Interds Advertising Private ... vs Modi Spinning And Weaving Mills ...
2005 Latest Caselaw 1296 Del

JUDGMENT

Sanjay Kishan Kaul, J.

IA 3646/1998 (Order 12 Rule 6 of CPC)

1. Learned counsel for the plaintiff does not press this application.

2. Dismissed as withdrawn.

IA 11573/2003

3. This is an application filed by defendants under the provisions of Section 22 of Sick Industrial Companies (Special Provisions) Act, 1985 ( hereinafter referred to as 'Act'). The suit has been filed under provisions of Order 37 of CPC and the leave to defend application has been filed by defendants which is pending consideration.

4. The facts set out in the present application as also in the affidavit fled by Sh Alok Sangal, Director of Defendant no.1 show that initially the scheme propounded was rejected, but the subsequent scheme was accepted by the BIFR. However the matter went in appeal and appeal has been admitted before the AIFR. The order dated 08.06.2004 of the AIFR has been filed showing hearing on the interim application being concluded and learned counsel for the defendants states that subsequently orders have been passed staying the operations of the said scheme.

5. The position which thus emerges is that though the BIFR had approved the scheme, the AIFR has stayed the implementation of the scheme and is considering the matter.

6. Learned counsel for the plaintiff submits that even in the scheme only a part of the debt due to the plaintiff has been reflected and thus the total debt as claimed in the suit does not form part of the scheme. It has to be kept in mind that the present suit relates to the payments not received by the plaintiff as the advertising concern for which invoices were raised from time to time. There is running account between the parties and payments were also made from time to time. However at a particular stage of time, the debts were crystallized and there is an acknowledgment of the defendants. However, in my considered view, it is not possible to segregate the element of debt since the question would be whether the debt due to the plaintiff is correctly reflected or whether a larger amount was due to the plaintiff.

7. The plaintiff unfortunately never went before the BIFR or claimed its debt. Thus the contention of the plaintiff as to whether a higher amount was due to the plaintiff, could not be considered while the scheme was being finalized by the BIFR. If that had been done, the grievance of the plaintiff that only part of the debt was reflected in the scheme would not have arisen. The plaintiff has also not filed any application for permission to continue the present civil proceedings which would be so required to be sought from the BIFR in view of the provisions of Section 22(1) of the Act.

8. Section 22(1) of the Act reads as under:

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 section 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 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.

9. Learned counsel for the defendants has invited my attention to the Judgment of the Apex Court in Deputy Commissioner Tax Officer v. Corromandal Pharmaceuticals, to contend that the mandatory requirement of debt being reflected in the sanctioned scheme is sufficient to stay the proceedings. Learned counsel submitted that in the said case, the only proposition which came out was that amounts like sales tax etc which the sick industrial company is capable to collect after the date of the sanctioned scheme belonged to the Revenue. In this behalf, Learned counsel also referred to the subsequent judgment of the Apex Court in Tata Davy Ltd v. State of Orissa and Ors. where in para 13 it was observed as under:

The Corromandal Pharmaceuticals judgment dealt with a sick industrial company which was enable to collect amounts like sales tax after the date of the sanctioned scheme. This Court said: 'Such amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the Act.' It added that the issue that had arisen before it had not arisen in the case of Vallabh Glass Works. It did not appear there from or from any other decision of this Court or of the High Courts 'that in any one of them, the liability of the sick dealt with therein itself arose, for the first time after the date of sanctioned scheme. At any rate, in none of those cases, a situation arose whereby the sick industrial unit was enable to collect tax due to the Revenue from the customers after the 'sanctioned scheme' but the sick unit simply folded its hands and declined to pay it over to the Revenue, for which proceedings for recovery had to be taken'. Clearly, the facts in the Corromandal Pharmaceuticals case differ from the facts of the Vallabh Glass Works case and those before us. The reference to the Corromandal Pharmaceuticals Case is, therefore, inapposite.

10. Learned counsel for the plaintiff on the other hand has invited my attention to the judgment of the Learned Single Judge in Cement Corporation of India v. Manohar Bhasin . The said matter dealt with a suit for possession and recovery of mesne profits and damages. Insofar as the issue of claim of landlord for taking possession is concerned, the same stands settled by the Judgment of the Apex Court in M/s Shree Chamundi Mopeds Ltd. v. Church of S.I.T Assocn., where it was held that there cannot be suspencion of legal proceedings on account of Section 22 of the Act in such a case as the object of Section 22 is to facilitate planning of repayment of debt and not to increase the debt which would arise if the company continued in possession without payment of rent. Learned Single Judge of this Court in Cement Corporation of India v. Manohar Bhasin (Supra) further held that once even the mesne profits and damages did not form part of the scheme for rehabilitation as due for arrears of rent, no embargo could be said to exist under section 22 of the Act.

11. In my considered view, the legal proposition is not in doubt, but it is the question of application of the said proposition to the fact of the present case as in case the debt is reflected in the scheme, there can be no question of continuing with the proceedings in the suit.

12. The debt is reflected but not to the full extent. There is thus a dispute whether the debt reflected is the correct amount or not.

13. In such a case, it cannot be said that the suit of proceedings can continue specially in view of the wide language of Section 22 of the Act. I am also unable to accept the contention of the Learned counsel for the plaintiff that because the scheme had been stayed by the AIFR, the present proceedings can go on. The scheme was sanctioned by BIFR and AIFR is ceased of the matter and interim stay has been granted. The language of Section 22 takes into its sweep such a situation.

14. In view thereof the option is with the plaintiff to approach AIFR for seeking leave for continuation of present proceedings or for even seeking enhancement of the amount included in the scheme if it is so permissible in law. Application is accordingly allowed leaving the parties to bear their own costs.