1997 (11) TMI 422 - HC - Companies Law

Summary

Issues:
1. Application under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Allegations regarding appointment of arbitrator and award.
3. Respondent declared as a sick company.
4. Request for stay of proceedings under section 22.
5. Interpretation of section 22(1) of the Act.
6. Comparison with previous judgments.
7. Decision on the application and dismissal.

Analysis:

The judgment involves an application under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, where the respondent, a Government company declared as a sick company, sought a stay of proceedings due to an arbitrator's award. The respondent alleged that the arbitrator directed them to pay a specific amount to the petitioner, and objections were filed under sections 30 and 33 of the Arbitration Act to set aside the award. The respondent's status as a sick company was confirmed by the Board, and proceedings were initiated under section 15 of the Act. The respondent requested a stay of proceedings under section 22, supported by a letter from the Board declaring them a sick company and appointing an operating agency.

In response, the petitioner did not contest the respondent's status as a sick company but argued that the award was yet to be made a rule of the Court. The petitioner contended that only proceedings to execute the decree, if any, should be stayed under section 22. The petitioner's stance was that the ongoing proceedings were not subject to automatic suspension under section 22(1) of the Act. Reference was made to a previous case to support this argument.

The judgment further delves into the interpretation of section 22(1) based on the Supreme Court's decision in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association. The Court highlighted that the automatic suspension under section 22(1) applies to specific proceedings like winding up, execution, distress, or appointment of a receiver against the sick industrial company's properties. The Court clarified that eviction proceedings by a landlord against a tenant company, even if the tenant is a sick industrial company, do not fall under the category of proceedings subject to automatic suspension under section 22(1).

Ultimately, the Court dismissed the application for a stay of proceedings under section 22, citing the ongoing objections under the Arbitration Act and the fact that the stage for recovery of dues through execution had not been reached. The judgment emphasized that the previous decision cited by the respondent did not align with the interpretation provided by the Apex Court in Shree Chamundi Mopeds Ltd's case. Consequently, the application was deemed misconceived and dismissed.

In conclusion, the judgment provides a detailed analysis of the issues raised concerning the application under section 22 of the Act, the interpretation of relevant legal provisions, and the comparison with previous judgments to arrive at a decision to dismiss the application for a stay of proceedings.