2002 (4) TMI 829 - HC - Companies Law

Summary

Issues Involved:
1. Whether Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, operates as a stay with respect to recovery of damages payable by the petitioner to various residents and agriculturists as directed by the Loss of Ecology (Prevention and Payment of Compensation) Authority.

Issue-wise Detailed Analysis:

1. Applicability of Section 22 of the SICA:
The petitioner argued that under Section 22(1) of the SICA, all recoveries, including damages payable pursuant to the award by the Loss of Ecology (Prevention and Payment of Compensation) Authority, are suspended or stayed. The petitioner sought a writ of mandamus to forbear the respondent from enforcing the award under the Revenue Recovery Act.

2. Nature of the Compensation:
The respondent contended that the compensation determined by the Loss of Ecology Authority is not a commercial transaction or a credit or loan outstanding but damages that the petitioner is required to pay for environmental damage. This compensation is a quasi-judicial determination towards the damages suffered by the agriculturists and residents due to the petitioner's activities.

3. Judicial Precedents:
The petitioner relied on the Supreme Court judgments in Maharashtra Tubes Ltd. v. State Industrial Investments Corpn. of Maharashtra Ltd. [1993] 2 SCC 144 and Tata Davy Ltd. v. State of Orissa [1998] 3 SCC 4621, which held that Section 22 of the SICA operates as a stay on recovery proceedings. The petitioner also cited Kiran Overseas Exports Ltd. v. CTO [2002] 2 CTC 26, where it was held that tax recovery actions are stayed under Section 22 of the SICA.

4. Argument of the Respondent:
The learned Government advocate pointed out that the individuals who sought compensation from the Loss of Ecology Authority are poor and have been deprived of their livelihood due to the petitioner's activities. The compensation awarded has not been included in the schedule of payments due before the BIFR and is not under investigation or enquiry before the BIFR.

5. Statutory Provisions:
Section 22 of the SICA provides for the suspension of legal proceedings, contracts, etc., during the pendency of an inquiry under Section 16 or any scheme under Section 17 or an appeal under Section 25. However, Section 24 of the Environment Protection Act, 1986, states that the provisions of this Act will have effect notwithstanding anything inconsistent therewith contained in any other enactment.

6. Interpretation of Conflicting Statutes:
The court noted that both the SICA and the Environment Protection Act are special enactments. The latter being of 1986, is later in point of time compared to the SICA. It is a well-settled rule of interpretation that when there are two special laws, the latter will normally prevail if it contains an overriding provision.

7. Supreme Court Observations:
The Supreme Court in Maharashtra Tubes Ltd.'s case held that the SICA deals with post-sickness situations, and its provisions would ordinarily prevail in cases of sick industrial undertakings. However, the court also emphasized that the purpose and policy underlying the conflicting enactments must be considered.

8. Conclusion:
In the present case, the court concluded that the Environment Protection Act, being a later enactment with an overriding effect, prevails over the SICA. The recovery of compensation for environmental damage is given more preference than the rehabilitation of a sick company. Thus, the contentions advanced by the petitioner were rejected.

Judgment:
The writ petition was dismissed, and the connected W.P.M.P. was also dismissed. The court emphasized the need to prioritize the recovery for individuals who have suffered environmental damage over the proceedings for the rehabilitation of the petitioner company.