Cement Corporation Of India Ltd. vs Appellate Authority For ...
2005 Latest Caselaw 330 Del

JUDGMENT

Anil Kumar, J.

1. Whether under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 separate permissions were required for proceeding with the recovery suit and for execution of the decree or a composite permission could do in the facts and circumstances of the case, is the question in the present writ petition.

2. The facts in brief are that disputes arose between petitioner and respondent No.3 which were referred to a sole arbitrator who made an award in favor of respondent No.3 whereby the petitioner was directed to pay a sum of Rs.6,50,74,341/- along with interest @ 12% from 03.01.1989 till the date of payment. Respondent no.3 therefore filed a suit bearing no.1519-A/1995 for making arbitration award dated 26.4.1995 rule of the court and for passing money decree in terms thereof. Petitioner filed objections against the award under Sections 30 and 33 of the Arbitration Act, 1940.

3. While the objections filed by the petitioner against the award were pending, petitioner filed a reference before Respondent No.2, (BIFR) in terms of Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as SICA) which was registered as BIFR Case No.501/1996. The Respondent No.3 opposed the reference and also filed a representation before BIFR seeking permission to continue proceedings against the petitioner as the petitioner had objected to the continuance of the suit on the ground that no permission was obtained by the respondent no.3 from BIFR under Section 22(1) and had sought suspension of suit proceedings. On consideration of the representation of the Respondent No.3, BIFR observed in its order dated 10th February, 1998 that the award in favor of respondent No.3 shall be provided for in the scheme.

4. The respondent no.3 also filed an application seeking permission from respondent no.2 to pursue proceedings of the said suit. The prayer made by respondent No.3 in its application dated 31.3.98 was as under:

"b) Grant permission to the applicant u/s 22 of SICA to proceed with the suit No.1519/1995 filed by them before the Hon'ble High Court of Delhi for a decree in terms of the arbitration award in their favor."

5. By its order dated 31st August, 1998 BIFR accorded permission to proceed with the matter before the High Court. The relevant order of BIFR reads:

"24. The advocate for Walchand Industries Ltd. (WIL), Shri Alok Dhir submitted that they had filed objections vide letters dated 17.7.98 and 27.7.98. Referring to the provisions of DRS, he submitted that on page '11' the payment to machinery suppliers i.e. will was indicated as a part of the cost of the scheme which implied that they would be paid immediately out of the funds available from sale of Yerraguntla Unit. However, on page '18' of DPS it was mentioned that the sale proceeds of Yerraguntla unit would be utilised for settlement of the dues of institutions and clearing the irregularity in the working capital accounts only. It was requested that Rs.650 lakhs payable to them should also be reserved out of the sale proceeds of Yerraguntla unit. will was holding an arbitration award for this amount and application for rectification of the same had been filed in the court against which CCIL had claimed protection u/s 22 of the Act. In the hearing held on 10.2.98, the Hon'ble Bench had stated that they would be given permission to pursue the application in the court which finally did not materialise. The Bench directed that will was free to pursue its case in Delhi High Court (DHC) as per its request."

Though the order of respondent No.2 did not disclose any reasons, however, the petitioner did not impugn the said order and did not file any appeal against the said order before the Appellate Authority or challenged the same in any other proceeding.

6. Pursuant to permission granted by BIFR, the proceedings in the objections filed by petitioner (Suit No.1519-A/95) continued and on 16.5.2002 with certain modifications, the amount awarded to respondent No.3 in the award was determined at Rs.5.53 crores instead of Rs.6.50 crores and the award was made rule of the Court and a decree dated 16th May,2002 was passed in favor of respondent no.3. On award being made rule of the Court in favor of respondent No.3, an execution petition in Delhi High Court being Execution case No.200/2002 seeking attachment of the properties of petitioner to execute decree dated 16.5.2002 was filed on 3rd September, 2002. The petitioner objected to the execution petition on the ground that no permission had been granted by respondent No.2, BIFR, for institution and continuation of the execution proceedings and the permission granted on 31.8.1998 was only to pursue respondent No.3's suit (1519-A/95) for making award the rule of the Court and a decree in terms thereof in High Court.

