Delhi High Court
M/S. Gupta Synthetics Ltd vs Union Of India on 10 March, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Delivered on: March 10, 2017
+ W.P.(C) 87/2017 & CM APPLN.No.2232/2017
M/S. GUPTA SYNTHETICS LTD. ..... Petitioner
Through Mr. Somesh Tiwari and Mr.
Pulkit, Advocates.
versus
UNION OF INDIA ..... Respondent
Through Mr. Arun Kumar, Advocate for
Respondent No.1.
Mr. Abhishek Anand, Advocate
for IDBI.
Ms. Sonal Jain and Mr. S.
Jauhari, Advocates for
Respondents 10 & 11.
Mr. Sahil, Advocate for
respondent No.12.
CORAM:
HON'BLE MS. JUSTICE INDIRA BANERJEE
HON'BLE MR. JUSTICE ANIL KUMAR CHAWLA
ORDER
INDIRA BANERJEE, J
1. In this writ petition, the petitioner has challenged an order dated
26.10.2016 passed by the Appellate Authority for Industrial
Financial Reconstruction, hereinafter referred to as AAIFR, in
=====================================================================
W.P.(C) No. 87/2017
Appeal No.19/2015, whereby the AAIFR has upheld an order
of the Board for Industrial and Financial Construction,
hereinafter referred to as BIFR, abating the pending reference
of the petitioner.
2. The petitioner, a company incorporated under the Companies
Act 1956, is engaged in the business of manufacture of textiles.
The petitioner started incurring losses and its losses eroded its
network, whereupon the petitioner filed a reference before the
BIFR under Section 15(1) of the Sick Industrial Companies
(Special Provisions) Act, 1985, hereinafter referred to as the
SICA. The reference of the petitioner was registered as BIFR
Case No.17/2012.
3. By an order dated 29.05.2013, the BIFR declared that the
petitioner was sick and appointed IDBI as Operating Agency to
prepare a scheme for rehabilitation of the petitioner.
4. On 14.12.2013, the petitioner submitted a Draft Rehabilitation
Scheme to IDBI, which was examined by IDBI. After
=====================================================================
W.P.(C) No. 87/2017
examining the Draft Rehabilitation Scheme, IDBI submitted the
same to the BIFR. By an order dated 02.01.2014, BIFR directed
IDBI to rectify the defects and deficiencies in the Draft
Rehabilitation Scheme.
5. Thereafter, by a letter dated 08.05.2014, IDBI informed the
BIFR that all the lenders had unanimously agreed that the Draft
Rehabilitation Scheme was not acceptable.
6. Thereafter by an order dated 11.06.2014, BIFR directed the
petitioner to settle the dues of its secured creditors and submit a
report to IDBI, failing which BIFR would initiate action under
the SICA.
7. On 30.10.2014 IDBI initiated action against the petitioner under
Section 13 (4) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,
2002, hereinafter referred to as SARFAESI Act, on behalf of all
the secured creditors and took over symbolic possession of the
secured assets of the petitioner.
=====================================================================
W.P.(C) No. 87/2017
8. It is the case of the petitioner that IDBI could not establish that
it enjoyed the support of secured creditors the aggregate value
of whose secured debts was 100% or even 75% of the total
value of the debts to secured creditors.
9. According to the petitioner, no 'panchnama' was prepared of
the assets, which had been taken over by the IDBI. The
petitioner continued to use and operate assets, particularly, the
manufacturing facilities.
10. Section 17(1) of the SARFAESI Act provides a right of appeal
against the illegal action under Section 13(4) of the said Act.
11. Any person aggrieved by an action under Section 13(4) of the
SARFAESI Act can apply to the Debt Recovery Tribunal,
having jurisdiction, under Section 17(1) of the SARFAESI Act.
An appeal from an order of the DRT under Section 17(1) lies to
the Debt Recovery Appellate Tribunal under Section 18 of the
SARFAESI Act.
=====================================================================
W.P.(C) No. 87/2017
12. If the petitioner was aggrieved by the action of IDBI under
Section 13(4) of the SARFAESI Act, their remedy lay under
Sections 17 and 18 of the said Act. Intervention of this Court is
not warranted under Article 226 of the Constitution of India.
