforceable as if it were a decree; where
\nthe time for making the application for setting it aside under Section 34 has
\nexpired, or such application having been made,  has been refused.\n<\/p>\n
Analysis of the Statutory Provisions  :\n<\/p>\n
It is not in dispute that during the pendency of an inquiry before the
\nBoard, the respondent could sell its shares.  It, however, could not, do so
\nbecause of the restraint order passed against it.  Was it, therefore,
\npermissible for the High Court to direct sale of the shares despite refusal on
\nthe part of the Board so to do, is the question.  The Board exercises statutory
\nfunctions.  It is a quasi judicial authority.  It exercises various powers under
\nthe Code of Civil Procedure.  For the purpose of the 1996 Act it is a judicial
\nauthority.\n<\/p>\n
A power to pass an interim order, however, and that too directing
\ndisposal of the assets must be found out in the scheme of the statute itself.
\nAlthough the courts of limited jurisdiction may also possess by necessary
\nimplication incidental power so as to enable it to direct preservation of
\nproperty during the pendency of a proceeding before it,  it is doubtful
\nwhether such incidental power can be exercised for sale of the assets of the
\ncompany.\n<\/p>\n
\tWhen a reference is made before the Board, certain consequences
\nensue, the proceedings  for the winding up of a company or for execution of
\ndistress or the like against the property of the company or for the
\nappointment of a receiver would not continue.  Even, no suit for recovery of
\nmoney or for the enforcement of any security  or of any  guarantee shall lie
\nor be proceeded with further, save and except with the consent of the Board
\nor the appellate authority.\n<\/p>\n
Section 22A, however, permits the Board to pass certain conditional
\norders.  Upon receipt of a reference, the Board has no other option but to
\nmake an inquiry, of course, therefor the reference is to be registered, upon
\nscrutiny thereof.  The imperative character of an inquiry  at the hands of the
\nBoard is inherent in the scheme of the Act.  The legislative intention therefor
\nis clear and explicit.  The consequences flowing from  registration of a
\nreference necessarily would mean initiation of an inquiry which would
\ninclude investigation into facts, causes and effects thereof.  Act No. 12 of
\n1994 amending SICA also specified  the main features of the amendments to
\nbe as under :\n<\/p>\n
“(a)\tjurisdictional amendments which redefine the
\ncategory of the companies coming within the
\npurview of the Act, and the options which are
\navailable for revival, rehabilitation or winding up
\nof sick industries companies;\n<\/p>\n
(b)\tamendments to enhance the effectiveness of
\nBoard;\n<\/p>\n
(c)\tamendments which seek to remove certain
\nambiguities and strengthen internal coherence of
\nthe Act by redefining certain provisions which are
\nclarificatory in nature.”\n<\/p>\n
Section 19A of SICA as inserted in the year 1994, although may be
\nheld to be clarificatory in nature, however, confers a special power to pass
\nan order envisaged thereunder.  Section 19A does not empower the Board to
\ndirect sale of the assets at the stage of enquiry.  Section 22(1) and 22(3)
\nagain would, however, be applicable where an inquiry under Section 16 is
\npending.  Whereas under sub-section (1) of Section 22 no specific order is
\nrequired to be passed by the Board; it is necessary,  in respect of the matters
\nenumerated under sub-section (3) of Section 22 thereof.\n<\/p>\n
 Although for the aforementioned purpose, it may not be imperative
\nthat such an order be passed only in terms of a  scheme, as was submitted by
\nMr. Sundaram, but it is true that  application of mind on the part of the
\nBoard in relation thereto is necessary.\n<\/p>\n
It is difficult to accept the submission of the learned Senior Counsel
\nthat sub-section (3) of Section 22 of SICA deals only with contractual
\nobligations.  The expression “award, standing orders or other instruments” in
\nour considered view does not refer only to a contractual obligation which is
\nbinding on the company, but also liabilities thereunder.\n<\/p>\n
