2010 (7) TMI 821 - HC - Companies Law

Whether the proceedings under Adhiniyam 1987 to remain suspended till enquiry is pending under the SICA, 1985 as per section 22 of the SICA, 1985? Held that - The present is not a case where the amount of tax is being recovered but here the respondent has taken recourse to the provisions contained in the Adhiniyam, 1987 for recovery of dues outstanding in the loan account of the petitioner. Therefore, the principle of law culled out from Corromandal Pharmaceuticals case (supra) is not attracted in the present matter. In view of the above, since a reference is pending before the BIFR further proceedings of Case No. 73/A-76/2008-09 in the court of Naib Tahsildar, Bairagarh shall remain stayed unless consent as required by section 22 is obtained.In the result petition succeeds to the extent above

Issues Involved:
1. Challenge to the order dated 16-11-2009 under the Madhya Pradesh Lok Dhan Shodhya Rashion Ki Vasuli Adhiniyam, 1987.
2. Application of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA, 1985).
3. Validity of recovery proceedings initiated under the Adhiniyam, 1987 during the pendency of reference before the Board for Industrial and Financial Reconstruction (BIFR).

Issue-wise Detailed Analysis:

1. Challenge to the Order Dated 16-11-2009:
The petitioner contested the order issued by the Naib Tahsildar, Bairagarh, Bhopal, which rejected the petitioner's request to stay the recovery proceedings initiated under the Madhya Pradesh Lok Dhan Shodhya Rashion Ki Vasuli Adhiniyam, 1987. The recovery was sought for Rs. 25,00,000 along with interest amounting to Rs. 37,68,033, totaling Rs. 62,68,033.

2. Application of Section 22 of SICA, 1985:
The petitioner argued that the proceedings under the Adhiniyam, 1987 should be suspended as per Section 22 of SICA, 1985, which stipulates that no suit for recovery of money or enforcement of any security against a sick industrial company shall lie or be proceeded with further without the consent of the BIFR. The petitioner highlighted that a reference under Section 15(1) of SICA, 1985, was registered on 25-9-2002 with the BIFR, thus entitling the company to protection under Section 22 of SICA, 1985.

3. Validity of Recovery Proceedings:
The petitioner contended that since the recovery proceedings under the Adhiniyam, 1987 were initiated on 27-7-2009, after the reference was registered with BIFR, these proceedings were not maintainable due to the bar under Section 22 of SICA, 1985. The respondents, however, argued that the recovery proceedings were initiated as per the terms of the indemnity bond and that Section 22's bar did not apply in this context. They relied on the judgment in Dy. CTO v. Corromandal Pharmaceuticals.

Court's Analysis and Conclusion:
The court examined the provisions of Section 22 of SICA, 1985, which stipulate that no proceedings for recovery of money or enforcement of any security against a sick industrial company shall lie or be proceeded with further without the consent of the BIFR. The court referred to the judgments in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. and Patheja Bros. Forgings & Stamping v. I.C.I.C.I. Ltd., which supported the petitioner's contention that the recovery proceedings should be stayed due to the pending reference before BIFR.

The court distinguished the present case from the Corromandal Pharmaceuticals case, noting that the latter pertained to the recovery of sales tax, which is not applicable here. The court concluded that since a reference was pending before the BIFR, further proceedings in Case No. 73/A-76/2008-09 in the court of Naib Tahsildar, Bairagarh, should remain stayed unless the required consent under Section 22 of SICA, 1985, is obtained.

Judgment:
The petition succeeded to the extent that the recovery proceedings were stayed pending the consent required under Section 22 of SICA, 1985. No costs were awarded.

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