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Issues Involved:
1. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act (SICA) to security deposits. 2. Whether the judgment of the Division Bench operates as constructive res judicata. Issue 1: Applicability of Section 22 of SICA to Security Deposits 1. The primary issue is whether the security deposit given by the tenant to the company, which is before the Board for Industrial and Financial Reconstruction (BIFR)/Appellate Authority for Industrial and Financial Reconstruction (AAIFR), is covered by Section 22 of the SICA, precluding the tenant from filing suit/proceedings or execution petition to recover this security amount. 11. The court concluded that Section 22 would not cover proceedings where execution of refund of security is sought. The relevant portion of Section 22 of the SICA reads: "...no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of industrial company or for the...." 12. The Supreme Court in Shree Chamundi Mopeds Ltd. v. Church of SIT Asson. [1992]2SCR999 held that eviction proceedings initiated by a landlord against a tenant company (which has gone sick and proceedings pending before the BIFR/AAIFR) would not fall under Section 22 of the SICA. The Court opined that three kinds of proceedings were contemplated under that provision, namely, (a) proceedings for winding up of the industrial company; (b) proceedings for execution, distress or the like against the properties of the sick industrial company; (c) proceedings for the appointment of receiver. 13. The Court held that the premises leased out to the sick industrial company would not become the property of the sick industrial company and proceedings for eviction instituted by the landlord against the tenant, who happens to be a sick industrial company, could continue. The sustenance drawn from this judgment is that if the security deposit given by the tenant to the landlord, which is a company and has become a sick industrial company now, does not become the property of the sick company, the bar under Section 22 of the SICA would not apply. 14. The Division Bench of Madhya Pradesh High Court in NEPA Ltd. v. Manoj Kumar (2002) (1) MPHT 125 held that security deposit was not the 'property' of the landlord, being held in trust by the said landlord/JD. The Court referred to the Oxford Shorter English Dictionary and Law Lexicon to find the meaning of 'Security'. 15. Karnataka High Court in Deepak Insulated Cable Corporation Ltd. v. Union of India and Ors. [2001] 106 CC 380 held that a deposit by the depositor is not a sum lent to the company but is a sum deposited with the company to be held in trust by the company till the time of maturity. It is not a loan in the strict sense of the term. Therefore, any claim for return of a deposit made with the company cannot be termed as a suit for recovery of money due. 16. The court agreed with the views taken by Madhya Pradesh and Karnataka High Courts. 17. The learned Single Judge's judgment, which is impugned in this appeal, noted the question of whether the security deposit is not to be treated as an asset or property of the sick company but did not answer this question. The order of the learned Single Judge is set aside on this ground. Issue 2: Constructive Res Judicata10(a). The appellant argued that JD No. 1 had not taken up the plea of Section 22 of the SICA before the learned Single Judge, who tried the suit and ultimately even the decree came to be passed on merits. This plea was subsequently raised before the Division Bench, which proceeded to decide the case on merits and dismissed the appeal. Therefore, the JD was estopped from raising the same plea in the execution proceedings, and the judgment of the Division Bench operated as constructive res judicata. 17. The court did not need to go into the other contention raised by the learned Counsel for the decree holder in this appeal based on constructive res judicata, as the appeal was allowed on the ground that Section 22 would not cover the proceedings where execution of refund of security is sought. Conclusion18. The appeal is accordingly allowed. The execution petition shall proceed on merits. 19. No costs.
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