1999 (8) TMI 914 - HC - Companies Law

Summary

Issues Involved:

1. Interpretation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Applicability of the moratorium under Section 22(3) to claims arising after the sanction of a rehabilitation scheme by the BIFR.

Detailed Analysis:

1. Interpretation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985:

The court addressed the interpretation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (the Act). The primary question was whether claims arising after the sanction of a rehabilitation scheme by the Board for Industrial and Financial Reconstruction (BIFR) would attract the provisions of Section 22(3). The appellant argued that claims made after the order sanctioned in the scheme would not attract Section 22(3), citing several precedents. The respondent contended that the winding-up proceedings were executory in nature and that a moratorium on all claims had been granted under Section 22(3).

2. Applicability of the Moratorium under Section 22(3) to Claims Arising After the Sanction of a Rehabilitation Scheme by the BIFR:

The court examined whether a person entering into a contract with a sick industrial company could initiate recovery proceedings after a scheme was framed under the Act. The court emphasized that any statutory embargo on the jurisdiction of the court must be strictly construed. The Supreme Court's decision in Corromandal Pharmaceuticals was pivotal, stating that the bar under Section 22(1) applies only to dues included in the sanctioned scheme. The court noted that claims arising after the scheme's sanction were not covered by the moratorium under Section 22(3). The court held that the term "creditor" in Section 18(8) referred to creditors involved in the BIFR proceedings at the time of the scheme's preparation, not those entering contracts afterward. Consequently, the appellant's claim did not fall within the bar under Section 22.

Conclusion:

The court concluded that the impugned judgment could not be sustained and set it aside, remitting the matter back to the learned trial judge for consideration on the merits in accordance with the law. No order as to costs was made.