RAMA SHREE CONDUCTORS LIMITED Vs. THE APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION

JUDGEMENT

(1.) The Petitioner by this petition challenges the validity of the order dated 21st October, 2008 passed by the Appellate Authority for Industrial and Financial Reconstruction, New Delhi in Appeal No. 97 of 2008 .

(2.) The relevant facts are that the reference of the Petitioner -company under Sick Industrial Companies (Special Provisions) Act ,1985 was registered on 30th April, 2002. Notice under Section 13(2) was given by Respondent No.3 -SICOM on 4 -7 -2002, by Respondent No. 4 IDBI on 29 -10 -2002 and by Respondent No. 6 -State Bank of India on 8 -2 -2003. These were admittedly the secured creditors of the Petitioner -company. It appears that the Respondent No. 4 IDBI gave consent letter to SICOM -Respondent No.3 on 1 -7 -2004 and the State Bank of India gave consent letter to the Respondent No.3 on

(3.) -1 -2005. The Respondent No. 3 issued notice under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 24 -1 -2005 and took possession of the property on 9 -2 -2005. Thereafter steps were taken to sell the property. In these circumstances on 4 -3 -2008 BIFR passed Order holding that the reference of the Petitioner -company stands abated as action under Section 13(4) of the Securitisation Act has been taken. That order was subjected to challenge in appeal before the AAIFR. In the appeal it was the of the contention of the Petitioner -company that as action under Section 13(4) of the securitisation Act taken by SICOM is not valid, in asmuch as there is no consent of 3/4th secured creditors the reference of the Petitioner -company does not abate. AAIFR by order dated 21 -1 -2008 held that the question whether the action taken under Section 13(4) of the securitisation Act is valid or incalid can be decided by the Forum provided by the Securitisation Act and not by AAIFR. The Petitioner is challenging that order in this petition. 3. The learned CouseI appearing for the Petitioner submits that the consequence of an action taken under section 13(4) of the Securitisation Act isabatement of the proceedings under the Sick Industrial Companies Act. Therefore, power to decide whether the proceedings have actually abated in accordance with law or not is of the authorities under the Sick Industrial Companies Act. The learned Counsel, therefore, submitted that the AAIFR has abdicated its power of deciding this controversy. It was for the AAIFR to decide the controversy. In our opinion, the submission is not well founded. Perusal of the provision of the Securitisation Act shows that sub -section 4 of Section 13 authorises the secured creditors to take recourse tO one or more measures which are mentioned in sub - section 4 of Section 13. One of the measure is taking possession of the secured assets and then taking steps to sell the same. Sub -section 9 of Sectioin 13 is relevant for the present purpose, which reads as under: - 13(9) In the case of finan cing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub -section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three -fourth in value) of the amount outstanding as on a record date and such action shall be binding on all the secured creditors; Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956); Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under Proviso to sub -section (1) of section 529 of the companies Act, 1956;(1 of 1956), may retain the sale. proceeds of his secured assets after depositing the workmen s dues with the liquidator in accordance with the provisions of section -52of that Act; Provided also that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen s dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen s dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen s dues under that section to the secured creditor andin such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator. Provided also that in case the secured creditor deposits the estimated amount of workmen s dues,such creditors shall be liable to pay the balance of the workmen s dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator; Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen s dues, if any.