2019 (8) TMI 1903 - HC - Companies Law

Consequence of the registration of the reference under the provisions of SICASuit for recovery - prohibition under Section 22 of the SICA - Seeking to set aside ex-parte judgement - It is contended that Applicant was unaware of the suit proceedings - HELD THAT - The suit for recovery against a company which is registered under the Provisions of SICA, would not ipso facto be rendered as not maintainable. The prohibition as contemplated under Section 22 of the SICA, would not be applicable to the present suit which is essentially for recovery and proving the debt. The proceedings that come within the purview of Section 22(1) of SICA are proceedings in nature of execution, distress or the like. It would depend on the facts of each case that whether the suit is hit by Section 22 of the Act. Concededly, the present suit is for recovery and is not one which has the effect of execution, distress or like action against the properties of the Sick Company and therefore it would not be hit by Section 22 (1) of the SICA. Significantly, there is no denial to the averments made in the Plaint, the contents of the Plaint have to be presumed to be correct. The final decision of the Court is only determinative of the indebtedness of the Applicant. The suit even without the permission of BIFR was maintainable on the date of filing. It is further significant to note that Plaintiff on becoming aware of the reference before BIFR, filed an application before BIFR on 23rd July, 2012, seeking its permission to execute the decree. The Defendant was provided an opportunity to file a reply to the said application, however, the same was not filed. Plaintiff was impleaded in the said proceedings before BIFR on 12th December, 2012. Defendant came out of purview of the Act on 18th September, 2014. This clearly shows the Judgment Debtor was aware of the decree passed by this court since 2012. After coming out of the purview of SICA, from 2014 to 2019 the Judgment Debtor remained silent. The conduct of the Defendant is completely laid-back and lackadaisical. There is no ground for interference. Application is dismissed.

Summary

Issues Involved:
1. Application under Order IX Rule 13 CPC for setting aside the ex-parte judgment and decree.
2. Applicability of Section 22 of the Sick Industrial Companies Act, 1985 (SICA).
3. Allegations of negligence against the counsel.
4. Delay in filing the application for setting aside the ex-parte decree.

Detailed Analysis:

1. Application under Order IX Rule 13 CPC for setting aside the ex-parte judgment and decree:
The Judgment Debtor filed an application under Order IX Rule 13 CPC seeking to set aside the ex-parte judgment and decree dated 27th May 2009. The application was filed on 25th April 2019, claiming unawareness of the suit proceedings until a show cause notice dated 17th November 2018 in Execution Petition No. 61/2016 was received. The court noted that the Judgment Debtor was served with summons by publication and appeared through counsel on 28th November 2000 and 15th February 2001 but subsequently stopped appearing, leading to an ex-parte decree on 28th January 2002. The court found the Defendant's attitude callous and negligent for failing to inform the court about the BIFR proceedings or filing a written statement.

2. Applicability of Section 22 of the Sick Industrial Companies Act, 1985 (SICA):
The Judgment Debtor contended that the suit and decree were in contravention of Section 22 of SICA, rendering them null and void. The court referred to the Division Bench decision in Saketh India Limited v. W. Diamond India Limited and M/s Ralson Industries Ltd. v. M/s Adhunik Transport Organisation Ltd., which clarified that a suit for recovery is not covered by Section 22 of SICA. The court emphasized that Section 22(1) of SICA applies to proceedings in the nature of execution, distress, or the like, and not to suits for recovery of money. The court concluded that the present suit for recovery was maintainable without BIFR's permission and was not hit by Section 22 of SICA.

3. Allegations of negligence against the counsel:
The Judgment Debtor argued that the failure to appear was due to the negligence of their counsel. The court, however, highlighted that the litigant owes a duty to be vigilant about judicial proceedings and cannot cast the entire blame on the counsel. The court cited Moddus Media Pvt Ltd. vs M/s. Scone Exhibition Pvt. Ltd., stating that the litigant must pursue their case diligently and cannot rely solely on the counsel. The court found the allegations against the counsel to be bald, unspecific, and vague, with no action taken against the counsel, thus rejecting the plea of counsel’s negligence.

4. Delay in filing the application for setting aside the ex-parte decree:
The court noted that the Judgment Debtor came out of the purview of SICA on 18th September 2014 but failed to approach the court until 25th April 2019. The only justification provided was the receipt of the show cause notice in November 2018. The court found this explanation insufficient, highlighting that the Plaintiff had filed an application before BIFR in 2012, and the Defendant was aware of the decree since then. The court deemed the Defendant's conduct as laid-back and negligent, dismissing the application with a cost of Rs. 25,000 to be deposited with the Delhi High Court Staff Welfare Fund.

Conclusion:
The application to set aside the ex-parte decree was dismissed due to the Defendant's negligence, lack of timely action, and failure to substantiate claims under Section 22 of SICA. The court emphasized the need for litigants to be vigilant and proactive in judicial proceedings.