Birla Transasia Carpets Limited vs M/S Roshin Lal Gupta & Sons
2012 Latest Caselaw 6117 Del

       *       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Date of Decision: 11.10.2012
+      CS(OS) 2308/2009

       BIRLA TRANSASIA CARPETS LIMITED     ..... Plaintiff
                         Through  Mr. D.B. Bhattacharya, Advocate
                    versus

       M/S ROSHIN LAL GUPTA & SONS                   ..... Defendants

                             Through   Mr. R.K. Singh and Ms. Reena
                                       Chongtham, Advocates

CORAM:
HON'BLE MR. JUSTICE V.K.JAIN

                             JUDGMENT

V.K.JAIN, J. (ORAL)

I.A. No. 9059/2010 (by plaintiff u/o VII r/w Sec. 151 CPC and Sec. 22 of the Sick Industrial Companies Act, 1985, for rejection of counter-claim)

This is an application for rejection of the counter-claim on the ground that permission from Board of Industrial and Financial Reconstruction (BIFR) under Section 22 of the Sick Industrial Companies (Special Provisions) Act (SICA), 1985, has not been obtained by the defendants in respect of the counter-claim filed by it.

2. In the suit, the plaintiff has sought recovery of Rs.90,34,079.73ps from the defendants. On the other hand a counter-claim for recovery of Rs.5.22 lacs has been filed by the defendants against the plaintiff. The case of the plaintiff is that its goods worth Rs.1,82,14,358/- were supplied to the defendant from time to time after giving credit for the payments made by it, a principal sum of

CS(OS) 2308/2009 Page 1 of 6 Rs.63.27.471.11 remained due to it. The plaintiff has claimed the aforesaid amount with interest @ 20% per annum, thereby directing a total sum of Rs.90,34,079.73.

The case of the defendant on the other hand is that taking into account of the debit and credit notes of both the sides as on 01.04.2006, the amount due to the plaintiff was only Rs.27,28,948.20p, after deducting Rs.6 lac which the plaintiff had received in cash out of the debit cheques, the balance amount payable to it came to Rs.21,28,948. As against this, the amount of debit notes which the defendant given to the plaintiff came to Rs.26,51,086/- and, therefore, they are entitled to recover that amount from the plaintiff.

3. Admittedly, the plaintiff before this Court filed petition No.03/1999 under SICA before BIFR, New Delhi and the same is still pending. No scheme has so far been approved by BIFR for rehabilitation of the plaintiff company. In the suit before this Court, the defendants are seeking adjustment of the principal amount claimed in the suit and have alleged that after that adjustment, a sum of Rs.5.22 lacs is due to them from the plaintiff. The claim of the defendants is based upon various credit notes alleged to have been issued to them by the plaintiff during the period from 1997-98 to 2006-07.

4. Section 22 of SICA, to the extent it is relevant provides that where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred in Section 17 is under preparation or consideration or a sanction scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, no suit for recovery of money shall lie or be proceeded with further, except with the consent of the Board or the Appellate Authority, as the case may be.

CS(OS) 2308/2009                                                          Page 2
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5. The learned counsel for the defendants has relied upon the decision of the Supreme Court in Deputy Commercial Tax Officer and Ors v. Corromandal Pharmaceuticals and Ors. (1997) 10 SCC 649. There, the Court inter alia held as under:

"Under the statute, the BIFR is to consider in what way various preventive or remedial measures should be afforded to a sick industrial company. In that behalf, BIFR is enabled to frame and appropriate scheme. To enable the BIFR to do so, certain preliminaries are required to be followed. It starts with the reference to be made by the Board of Directors of the sick company. The BIFR is directed to make appropriate inquiry as provided in Sections 16 and 17 of the Act. At the conclusion of the inquiry, after notice and opportunity afforded to various persons including the creditors, the BIFR is to prepare a scheme which shall come into force on such date as it may specify in that behalf. It is in implementation of the scheme wherein various preventive, remedial or other measures are designed for the sick industrial company, steps by way of giving financial assistance etc. by Government, banks or other institutions, are contemplated. In other words, the scheme is implemented or given effect to, by affording financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices by Government, banks, public financial institutions and other authorities. In order to see that the scheme is successfully implemented and no impediment is caused for the successful carrying out of the scheme, the Board is enabled to have a say when the steps for recovery of the amounts or other coercive proceedings are taken against sick industrial company which, during the relevant time, acts under the guidance/ control or supervision of the Board (BIFR). Any step for execution, distress or the like against the properties of the industrial company or other similar steps should not be pursued which will cause delay or impediment in the implementation of the sanctioned scheme.

