2003 (3) TMI 602 - HC - Companies Law

Summary

Issues:
1. Maintainability of suit under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
2. Ownership and possession of leased equipment.
3. Application of section 22 of SICA to properties not owned by the defendant-company.

Issue 1: Maintainability of suit under SICA:
The plaintiff sought a mandatory injunction for possession of two Diesel Generating Sets leased to the defendant. The defendant raised objections based on section 22 of SICA, claiming the suit was not maintainable due to pending proceedings before the BIFR. The defendant argued that alienation of assets without BIFR approval was impermissible. However, the plaintiff contended that the property belonged to them and no order suspending the Hire Purchase Agreement had been issued under SICA.

Issue 2: Ownership and possession of leased equipment:
The lease agreement clearly stated that the ownership of the equipment remained with the plaintiff, and the defendant was the lessee. The defendant defaulted on payments, leading to reminders and demands for repayment. The plaintiff moved for a decree on admissions, as the defendant admitted to the disbursement but cited financial difficulties due to a recession in the automobile industry.

Issue 3: Application of section 22 of SICA to properties not owned by the defendant-company:
Legal precedents were cited to establish that section 22 of SICA applies only to properties owned by the company undergoing proceedings. Cases like GE Capital Transportation Financial Services Ltd. v. Dee Pharma Ltd. and Space Capital Service v. Prakash Industrial Ltd. clarified that the provision does not apply to leased properties. The court held that since the leased equipment belonged to the plaintiff, the bar under section 22 did not apply, allowing the plaintiff to obtain a decree for possession of the Diesel Generating Sets.

In conclusion, the court found the defendant's objections to the maintainability of the suit under SICA to be unsustainable. Given the ownership of the leased equipment by the plaintiff and the legal precedents establishing the inapplicability of section 22 of SICA to leased properties, the plaintiff was granted a decree for possession of the Diesel Generating Sets. The court allowed a 30-day period before execution of the decree to provide the defendant with an opportunity to clear the dues, maintaining a restraint on alienation or possession of the equipment in the interim.