13. On 10.03.2015, IDBI filed a Miscellaneous Application being
M.A. No.122/2015, seeking abatement of the reference in terms
of the proviso to Section 15(1) of the SICA.
14. The petitioner submits that IDBI's documents filed before the
BIFR and the AAIFR did not show that IDBI had authorisation
of more than 3/4th of the total secured lenders of the petitioner,
as per the mandate of Section 13 (4) of the SARFAESI Act.
15. On behalf of the petitioner it was submitted that M/s. Edelweiss
ARC, which had acquired the debt of M/s Oriental Bank of
Commerce representing 24.20% of the total secured debt had
neither issued any notice under Section 13(2) of the SARFAESI
Act, nor given its consent prior to 13.10.2014.
=====================================================================
W.P.(C) No. 87/2017
16. It was further stated that another secured creditor ING Vysya
Bank representing 22.43% of the secured debt gave its consent
within three days of the issue of Section 13(2) notice. The said
consent dated 10.10.2014 was conditional. If the secured debts
of these three banks are taken up, then the remaining secured
creditors would constitute less than 75% of the total secured
debt, which is the requirement under Section 13(4) of the
SARFAESI Act.
17. However, the BIFR by its order dated 01.07.2015, wrongly
abated the reference of the petitioner and passed the following
order:-
"IDBI being a sole secured creditor and holds
100% of secured debts of the company had taken
action under section 13(4) of SARFAESI Act, on
10.02.2014 and had also taken action under
section 13(4) on 10.04.2014 and had also taken
possession of the assets of the company charged to
the bank. Accordingly, the bench came to the
conclusion that the reference case no.17/2012 M/s.
gupta Synthetics stands abated in terms of third
proviso of sub-section (1) of section 15 of SICA,
1985."
=====================================================================
W.P.(C) No. 87/2017
18. The petitioner filed an appeal against the said order dated
01.07.2015 in the learned AAIFR being Appeal No.19/2015,
inter alia contending that IDBI did not have authorisation of
100% or even 75% of the secured creditors. The learned
AAIFR, however, rejected the appeal of the petitioner and
upheld the order of the BIFR.
19. In this writ petition, the petitioner has challenged the said
impugned order of the AAIFR on various grounds. The
petitioner has prayed for a writ of certiorari quashing the
impugned order dated 26.10.2016 passed by the AAIFR in
Appeal No.19/2015, for restoration of the reference of the
petitioner being Case No.17/2012 before the BIFR and other
consequential reliefs.
20. The writ petition was filed on 30.11.2016. In the meanwhile, a
Gazette Notification No.2794 dated 28.11.2016 was issued,
enforcing the Sick Industrial Companies
(Special Provisions) Repeal Act, 2003 w.e.f. 01.12.2016. With
=====================================================================
W.P.(C) No. 87/2017
the enforcement of the said Repeal Act of 2003, the AAIFR and
BIFR stand dissolved, and all proceedings of whatever nature
pending before the AAIFR or BIFR under the SICA stand
abated.
21. Since AAIFR and BIFR stand dissolved and all proceedings
stand abated w.e.f. 01.12.2016, this writ petition is infructuous
and adjudication of the question of legality of the appellate
order would be nothing but an exercise in futility.
22. By reason of provisions of the 2003 Repeal Act, a Company in
respect of which any appeal or reference or enquiry stand
abated, might make reference to the National Company Law
Tribunal under the Insolvency and Bankruptcy Code 2016,
within 180 days from the commencement of the Insolvency and
Bankruptcy Code 2016.
23. If, as contended by the petitioner, there is any infirmity in the
order impugned by reason of the same being based on the action
taken by the IDBI under Section 13(4) of the SARFAESI Act,
=====================================================================
W.P.(C) No. 87/2017
which action was according to the petitioner illegal, the
petitioner should have challenged the action under Section 17
and 18 of the SARFAESI Act and obtained appropriate orders.
24. Writ petition is, therefore, dismissed.
INDIRA BANERJEE, J
ANIL KUMAR CHAWLA, J
March 10, 2017/n
=====================================================================
W.P.(C) No. 87/2017