CS(OS) 2308/2009                                                             Page 3
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In order to safeguard such state of affairs, an embargo or bar is placed under Section 22 of the Act against any step for execution, distress or the like or other similar proceedings against the company without the consent of the Board or, as the case may, the appellate authority. The language of Section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by Section 22 of the Act, So, we are of the view that though the language of Section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after the implementation of the scheme or the disposal of an appeal under Section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in Section 22(1) of the Act can apply only to such of those dues reckoned or included in the sanctioned scheme"

In Sirmor Sudburg Auto Ltd. v. Kuldip Singh Lamba, 67 (1997) DLT 870, the court inter alia held as under:

"to be entitled to stay of the legal proceedings under Section 22 of the Act a mere pendency of the inquiry would not suffice, the dues must be reckoned or included in the sanctioned scheme. A suit for eviction against a sick industrial company is not liable to be stayed under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985."

In Shaw Wallace Breweries Ltd. v. Him Neel Breweries Ltd. 133 (2006) DLT 153, a learned Single Judge of this Court relying upon the decision of Supreme Court in Sirmor Sudburg Auto Ltd (supra), held that bar of Sec. 22(1) of SICA applies only to the disputes which are reckoned or included in the sanctioned scheme.

CS(OS) 2308/2009                                                              Page 4
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In Cement Corporation of India Ltd & Ors v. M.P. Joseph 111 (2004) DLT 120, a learned Single Judge of this Court rejected the contention that a person cannot have his claim adjudicated upon, where a sick company declines to admit its liability meaning thereby that it is permissible to obtain adjustment in respect of a liability which the sick company is disputing.

6. In the case before this Court, the plaintiff company is disputing the counter-claim of the defendants. The case of the plaintiff is that instead of being liable to pay any amount to the defendants, they are entitled to recover an amount of Rs.90,34,079.73ps from them. Since the plaintiff does not admit the counterclaim, the defendants are entitled to an adjudication with respect to their claim and admittedly that adjudication cannot be done by BIFR. For this reason alone, the counterclaim is not liable to be stayed. Admittedly, the amount of adjustment sought by the defendants and that of counter-claim does not find inclusion in the liabilities admitted by the plaintiff before BIFR. The defendants have not approached BIFR and the plaintiff does not admit the claim set up by them. The Scheme by BIFR is yet to be framed. Since the claim of the defendants is not the subject matter of the proceedings before BIFR, the Scheme as and when it is framed, obviously, would not include the claim of the defendants. Therefore, it can hardly be disputed that the claim of the defendants would not be covered by the sanctioned scheme as and when it is approved by the Board. Therefore, the ratio of the decisions of the Supreme Court in Deputy Commercial Tax Officer and Ors v. Corromandal Pharmaceuticals (supra) squarely applies to the present case and, counter- claim, therefore, would not be hit by Sec. 22(1) of SICA.

The application is devoid of any merit and is, therefore, dismissed.

CS(OS) 2308/2009                                                            Page 5
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 CS(OS) 2308/2009

The written statement to the counter-claim has already been filed. List before the Joint Registrar for admission/denial of the documents on 11th December, 2012. Additional documents can be filed within two weeks.

List before Court on 9th April, 2013 for framing of issues.

                                                                     V.K. JAIN, J
OCTOBER 11, 2012/raj/rd




CS(OS) 2308/2009                                                            Page 6
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