Air Control And Chemical Engg. Co. ... vs Bharat Bijlee Ltd. And Anr.
2006 Latest Caselaw 1584 Del

JUDGMENT

Vijender Jain, Acting C.J.

1. Aggrieved by the order passed by the AAIFR the appellant has filed this appeal before this Court. The AAIFR vide its order dated 7.9.2000 had observed that the respondent had supplied certain material to the appellant in the first quarter of the year 1999. Mr. Kaul, learned senior counsel appearing for the petitioner has contended that the goods were received by the appellant prior to the cut off date of 31.3.1999. As per appellant, the scheme formulated by the BIFR was applicable to the case of the respondent as well.

2. From the perusal of the order of the AAIFR which is from page 82 to 86, paragraph 5 is important.

5. The most important point in the matter before us is that goods were supplied by the appellant company to the first respondent company after the preparation of the draft rehabilitation scheme (DRS) and payments were due from the first respondent company to the appellant during the course of the implementation of the sanctioned scheme. By no stretch of imagination, we can accept a situation that the suppliers of goods to a sick industrial company, when goods are supplied after a scheme has been prepared and payments are required to be made when the scheme is under implementation, must be made to make sacrifices. If such a proposition is accepted with the consequence that the suppliers of goods, who are to be paid for such suppliers after the sanction of the scheme in accordance with the terms agreed to between the supplier of goods and the company receiving the goods, are compelled to make sacrifices in a scheme sanctioned by BIFR, then the entire system of companies buying materials on credit will come to naught. Honestly in commercial transactions is of utmost importance. If the contention of Shri Jariwala is accepted, a situation may arise that even the current suppliers of goods may be asked, under a scheme (original or modified), to make sacrifices. This is not warranted under the provisions of SICA.

3. The AAIFR has rightly come to the finding that the purchase of material is an essential part of the operations of a manufacturing company. Use of working capital finance for payment of the suppliers of such materials is a legitimate use of working capital finance and not its diversion. What has been canvassed before us by Mr.Kaul, if accepted, then, the industrial company for which draft rehabilitation scheme has been prepared, can conveniently deny the payment to the supplier of the goods although such a supplier was not a creditor enlisted under the rehabilitation scheme. This argument has no force as the AAIFR in the above Para 5 has dealt with this proposition of appellant and we upheld the same.

4. Apart from that, pursuant to an arbitration clause between the parties when the appeal was filed, this Court had allowed the arbitration proceedings and award has come in favor of the respondent. To that contingency, Mr. Kaul, learned senior counsel appearing for the appellant has contended that the arbitrator has not decided as to whether 10% payment was to be made to the respondent in terms of the scheme or not as that question was pending consideration before this Court. It will be in the fitness of things to quote another order of the AAIFR dated 29.12.1999 where certain observations with regard to the conduct of the appellant has been noted:

The conduct of the new promoters is clearly indicative of a skilfully prepared and executed plan to cheat the suppliers of goods from December 1998 to April 1999. The plan was successfully executed due to non-publication of the DRS in brief in newspapers as required under Section 18(3)(a) of SICA. The fraud planned and executed by ACCECL/new management was not noticed by the OA and BIFR.

5. We do not wish to make any further observation on the conduct of the appellant. Now the arbitrator has also given its findings against the appellant vide award dated 17.11.2002, therefore, the appellant cannot take shelter that the arbitrator could not decide the issue due to pendency of present writ petition. We refer to Para 20 of Award in which the arbitrator has decided the issue in favor of the respondent. Para 20 of award is read as under:

We have considered the submissions of Learned Advocates of the parties and also considered documentary evidence and we agree with the submissions of claimant's Learned Advocate and do not accept the submissions of Learned Advocate for the respondent that as per the scheme sanctioned by BIFR, the claimant is eligible only for 10% of the payment with respect to outstanding dues as on 31st March 1999, i.e. cut off date, and the balance is to be written off by the claimant. We decide issue No. 1 in the negative.

6. The other argument which has been advanced by learned Counsel for the appellant before us was that the supplies of the goods were made prior to the cut off date i.e. before 31.3.1999 and, therefore, also the claim of the respondent has to be settled as per the scheme. As a matter of fact, the goods which were supplied under the invoice carried a stipulation that payment of the goods supplied were to be made within a period of 60 days. It is only after expiry of 60 days cause of action for payment accrued in favor of the respondent. Therefore, even if the goods were supplied prior to the cut off date, the cause of action in favor of the respondent to receive the payment on such supplies accrued after cut off date.

7. For the foregoing reasons, we find no infirmity with the order passed by the AAIFR.