[ad_1]
Calcutta High Court
Arcl Organics Ltd vs Stressed Asset Stabilization Fund on 30 June, 2025
1
IN THE HIGH COURT AT CALCUTTA
EXTRAORDINARY CIVIL JURISDICTION
ORIGINAL SIDE
BEFORE:
HON'BLE JUSTICE RAJA BASU CHOWDHURY
CA 136 of 2017
ARCL Organics Ltd.
Versus
Stressed Asset Stabilization Fund.
For the applicant : Mr. Ratnanko Banerji, Sr. Adv.
Mr. Kanishk Kejriwal, Adv.
Mr. Patit Paban Bishwal, Adv.
Ms. Sohini Dey, Adv.
Mr. Oishij Mukhopadhyay, Adv.
For the respondent : Mr. Sakya Sen, Sr. Adv.
Mr. Sayan Banerjee, Adv.
Ms. Pallavi Chatterjee, Adv.
Mr. Ajay Gaggar, Adv.
Mr. Uttiyo Mallick, Adv.
Heard on : 11.11.2024, 12.12.2024, 08.01.2025, 15.01.2025,
29.01.2025, 28.03.2025 & 02.04.2025.
Judgment on : 30.06. 2025.
RAJA BASU CHOWDHURY, J:
1. The instant application has been filed, inter alia, praying for
execution of order sanctioning a scheme of arrangement / compromise
dated 14th January, 2009 in CA No. 414 of 2008 arising out of CP No.
306 of 2008 under the provisions of Section 391(2) of the Companies Act,
1956 (hereinafter referred to as the "said Act"), as a deemed decree
within the meaning of Civil Procedure Code, 1908, having regard to the
2
provisions contained in Section 634 of the said Act. The applicant seeks
for a direction upon the respondent to issue "No Objection Certificate" for
release of all charges on the assets and properties of the applicant on the
ground that such charges have been extinguished and for release on the
satisfaction of charge on the securities of the applicant from the
Registrar of Companies, West Bengal. The above application has been
contested by the respondent/judgment debtor.
2. In order to understand the scope of the aforesaid execution application,
it is necessary to consider the order dated 14 th January, 2009 whereby a
scheme of compromise had been sanctioned between the Allied Resin
and Chemicals Limited (hereinafter referred to as the "Allied Resin") on
one hand and the secured creditors of the Allied Resin on the other.
3. The applicant claims to have complied with the terms of the scheme and
having paid the entire settlement amount along with interest, the charge
of the secured creditors over the assets and properties of the said Allied
Resin stands released and extinguished and the said Allied Resin is
relieved and discharged of all its liabilities and obligations towards the
secured creditors under the loan agreement and the secured creditors
have no further or other claim against the said Allied Resin and its
successors.
4. At the very outset, it may be pointed out that though Mr. Sen, learned
senior advocate representing the respondent had attempted to raise a
point of maintainability as to whether, an application for executing an
3
order of this nature by filing an execution application in the form of a
tabular statement under Order 21 rule 11(2) of the Code of Civil Procedure
!908, is permissible especially when the Company Court has exclusive
competence and jurisdiction to pass an order including enforcement of
any of its order and having regard thereto, the execution application filed
before a Civil Court is not maintainable. However, since the aforesaid
issue has already been considered by a Coordinate Bench of this Court
by its order dated 29th March, 2016 whereby the Coordinate Bench by
taking note of the premise that the company Court has the exclusive
jurisdiction to pass any order including enforcement of its own order,
and having regard to the availability of the Company Court, expressed
that the executing Court does not intend to entertain such application.
However, taking note of the premise that a considerable time had elapsed
since the date of filing of the execution application and service having
been effected on the judgment debtor and considering the hardship that
the applicant shall face if the application was to be dismissed, the
execution case was sent back to the department to be placed before the
company Court competent to execute the order by assigning a new
number. Since then, in terms of the above order a new number has been
assigned and the matter is being dealt with as company matter. Having
regard thereto, the preliminary objection raised by Mr. Sen that the
matter ought to have been moved before a company Court, can no longer
4
be sustained and accordingly the application has been taken up for
consideration.
