2001 (1) TMI 900 - HC - Companies Law

Issues Involved:
1. Interpretation of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
2. Applicability of section 22(1) of SICA to arbitration proceedings under sections 14 and 17 of the Arbitration Act, 1940.
3. Conflict between two Single Judge orders regarding the stay of proceedings under section 22 of SICA.

Detailed Analysis:

1. Interpretation of Section 22 of SICA:
The primary issue is the interpretation of section 22 of SICA, particularly whether the bar on "suit for recovery of money" under section 22(1) applies to arbitration proceedings pending under sections 14 and 17 of the Arbitration Act, 1940. Section 22(1) states that no suit for recovery of money shall lie or be proceeded with further, except with the consent of the Board or appellate authority, when an inquiry under section 16 is pending or a scheme under section 17 is under preparation, consideration, or implementation.

2. Applicability of Section 22(1) of SICA to Arbitration Proceedings:
The court had to determine if the bar under section 22(1) extends to arbitration proceedings. The appellant argued that arbitration proceedings are not in the nature of a "suit for recovery of money" and referred to sub-section (3) of section 22, which includes "awards" and suggests that suspension would come into play only when the Board makes a declaration. The respondent contended that arbitration proceedings, once an award is filed in court for making it a rule of the court, should be treated as a suit for recovery of money.

3. Conflict Between Two Single Judge Orders:
There was a conflict between two Single Judge orders. In one case, the learned Single Judge stayed proceedings under section 22 of SICA, while in another, the learned Single Judge dismissed the application, holding that section 22 does not apply to such proceedings. The court had to resolve which view was correct.

Analysis and Judgment:

Literal and Purposive Interpretation:
The court emphasized the primary rule of interpretation, which is literal construction. The term "suit" is not defined in the Code of Civil Procedure, General Clauses Act, or SICA. However, it is generally understood to mean a civil proceeding instituted by the presentation of a plaint. The court noted that the Legislature intentionally used the word "suit" in section 22(1) and not "proceedings," indicating a restricted meaning.

Precedents and Legal Definitions:
The court referred to various judgments, including the Supreme Court's decision in Shree Chamundi Mopeds Ltd. and BSI Ltd., which distinguished between different types of legal actions and clarified that the term "suit" does not encompass arbitration proceedings. The court also cited Nawab Usmanali Khan's case, where it was held that proceedings under sections 14 and 17 of the Arbitration Act are not in the nature of a suit.

Section 22(3) of SICA:
The court highlighted that sub-section (3) of section 22 empowers the Board to suspend the operation of awards, which includes arbitration awards. This provision indicates that the Legislature did not intend for arbitration awards to be covered by the term "suit for recovery of money" in section 22(1).

Conclusion:
The court concluded that arbitration proceedings under sections 14 and 17 of the Arbitration Act are not "suits for recovery of money" and, therefore, are not covered by section 22(1) of SICA. The court allowed FAO (OS) No. 84 of 1997, setting aside the order dated 5-2-1997, and dismissed FAO (OS) No. 1 of 1998, confirming the order dated 20-11-1997. The parties were directed to bear their respective costs.

Summary of Reasons:
1. The term "suit" in section 22(1) refers to civil proceedings instituted by a plaint, not arbitration proceedings.
2. The Legislature used "suit" intentionally, indicating a restricted meaning.
3. Sub-section (5) of section 22 relates to suits where the law of limitation applies strictly.
4. Sub-section (3) of section 22 includes "awards," suggesting arbitration awards are not covered by "suit" in section 22(1).
5. The Board has the power to declare the suspension of arbitration awards under section 22(3).

Final Judgment:
FAO (OS) No. 84 of 1997 is allowed, and the order dated 5-2-1997 is set aside. FAO (OS) No. 1 of 1998 is dismissed, and the order dated 20-11-1997 is confirmed.

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