 The expression “award” has a distinct connotation. It envisages a
\nbinding decision of a judicial or a quasi judicial authority. It may be an
\narbitral award.  It may also be an award under Section 10A of the Industrial
\nDisputes Act, 1947, or one made by the Labour Court or an Industrial
\nTribunal.  An award of a quasi judicial or judicial authority may provide for
\na binding decision on the company.\n<\/p>\n
Meaning of the term “award” in our opinion cannot be restricted to a
\ncontractual obligation inasmuch as by its very nature a third party
\nintervention, for  resolution of disputes between the parties where company
\nis a party, is envisaged.  Even a ‘settlement’ arrived at by and between the
\nparties thereto would be binding, inter alia, in terms of the  provisions of
\nSection 18 of the  Industrial Disputes Act, 1947.\n<\/p>\n
Submission of Mr. Sundaram that sub-section (3) of Section 22 would
\nbe attracted only in a case where a scheme has been made,  in our opinion,
\ndoes not stand a close scrutiny.  Sub-section (3) of Section 22 contemplates
\nfour different regimes : (i) where an inquiry under Section 16 is pending; or\n<\/p>\n
(ii) where any scheme referred to in Section 17 is under preparation; or (iii)
\nduring the period of consideration of any scheme under Section 18; or (iv)
\nwhere any such scheme  is sanctioned thereunder.\n<\/p>\n
The expression “for due implementation of the scheme” would refer
\nonly to the scheme which has been sanctioned under Section 18 and not any
\nstage prior thereto.  If  the submission of Mr. Sundaram is accepted, the
\nother provisions contained in sub-section (3) of Section 22 cannot be given
\neffect to,  as a result whereof the same would become otiose.\n<\/p>\n
What, however can be directed to be  suspended were the matters
\nwhich were existing immediately before the date of such order.\n<\/p>\n
Rule of ejusdem generis for construing the words “agreement,
\nsettlement standing order or other instruments” is also not applicable in the
\ninstant case.\n<\/p>\n
\tAn award under the 1996 Act indisputably stand on a different footing
\nvis-`-vis an award made under the  Arbitration Act, 1940.  Whereas under
\nthe 1940 Act, an award was required to be made a rule of the court to make
\nit enforceable;  the 1996 Act, however, raises a legal fiction.  When an
\naward is made, an application under Section 34 is required to be filed
\nquestioning the validity thereof.  Once such an application is filed, it remains
\nunder suspension in the sense that it would not be enforceable.  Only upon
\nexpiry of the period specified in Section 34 to challenge an award or when
\nsuch objection is refused,  the same would become enforceable.  Section 36
\nmerely specifies as to how such an award can be enforced by laying down
\nthat it can be enforced as if it were  a decree.\n<\/p>\n
\tThe legal fiction created under Section 36 has, therefore, a limited
\napplication. An award is, thus, to be treated to be a decree even without
\nintervention of the court only for the purpose of its enforceability.\n<\/p>\n
Thus, an order can be passed by the Board for suspending the
\noperation of the award if any occasion arises therefor.\n<\/p>\n
In Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd.<\/a>
\n(2000) 5 SCC 514], it was held that the word ‘deemed’ used in the section
\nwould thus mean, “supposed”, “considered”, “construed”, “thought”, “taken
\nto be” or “presumed”.\n<\/p>\n
\tThe question, however, will moreover  have to be considered in the
\nlight of Section 5 of the 1996 Act, which would depend on the meaning of
\nthe word “judicial authority” occurring therein.\n<\/p>\n
However, sub-section (1) of Section 22 would be attracted only when
\nan award becomes a decree and, thus, enforceable in a court of law, albeit in
\nthe event a proceeding is initiated therefor.   In this case, an objection to the
\naward has been filed.  It is, therefore, yet to become a decree.\n<\/p>\n
\tWhile exercising its power under sub-section (3) of Section 22, the
\nBoard cannot ignore an order passed by a superior court.  It may be bound
\nby the doctrine of judicial discipline.\n<\/p>\n
Sub-section (1) of Section 22 itself provides for a non-obstante clause.