5. It is the applicant's case that the applicant is the successor-in-interest of
Allied Resin duly registered under the said Act. According to the
applicant, by an order dated 15th September, 2010, the erstwhile Allied
Resin merged with its assets and properties with the applicant. By
operation of law the applicant i.e. ARCL Organics Limited became
entitled to and has been vested with all rights and liabilities and
properties of Allied Resin.
6. It is also the applicant's case that on 24 th September, 2004, the Central
Government had constituted and formed the respondent by a Trust Deed
dated 24th September, 2004 with the object of acquiring the stressed
assets of IDBI for the purpose of recovering the amount due thereunder.
Subsequently, the Central Government by a notification dated 29 th
September, 2004 notified the respondent as a Financial Institution, and
on 30th September, 2004 IDBI had transferred to the respondent all the
facilities granted to its borrowers together with all underlying security
interest and all other right title and interest of IDBI in all agreements,
deeds and documents in relation to and/or in connection with credit
facilities and loans granted by IDBI. By reasons thereof, the respondent
had stepped into the shoes of IDBI. It is also the applicant's case that on
16th June, 2008 Allied Resin had filed an application under Section 391
of the said Act, before this Hon'ble company Court for convening a
5
general meeting of its secured creditors for the purpose of considering
and approving a scheme of compromise between Allied Resin and its
secured creditors. On the date of filing of such application, the secured
creditors of Allied Resin were as follows:
a) Industrial Investment Bank of India (Claim assigned to IFCI)
b) Industrial Development Bank of India (Claim assigned to Stressed
Asset Stabilisation Fund)
c) The Industrial Finance Corporation of (India) Ltd.
d) Industrial Credit & Investment Corporation of India Limited (Claim
assigned to Standard Chartered Bank)
e) West Bengal Industrial Development Corporation Ltd.
f) LIC
g) LIC Mutual Fund
h) UTI
i) Army Group Insurance Fund
j) National Insurance Co. Ltd.
k) New India Assurance Co. Ltd.
l) UCO Bank
m) UCO Bank (MDF Advance)
n) Allahabad Bank
7. The above scheme of compromise was approved by a majority of the
creditors. Subsequently, by an order dated 14 th January, 2009, the
Hon'ble Court has sanctioned the scheme of compromise, which
6
according to the applicant became effective on 2 nd March, 2009 and the
certified copy of the order of the Company Court, sanctioning the
compromise scheme, was filed in the officer of the Registrar of
Companies. Under the scheme, Allied Resin was to pay an amount stated
in the first schedule of the Compromise Scheme referred to as the
(Settlement Amount) in full and final settlement to the secured creditors
as specified therein. Clause 3.2 of the Compromise Scheme provides for
payment of 20% of the Settlement Amount before expiry of 30 days from
the effective date and the balance 80% in 36 equal monthly instalments.
According to Clause 3.4 of the Compromise Scheme, the Settlement
Amount shall not carry any interest for a period of 12 months from the
effective date and thereafter, interest at the rate of 8.5% is payable on the
balance settlement amount.
8. In compliance of the Compromise Scheme, the said Allied Resin
being otherwise obliged to pay the entire Settlement Amount along with
interest to the secured creditors of Allied Resin, had duly paid the same
by 2nd April, 2012 and in support thereof, a chart showing details of
payments made to IDBI has been enclosed. The relevant portion of the
chart is extracted herein below:
7
9. It is the applicant's case that upon payment of the entire amount
covered by the Compromise Scheme along with interest, the charge of
secured creditors over the assets and properties of the said Allied Resin
stood released and extinguished and the secured creditors have no
further or other claim against Allied Resin or its successor/s.
Consequentially in terms of the scheme, upon payment of the Settlement
Amount, the secured creditors are under an obligation to issue a "No
Objection" for release of the charge as against all assets and properties of
8
Allied Resin. Unfortunately, the respondent instead of issuing the "No
Objection" had purported to issue a notice under Section 13(2) of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (in short, "SARFAESI Act") by alleging
default committed by the Allied Resin and accordingly, called upon the
Allied Resin to make payment of a sum of Rs. 237,74,64,692/- as on 1 st
July, 2007. In response thereto, the said Allied Resin through its
advocate's letter dated 18th November, 2011 intimated the respondent
that the said Allied Resin had been making payment as per the scheme
of compromise sanctioned by the Company Court and Clause 3.7 of the
said scheme debars the respondent from initiating any new proceedings
for recovery of its alleged dues and accordingly, the letter dated 2 nd
November, 2011 issued by the respondents under Section 13(2) of the
SARFAESI Act be withdrawn.