7. On 31.10.2002, respondent no.2, BIFR passed a detailed order dated 31.10.2002 which reads:

"8. The representative of Walchand Industries Limited (WIL) Shri N. Venkatachalam stated that their dues were for Rs.5.73 crores. He stated that they had sent the copy of the application under Section 22(1) of the Act to the company and added that the company had gone in for appeal. He added that there was no stay from the Court in the matter but BIFR's permission was required. It was noted that since they had already got the decree, therefore, the company had no protection in so far as Section 22(1) of the Act was concerned and they could go ahead in the matter as permitted by the Board earlier. If they have gone to the High Court, the Board would go by the decision of the High Court in the execution of Decree."

This order dated 31.10.2002 of the respondent no.2 whereby the respondent no.3 was allowed to go ahead was not challenged by the petitioner in any appeal.

8. In the meantime, the decree passed in favor of respondent No.3 making the award rule of the Court, was affirmed by the Division Bench in an appeal. A Special Leave Petition filed in the Supreme Court by the petitioner against the dismissal of the appeal by the division bench was also dismissed.

9. The respondent no.3 pursuant to observation made by the BIFR in its order dated 31.10.2002 continued with the execution proceedings and sought attachment of the properties of the petitioner. The petitioner, therefore, filed an application dated 6th February, 2003 before the BIFR seeking clarification of order dated 31.10.2002 and direction to the petitioner to file necessary application for permission under Section 22(1) of SICA and to review and recall para 8 of the order dated 31.10.2002.

10. The application filed by the petitioner before the BIFR was decided by order dated 28.01.2004 regarding the permission granted vide order dated 31.10.2002. BIFR again confirmed that the permission for execution under Section 22(1) of SICA was already granted to respondent No.3 for execution of decree. The relevant portion of the BIFR order dated 28.01.2004 is as under:-

"27 Responding to the submissions of Shri Dhir for WIL, the counsel for CCIL, Shri Sanjeev Ralli, contested the interpretation of the Board's order dated 31.08.1998 and 31.10.2002 purporting to have granted permission to will or execution of Decree by DHC. The Bench observed that permission under Section 22(1) of the Act was granted to will for execution of Decree but in view of pendency of the case in DHC, the issue would have to be decided by the Hon'ble DHC. The counsel for the will was, therefore, directed to approach DHC for necessary directions in the matter of execution of the decree."

11. Despite the dismissal of the application of the petitioner seeking clarification of order dated 31.10.2002 and direction to respondent no.3 to seek appropriate permission under Section 22(1) of the SICA, petitioner raised the issue before the executing Court of this court and again reiterated that the execution of the decree could not proceed without obtaining the prior permission under Section 22(1) of the SICA.

12. The learned Single Judge after perusal of the order dated 28.01.2004 of BIFR held in its order dated 26.4.2004 that since permission had already been granted by BIFR, there was no bar to proceed against petitioner/judgment debtor, for recovery of decreetal amount and, therefore, petitioner was directed to deposit the principal amount of Rs.5.53 crores under the decree within four weeks from 26.4.2004. The learned Single Judge held;-

"I have perused the said order very carefully. In my considered opinion, the BIFR has granted permission to decree holder to proceed against the judgment debtor in the execution case also. It is clearly observed in paragraph 27 thereof that permission under Section 22(1) of the Act was granted to the decree holder for the execution of the decree. Since permission is already granted by the BIFR, in that view of the matter there is no bar to proceed against the judgment debtor for recovery of the amount as sought to be done by the decree holder by filing the present execution petition."

13. The petitioner filed an appeal against order dated 26th April,2004 and the directions of the learned Single Judge to deposit Rs.5.53 crores which was disposed of leaving the view taken by the Ld.Single Judge that BIFR had granted permission for execution also intact. Meanwhile, the petitioner also challenged the order dated 28.01.2004 of BIFR reconfirming that the permission accorded to the respondent No.3 under Section 22(1) of SICA was also for the execution of the decree by filing an appeal before the Appellate Authority for Industrial and Financial Reconstruction which was dismissed by respondent No.1 (Appellate Authority) by impugned order dated 21.10.2004. While doing so, the Appellate Authority took the view that once permission to file a suit was granted by the BIFR, no further permission or any separate order for taking action was required at every subsequent stage. Because the suit was filed for the purpose of recovering money and once the permission was granted to file the suit and the suit succeeded, further action would necessarily have to follow till the money was recovered unless the BIFR on its own had limited its permission to any particular stage of the suit. The authority alternatively found that the permission granted by the BIFR to respondent was both for filing of the suit and the execution of the decree in the facts and circumstances of the case.

