Saturday, November 15, 2014

Provision of suspension of legal proceedings under SICA prevails over provisions of debt recovery under RDDB Act


Section 22 of SICA covers and interdicts instances of application for recovery made under the provisions of the RDDB Act. Provisions of SICA, in particular section 22, shall prevail over provisions for recovery of debts in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (‘RDDB’).

Issues:

a)Whether as per bar contained in section 22 of Sick Industrial Companies (Special Provisions) Act, 1985 (‘SICA’), no recovery proceeding could be effected against defaulting-Company?

b)Since Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (‘RDDB’) was a subsequent enactment, whether provisions under sub-section (2) of section 34 of RDDB Act would have an overriding effect over other laws mentioned therein, including SICA?

The Supreme Court held as under:

1)Proceedings by way of an application for recovery according to a summary procedure as provided for under the RDDB Act are not referred to in Section 22 of SICA simply because the RDDB Act had not then been enacted.

2)Though the RDDB Act is the later enactment, sub-section (2) of Section 34 specifically provides that the provisions of the Act or the rules thereunder, shall be in addition to, and not in derogation of the other laws mentioned therein including SICA.

3)Section 22 of SICA clearly covers and interdicts such an application for recovery made under the provisions of the RDB Act. Therefore, the provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act. – KSL & INDUSTRIES LTD. V. ARIHANT THREADS LTD. [2014] 51 TAXMANN.COM 252 (SC)