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TMI Blog1999 (4) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... registered with the Board for Industrial and Financial Reconstruction, ( BIFR ), and that a scheme for rehabilitation had been sanctioned. There was nothing to substantiate the allegations of the company. It was contended on behalf of the petitioner that its claim had not been included in the alleged scheme and that its claim arose after the scheme had been sanctioned. On the prayer made on behalf of the petitioner liberty was given and the petitioner filed a supplementary affidavit enclosing a copy of the alleged scheme, three letters dated 10-1998, 2-9-1998 and 16-12-1998 were produced by the company, and it was confirmed that the sanctioned scheme was continuing process of implementation. 2. According to the petitioner the embargo under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, ('the SICA') was not applicable to the present winding up proceedings, as the transaction between the parties had taken place after the sanction of the scheme and the petitioner's claim was not included in the sanctioned scheme. On that ground, according to the counsel for the petitioner, this application for winding up could be taken up for hearing by the Court an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further, except with the consent of the Board or, as the case may be the appellate authority." The SICA was amended and the Amendment Act came into force on 1-2-1994. Sub-section (1) of section 22 was amended by section 12 ( a ) of the Amendment Act, and after amendment the words ". . . for the appointment of a receiver in respect thereof" appearing in the earlier section 22(1) would be followed by the words : "and no suit for the recovery of money or for the enforcement of any security against the industrial company or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g finding in Maharashtra Tubes Ltd. s case ( supra ) : "Where an inquiry is pending under sections 16/17 or an appeal is pending under section 25 of the 1985 Act there should be cessation of the coercive activities of the type mentioned in section 22(1) to permit the BIFR to consider what remedial measures it should take with respect to the sick industrial company. The purpose and object of suspension of proceedings etc. under section 22(1) of the 1985 Act is to await the outcome of the reference made to the BIFR for the revival and rehabilitation of the sick industrial company. The word, 'or the like' which follow the words 'execution' and 'distress' are clearly intended to convey that the properties of the sick industrial company shall not be made the subject-matter of coercive action of similar quality and characteristic till the BIFR finally disposes of the reference made under section 15 of the 1985 Act. The legislature had advisedly used an omnibus expression 'the like' as it could not have conceived of all possible coercive measures that may be taken against a sick undertaking.. " In short what their Lordships had held, as would appear to me, would be that proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward by the revenue, reasonable and fair in all the circumstances of the case." and it was on the basis of the 'contention' of the revenue that the Hon'ble Judges upheld the plea put forward by the revenue that section 22(1) should be read down or understood as contended by the revenue, and distinguished the two decisions as not applicable in the facts before them. In other words it would appear, would it not, that in no other circumstances proceedings to recover a money claim, which would in effect increase the financial liability of the sick industrial company, would be allowed to be instituted or continued with, inspite of the embargo contained in section 22(1). 5. In a decision Sirmor Sudburg Auto Ltd's case ( supra ), the Delhi High Court considered the applicability of section 22(1) with regard to a suit for eviction, and held that proceedings for eviction of a tenant which was a sick company, was not liable to be stayed, though the embargo would be attracted to proceedings for the recovery of arrears of rent, damages and mesne profits, as those proceedings would be in furtherance of recovery of money, which would cast further financial liability on the sick company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reckoned in the scheme it could not be assumed that the money claim could be considered to be out of the scope of the embargo. As regards the bench decision I would very humbly quote the observations in the Bench decision of the Madras High Court in J. M. Malhotra v. Union of India [1997] 89 Comp. Cas. 600 that, "there is no question of comparison of one company with another because proceedings against each company will have to be decided in accordance with the particular facts and circumstances of each case." 6. In those circumstances, I hold unhesitatingly that the facts of the case before this Court would indeed attract the embargo envisaged in section 22(1). Here was a simple money claim against the company. If proceedings for such claims were adjudged not to attract the provisions contained in section 22(1), the, very purpose of the statute would be frustrated. The endeavour of the legislators to revive a sick industrial company would, hardly be appreciated if the company was to be burdened with further financial liabilites. The provisions in the section in that event would be rendered quite superfluous, and it 'would be against the spirit of the statute. Simply put ..... X X X X Extracts X X X X X X X X Extracts X X X X
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