RAHEJA UNIVERSAL LIMITED Vs. NRC LIMITED

JUDGEMENT

(1.) An interesting question of law as to the ambit and scope of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, the 'Act of 1985') and its overriding application over the provisions of Transfer of Property Act, 1882 (for short, the 'Act of 1882'), with particular reference to Section 53A and Section 54 of the latter Act, arises for consideration in the present case. Reference to the basic facts which give rise to this proposition of law would be necessary and are as follows:

(2.) NRC Limited is a company which was originally incorporated under the name and style of 'National Rayon Corporation Limited' in the year 1946. However, subsequently, by an appropriate resolution of the Board of Directors, its name was changed to 'NRC Limited' on 4 th August, 1994 (hereinafter referred to as the 'RespondentCompany'). The Respondent-Company was engaged in the manufacture of viscos filament yarn, chemicals and allied products with its factory at Mohane, Kalyan, District Thane. As per the facts on record, the Respondent-Company was declared a 'sick industrial company' in the year 1987, but as its net worth turned positive, vide order dated 10 th January, 1994 passed by the Board for Industrial and Financial Restructuring (for short, the 'BIFR'), it was discharged from the purview of the Act of 1985. The Respondent-Company had arranged finances and invested nearly Rs.86 crore in the financial year 2005-06 whereafter it started incurring losses because reduction in the customs duty seriously affected its business. Because of the financial crunch faced by the Respondent-Company, a consortium of five nationalized banks comprising of Punjab National Bank, Dena Bank, Canara Bank, Indian Overseas Bank and the Bank of Baroda had sanctioned a term loan as well as a working capital loan, secured by the current assets as well as the fixed assets of the Respondent-Company including the land in question. The total outstanding amount of loan, as on 31 st March, 2006, was approximately Rs.147 crore. The Respondent-Company intensified its efforts to dispose of the surplus land so as to bring in additional funds required for financial restructuring. A Memorandum of Understanding was signed on 13 th April, 2006 with 'K. Raheja Universal Limited' renamed as 'Raheja Universal Limited' (hereinafter referred to as the 'AppellantCompany') for sale of about 344 acres of land for a total consideration of Rs.166.40 crore. After obtaining 'No Objection Certificates' from the lending banks, an agreement dated 1 st March, 2007 was signed between the parties and a sum of Rs.25 crore was paid by the Appellant-Company to the Respondent-Company. The balance consideration of Rs.141.40 crore was to be paid as per the terms of the agreement. In terms of the said agreement, the Appellant-Company was to pay the second instalment of Rs.25 crore, as and when required, to be utilized only to remove the first charge on the saleable land, the third instalment of Rs.48.90 crore was to be paid on receipt of 'No Objection Certificate' from the labour, Kalyan Dombivli Municipal Corporation and, on completion of fencing and the vacant possession of non-colony land and the fourth and final instalment of Rs.72.50 crore was to be paid subsequent thereto.

(3.) The Agreement dated 1 st March, 2007 had postulated payment of the sale consideration in instalments. The parties continued further negotiations in regard to payment of the balance sale consideration. The Respondent-Company had requested the Appellant-Company to advance the payment of instalments. Thereafter, the parties came to an understanding and, in furtherance to such understanding, a supplementary deed to the agreement was signed on 29 th September, 2007. As already noticed, the Appellant-Company had declined to pay the third instalment of the consideration payable, causing impediment to payments towards labour costs and other expenses of the Respondent-Company. Then, the parties, by mutual agreement, signed a second supplementary agreement dated 17 th August, 2010. This agreement referred to the principal agreement and besides advancing the payment of instalments, the possession of the property was also given to the Appellant-Company.