Section 22 of SICA prevails over the provisions of recovery of debts in the RDDB Act

Supreme Court: Holding that the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), especially Section 22 prevails over the provisions of recovery of debts in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act), the 3-judge bench of H.L. Dattu, C.J. and S.A. Bobde and A.M. Sapre, JJ said that where actions under the two laws may seem to be in conflict, Parliament has wisely preserved the proceedings under the SICA, by specifically providing for sub-section (2) of S. 32 of SICA, which lays down that the RDDB Act shall be in addition to and not in derogation of the SICA.

In the present case, the conflict arose between Section 22 of the SICA which purports to make untenable “proceedings” for recovery of the debt against the sick company and “suits” for recovery and Section 34 of the RDDB Act which contains an overriding effect to its own provision, obviously including those for recovery of debts. Explaing the difference between the purposes of both the Acts, the Court held that the purpose of SICA is to provide ameliorative measures for reconstruction of sick companies, and the purpose of RDDB Act is to provide for speedy recovery of debts of banks and financial institutions which makes both the Acts to be special. However, it was further held that with reference to the specific purpose of reconstruction of sick companies, the SICA must be held to be a special law, though it may be considered to be a general law in relation to the recovery of debts and vice-versa.

Interpreting the term “not in derogation”, the Court said that the term expresses the intention of Parliament not to detract from or abrogate the provisions of SICA in any way but the proceedings under SICA for reconstruction of a sick company to go on, further holding that Section 22 of SICA clearly covers and interdicts such an application for recovery made under the provisions of the RDDB Act. KSL & Industries Ltd. v. M/s. Arihant Threads Ltd., 2014 SCC OnLine SC 846, Decided on 27.10.2014