\nIt not only refers to the provisions of the Companies Act or the
\nMemorandum or Articles of Association of an industrial company or any
\nother instrument in force under the said Act, but also of other laws.\n<\/p>\n
SICA furthermore was enacted to give effect to a larger public interest
\nso as to secure the principles specified in Article 39 of the Constitution of
\nIndia.  Sub-section (1) of Section 22 must be construed having regard to the
\naforementioned principles in mind.  It seeks to restrain the Court from
\nentertaining and\/or proceeding with any court proceeding if the lis is before
\nit.\n<\/p>\n
 The provisions contained in sub-section (1) of Section 22, however,
\nappear to be clear and unambiguous.  Sub-section (3) of Section 22, on the
\nother hand, does not speak of automatic suspension of the proceedings or bar
\nthe jurisdiction of the Court in entertaining any application.  The provision
\nempowers the Board to make a declaration in terms whereof, inter alia,
\noperation of a settlement or award, not only where the industrial company is
\na party, but also where the same would be applicable thereto, would remain
\nsuspended.  It envisages suspension of not only operation of any contract of
\nassurances of property, agreement, settlement, award, standing orders, etc.,
\nbut also rights, privileges, obligations and liabilities accruing or arising
\nthereunder.  The result of such declaration is not far to seek.  Such
\ndeclaration, however, either for suspension or operation of the contract or
\naward, etc. for the rights, privileges, obligations and liabilities or all or any
\nof the rights, privileges, obligations and liabilities accruing or arising
\nthereunder is to be made specifically.  The Board may choose to make either
\nof the declarations, as provided for thereunder.  The period for such
\nsuspension, however, is controlled by the proviso appended thereto.\n<\/p>\n
\tA statutory distinction has, thus, been made by the Legislature as
\nregard suspension of a proceeding, on the one hand, and initiation and\/or
\ncontinuance thereof, on the other. Whereas in the former case the statutory
\nimpact would be automatic, in the latter the court is required to apply its
\nmind having regard to facts and circumstances of each case.  When an order
\nis passed by the Board in exercise of its jurisdiction under sub-section (3) of
\nSection 22 directing the parties not to continue the proceeding, an award or
\ndecree is not set aside thereby.  They are merely kept in abeyance so as to
\nenable the Board to pass an appropriate order, inter alia, for revival of a sick
\ncompany for the purpose of giving effect to the purport and object for which
\nthe laws relating to corporate insolvency have been enacted.\n<\/p>\n
\tWhile it has to be acknowledged that that the Board has a duty to
\nafford maximum protection to employment, optimize the use of financial
\nresources, salvaging the assets of production, realizing the amounts due to
\nthe Banks and to replace the existing time consuming and inadequate
\nmachinery by efficient machinery for expeditious determination by a body
\nof experts and, thus, to a limited extent making it entitled to safeguard the
\neconomy of the country and protect viable sick units, it, however,  must act
\nwithin the four-corners of the statute.  The Board, however, while passing an
\ninterim order has to keep in mind not only the governing principles relating
\nto grant of injunction as envisaged  in Morgan Stanley Mutual Fund etc. v.
\nKartick Das etc. [(1994) 4 SCC 225], but also the principles of judicial amity
\nor comity.  [See ‘A Treatise on the Law Governing Injunctions’ by Spelling
\nand Lewis’ page 10 –  See also M\/s Transmission Corporation of A.P. Ltd.
\n& Ors.  v.  M\/s Lanco Kondapalli Power Pvt. Ltd.<\/a>  (2006) 1 SCC 540,
\nRamdev Food Products Pvt. Ltd. v. Arvindbhai Rambhai & Ors.<\/a> 2006 (8)
\nSCALE 631 and M. Gurudas & Ors. v. Rasaranjan & Ors.<\/a> 2006 (9) SCALE
\n275]<\/p>\n
Judicial Authority :\n<\/p>\n
\tThe 1996 Act does not define the term ‘Judicial Authority’.   What is
\ndefined in Section 2(e) thereof is ‘Court’.  In its ordinary parlance ‘judicial
\nauthority’ would comprehend a court defined under the Act but also courts
\nwhich would either be a civil court or other authorities which perform
\njudicial functions or quasi judicial functions.\n<\/p>\n
\tIn SBP & Co. v. Patel Engineering Ltd. and Another [(2005) 8 SCC
\n618], a Seven Judge Bench of this Court although did not have the occasion
\nto deal with the question directly; but while overruling the decisions in
\nKonkan Railway Corporation Ltd. and Others v. Mehul Construction Co.<\/a>
\n[(2000) 7 SCC 201] and Konkan Railway Corporation Ltd. and Another v.