10. Mr. Banerji, learned senior advocate representing the applicant
has drawn the attention of this Court to not only the provisions of the
scheme but also the schedule of payments as identified in the letter
dated 23rd February, 2012. It is submitted that as per the said letter IDBI
had received a sum of Rs.7,35,20,871/- out of settlement amount of
Rs.8,22,94,500/-, as on 1st December, 2011. The subsequent payment
including interest was lastly paid on 10th February, 2012, though as per
the scheme the last date for payment was 2 nd April 2012. According to
Mr. Banerji, the No Due Certificates as are required to be issued by the
9
secured creditors apart from the respondent, have all been issued in due
course, in discharge of their obligations upon receipt of payment under
the compromise scheme. Unfortunately, the respondent has been
wrongfully withholding the issuance of the "No Due Certificate". Mr.
Banerji would submit that the scheme of arrangement approved by this
Hon'ble Court under provisions of the said Act is binding on all
stakeholders and cannot be unilaterally revoked. In support of such
contention, he has placed reliance on the following judgments :
i. S. K. Gupta & Anr. v. K. P. Jain & Anr., reported in (1979) 3
SCC 54,
ii. Hindustan Lever & Anr. v. State of Maharashtra & Anr.,
reported in (2004) 9 SCC 438,
iii. Shri Kundanmal Dabriwala v. Haryana Financial Corporation
& Anr., reported in 2011 SCC OnLine P&H 17373.
11. He would submit that although, the notice under Section 13(2) of
the SARFAESI Act had been issued, upon an objection being raised by
the said Allied Resin as regards enforceability of such provision, having
regard to the provisions of the scheme debarring the secured creditors
from initiating further proceedings, no further steps have been taken by
the respondent and the proceeding initiated under Section 13(2) has died
a natural death, as no notice under Section 13(4) of the SARFAESI Act
has been issued thereafter, till this date. He would submit that in
absence of a notice under Section 13(4) of the SARFAESI Act being
10
issued, there is no scope for the applicant to challenge the same. On the
aforesaid contention reliance is placed on the judgment delivered in the
case of M/s. Vijay Laghu Udyog & Ors. v. Punjab National Bank &
Ors., reported in 2004 SCC OnLine All 2038. On the question, whether
a standalone notice issued under Section 13(2) of the SARFAESI Act on
2nd November, 2011 without taking further recourse to the provisions of
the SARFAESI Act, or by issuing a notice under Section 13(4) of the
SARFAESI Act, can be said to be legal and valid and enforceable after 13
years, reliance has been placed on the judgment delivered in the case of
Taher Ahmed Siddiqui v. Standard Chartered Bank, reported in
MANU/HY/0048/2017.
12. On the issue whether a scheme of arrangement/compromise
sanctioned by a Court can be frustrated by invoking the provisions of
SARFAESI Act, reliance has been placed on an unreported judgment
delivered by the Hon'ble High Court of Gujarat at Ahmedabad in the case
of Kotak Mahindra Bank Ltd. v. Shree Narmada Aluminium
Industries Ltd., in R/O.J. Appeal No. 143 of 2008 having neutral
citation C/OJA/143/2008, case citation (2025)ibclaw.in 388 HC. In
the facts noted hereinabove, he would submit that the objection raised
by the respondent cannot be sustained, accordingly appropriate orders
may be passed to enforce the scheme in the manner as has been sought
for in the tabular statement.
11
13. Per contra, Mr. Sen, learned senior advocate by drawing attention
of this Court to the provisions of the said Scheme and the payment
details would submit that the Allied Resin had defaulted in making
payment in terms of the sanctioned Scheme. According to him, the
default commenced from April, 2010 which continued till July, 2011 and
having regard thereto, a right had accrued in favour of the respondent to
invoke its statutory right conferred under the SARFAESI Act.
