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TMI Blog2001 (4) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002, within which the petitioner has to comply with the export obligations with reference to which the Indemnity cum Surety bonds were furnished. 2. This Court granted interim injunction on 2-11-1999 in W.M.P. No. 25667 of 1999 and it has been extended on 19-11-1999 until further orders. To vacate the interim orders, the respondents 1 and 2 have moved W.M.P. No : 25067 of 2000. When the applications came up for orders, as it was represented that the arguments in the interim applications as well as the main writ petition are one and the same, the writ petition itself could be disposed of. In the light of the said representation, this Court heard the writ petition itself and reserved orders. 3. Heard Mr. S. Parthasarathy, learned Counsel appearing for Mr. Mohan Parasaran, for the petitioner and Mr. V.T. Gopalan, learned Additional Solicitor General, appearing for Mr. S. Udayakumar, Additional Central Government Standing Counsel, appearing for respondents 1, 2 and 5. 4. At the outset it is essential to set out few facts which are not in controversy. The petitioner-company entered into a Joint Venture with the Tamil Nadu Industrial Development Corporation. The petitioner-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntant and Bank. 6. After further steps the guarantees were invoked. The third and fourth respondent-bank by its communication intimated the petitioner that the first respondent had invoked the guarantee as the writ petitioner had failed to discharge the export undertaken obligation before the stipulated period and that he had failed to achieve the requisite export earning in fully convertible currency and the first respondent had called the banks to deposit the bank guarantee amount within fifteen days. The Banks in turn called upon the petitioner to make arrangements for remitting the amount to honour the commitment under the guarantee. Hence, the present writ petition seeking the relief of mandamus. 7. The petitioner had also moved the first respondent while furnishing the statement containing details of a small portion of exports so far made towards the import licence issued in its favour and requested the first respondent to give them the benefit of extended period up to 30-3-2001. Concedingly the petitioner had not accomplished export obligation which it had undertaken and only a fraction of the export obligation had been achieved. Hence, there is every justification for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, the points that arise for consideration, admittedly had not been decided by the Apex Court in its earlier pronouncements. The relevant point to be examined would be. When proceedings are pending in respect of the petitioner-company before the BIFR under the SICA Act and other provisions, whether the guarantees could be invoked ? 12. The learned Counsel for the petitioner referred to earlier pronouncements of the Apex Court wherein the scope of Section 22 of the SICA Act had been considered by Their Lordships of the Supreme Court in respect of a loan transaction or arrears of tax, liability incurred under a contract and like, which undoubtedly fell within the ambit of Section 22(3) or (4) of the Act. It is contended by the Counsel for the respondents that those cases are distinguishable on facts and the said pronouncements will have no application to the facts of the case. 13. The following points arise for consideration : (a) Whether by virtue of the public notification issued by the Government of India on 6-4-1999 in exercise of powers conferred under Export and Import Policy, the time granted to accomplish the export obligation is deemed to have been extended ? and Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for extension of export obligation period up to 31-3-2001 provided the licence holder who has failed to complete his export obligation within the earlier stipulated time limit, applies for extension of export obligation period on submission of a Bank Guarantee, covering the Customs duty in proportion to the unfulfilled export obligation together with 24% simple interest thereon from the date of import up to 30-9-2001. 3. The request for extension shall be filed with the concerned licensing authority within a period of 60 days from the date of the Public Notice. The licensing authority which originally issued the licence shall be competent to grant extension in export obligation period. 5. In such cases where the licence holder has not availed the facility accorded under this Public Notice, adjudication proceeding shall be initiated on the expiry of 60 days from the date of this Public Notice. 16. Except forwarding a letter dated 3rd July, 1999, concedingly the petitioner had not complied with any of the requirements prescribed for the extension of time as notified by the Ministry of Commerce. Even as of today, it is stated that the writ petitioner had not complied with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner - company. 20. A reading of sub-section (1) of Section 22 of the SICA Act, according to the Counsel for the petitioner has to be given on all comprehensive or wider meaning so as to include all kind of guarantees or liabilities whatsoever as the liability in respect of a statutory liability or tax liability as already held to be included by various decisions of the Apex Court and therefore the bank guarantees which are sought to be invoked and enforced is suspended by virtue of Section 22 of SICA Act and hence, the respondent cannot proceed. 21. The learned Additional Solicitor General while relying upon the pronouncements of the Supreme Court contended that there shall be no interdiction or stay or injunction by a Court in respect of a bank guarantee which is enforceable on its terms and interdiction or injunction or restriction if any by a Court of law is impermissible except in case of fraud or like. This proposition of law is not in dispute by the Counsel for the petitioner. In this respect the learned Additional Solicitor General relied upon the judgment of the Apex Court in Hindustan Steel Workers Construction Company v. G.S. Atwal and Company, reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdships of the Apex Court held thus :- 12. ...... Section 22 of the Central Act requires all creditors seeking to recover their dues from sick industrial companies in respect or whom an inquiry under Section 16 is pending or a scheme is under preparation or consideration or has been sanctioned to obtain the consent of the said Board to such recovery. If such consent is not secured and the recovery is deferred, the creditor s remedy is protected for the period of deferment is, by reason of sub-section (5) of Section 22, excluded in the computation of the period of limitation. The words any other law in Section 22 cannot, therefore, be read in the manner suggested by learned Counsel for the respondents. 