\nRani Construction Pvt. Ltd.<\/a> [(2002) 2 SC 388] opined :\n<\/p>\n
“A judicial authority as such is not defined in the Act.
\nIt would certainly include the court as defined in Section
\n2(e) of the Act and would also, in our opinion, include
\nother courts and may even include a special tribunal like
\nthe Consumer Forum (see Fair Air Engineers (P) Ltd. v.
\nN.K. Modi). When the<\/a> defendant to an action before a
\njudicial authority raises the plea that there is an
\narbitration agreement and the subject-matter of the claim
\nis covered by the agreement and the plaintiff or the
\nperson who has approached the judicial authority for
\nrelief, disputes the same, the judicial authority, in the
\nabsence of any restriction in the Act, has necessarily to
\ndecide whether, in fact, there is in existence a valid
\narbitration agreement and whether the dispute that is
\nsought to be raised before it, is covered by the arbitration
\nclause. It is difficult to contemplate that the judicial
\nauthority has also to act mechanically or has merely to
\nsee the original arbitration agreement produced before it,
\nand mechanically refer the parties to an arbitration”\n<\/p>\n
In Management Committee of Montfort Senior Secondary School v.
\nVijay Kumar and Others<\/a>  [(2005) 7 SCC 472] a question arose as to whether
\na Tribunal under the Delhi School Education Act, 1973, is a judicial
\nauthority.  It was held that a School Tribunal is a judicial Authority, as it act
\njudicially and exercise a judicial power.\n<\/p>\n
The question again came up for consideration indirectly in P. Anand
\nGajapathi Raju and Others v. P.V.G Raju (Dead) and Others<\/a>  [(2000) 4 SCC
\n539] wherein it was held :\n<\/p>\n
“5. The conditions which are required to be satisfied
\nunder sub-sections (1) and (2) of Section 8 before the
\ncourt can exercise its powers are:\n<\/p>\n
(1) there is an arbitration agreement;\n<\/p>\n
(2) a party to the agreement brings an action in the
\ncourt against the other party;\n<\/p>\n
(3) subject-matter of the action is the same as the
\nsubject-matter of the arbitration agreement;
\n(4) the other party moves the court for referring the
\nparties to arbitration before it submits his first statement
\non the substance of the dispute.\n<\/p>\n
This last provision creates a right in the person bringing
\nthe action to have the dispute adjudicated by the court,
\nonce the other party has submitted his first statement of
\ndefence. But if the party, who wants the matter to be
\nreferred to arbitration applies to the court after
\nsubmission of his statement and the party who has
\nbrought the action does not object, as is the case before
\nus, there is no bar on the court referring the parties to
\narbitration.”\n<\/p>\n
In Fair Air Engineers Pvt. Ltd. and Another v. N.K. Modi<\/a> [(1996) 6
\nSCC 385], it was held that the District Forum, National Commission and the
\nState Commission under the Consumer Protection Act  are included in the
\nterm ‘judicial authority’ for the purpose of Section 34 of the Arbitration Act,
\n1940.\n<\/p>\n
In Canara Bank v. Nuclear Power Corporation of India Ltd. and
\nOthers<\/a> (1995) Supp. 3 SCC  page 81], it was held :\n<\/p>\n
“8. Sub-section (1) of Section 9-A empowers the
\nSpecial Court to exercise the jurisdiction, powers and
\nauthority exercisable by a civil court. It so empowers the
\nSpecial Court in relation to any matter or claim, inter
\nalia, that arises out of transactions in securities entered
\ninto between the stated dates in which a notified person is
\ninvolved. The words “civil court” are used in the context
\nof the jurisdiction, powers and authority that the Special
\nCourt may exercise. The Special Court is empowered to