Accordingly, the respondent had rightly revoked the settlement and has
resorted to invocation of SARFAESI Act by issuing a notice under Section
13(2) of the SARFAESI Act. He would submit that once, a notice under
Section 13(2) has been issued, there is no scope to entertain the
execution application as the same is barred under Section 34 of the
SARFAESI Act. In support of this aforesaid contention, he has placed
reliance on the following judgments:
i. Mardia Chemicals Ltd. & Ors. v. Union of India & Ors.,
reported in (2004) 4 SCC 311.
ii. Punjab & Sind Bank v. Frontline Corporation Limited,
reported in 2023 SCC OnLine SC 470.
iii. Jyoti Bhushan Gupta & Ors. v. Banaras Bank Ltd., reported in
AIR 1962 SC 403.
iv. Mrs. Pratibha Inderjit Kapur v. Nilesh Lalit Parekh, reported in
2001 SCC OnLine Bom 1213.
12
14. He would still further submit that the provisions of the SARFAESI
Act has an overriding effect and in this context he places reliance on the
provisions of Sections 34 and 35 of the SARFAESI Act and on the
following judgments:
i. Pegasus Assets Reconstruction Private Limited v. Haryana
Concast Limited & Anr., reported in (2016) 4 SCC 47
ii. Akola Oil Industries & Ors. v. State Bank of India & Anr.,
reported in 2005 SCC OnLine Bom 570.
15. In any event, without prejudice for the aforesaid, he would submit
that the terms of the scheme would show that the same was contingent
in nature and the reciprocal liability of the respondent to perform its
obligation could have only arisen upon payment of the entire amount
with interest in terms of Clause 3.6 thereof, which the said Allied Resin
had failed. Thus, the performance of the reciprocal obligation by the
respondent cannot and does not arise at all. It is submitted that the
aforesaid scheme has been given a go-by, due to reasons attributable to
the said Allied Resin. The respondent is also proceeding with OA 86 of
2006 and the entire loan amount has now become due and payable to
the respondent. In lieu of the fact that the scheme did not fructify, the
said Allied Resin having only paid a sum of Rs. 4,44,134/- upto the date
of revocation of the settlement, the original dues were restored and the
amount paid to the extent of Rs.147.18 lakhs has been adjusted as per
13
the provisions of the loan agreement. In such circumstances, according
to him, the applicant is not entitled to any relief.
16. Heard the learned advocates appearing for the respective parties
and considered the materials on records. The primary question that falls
for consideration in the present case is whether the said Allied Resin had
complied with the terms of agreement. In order to answer the aforesaid
question, it is necessary to consider whether the said Allied Resin had
made payment in terms of Clause 3.2 of the scheme of compromise and if
there was any default/breach, whether the respondent accepted such
breach and/or whether the respondent was entitled to adjust the amount
paid by the said Allied Resin after the said Allied Resin committing the
breach, against the amount under the original loan agreement dehors
the scheme, by treating that the scheme did not fructify.
17. Another important issue that arises for consideration is whether
the respondent after having issued a notice under Section 13(2) of the
SARFAESI Act, this Court retains any jurisdiction to decide the case
having regard to the provisions contained in Sections 34 and 35 of the
SARFAESI Act. At the very outset, in order to appreciate the issues
involved, it is necessary to consider the scope of the Compromise
Scheme. The relevant clauses of the Compromise Scheme is extracted
hereinbelow:
"SCHEME
Part I
3.0. COMPROMISE WITH THE SECURED CREDITORS
14
3.1. The Secured Creditors agree to receive and accept the
Settlement Amount as stated in the First Schedule hereunder in
full and final settlement or their entire claim against the Company
and the guarantors.
3.2. The Company shall pay the Settlement Amount to the secured
creditors in the manner following :-
(a) 20% (twenty percent) of the Settlement Amount on or
before expiry of thirty days from the Effective Date; and
(b) The balance 80% (eighty percent) of the Settlement
Amount in thirty-six equal monthly instalments commencing
from the end of the month succeeding the month in which the
amount mentioned in Clause (a) hereinabove is paid by the
Company.
