2011 (1) TMI 1590 - HC - Indian Laws

Summary

Issues Involved:
1. Maintainability of the suit in light of the Defendant being a sick company u/s 22(1) of the Sick Industrial Companies (Special) Provisions Act, 1985.
2. Jurisdiction of the Court.
3. Admission of liability by the Defendant.

Summary:

Issue 1: Maintainability of the Suit
The Defendant argued that the suit should be adjourned sine die as the Defendant is a sick company u/s 22(1) of the Sick Industrial Companies (Special) Provisions Act, 1985, and proceedings cannot continue without BIFR's permission. The Defendant supported this with BIFR's orders dated 15.09.2006 and 17.05.2007, which restricted creditors from pursuing suits. The Plaintiff countered that since the Defendant denied its liability, the suit must continue as per the Supreme Court's judgment in Dy. Commercial Tax Officer v. Corromandal Pharmaceuticals AIR 1997 SC 2027. The Court noted that the Defendant had not provided current status of the BIFR reference or any rehabilitation scheme. The Court emphasized that Section 22(1) aims to protect sick companies from financial strain but does not apply if the debt is not admitted or included in a rehabilitation scheme. The Court concluded that the Defendant's liability was neither admitted nor included in any scheme, thus the suit could proceed.

Issue 2: Jurisdiction of the Court
The Defendant challenged the jurisdiction, claiming exclusive jurisdiction of the Kanpur Court. However, this issue was not elaborated upon in the judgment, indicating that the primary focus was on the maintainability of the suit under Section 22(1) of the Act.

Issue 3: Admission of Liability
The Defendant, in its written statement, denied liability for the claimed amount. An affidavit by Mr. D.R. Dogra indicated an amount of Rs. 21,70,490.88 owed to the Plaintiff but contested the accuracy due to unaccounted debit notes. The Court found this to be a conditional admission, not a clear acknowledgment of debt. The Court held that without an unambiguous admission of liability, the proceedings could not be stayed.

Conclusion:
The Court dismissed the Defendant's application to adjourn the suit sine die, stating that the Defendant's liability was neither admitted nor included in any rehabilitation scheme. The suit was allowed to proceed, with further proceedings scheduled for 24.03.2011.