\nexercise such jurisdiction, powers or authority in relation
\nto the matters or claims therein specified. These matters
\nor claims include those arising out of transactions in
\nsecurities entered into between the stated dates in which a
\nnotified person is involved. Sub-section (2) of Section 9-
\nA deals with the transfer of certain suits, claims or other
\nlegal proceedings (other than an appeal) to the Special
\nCourt. Every suit, claim or other legal proceeding
\npending before any court the cause of action whereof is
\nsuch that, had it arisen after the commencement of the
\nAmendment Ordinance, the suit, claim or other legal
\nproceeding would have had to be filed before the Special
\nCourt, stands transferred to the Special Court. Every suit,
\nclaim or other legal proceeding pending before any court
\nthe cause of action whereof arises out of transactions in
\nsecurities entered into between the stated dates in which a
\nnotified person is involved would, therefore, if it is
\npending before any court on the date on which the
\nAmendment Ordinance came into force, stand transferred
\nto the Special Court. By reason of sub-section (3) of
\nSection 9-A, on and after the commencement of the
\nAmendment Ordinance, no court other than the Special
\nCourt may exercise any jurisdiction, powers or authority
\nin relation to any matter or claim referred to in sub-
\nsection (1), that is to say, in relation to any matter or
\nclaim, inter alia, arising out of transactions in securities
\nentered into between the stated dates in which a notified
\nperson is involved.”\n<\/p>\n
We are, however, not oblivious of a decision of this Court in The
\nBharat Bank Ltd., Delhi v. Employees of the Bharat Bank Ltd., Delhi<\/a> [1950
\nSCR 459] wherein an Industrial Tribunal functioning under the Industrial
\nDisputes Act was held to be not a Judicial Tribunal, stating that although it
\nhas all the trappings of a court but is not a court.\n<\/p>\n
The expression ‘judicial authority’ must, therefore, be interpreted
\nhaving regard to the purport and object for which the 1996 Act was enacted.
\nJudging the contention of the Board and having regard to the width of its
\njurisdiction, we are of the opinion that the Board is a judicial authority
\nwithin the meaning of Section 5 of the Act.\n<\/p>\n
Non Obstante Clause  :\n<\/p>\n
\tBoth the Acts contain non-obstante clauses. Ordinary rule of
\nconstruction  is that where there are two non-obstante clauses, the latter shall
\nprevail. But it is equally well-settled that ultimate conclusion would depend
\nupon the limited context of the statute.  [See Allahabad Bank  v. Canara
\nBank and Another<\/a> (2000) 4 SCC 406  para 34].\n<\/p>\n
In  Maruti Udyog Ltd. v. Ram Lal and Others<\/a> (2005) 2 SCC 638], it
\nwas observed :\n<\/p>\n
“39. The interpretation of Section 25-J of the 1947 Act
\nas propounded by Mr Das also cannot also be accepted
\ninasmuch as in terms thereof only the provisions of the
\nsaid chapter shall have effect notwithstanding anything
\ninconsistent therewith contained in any other law including
\nthe Standing Orders made under the Industrial
\nEmployment (Standing Orders) Act, but it will have no
\napplication in a case where something different is
\nenvisaged in terms of the statutory scheme. A beneficial
\nstatute, as is well known, may receive liberal construction
\nbut the same cannot be extended beyond the statutory
\nscheme”\n<\/p>\n
\tIn Shri Sarwan Singh and Another v. Shri Kasturi Lal<\/a> [(1977) 1 SCC
\n750], this Court opined :\n<\/p>\n
“When two or more laws operate in the same field
\nand each contains a non-obstante clause stating that its
\nprovisions will override those of any other law,
\nstimulating and incisive problems of interpretation arise.