3.3. Notwithstanding anything contained in Clause 3.2
hereinabove, the Company shall be at liberty to pay the
Settlement Amount prior to sanction of the Scheme in instalments
stated in sub-clauses (a) and (b) of Clause 3.2 above to any
Secured Creditor who enters into a firm settlement with the
Company prior to sanction of the Scheme.
3.4. The Settlement Amount shall not carry any interest for a
period of twelve months from the Effective Date.
3.5. Immediately after expiry of the period of twelve months, the
Settlement Amount shall carry interest at the rate of 8.5% per
annum on the outstanding Settlement Amount and shall be
calculated upto 31st day of December every year and shall be
payable on or before 31st day of March of the succeeding year
subject to the condition that the entire interest shall be paid along
with the last instalment on or before expiry of thirty-seven month
from the Effective Date.
3.6. Upon payment of the entire Settlement Amount along with
interest as aforesaid -
15
(a) the charge of the Secured Creditors on the assets and
properties of the Company shall stand released and
extinguished;
(b) the Company shall be relieved and discharged of all its
liabilities and obligations towards the Secured Creditors
under the loan agreement and the Secured Creditors shall
have no further or other claim against the Company;
(c) the personal guarantees given by the Guarantors shall
stand discharged and revoked and the Guarantors shall be
relieved of all their liabilities and obligations towards the
Secured Creditors under the guarantees;
(d) the proceedings mentioned in the Second Schedule shall
stand dismissed as unconditionally withdrawn by the
Secured Creditors.
3.7. During the sanction and implementation of this Scheme the
Secured Creditors (save and except as otherwise expressly
provided) shall not -
(a) proceed any further with the proceedings mentioned in the
Second Schedule hereunder;
(b) file any suit or legal proceeding against the Company or
the Guarantors for recovery and/or realisation of any part of
portion of their claims;
(c) take any step for enforcing or invoking any security or
guarantee against the Company or the Guarantors.
(d) proceed against the Company or the Guarantors before
BIFR or the Appellate Authority or take any step for sale of
the assets or properties of the Chemical Division of the
Company;
(e) initiate any action for winding up of the Company.
3.8. This Scheme upon approval by the requisite majority under
Section 391 of the Companies Act, 1956 and sanctioned by the
16
Hon'ble Calcutta High Court and shall be binding upon all the
Secured Creditors of the Company including the dissenting
Secured Creditors of the Company.
.....................................
The SECOND SCHEDULE ABOVE REFERRED TO
(Particulars of the proceedings initiated by the Secured Creditors)
Name of the Court Case No. Applicant
1. Debt Recovery Tribunal OA No. 305 of 1998 UCO Bank
Kolkata
2. Debt Recovery Tribunal OA No. 6 of 2004 IFCI
Kolkata
3. Debt Recovery Tribunal OA No.11 of 2004 IIBI
Kolkata
4. Bankshall Court Kolkata 2413/1998 WBIDC
5. Calcutta High Court AST 293 of 1999 WBIDC
6. Debt Recovery Tribunal, OA No.86 of 2005 Stressed Assets
Kolkata Stabilization
Fund of IDBI”
18. It must also be noted that the scheme of compromise that had
been sanctioned by the Court pertains to all the secured creditors of the
said Allied Resin and is not limited to the respondent alone. Clause 3.2 of
the scheme provides that the Allied Resin shall pay the settlement
amount to the secured creditors in the manner as indicated therein.
Clause 3.3 provides that notwithstanding Clause 3.2, Allied Resin will be
at liberty to pay the settlement amount prior to sanctioning of the
scheme in instalments stated in sub-clause (a) and (b) of Clause 3.2 to
17any secured creditor who enters into a firm settlement with the company
prior to sanction of the scheme. As per the settlement, the settlement
amount shall not carry interest for 12 months from the effective date.
However, on the expiry of 12 months the settlement amount shall carry
interest @ 8.5% on the outstanding settlement amount.
