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CASE NO.: Appeal (civil)  2572 of 2006

PETITIONER: MORGAN SECURITIES AND CREDIT PVT. LTD.          \005\005 APPELLANT

RESPONDENT: MODI RUBBER LTD.                                            \005\005 RESPONDENT

DATE OF JUDGMENT: 14/12/2006

BENCH: P.K. BALASUBRAMANYAN

JUDGMENT:

J U D G M E N T  

P.K. BALASUBRAMANYAN, J.

                                 1.              While, I agree with the conclusion of my learned  Brother on the interplay of the Sick Industrial Companies  (Special Provisions) Act, 1985 (hereinafter referred to as  ’SICA’) and the Arbitration and Conciliation Act, 1996 on  the question of law formulated while issuing notice on the  Petition for Special Leave to Appeal to this Court, and his  final order, I think it necessary to express my reservation  on the propriety of the order passed by the Division Bench  of the High Court on the facts and in the circumstances of  the case.  While purporting to exercise jurisdiction in a  writ petition challenging an order of the Board for  Industrial and Financial Reconstruction (hereinafter  referred to as, ’B.I.F.R.’) which was approached by the  respondent, the Division Bench of the High Court has  chosen to brush aside valid orders passed by the  Company Court in Allahabad, the order to maintain status  quo passed by the Appellate Authority for Industrial and  Financial Reconstruction (A.A.I.F.R.) and by various Debts  Recovery Tribunals and has permitted the asset of the  respondent to be sold as proposed by the respondent.  It  must be noted that the orders were made by the  competent tribunals or court and that those orders were  binding on the respondent, the writ petitioner in the High  Court.  If on its understanding of Section 22(3) of SICA,  the High Court was of the view that the orders of restraint  did not bar the BIFR from considering the prayer of the  respondent, there was still the order of A.A.I.F.R. to  maintain status quo regarding the assets of the  respondent-Company.  Surely, that was an order under  the SICA.  No reason is given by the High Court to hold  that the order of A.A.I.F.R. is also not binding on B.I.F.R.  or that B.I.F.R. could ignore it.  According to me, the High  Court should have dealt with the question properly with  reference to the nature of the relevant orders and the  context in which they were made and if it was still of the  view that the power vested in B.I.F.R. under Section 22(3)  of SICA enabled it to override all those orders, it should  have normally remitted the application made by the  respondent to B.I.F.R. so as to enable it to take a decision  on the prayer of the respondent in the context of the  proceedings pending before B.I.F.R. and all elements  relevant for the purpose of such a decision.  The High  Court has also not considered how far it will be

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appropriate to permit the sale of the assets of a Company  which is before B.I.F.R. for a scheme of revival.  2.                Occasions are not infrequent when not so  scrupulous debtors approach B.I.F.R. to stall the  proceedings and to keep their creditors at bay.  The delay  before the B.I.F.R.  is sought to be taken advantage of.    The Parliament has apparently taken note of this and has  repealed SICA by the Sick Industrial Companies (Special  Provisions) Repeal Act, 2003.  The vacuum, thus created  has been filled by an amendment to the Companies Act.   But, so far, the provisions of the Amending Act and the  Companies Act introduced, have not been brought into  force.  It appears to be time to consider whether these  enactments should not be notified.