14. It is this order which is under challenge in the present petition and the contention of petitioner's senior counsel Mr.Reddy is that after the amendment in Section 22 of SICA in 1994 inserting the expression "pertaining to suit for recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to industrial company" leaving the first part related to execution, distress and like intact had changed the whole complexion of this provision which now envisaged that one permission was required for filing of the suit and the other for execution of the decree.

15. He alternatively submitted that BIFR was to grant the requisite permission on due application of mind and by a reasoned order and, therefore, its order dated 28.1.2004 could not be treated as an order granting permission for the execution proceedings also. He buttressed this by pointing out that even third respondent had also not asked for a permission for execution of the decree in its Suit No.1519-A/95 and, therefore, what was granted by the BIFR vide order dated 31.8.1998 was only a permission to proceed with the suit and not with the execution of the decree.

16. We firstly find ourselves in agreement with the view taken by the AAIFR in the facts and circumstances of the case that the BIFR had granted permission for the execution of the decree also. Because once the BIFR itself, which was the only right and competent forum to grant the requisite permission, had clarified that it had granted permission for both proceeding with the suit and the execution proceedings, there was no reason and scope to question this, unless it was shown that the clarification made by the BIFR was perverse or contrary to any provision of law. The statute after all vests the power to grant permission in the BIFR and if the Board clarifies that the permission was covering both the stages, the matter should end at that. And to top it all, when this view had been affirmed by learned Single Judge of this court and had been left intact even in an appeal taken against his order, the Appellate Authority was justified in taking note of the orders passed by the BIFR and affirmed by this court and following the view taken in these. Needless to emphasise that the BIFR and the AAIFR are the only right permission granting forums competent to take stock of the industrial health of a company and to grant or refuse a permission for proceeding with any recovery action by any creditor on the material before them. Once these forums/ authorities have certified on record that the permission granted by the BIFR was not only for the suit proceedings but also for execution proceedings, there was no scope for any other forum to take any contrary view in the matter.

17. It is a different matter whether such permission was given on due application of mind or whether it should have been granted by a reasoned order. This aspect need not be examined by us in this petition because petitioner had failed to challenge the basic order of permission of the BIFR dated 31.8.1998 on any such ground. So long as that order remained intact and was clarified by the BIFR itself to cover the permission for execution of the decree also, it was no longer open to the petitioner now to challenge it on the ground of any non-application of mind or for suffering for want of reason.

18. Mr.Reddy's second contention that Section 22 envisaged two separate orders to be passed by the BIFR or the AAIFR also does not stand any scrutiny. Section 22(1) reads:-

"Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under sections 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. "

A plain reading of the provisions of this Section would show that it does not provide for or prescribe any particular mode of granting a permission and, therefore, it can't be said that it envisaged one permission for suit proceedings and the other for execution proceedings.

19. It is true that the amendment made in this provision in 1994 added and included the suits for recovery and their enforcement also but that by itself would not suggest that the permission granting authority (BIFR or AAIFR) was to pass one order for filing of the suit and the other for execution proceedings. There is also no bar provided in this Section for passing any composite order by the two forums granting permission both for filing of the suit and execution of the decree.

20. It also required to be noted that permission in the present case was granted by BIFR in 1998 after the amendment carried out in Section 22 which suggests that the BIFR was in know and conscious of the import of the amendment and yet it had clarified that it had granted the requisite permission both for the suit proceedings and the execution proceedings.

21. We accordingly hold that Section 22 of SICA does not envisage or provide for passing of any separate orders - one for filing of the suit and the other for execution of the decree. The permission granting authority can even pass a composite order covering the both stages of the suit. As regards the present case, there is no scope to take any contrary view after the BIFR had clarified that it had granted permission for both the suit and the execution proceedings.

22. We are unable to appreciate the resistance put up by the petitioner to avoid the execution of the decree after it had been affirmed up to the Supreme Court.

23. The petition accordingly fails and is dismissed.