19. It may be noted here that the said Allied Resin has made payment
of the entire settlement amount as noted in the chart above. Though, the
payment is not disputed, Mr. Sen has claimed that the said Allied Resin
had defaulted in making payments of the settlement amount since April,
2010 and such default had continued upto July, 2011. However, the
notice under Section 13(2) of the SARFAESI Act was issued only on 2 nd
November, 2011. Records would reveal that the said Allied Resin had
duly responded to the said notice by advocate’s letter dated 18 th
November, 2011, inter alia, contending that the sanctioned scheme
debars the respondent from initiating any proceeding for recovery of its
dues and accordingly, the letter dated 2nd November, 2011 issued under
Section 13(2) of the SARFAESI Act should be withdrawn. It may be noted
that the said Allied Resin had duly paid 20% of the Settlement Amount
prior to expiry of 30 days from the effective date of the scheme which was
sanctioned on 14th January, 2009. The subsequent payments made by
the said Allied Resin corroborates from the chart appearing at page 45 of
the affidavit affirmed on behalf of the applicant on 16 th December, 2013.
Such payments are not disputed. It would transpire that even after the
18notice was issued by the respondent on 2nd November, 2011 and upon
receipt of the Allied Resin’s advocate’s reply on 18 th November, 2011, the
respondent had received the payments without any objection. Although,
Mr. Sen, would submit that consequent upon the respondent resiling
from the above scheme, the amount paid by the said Allied Resin had
been accepted and adjusted towards the original loan amount, I,
however, find that there is nothing on record apart from the letter dated
2nd November, 2011 to hold out that the respondent had ever claimed
that the Allied Resin had committed breach, or that such breach had
been accepted by the respondent. In any event, it would be relevant to
consider whether the respondent could unilaterally resile from the
scheme by claiming that the said Allied Resin had committed breach
since, the Scheme for compromise was no ordinary compromise to
operate as an agreement but a compromise which has a statutory force
and is not only binding on the said Allied Resin but also on all the
creditors identified in the Scheme. Having regard to the scheme of the
said Act, especially as reflected in Section 391 and Section 392, I am of
the view that ordinarily there is no scope to either of the parties to
unilaterally resile from a scheme of arrangement duly sanctioned by a
Court and in this context, it will be relevant to refer to paragraphs 12
and 13 of the judgment delivered in the case of S. K. Gupta & Anr.
(supra), as is reproduced hereinbelow:
19
“12. Section 391 envisages a compromise or arrangement being
proposed for consideration by members and/or creditors of a
company liable to be wound up under the Companies Act,
1956. Compromise or arrangement has to be between creditors
and/or members of the company and the company, as the case
may be. It was always open to the company to offer a
compromise to any of the creditors or enter into arrangement
with each of the members. The scheme in this case is
essentially a compromise between the company and its
unsecured creditors. The scheme when sanctioned does not
merely operate as an agreement between the parties but has
statutory force and is binding not only on the company but even
dissenting creditors or members, as the case may be. The effect
of the sanctioned scheme is “to supply by recourse to the
procedure thereby prescribed the absence of that individual
agreement by every member of the class to be bound by the
scheme which would otherwise be necessary to give it validity”
[see J.K. (Bombay) Pvt. Ltd. v. New Kaiser-i-Hind Spg. & Wvg.
Co. Ltd. [AIR 1970 SC 1041 : (1969) 2 SCR 866, 891 : (1970) 40
Com Cas 689] ]. Further Section 391(1) itself, by a specific and
positive provision, prescribes who can move an application
under it. Only the creditor or member of that company or a
liquidator in the case of a company being wound up is entitled
to move an application proposing a compromise or arrangement.
By necessary implication any one other than those specified in
the section would not be entitled to move such an application.
13. When a scheme is being considered by the Court, in all its
ramifications, for according its sanction, it would not be
possible to comprehend all situations, eventualities and
exigencies that may arise while implementing the scheme.