\nSince statutory interpretation has no conventional
\nprotocol, cases of such conflict have to be decided in
\nreference to the object and purpose of the laws under
\nconsideration”\n<\/p>\n
\tThe endeavour of the court  would, however, always be to adopt a rule
\nof harmonious construction.\n<\/p>\n
In NGEF Ltd. v. Chandra Developers (P) Ltd. and Another<\/a>  [(2005) 8
\nSCC 219], interpreting sub-section (4) of Section 20 of  SICA, it was held :\n<\/p>\n
“41. It is difficult to accept the submission of the
\nlearned counsel appearing on behalf of the respondents
\nthat both the Company Court and BIFR exercise
\nconcurrent jurisdiction. If such a construction is upheld,
\nthere shall be chaos and confusion. A company declared
\nto be sick in terms of the provisions of SICA, continues
\nto be sick unless it is directed to be wound up. \tTill
\nthe company remains a sick company having regard to
\nthe provisions of sub-section (4) of Section 20, BIFR
\nalone shall have jurisdiction as regards sale of its assets
\ntill an order of winding up is passed by a Company
\nCourt.”\n<\/p>\n
\tIt was further held :\n<\/p>\n
“49. Section 32 of SICA contains a non obstante
\nclause stating that provisions thereof shall prevail
\nnotwithstanding anything inconsistent with the provisions
\nof the said Act and of any rules or schemes made
\nthereunder contained in any other law for the time being
\nin force. It would bear repetition to state that in the
\nordinary course although the Company Judge may have
\nthe jurisdiction to pass an interim order in exercise of its
\ninherent jurisdiction or otherwise directing execution of a
\ndeed of sale in favour of an applicant by the Company
\nsought to be wound up, but keeping in view the express
\nprovisions contained in sub-section (4) of Section 20 of
\nSICA such a power, in our opinion, in the Company
\nJudge is not available. (See BPL Ltd.)<\/p>\n
50. We may, however, observe that the opinion of the
\nDivision Bench in BPL Ltd. to the effect that the
\nwinding-up proceeding in relation to a matter arising out
\nof the recommendations of BIFR shall commence only
\non passing of an order of winding up of the Company
\nmay not be correct. It may be true that no formal
\napplication is required to be filed for initiating a
\nproceeding under Section 433 of the Companies Act as
\nthe recommendations therefor are made by BIFR or
\nAAIFR, as the case may be, and, thus, the date on which
\nsuch recommendations are made, the Company Judge
\napplies its mind to initiate a proceeding relying on or on
\nthe basis thereof, the proceeding for winding up would be
\ndeemed to have been started; but there cannot be any
\ndoubt whatsoever that having regard to the phraseology
\nused in Section 20 of SICA that BIFR is the authority
\nproprio vigore which continues to remain as custodian of
\nthe assets of the Company till a winding-up order is
\npassed by the High Court.”\n<\/p>\n
\tIn ICICI Bank Ltd. v. Sidco Leathers Ltd.  and Others<\/a> [2006) 5
\nSCALE 27] the law is stated in the following terms :\n<\/p>\n
“The non-obstante nature of a provision although
\nmay be of wide amplitude, the interpretative process
\nthereof must be kept confined to the legislative policy.
\nOnly because the dues of the workmen and the debt due
\nto the secured creditors are treated pari passu with each
\nother, the same by itself, in our considered view, would
\nnot lead to the conclusion that the concept of inter se
\npriorities amongst the secured creditors had thereby been
\nintended to be given a total go-by.\n<\/p>\n
 \tA non-obstante clause must be given effect to, to
\nthe extent the Parliament intended and not beyond the
\nsame.”\n<\/p>\n
\tSection 5 of the 1996 Act also provides for a non-obstante clause.  It
\nhas, however, a limited application aiming at the extent of judicial
\nintervention.  Its application would be attracted only when an order under
\nsub-section (3) of Section 22 is required to be passed.  If the said provision
\nis to be given effect to, the Board would not intervene in the matter of  the
\nimplementation of the award.  It would merely suspend the operation of it.
