2003 (9) TMI 562 - HC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 22 of SICA during the pendency of an appeal under Section 25.
2. Availability of Section 22 protection for security deposits related to tenanted premises.
3. Bar of res judicata due to prior dismissal of appeal by the Division Bench.

Issue-wise Detailed Analysis:

1. Applicability of Section 22 of SICA during the pendency of an appeal under Section 25:

The judgment-debtor argued that Section 22 of SICA should stay the execution proceedings since an appeal under Section 25 of SICA was pending. The decree-holder countered that the mere filing of an appeal does not invoke Section 22, especially since the reference under Section 15 had been rejected after an enquiry under Section 16.

The court held that Section 22 of SICA applies even if a reference under Section 15 has been dismissed, provided an appeal under Section 25 is pending. This interpretation aligns with the Supreme Court's decision in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., which stated that Section 22 is applicable during the pendency of an appeal under Section 25. The court emphasized that the pendency of an appeal under Section 25 triggers the protection under Section 22, thereby staying the execution proceedings.

2. Availability of Section 22 protection for security deposits related to tenanted premises:

The decree-holder contended that Section 22 of SICA does not apply to the security deposit for tenanted premises, as it is not an asset or property of the sick company. The court rejected this argument, clarifying that a money decree for the refund of a security deposit falls within the scope of proceedings for execution, distress, or recovery of money under Section 22. Therefore, the protection under Section 22 extends to the security deposit related to tenanted premises.

3. Bar of res judicata due to prior dismissal of appeal by the Division Bench:

The decree-holder argued that the current application under Section 22 of SICA is barred by res judicata because the Division Bench had dismissed an appeal where the issue of Section 22 was raised via an affidavit. The court examined whether the Division Bench's dismissal constituted a decision on the merits that would invoke res judicata.

The court referred to several Supreme Court judgments, including Daryao v. State of U.P. and Ferro Alloys Corpn. Ltd. v. Union of India, which establish that for res judicata to apply, the decision must be on the merits and articulated in a speaking order. The Division Bench's order was not a speaking order and did not address the Section 22 issue explicitly. Therefore, the court concluded that the dismissal by the Division Bench does not operate as res judicata, allowing the judgment-debtor to raise the Section 22 objection in the current proceedings.

Conclusion:

The court allowed the application under Section 22 of SICA, staying the execution proceedings against the judgment-debtor until the disposal of the appeal before the AAIFR or until the decree-holder obtains consent from BIFR. The decision affirms the applicability of Section 22 protections during the pendency of an appeal under Section 25 and clarifies that such protections extend to security deposits for tenanted premises. Additionally, the court ruled that the prior dismissal of an appeal without a speaking order does not bar the current application under the principle of res judicata.