1999 (11) TMI 806 - HC - Companies Law

Summary

Issues:
1. Whether the proceedings in C.S. No. 408/97 are liable to be stayed under section 22 of the Act?
2. Whether the plaintiff is entitled to an interim decree for a sum of Rs. 8,97,960 under Order XII Rule 6 of the Code of Civil Procedure?
3. To what relief is the plaintiff entitled?

Issue 1 - Proceedings Stay under Section 22 of the Act:
The defendant company, declared a Sick Industry under section 3(1)(D) of the Act, filed Application No. 4003 of 1998 seeking to stay the trial of the suit pending BIFR proceedings. The defendant argued that allowing independent action by the plaintiff would render the BIFR proceedings ineffective. The plaintiff, on the other hand, claimed various reliefs including recovery of money and ownership declaration of leased equipments. The court examined precedents like BLU Star Ltd. v. Hindustan Photo Films Mfg. Co. Ltd., emphasizing the prohibition on suits for recovery against sick industrial companies under section 22. The plaintiff cited Shri Ananta Udyog (P.) Ltd. v. Cholamandalam Investment to support their claim that seizure and sale applications fall outside section 22's scope. However, the court found the latter case inapplicable to the current scenario. Considering the relief of money recovery in the suit, the court concluded that proceedings must be stayed until BIFR proceedings are finalized.

Issue 2 - Interim Decree under Order XII Rule 6:
The plaintiff sought an interim decree based on a communication from the defendant admitting a sum of Rs. 8,97,960. However, the court ruled that the plaintiff cannot obtain an interim decree at this stage due to the ongoing BIFR proceedings. Therefore, Application No. 4002 of 1998 was ordered closed, pending the conclusion of BIFR proceedings.

Issue 3 - Relief Entitlement:
The plaintiff's suit included a declaration of ownership of leased equipments and sought injunctions against the defendant. The court noted that the relief of money recovery was part of the suit, aligning with the provisions of section 22, necessitating a stay in proceedings. As a result, Application No. 4003 of 1998 was allowed, staying further proceedings in C.S. 408 of 1998 until the BIFR proceedings are finalized. The court directed that Application No. 4002 of 1998 can be reopened post the conclusion of BIFR proceedings.

This comprehensive analysis of the judgment addresses the issues involved, the arguments presented by both parties, the relevant legal precedents cited, and the court's final decision on each issue.