\nIt may even pass an order suspending the liabilities or obligations of the
\nindustrial company under the award.  Even otherwise  in the fact of the
\npresent case it stands suspended.\n<\/p>\n
The Board however, has not passed an order under sub-section (3) of
\nSection 22 of SICA.  The court, therefore, must proceed with the objection
\nfiled by the Respondent under Section 34 of the 1996 Act.  However, if the
\nobjection filed by the Respondent is rejected, the question of its
\nenforceability would come into being.  Once the arbitral award having the
\nforce of a decree  is put into execution, sub-section (1) of Section 22 of
\nSICA would come  on its way from being enforced.  The contention raised
\nby Mr. Sundaram that having regard to the provisions of  Section 5 of the
\n1996 Act, the Board would have no jurisdiction, therefore, does not seem to
\nhave any force.\n<\/p>\n
\tSub-section (3) of Sections 22 SICA provides for a specific power in
\nthe Board  The said provision contemplates a larger public interest.  In the
\nevent an arbitral award is held to be outside the purview of sub-section (3) of
\nSection 22 thereof, it may be difficult to frame a scheme or in a given case
\nimplement the same under SICA.  SICA provides for a time-frame for all the
\nstages of proceedings.   Proviso appended thereto assumes significance in
\nthis behalf.\n<\/p>\n
The Parliament presumed that the suspension of an award shall not be
\nfor a long period.  In a given case, a party to an award may face some
\nhardships owing to its suspension; but in such an event, it would always be
\nopen to it to bring the same to the notice of the Board   The Board under
\nsub-section (3) of Section 22 of SICA may pass such an order or may not do
\nso.  If an order is passed by the Board, an appeal lies thereagainst.  The
\nprovisions of SICA, it will bear repetition to state, have been made to seek to
\nachieve a higher goal and, thus, the provisions of  SICA would be
\napplicable, despite Section 5 of the 1996 Act.\n<\/p>\n
In Kailash Nath Agarwal and Others v. Pradeshiya Industrial &
\nInvestment Corporation of U.P. Ltd. and Another [(2003) 4 SCC 305], it was
\nheld :\n<\/p>\n
“The object for enacting SICA and for introducing the
\n1994 Amendment was to facilitate the rehabilitation or
\nthe winding up of sick industrial companies. It is not the
\nstated object of the Act to protect any other person or
\nbody”\n<\/p>\n
\tIn Burn Standard Co. Ltd. v. Mc.Dermott International Inc. & Others<\/a>
\ndisposed of on 11.06.1997, a Division Bench of the Calcutta High Court
\nopined that the  arbitration proceedings may continue during the pendency of
\nan inquiry pursuant to a reference made under SICA.\n<\/p>\n
Yet again in Saurabh Kalani v. Tata Finance Lrtd. and Anr. [2003 (3)
\nArb. LR 345 (Bombay),  the Bombay High Court took the same view.\n<\/p>\n
Conclusion :\n<\/p>\n
\tIn this case, the shares have been sold.  The sale proceeds have been
\ndeposited before the Board.  It is, thus, futile to interfere with the impugned
\norder at this stage.  However, we thought it necessary to lay down the law
\nfor future guidance of the Board while deciding a similar case.\n<\/p>\n
\tFor the reasons aforementioned, we do not intend to interfere with the
\nimpugned judgment of the High Court.  It is dismissed accordingly having
\nbecome  infructuous.  No costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Morgan Securities And Credit Pvt. … vs Modi Rubber Ltd. \u00c3 Respondent on 14 December, 2006 Author: S.B. Sinha Bench: S.B. Sinha CASE NO.: Appeal (civil) 2572 of 2006 PETITIONER: Morgan Securities and Credit Pvt. Ltd. Appellant RESPONDENT: Modi Rubber Ltd. Respondent. DATE OF JUDGMENT: 14\/12\/2006 BENCH: S.B. Sinha JUDGMENT: J […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-126830","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nMorgan Securities And Credit Pvt. ... vs Modi Rubber Ltd. \u00c3 Respondent on 14 December, 2006 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/morgan-securities-and-credit-pvt-vs-modi-rubber-ltd-a-respondent-on-14-december-2006\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Morgan Securities And Credit Pvt. ... vs Modi Rubber Ltd. \u00c3 Respondent on 14 December, 2006 - 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