20
When a detailed compromise and/or arrangement is worked
out, hitches and impediments may arise and if there was no
provision like the one in Section 392, the only obvious
alternative would be to follow the cumbersome procedure as
provided in Section 391(1) viz. again by approaching the class
of creditors or members to whom the compromise and/ or
arrangement was offered to accord their sanction to the steps to
be taken for removing such hitches and impediments. This
would be unduly cumbersome and time-consuming and,
therefore, the legislature in its wisdom conferred power of
widest amplitude on the High Court under Section 392 not only
to give directions but to make such modification in the
compromise and/ or arrangement as the Court may consider
necessary, the only limit on the power of the Court being that
such directions can be given and modifications can be made for
the proper working of the compromise and/or arrangement. The
purpose underlying Section 392 is to provide for effective
working of the compromise and/or arrangement once
sanctioned and over which the Court must exercise continuous
supervision [see Section 392(1)], and if over a period there may
arise obstacles, difficulties or impediments, to remove them,
again, not for any other purpose but for the proper working of
the compromise and/or arrangement. This power either to give
directions to overcome the difficulties or if the provisions of the
scheme themselves create an impediment, to modify the
provision to the extent necessary, can only be exercised so as to
provide for smooth working of the compromise and/or
arrangement. To effectuate this purpose the power of widest
amplitude has been conferred on the High Court and this is a
basic departure from the scheme of the U.K. Act in which
provision analogous to Section 392 is absent. The sponsors of
21
the scheme under Section 206 of the U.K. Act have tried to get
over the difficulty by taking power in the scheme of compromise
or arrangement to make alterations and modifications as
proposed by the Court. But the legislature, foreseeing that a
complex or complicated scheme of compromise or arrangement
spread over a long period may face unforeseen and
unanticipated obstacles, has conferred power of widest
amplitude on the Court to give directions and, if necessary, to
modify the scheme for the proper working of the compromise or
arrangement. The only limitation on the power of the Court, as
already mentioned, is that all such directions that the Court
may consider appropriate to give or make such modifications in
the scheme, must be for the proper working of the compromise
and/or arrangement.”
20. Similar view has been taken by the Hon’ble Supreme Court in the
case of Hindustan Lever & Anr. (supra). It is not the case of the
respondent that any attempt was made to approach the Company Court for
variation of the Scheme framed under Section 391 of the said Act. In the
light of the above and the respondent having accepted the entire amount
along with interest, even after issuance of the notice under Section 13(2)
of the SARFAESI Act on 2nd November, 2011, and also having not acted
further on the basis thereof, it cannot be said that the respondent has
resiled from the said scheme or could have unilaterally resiled from the
compromise. It may however be noted that Mr. Sen has also contended
that by reasons of the notice under section 13(2) of the SARFAESI Act
being issued and having regard to Sections 34 and 35 of the SARFAESI
22
Act, this Court is not competent to entertain the present petition. In this
context, it may be noted that in order to invoke Section 13(2) of the
SARFAESI Act in the given facts, in my view, the respondent at the first
instance ought to have approach the Hon’ble Company Court and could
not have unilaterally resiled from the said compromise. The provisions of
Sections 34 and 35 of the SARFAESI Act cannot be construed so as to
give unilateral powers to the respondent to reopen issues which have
been closed especially having regard to the scheme of compromise being
sanctioned by the Company Court under Section 391 of the said Act. The
judgments delivered in the case of Pegasus Assets Reconstruction
Private Limited (supra), Jyoti Bhushan Gupta & Ors. (supra) and Mrs.
Pratibha Inderjit Kapur (supra) are distinguishable on the facts of this
case. While in the case of Pegasus Assets Reconstruction Private
Limited (supra) the issue for consideration was whether the Company
Court could directly or through the official liquidator yield any control in
respect of sale of secured assets by a secured creditor in exercise of
power available to such creditor under the SARFAESI Act. The case did
not concern a compromise sanctioned under section 391 of the said Act.
The aforesaid judgment, in my view, does not assist the respondent at
all. It is well settled that a judgment is an authority for what it decides as
a slight variation in facts is likely to provide an entirely different outcome.