13. The Corromandal Pharmaceuticals judgment dealt with a sick industrial company which was enabled to collect amounts like sales tax after the date of the sanctioned scheme. This Court said, such amounts like sales tax, etc. which the sick industrial company is enabled to collect after the date of the sanctioned scheme, legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the Act. It added that the issue that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide that no suit (a) for the recovery of money, or (b) for the enforcement (i) of any security against the industrial company, or (ii) of any guarantee in respect of any loans or advance granted to the industrial company : shall lie or be proceeded with except with the consent of the Board or the appellate authority under the said Act. For our purposes, therefore, the relevant words are : no suit .... for the enforcement ... of any guarantee in respect of any loans or advance granted to the industrial company shall lie without the consent of the Board or the appellate authority. The words are crystal clear. There is no ambiguity therein. It must, therefore, be held that no suit for the enforcement of a guarantee in respect of a loan or advance granted to the industrial company concerned will lie or can be proceeded with, without the sanction of the Board or the appellate authority under the said Act. 8. It is not possible to read the relevant words in Section 22 as meaning that only a suit against the industrial company will not lie without such consent. There is no requirement in Section 22, as analysed above, that, to be covered thereby, a suit for the enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e personal interest of the guarantors as proceedings against guarantors and their personal properties would not affect the revival of the industrial company in any manner whatsoever. In the circumstances the words of any guarantee in respect of any loan or advance granted to the industrial company in the context will have to be read as a guarantee given by the industrial company towards loan or advance and none else . Section 22 is clear and unambiguous in that they provide that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the concerned industrial company will lie or can be proceeded without the consent of the Board or the Appellate Authority. 28. The decision of the Apex Court in Borukha Steel Ltd. v. Fairgrowth Financial Services Ltd. reported in 1997 (89) Company Cases page 547, has been approved by the later Full Bench judgment in Salidair (India) Ltd. v. Fairgrowth Financial Services Ltd. and others reported in 2001 (104) Company Cases page 569. 29. In the light of the said pronouncements of the Apex Court the emphasis being that the transaction should be loan or advance and not every other kind of liabilities as in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the language of the statute has to be read as it is and no addition or substraction of words is permissible. The object is to give protection to the industries which are unable to repay the loans or advance or liability of like nature. In terms of the provision of Import and Export Control Act notifications have been issued and in terms of the said notification what has been undertaken by the petitioner is to discharge performance the obligation as per the notification by availing the benefit of the scheme and importing capital goods or machineries free of duty or at a concessional rate. The failure to re-export had led to the respondent enforcing the provisions of the scheme under which capital goods have been imported with the concomitant obligation to re-export before a particular date and the value to be exported being thrice the value of the capital goods imported under a licence. It is a concessions which has been provided for and availed. 33. To enforce the provisions of the notification, bank guarantee was directed to be furnished. Therefore, it is clear that this is not a loan transaction, but it is an obligation undertaken as performance, failure of which led to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediment for instituting and proceeding with a criminal case on the allegations of an offence under Section 138 of the NI Act against a company or its directors. The section as we read it only creates an embargo against disposal of assets of the company for recovery of its debts. The purpose of such an embargo is to preserve the assets of the company from being attached or sold for realisation of dues of the creditors. The section does not bar payment of money by the company or its directors to other persons for satisfaction of their legally enforceable dues. 36. In Gujarat Steel Tubes Company Ltd. v. Virchandbhai B. Shah, reported in 1999 (8) SCC 11, the Apex Court held that filing of eviction petition on the ground of non payment of rent cannot be regarded as a suit filed for recovery in nature and therefore Section 22 will not get attracted. 37. Further, neither the respondent is a party to the proceedings before the BIFR, nor the respondents claim or entitlement to get bank guarantees invoked were sham in the liability and it will not fall under the contingencies provided under Section 22 of the SICA Act. 38. In fact the liability to pay arises after the Company became si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 22 of the Act. So, we are of the view that though the language of Section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after the implementation of the scheme or the disposal of an appeal under Section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in Section 22(1) of the Act can apply only to such of those due reckoned or included in the sanctioned scheme. Such amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the Act. Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the Revenue and withhold it indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against the spirit of the statute in a business sense, should be avoided. 14. The situation which has arisen in this case seems to be rather exceptional. The issue that has arisen in this appeal did not ari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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