2000 (8) TMI 1036 - HC - Companies Law

Summary

Issues:
1. Entitlement of the defendant to refund of the deposited amount.
2. Stay of further proceedings in the suit under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.
3. Relief sought by the parties.

Issue 1: Entitlement of the defendant to refund of the deposited amount:
The defendant sought a refund of Rs. 10,80,101.40 deposited in court, claiming the company's sick status and ongoing proceedings before the Board for Industrial and Financial Reconstruction (BIFR) under SICA, 1985. The plaintiff filed a counter-affidavit denying liability, stating the defendant's delay in disclosing BIFR proceedings. The court noted the defendant's failure to inform about BIFR proceedings until the deposit, emphasizing the need for Board consent to proceed with recovery suits against industrial companies under section 22. The court held that the defendant's silence aimed at obtaining the deposit, jeopardizing creditors' rights. It ruled against refunding the amount until BIFR proceedings conclude, directing deposit in a nationalized bank under fixed deposit.

Issue 2: Stay of further proceedings in the suit under section 22(1) of SICA, 1985:
The plaintiff sought recovery of the deposited amount, having obtained a restraining order against payment to the defendant. The defendant argued for a stay based on the company's sick status and ongoing BIFR proceedings. The court highlighted the defendant's failure to disclose BIFR proceedings promptly, emphasizing section 22's bar on recovery suits without Board consent. Referring to legal precedents, the court held that no recovery suit was maintainable, ordering a stay of proceedings until BIFR's conclusion. It rejected the defendant's claim for immediate refund, aligning entitlement with the ongoing BIFR process.

Issue 3: Relief sought by the parties:
The plaintiff sought recovery of Rs. 10,80,101.40, backed by a restraining order on payment to the defendant. The defendant sought a refund based on the company's sick status and ongoing BIFR proceedings. The court dismissed the defendant's application, directing deposit of the amount in a nationalized bank under fixed deposit for two years, staying further proceedings in the suit. The judgment balanced the parties' interests, ensuring compliance with SICA, 1985 provisions and protecting creditors' rights amidst the company's financial challenges.

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