The case of Mrs. Pratibha Inderjit Kapur., (supra), proceeds on the premise
that the company having failed to make payment despite admitting its
23
liability and despite agreeing to pay the same in instalments in
connection with a winding up proceedings, could the secure creditor
upon the failure of the company to make payment in accordance with the
order of company Court recording the compromise terms, apply before a
Court for issue of an insolvency notice under the provisions of Presidency
Town Insolvency Act 1909 as a consent order is enforceable as a decree
under section 634 of the said Act. It is in this context it was clarified that
though the power of Court to direct payment of money in a winding up
proceedings was not disputed, the power to proceed with the insolvency
notice was sustained, the said case also did not involve a compromise
under section 391 of the said Act. The same dealt with the scope of a
winding up petition viz a viz enforceability of a consent order passed in a
winding up petition and the remedy therefor, including the power to
invoke the proceedings under the provisions of Presidency Town
Insolvency Act 1909. The above judgment does not assist the respondent.
21. This apart although, by relying on the case of Akola Oil
Industries & others., (supra), an attempt was made to make out a case
that since, the intervention of the Court is not necessary for invoking the
provisions of the SARFAESI Act, and since the intent to recover secured
debt is to be given primacy, there was no necessity for the respondent to
seek leave of the company Court to issue notice under section 13(2) of
the SARFAESI Act., or to proceed with its application being O.A. 86 of
2005 before the Tribunal, I however, find that the issue that fell for
24
consideration in the said case was entirely different. The question that
fell for consideration in such case was whether the secured creditor for
the purpose of realising his security could remain outside the winding up
proceedings or whether any leave was necessary to be obtained from the
company Court. It is in that context that the Hon’ble Court in paragraph
32 of the said judgement was pleased to hold that the objection of the
official liquidator that the Debt Recovery Tribunal (DRT) could not have
been approached without the leave of the Court, or proceedings under
the SARFAESI Act could not have been initiated without such leave, is
misconceived and rejected. Such is not the case here. Admittedly, the
respondent has not only accepted the compromise but in furtherance
thereof, had accepted payments under the compromise, duly sanctioned
by the Court. Therefore, the question that has arisen in the instant case
was whether the respondent could resile from the compromise
unilaterally. Admittedly, in this case notwithstanding issuing a further
notice under section 13(2) of the SARFAESI Act, the respondent chose
not to proceed thereunder, on the contrary, the respondent claims to
have revived the proceedings being O.A. 86 of 2005 which was subsisting
as on the date when the scheme was sanctioned by the company Court.
In the light of the specific bar provided for in clause 3.7 of the scheme
sanctioned by the company court, which prevents the respondent from
filing any suit or legal proceedings or from enforcing or invoking the
security or the guarantee against the company or its guarantors during
25
the subsistence of the scheme, and from proceeding further with O.A. 86
of 2005 filed by the respondent, the above procedure could not have been
adapted by the respondent. The sanctioning of the scheme under the
provisions of section 391 to 394 of the Companies Act 1956 is binding on
all and sundry interested in the company. Once, a scheme is sanctioned
in a particular manner and is acted upon, it is no longer permissible for
the secured creditor to resile therefrom unilaterally. If the same is
permitted, the very essence of the scheme in restructure/revival of the
company will stand frustrated, rendering the provisions otiose. Further
in the instant case in terms of clause 3.8 of the scheme, the same was
made binding on all the secured creditors including the dissenting
creditors. Thus, the order sanctioning a scheme for compromise under
section 391 to 394 of the said Act stand on a different footing than an
order in a winding up petition, which is yet to be advertised under rule
99 of the Company Court Rules 1959. The above observations are also in
tune with the observations made in the case of Kotak Mahindra Bank.,
(supra) by a Coordinate bench of the Gujrat High Court.
22. In the light of the above, the judgments delivered in the case of
Mardia Chemicals Ltd. & Ors. (supra) and Punjab & Sind Bank
(supra) also does not assist the respondent as the overriding effect of
Sections 34 and 35 cannot dilute the Compromise Scheme sanctioned by
the Court, especially when the same has been acted upon. In view
thereof, both the issues having been answered against the respondent,
26
the objection fails. The respondent is directed to issue “No Objection” for
release of all charges on assets and properties of the applicant within
four weeks from date of receipt of this order.
23. The application is thus, allowed.
24. There shall be no order as to costs.
25. Urgent photostat certified copy of this order, if applied for, be made
available to the parties, on priority basis, upon compliance of all
formalities.
(RAJA BASU CHOWDHURY, J.)
[ad_2]
Source link