1998 (11) TMI 504 - HC - Companies Law

Summary

Issues:
1. Application for stay of execution proceedings under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Interpretation of section 22 in the context of ongoing execution proceedings against a corporation.
3. Requirement of consent from the Board for Industrial and Financial Reconstruction (BIFR) for further execution proceedings against an industrial company.

Analysis:
The High Court of Rajasthan addressed a revision petition against an order passed by the Additional District Judge, Indore, dismissing an application under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. The petitioner, a judgment debtor, sought a stay of execution proceedings initiated by the respondent decree-holder. The petitioner-corporation issued a cheque to the bailiff of the Court for the decree amount, attempting to halt the execution. The Court held that the provisions of the Act were attracted in the case due to a reference made by the petitioner's company before the BIFR under sections 15, 16, and 17 of the Act. Section 22 prohibits further execution proceedings against an industrial company without the consent of the BIFR. As no consent was obtained by the respondent, the execution proceedings could not proceed.

The respondent argued that since a distress warrant was issued and a cheque was passed for payment, the execution case was rendered infructuous, making the petitioner's application irrelevant. However, the Court disagreed, stating that the execution proceedings were still pending, and the cheque had not been handed over or encashed. The Court emphasized that handing over the cheque to the respondent was part of the execution proceedings, and upon knowing about the reference proceedings to the BIFR, the Court was obligated to suspend further execution unless consented to by the BIFR. The Court found the lower court's decision erroneous in holding that section 22 was not applicable in the case.

Consequently, the revision petition succeeded, and the impugned order was set aside. The Court directed the suspension of further proceedings in the execution case as mandated by section 22 of the Act. No costs were awarded in the matter. The judgment signifies the importance of complying with the statutory provisions of the Act and obtaining necessary consent before proceeding with execution against a sick industrial company, ensuring legal protection and adherence to due process.