2013 (2) TMI 169 - HC - Companies Law

Review application - the petitioner company was entitled of benefits u/s 22 of the Sick Industries Companies Act, 1985 (SICA) thus imposition of condition of deposit of 50% of the suit amount was contrary to the provisions of Section 22 of SICA - Held that - No merit in the instant review application as the law as to the continuation of a suit filed against a sick company is no longer res integra as well laid by in Saketh India Ltd. Vs. W. Diamond India Ltd. (2010 (4) TMI 621 - HIGH COURT OF DELHI) & also by the Supreme Court in Raheja Universal Ltd. Vs. NRC Ltd., (2012 (10) TMI 233 - SUPREME COURT). As all suits including that of recovery are not hit by Section 22 (1) of the SICA, but, only those suits which have the effect of execution, distress or like action against the properties of sick company, which would be hit by this provision. In a simple suit for recovery of money where the properties of sick company are not threatened by the proceedings including the interim ones such as appointment of receiver, execution, distress or the like, such suits could continue without the permission under Section 22. In the present suit for recovery, it cannot be said that the suit is of a nature which has the impact of or threat to the properties of the petitioner to affect the scheme of its revival.Thus, the present suit being the simple suit of recovery under Order 37 CPC, would not be hit by the provision of Section 22 of the SICA. There is no cogent reason warranting review of the said order.

Summary

Issues:
Review of order allowing leave to defend application subject to deposit of 50% of the suit amount under Section 22 of the Sick Industries Companies Act, 1985.

Analysis:
The petitioner filed a review application challenging the order requiring a deposit of 50% of the suit amount, claiming entitlement to benefits under Section 22 of the Sick Industries Companies Act, 1985 (SICA). The court cited precedents, including Saketh India Ltd. Vs. W. Diamond India Ltd. and Raheja Universal Ltd. Vs. NRC Ltd., to establish the legal framework. The court emphasized that Section 22 of SICA does not require permission for suits unless the dues are admitted in a sanctioned scheme or before the court. The court highlighted that legal proceedings should not be halted unless the debt is admitted, to prevent unjustified hardship to creditors. The judgment clarified that suits not threatening the properties of a sick company can proceed without permission under Section 22.

The court dismissed the review application, stating that the petitioner did not admit the amount in the suit, as required by the precedents. The judgment differentiated between suits impacting a sick company's properties and simple recovery suits. It concluded that the present suit, a simple recovery suit under Order 37 CPC, did not threaten the petitioner's properties for revival. Therefore, the court held that the suit was not subject to Section 22 of SICA. The court found no valid reason to review the order, ultimately dismissing the review application and related miscellaneous applications.