Supreme Court Clarifies: Recovery Application By Banks Stayed Against Sick Company

• A three judge bench of the Supreme Court holds that the immunity under Section 22 of Sick Industrial Companies (Special Provisions) Act, 1985 would also extend to a recovery application made under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993;
• Supreme Court states that the principle of giving effect to the intention of legislature is to be given precedence over the doctrine of generalia specialibus non derogant;
• Bank and Financial Institutions cannot proceed against a Sick Company.

INTRODUCTION

The Supreme Court recently in KSL and Industries Limited ("KSL") v. M/s Arihant Threads Limited ("Arihant") and Others¹ has held that the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA") shall prevail over the provision for the recovery of debts in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ("RDDBFI"). It has been observed that the bar under Section 22 of the SICA is very