9911796707
TMI Blog2001 (1) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of such an industrial company no civil suit for recovery of money is maintainable and if it is pending it is not be proceeded with further. Further Progress of proceedings in such a suit have to be halted and the suit can proceed only if Board or appellate authority consents for the same. The question to be determined is as to whether this bar would apply to arbitration proceedings pending under sections 14 and 17 of the Arbitration Act, 1940 as well? In both the appeals, arbitrators have rendered their awards after the arbitration proceedings which were conducted under the 1940 Act. Arbitration awards were filed in the court for making rule of the Court. Cement Corpn. of India Ltd. ( CCI Ltd. ) which is a party in both the cases has suffered awards. Not satisfied with the awards, it has filed objections in both the cases. One is registered as suit No. 171-A of 1995 out of which FAO (OS) No. 84 of 1997 arises and other suit is registered as Suit No. 3125A of 1992 out of which FAO (OS) No. 1 of 1998 arises. CCI Ltd. has made reference to the Board for Industrial and Financial Reconstruction ( Board ) constituted under SICA which has been registered. In view thereof in both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. (2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned under section 18, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law ( a )it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a direction of the company; ( b )no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board. (3) Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under preparation or during the period of consideration of any scheme under section 18 or where any such scheme is sanctioned thereunder, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or counsel appearing for the appellant, Lloyd Insulations India (Ltd.) in FAO (OS) No. 84 of 1997 submitted that the provisions of section 22(1) would not apply to such arbitration proceedings pending before the Court inasmuch as these proceedings are not in the nature of suit for recovery of money . He referred to sub-section (3) of section 22 as per which Board had the power to declare, with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, shall remain suspended or be enforceable with such adoptions and in such manner as may be specified by the Board. His submission was that since awards are included in sub-section (3) of section 22, which expression would include arbitration awards as well, to such proceedings pending under sections 14 and 17 of the 1940 Act provisions of sub-section (3) of section 22 of the SICA would apply and there would not be an automatic suspension but the suspension would come into play only when Board passes an order and makes a declaration to this effect. Therefore, it was for the CCI Ltd. to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt decree has to follow and, therefore, these proceedings are to be treated in the nature of suit for recovery of money . Thus in effect and in substance it is an action for recovery of money and, therefore, suit within the meaning of section 22(1). He relied upon the reasoning given by the learned Single Judge in the impugned order dated 5-2-1997 and contended that purposive interpretation needs to be given to the expression suit for recovery of money keeping in view the objective which was sought to be achieved by introducing such an amendment by the Legislature. It was submitted that the word suit is not defined either in the Code of Civil Procedure, 1908 or in the General Clauses Act or even in the SICA. Therefore, the expression used in the context and in generic sense is to be adopted. He referred to the legal dictionaries as per which term suit was very comprehensive and applies to any proceeding in Court of justice by which an individual pursues that remedy which the law affords him. He referred to Law Lexicon, 1997 edition which defines the expression suit as under: "The term suit is a very comprehensive one, and is said to apply to any proceeding in a Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or for enforcement of any security against the company or guarantee in respect of loan or advance granted to the company. Thus in BSI Ltd. s case ( supra ) where this amended section came up for interpretation in respect of proceedings under sections 138, 141 and 142 of the Negotiable Instruments Act, the Apex Court carved out the ban imposed, as per section 22(1), in respect of maintainability of the following legal actions: (1)Proceedings for the winding up of the company; (2)Proceedings for execution, distress or the likes against any of the properties of the company; (3)Proceedings for the appointment of a receiver in respect of such properties; (4)Suits for recovery of money or for enforcement of any security against the company or guarantee in respect of any loan or advance granted to the company. 9. It is an admitted case of both the parties that the arbitration proceedings which are pending in the two cases under sections 14 and 17 are not the proceedings of the nature covered by legal actions as enumerated at 1 to 3 above. Therefore, the attempt of the CCI Ltd. was to bring the case within the expression suit for recovery of money . Therefore, the task bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and apart from some context must be taken to mean, a civil proceeding instituted by the presentation of a plaint. ( c )A proceeding which does not commence with a plaint or petition in the nature of a plaint or where the claim is not in respect of dispute ordinarily triable in a civil court would prima facie not be regarded as suit . ( d )Proceedings under sections 8, 20(2) and 33 of the Arbitration Act were not to be treated as a suit . 12. This amended section 22(1) came up for interpretation before the Supreme Court in a recent judgment in the case of BSI Ltd. ( supra ). The question to be decided was as to whether proceedings under section 138 of the Negotiable Instruments Act were in the nature of suit for recovery of money . This submission arose in the following background: "14. Some of the learned counsel pointed out that when a company is convicted under section 138 of the NI Act the court can only impose a fine as the sentence since a juristic person like the company cannot possibly be sent to prison. On its premise learned counsel contended that recovery of the fine covered by such sentence would be impractical on account of the ban envisaged in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial Investment Corpn. of Maharashtra Ltd. [1993] 2 SCC 144. While considering the purpose and objects of suspension of proceedings mentioned in section 22(1) of SICA, therein it has been held that the expression proceedings in the sub-section must be widely construed. This is what the Bench has observed: (SCC p. 158 para 10) The Legislature has 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. 19. The said contention is also devoid of merits. The word suit envisaged in section 22(1) cannot be stretched to criminal prosecution. The suit mentioned therein is restricted to recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans or advanced granted to the industrial company . As the suit is clearly delineated in the provision itself, the context would not admit of any other stretching process." (p. 743) Although in this case the question involved was whether criminal proceedings under section 138 of the Negotiable Instruments Act was suit for recovery of money , what is significant for our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed us. The primary and golden rule of interpretation is the literal construction. No doubt the object of interpretation is to discover the intention of the Parliament, but the intention of Parliament must be deduced from the language used. Where the language is plain and admits of but one meaning, that meaning is to be given to the language in the Statute. It is only when words are susceptible of more than one meaning that other rules of interpretation come into play. In the instant case the Legislature has intentionally used the word suit in so far as recovery of money is concerned. The unamended section which covered winding up, execution, distress etc. has used the expression proceedings . Thus, the Legislature had in mind that as far as winding up, execution, distress etc. is concerned, no proceedings of this nature shall lie or be proceeded with except with the consent of the Board. However, when the section was amended to add the claims for recovery of money, Legislature used the expression suit and not proceedings . Thus, if one has to really see the intention, it was to confine to suits only, i.e., suits which are understood in common parley, namely, which are fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... former case the proceedings of the suit of the nature mentioned in sub-section (1) shall not lie or proceeded with except with the consent of the Board, in the latter case Board has to declare the suspension of such contracts, settlements, awards etc. Since awards are mentioned in sub-section (3) of section 22 that is another reason to infer that the Legislature did not intend such awards to be covered by the expression suits for recovery of money . 16. Accordingly we hold that the arbitration proceedings pending under sections 14 and 17 of the Arbitration Act in Suit Nos. 171-A of 1995 and 3125 of 1992 cannot be treated as suits for recovery of money and, therefore, would not be covered by sub-section (1) of section 22 of the SICA. We may summarise the reasons for taking this view: (1)The expression suit under sub-section (1) of section 22 is to be given the meaning in which it is normally understood, i.e., civil proceeding instituted by the presentation of a plaint. This would refer to the suit as contemplated by section 9 of the Code of Civil Procedure. Proceeding under section 14 read with section 17 of the Indian Arbitration Act for the passing of a judgment and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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