2005 (7) TMI 702 - HC - Companies Law

Summary

Issues Involved:
1. Petition under Section 9 of the Arbitration and Conciliation Act, 1996.
2. Allegations of suppression of material facts.
3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
4. Prima facie case for pre-award attachment.

Issue-wise Detailed Analysis:

1. Petition under Section 9 of the Arbitration and Conciliation Act, 1996:
The petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking a direction for the Public Works Department (PWD) of Rajasthan State to release Rs. 1.33 crores out of a total escalation of Rs. 4.51 crores in favor of the petitioner. Alternatively, the petitioner sought a direction to place Rs. 1.33 crores in a secure account until the rights and liabilities of the parties were adjudicated in the arbitral proceedings. The petitioner alleged that the respondent withheld payment despite the completion of work to satisfaction and receiving payment from the PWD.

2. Allegations of Suppression of Material Facts:
The respondent contested the petition, raising preliminary objections that the petitioner suppressed material facts, including filing a similar petition under Section 17 of the Act before the Arbitral Tribunal, which was dismissed on 8.9.2001. The petitioner did not challenge this order and filed the present petition without disclosing these facts. The court noted that suppression of facts or misleading facts by a party seeking equitable relief could disentitle the party from such relief.

3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA):
The respondent argued that the petitioner's claims were premature and that the respondent, being declared a sick unit under SICA, was protected under Section 22 of the Act, which bars distress proceedings or restraint orders against sick companies. The court cited the Supreme Court's interpretation of Section 22 of SICA, emphasizing that the properties of a sick industrial company should not be subjected to coercive action until the BIFR disposes of the reference made under Section 15 of SICA. The court held that the present proceedings seeking interim relief fell within the description of "distress or the like thereof" and were barred under Section 22 of SICA without the consent of the board or appellate authority.

4. Prima Facie Case for Pre-award Attachment:
The court examined whether the petitioner made a prima facie case for pre-award attachment, noting that such orders are drastic and should be exercised with utmost care and caution. The court highlighted that the petitioner must prove that the defendant is about to dispose of or remove property to obstruct or delay execution of any decree. The respondent argued that the petitioner had already been paid more than the contract value and that the respondent had counterclaims against the petitioner. The court found that the claims and counterclaims were still under adjudication by the Arbitral Tribunal, making the petition premature. The court referenced the Arbitral Tribunal's earlier decision to decline similar relief under Section 17 of the Act.

Conclusion:
The court concluded that the petitioner failed to disclose material facts and that the proceedings were barred under Section 22 of SICA. Additionally, the petitioner did not make a prima facie case for pre-award attachment. Consequently, the petition was dismissed, and the ad-interim ex-parte injunction order dated 25.9.2003 was vacated.