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2003 (7) TMI 487 - Commission - Companies Law

Issues:
1. Application for stay of execution applications under section 22(1) of SICA.
2. Nature of proceedings under section 27 of the Consumer Protection Act, 1986.
3. Impact of show-cause notice under section 20(1) of SICA on the execution applications.

Issue 1: Application for stay of execution applications under section 22(1) of SICA

The petitioner filed revision petitions against the dismissal of applications under section 151 Cr.PC seeking a stay of execution applications under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The petitioner contended that the proceedings under section 27 of the Consumer Protection Act, 1986, are civil in nature, making section 22(1) of SICA applicable to the execution applications. The respondents argued that the proceedings under section 27 are criminal in nature, and thus, the provisions of section 22 of SICA would not be applicable. The judgment emphasized that section 22(1) of SICA suspends legal proceedings against an industrial company, but it does not bar the payment of money by its directors to satisfy legally enforceable dues. The court held that without determining the nature of proceedings under section 27, the managing director and/or directors of the petitioner company could not avoid liability for payment and seek a stay of execution applications under section 22(1) of SICA.

Issue 2: Nature of proceedings under section 27 of the Consumer Protection Act, 1986

The judgment discussed the nature of proceedings under section 27 of the Consumer Protection Act, 1986. It highlighted that the applications filed by the respondents under sections 27/25 of the Act presumably sought imprisonment for the managing director and/or directors of the company for non-compliance with payment orders. The court noted that a command to a corporation is essentially a command to its responsible officials, and failure to act on such orders could lead to punishment. Regardless of whether the proceedings under section 27 are civil or criminal in nature, the judgment emphasized that the managing director and/or directors of the company could not evade payment liability and halt the execution applications under section 22(1) of SICA.

Issue 3: Impact of show-cause notice under section 20(1) of SICA on the execution applications

The judgment addressed the impact of a show-cause notice issued under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) on the execution applications. It was noted that the Board for Industrial and Financial Reconstruction (BIFR) had issued a show-cause notice under section 20(1) of SICA regarding the potential winding up of the petitioner company. The court explained that if the Board decides on winding up, the matter would be forwarded to the High Court, and only then would the provisions of section 446 of the Companies Act, 1945 be applicable. The judgment concluded that the impugned order did not warrant interference in the revisional jurisdiction under section 21(b) of the Act. Consequently, the revision petitions were dismissed with costs, except for a stay on further proceedings in one of the execution applications pending the final disposal of an appeal.

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