1992 (4) TMI 183 - SC - Companies Law

Interpretation of section 22 of the Sick Industrial Companies (Special Provisions) Act 1985 Held that - Appeal dismissed. Except in cases covered by the two provisos to sub-section (1) of section 23 there is a prohibition for a tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein. This prohibition is however subject to a contract to the contrary. A tenant who sublets or assigns or transfers the premises in contravention of this prohibition loses the protection of law and can be evicted by the landlord under section 21(1)(f). The provisions of section 22(1) were not attracted to the eviction proceedings instituted by the respondents against the appellant-company.The provisions of section 22(1) did not therefore bar the prosecution of the said proceedings by the respondents and the order dated September 30 1989 passed by the XII Additional Small Causes Judge Bangalore allowing the eviction petition cannot be held to have been passed in contravention of the provisions of section 22(1) of the Act.

Summary

Issues Involved:
1. Effect of the stay order passed by the Delhi High Court on February 21, 1991.
2. Applicability of section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, to eviction proceedings against a sick industrial company.

Detailed Analysis:

1. Effect of the Stay Order Passed by the Delhi High Court on February 21, 1991:
The first issue concerns whether the stay order issued by the Delhi High Court on February 21, 1991, which stayed the operation of the Appellate Authority's order dated January 7, 1991, meant that the proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 ("the Act") should be treated as pending. The Court clarified that the stay of operation of an order does not equate to the quashing of the order. The stay merely suspends the order's effect but does not nullify it. Consequently, the appeal dismissed by the Appellate Authority on January 7, 1991, was not revived by the stay order. Therefore, no proceedings under the Act were pending before the Board or the Appellate Authority on the dates when the Karnataka High Court issued the winding-up order on August 14, 1991, and the subsequent dismissal by the Division Bench on November 6, 1991. The Court concluded that section 22(1) of the Act could not be invoked, and there was no impediment in the High Court proceeding with the winding-up petition.

2. Applicability of Section 22(1) of the Act to Eviction Proceedings:
The second issue pertains to whether eviction proceedings initiated by a landlord against a tenant company, which is a sick industrial company, should be suspended under section 22(1) of the Act. Section 22(1) suspends specific legal proceedings against a sick industrial company, including winding-up proceedings, execution, distress, or the appointment of a receiver. However, the Court held that eviction proceedings do not fall within these categories. The Court reasoned that eviction proceedings do not constitute actions for execution, distress, or similar processes against the company's property. The intention of section 22(1) is to prevent actions that would affect the company's working or finances while under consideration by the Board or Appellate Authority. Allowing a sick industrial company to continue incurring liabilities by occupying premises without paying rent would contradict this objective. Therefore, section 22(1) does not cover eviction proceedings, and the leasehold interest of a statutory tenant under the Karnataka Rent Control Act cannot be considered property for the purposes of section 22(1). Consequently, the eviction order dated September 30, 1989, by the XII Additional Small Causes Judge, Bangalore, was not in contravention of section 22(1).

Conclusion:
Both Civil Appeal No. 126 of 1992 and Civil Appeal No. 2553 of 1991 were dismissed. The Court held that the stay order by the Delhi High Court did not revive the appeal dismissed by the Appellate Authority, and section 22(1) of the Act did not apply to eviction proceedings against a sick industrial company.