Delhi High Court
Apollo Finance Limited vs M/S. Gsl (India) Limited & Anr. on 3 August, 2001
Equivalent citations: 2002 108 CompCas 184 Delhi, 94 (2001) DLT 353
Author: J Kapoor
Bench: J Kapoor
ORDER
J.D. Kapoor, J.
I.A. 6868/2000 in S.No. 2558/99
1. This is an application under Section 442 of the Companies Act, on behalf of defendant no. 1 for the stay of the suit on the ground that winding up petition being CP No. 79/95 was admitted by the Company Judge of the Gujarat High Court on 15.2.2000 and subsequent thereto BIFR exercising the powers under the Sick Industrial Companies (Special Provisions) Act, 1985 (in short 'SICA') has entertained reference No. 254/2000 on 7.8.2000.
2. For the stay of the suit proceedings, defendant has taken refuge under the judgment of the Supreme Court in M/s Patheja Bros. Forgings & Stamping and Anr. Vs. I.C.I.C.I. Ltd. & Ors. wherein question for consideration was whether the proceedings can continue against the guarantor in respect of which a reference has been entertained under SICA.
3. The Supreme Court while upsetting the decision of the Division Bench of Bombay High Court in Madalso International Ltd. wherein a view was taken that Section 22 cannot be interpreted to hold that a suit against the guarantor also stands suspended. The Division Bench took the following view "The guarantor could be absolute third parties or directors of an industrial company. However, in both cases it would be the guarantors, whether third parties or directors, who would be affected personally; and we see no reason to interpret the Section in such a manner that apart from the properties of the industrial company, the legislature intended to protect the personal interest of the guarantors as proceedings against guarantor and their personal property would not affect the revival of the industrial company in any manner whatsoever. In the circumstances, the words "of an guarantee in respect of any loans, or advance granted to the industrial company" in the context will have to read as the guarantee given by the industrial company itself and none else."
4. The above view did not find favor with the Supreme Court. According to the Supreme Court, provisions of Section 22 are clear and unambiguous and that they provide that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the concerned industrial company will lie or can be proceeded without the consent of the Board or the Appellate Authority. When the words of a legislation are clear, the court must give effect to them as they stand and cannot demur on the ground that the legislature must have intended otherwise. The Supreme Court further held that respondent's suit for the enforcement of the guarantees in respect of the loans granted to the company cannot be proceeded with unless consent as required by Section 22 is obtained.
5. Since the aforesaid position of law as to the stay of proceedings against the guarantors has been settled once for all the contention of the counsel for the defendant that the instant suit be stayed, would have held the field if the proceedings against the company for winding up or under SICA would have commenced either prior to the institution of the suit or during the pendency of the suit. But in the instant case, the facts are pronouncedly distinguishable. It is a case where defendant company had taken a loan concealing the factum of winding up petition having been filed by it. Petition for winding up being CP 79/95 was filed on 14.7.1995 whereas loan was taken by the Company on 8.6.1996, i.e., almost an year after filing of those proceedings.
6. It is a cardinal principle that a person approaching the court should always come with clean hands. Latin axiom suppressio veri suggestio falsi and dolus malus has been a guiding factor since ages. Had defendants disclosed these proceedings to the plaintiff, the plaintiff would have never advanced loan to it. Only a naive or fool would advance a loan to not only a drowning company but the company that has already sunk deep. The defendants procured this loan by either hoodwinking or concealing the factum of winding up proceedings initiated way back in the year 1995.
7. The object of the provisions of Section 22 of SICA is not to provide protection to such unscrupulous or uncouth persons who procure loan by concealing the facts particularly as to their bankruptcy. This protection is provided to genuine persons. Even if the proceedings of winding up under BIFR are initiated in a fraudulent manner or with an object to defeat the creditors, still protection under Section 22 cannot be denied. It is not blanket protection and has to be exercised in a judicial manner by scanning and scrutinizing facts of the case. Facts of no two cases are akin. Every case is to be examined in its own perspective and not in a mechanical manner.
8. These facts disentitle the defendants to protection under Section 22 of SICA as the Supreme Court has also held in O.L. Golcha Properties P. Ltd. Versus Dharti Dhan (P) Ltd. 47 Company Cases 420 (SC) their stay under Section 442 of Companies Act should not be ordered mechanically but must be made judicially upon an examination of all the facts and circumstances.
9. In view of the foregoing reasons, I am not inclined to allow the application and dismiss the same.
