2007 (11) TMI 400 - SC - Companies Law

Whether the surcharge is included in the interest and damage as appearing in clause 5.04 of the approved scheme? Whether delayed payment surcharge is included in interest or the damages in view of the conceded position that no interest was levied? Held that - The High Court has not referred to various stands taken and urged before it. Specific reference was made to Board s letter dated 18-6-2003 to Lord Krishna Textile Mills, and another letter dated 20-6-2003 in the context of waiver of delayed payment surcharge. Reference was also made to letter dated 7-9-2005 of the Corporation to the NTC that it has been decided to act as per decision taken in Lord Krishna Textile Mills. Reference was also made to letter dated 3-3-2003 of the Special Secretary, Government of Uttar Pradesh addressed to BIFR. In the circumstances, the matter is remitted to the High Court with the following directions that the BIFR shall be moved by the parties to clarify whether delayed payment surcharge is included in interest or the damages in view of the conceded position that no interest was levied. The order of the BIFR shall be placed on record before the High Court. The parties shall move the BIFR within one month and BIFR is requested to pass necessary orders within two months thereafter.The effect of waiver in case of Lord Krishna Mills case shall be duly considered.

Summary

Issues:
Challenge to judgment of Allahabad High Court regarding recovery proceedings and late payment surcharge.

Analysis:
The appellant, a unit of National Textile Corporation U.P. Limited, moved the High Court to quash recovery proceedings and sought direction to not demand or recover any amount. The appellant's unit was involved in cotton yarn manufacture, which ceased in 1992. The appellant referred the matter of mill sickness to BIFR under SICA. A bill was raised for a substantial sum towards principal and late payment surcharge. The appellant argued that late payment surcharge demand was contrary to the approved scheme by BIFR, which did not include surcharge but only interest and damage.

The main issue revolved around whether the surcharge was included in the interest and damage as per the approved scheme. The High Court held that late payment surcharge was applicable, not being a penalty or compensation. The appellant cited a similar case where the Corporation had written off surcharge, but the High Court found no grounds to do the same in this case. The appellant contended that no separate levy was made, so the question of waiving interest did not arise. The Corporation argued that late payment surcharge was distinct from interest or damage and could not be waived.

The approved scheme included clauses regarding relief undertakings and waiver of interest and damages on dues. The High Court did not discuss why a similar case was distinguishable or clarify the effect of the approved scheme. The matter was remitted to the High Court with directions to seek clarification from BIFR on the inclusion of delayed payment surcharge in interest or damages and consider the waiver in a related case. The High Court was requested to review the matter within a specified timeframe. Two additional applications were filed but deemed irrelevant to the issues in the appeal. The appeal was allowed with no order as to costs.