9911796707
TMI Blog2003 (9) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... lication may be briefly noted. Plaintiff had filed the above suit under Order XXXVII of the Code of Civil Procedure for recovery of Rs. 50 lakhs together with interest. Defendant filed the application for leave to contest, claiming that the amount in suit was neither due nor payable by the defendants. On 16th December, 1997, as noted, the Court had restrained the defendants from selling, transferring or parting with possession or encumbering with regard to properties mentioned in Annexures A and B. An application I.A. 9930/98 under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as SICA , for short) had been moved by the defendant in October, 1998, claiming that during the pendency of the suit, the defendant No. 1 had been declared a sick company vide order dated 17-3-1998 in case No. 10 of 1998 titled Prestige H.M. Poly Containers Ltd. (An inquiry under section 16 of SICA was pending and the scheme under section 17 was stated to be under preparation. The defendant, therefore, submitted that in the absence of the requisite consent under section 22 of the SICA, proceedings in the present suit were liable to be suspended straig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 22 of SICA, except with the consent and permission by BIFR being granted. The present application under Order XXXIX, Rule 4, C.P.C. was barred and could not be entertained in view of section 22 of SICA. ( ii )The second submission of Mr. Sawhney is that the plaintiff had obtained the ex parte restraint order by wilful misrepresentations and concealments. The plaintiff in the plaint did not disclose the payment made by the defendant of nearly Rs. 25 lakhs. Plaintiff also did not disclose that it had sought transfer of shares in its favour valued at over Rs. 25 lakhs, which had been pledged as security. The plaintiff in reply filed to the application for leave to contest by the defendant itself had admitted the receipt of Rs. 20.94 lakhs. Defendant No. 1 had plant and machinery worth Rs. 7.36 crores and factory building worth Rs. 90.82 lakhs at Maharashtra, as per the plaintiffs own case. The residential house at A-7, Maharani Bagh, belonging to the guarantor, defendant No. 2, the transfer/alienation of which has been restrained, is itself worth crores. The ex parte restraint order dated 16-12-1997, was liable to be vacated. Mr. U.K. Chaudhary, senior advocate appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof (and no 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." 7. Mr. Sawhney urged that the bar in the section was confined to the proceedings against the company mentioned therein. There was no bar under the said section against the company instituting a suit or recovering its assets or seeking enforcement of its rights. Mr. Sawhney also places reliance on a decision of the Bombay High Court in Duke Offshore Ltd. v. Burns Standard Co. Ltd., 1998 (CC2) GJX 350. The Court while considering whether the status quo granted in a matter of bank guarantee should be continued, made the following observations: "This judgment nowhere lays down that the company against which the proceedings have been initiated is prohibited from taking legal steps for the enforcement of its rights. However, by placing reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be in all cases a construction which gives effect to the legislative intention, whether or not the statutory language needs to be strained to achieve this. 10. In the instant case it was urged that the legislative intent was for protection of the assets of the company, having financial difficulties for which provisions of section 22 of SICA had been invoked. It is only proceedings against the company which are stayed and not to be proceeded with. The intention is to protect its assets base being eroded pending consideration and evaluation of a scheme for its rehabilitation. Accordingly, he submitted that there could be no embargo or bar on the defendant, seeking vacation of the restraint order which is for the benefit of the company or the guarantor. 11. Mr. Chaudhary submitted that once the conditions of applicability of section 22 of SICA are satisfied then no suit for recovery of money or for enforcement of any security against the industrial company or any guarantee shall lie or be proceeded with further (emphasis supplied). He submitted that there was thus an embargo or a complete bar to the very exercise of jurisdiction by the Court to proceed further with the sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly after leave is granted to the defendant. The trial under section 10, C.P.C. in the context of a summary suit cannot be interpreted to mean the entire proceedings starting with the institution of the suit by lodging a plaint. In a summary suit the trial really begins after the Court grants leave to the defendant to contest the suit. The Court, therefore, set aside the order of the Division Bench and restored the order passed by the Single Judge holding that the Single Judge could dispose of the application for leave to contest. Reference in this regard may also be made to Escorts Construction Equipment Ltd. v. Action Construction Equipment Pvt. Ltd. AIR 1999 Delhi 73. There are catena of authorities that the Court is not divested of its power to pass interlocutory orders when required in the interest of justice even if the suit stands stayed under section 10 C.P.C. or section 34 of Arbitration Act, 1940. 13. To determine whether on the analogy of section 10, C.P.C. and section 34 of the Arbitration Act, 1940, the Court can also pass interlocutory orders where section 22 of SICA is attracted, during the stay of proceedings, the legislative intent as reflected in the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its assets except with the consent of BIFR during the period specified. These provisions are directed to ensure that a Company which is having a reference registered under section of SICA and is enjoying the protective umbrella against recovery distress or execution proceeding is also not permitted either to dissipate or disburse its assets or that of the guarantor to endanger the interest of the creditors in the event the proposal or scheme for rehabilitation does not come through or a decision is taken to wind up the company. From the foregoing discussion, I am of the prima facie view that though the power of the Court to entertain an application for variation of interlocutory orders under section 10, C.P.C. or the Arbitration Act may be there as noted above, SICA provides the complete machinery for getting permission either to proceed against the sick company or for obtaining restraint on the sale or disposal of assets or getting the operation of contracts, agreements, settlements suspended. The legislative intent is that during the inquiry and consideration of the schemes no proceedings as are mentioned in section 22 are proceeded with. The use of the words shall lie or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security. The plaintiff utilising blank transfer deeds had lodged the shares for transfer. It was thus urged that the plaintiff had come to the Court with unclean hands and was not entitled to the equitable relief of injunction. Learned counsel also placed reliance in the case of Lallan Prasad v. Rahmat Ali AIR 1967 SC 1322 wherein the suit for recovery on account of non-disclosure of the security being pledged, the Supreme Court upheld the decision of dismissal of the injunction application. In the instant case while it is true that the plaintiff did not make a specific averment in the plaint with regard to receipt of Rs. 20.94 lakhs, the plaintiff filed a statement of account at page 105 of the paper book, which reflected the receipt of Rs. 20.94 lakhs and after adjusting the payments made and computing the interest payable, an amount of Rs. 61,38,279 was shown as due from the defendants as on 13-11-1997. As regards question of non-disclosure of security is concerned, learned counsel for defendant has pointed out that despite the lodging of shares the defendant No. 2 who controls the company is not allowing/permitting the transfer on account of one objection or the other such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company being wound up and disapproved of the attempts by the petitioner to write off the uncleared loans and other liabilities as not being maintainable. In this scenario, defendant No. 2, who is a guarantor cannot be permitted to be absolved of the obligations admittedly undertaken by the deed of guarantee. Defendant No. 2 itself along with the guarantee executed by him had filed an affidavit to the following effect. Relevant extract from the affidavit dated 4th July, 1995 is as under: "2. That on the request of our company MS Prestige HM Polycontainers Ltd., Goyal Gases Limited, New Delhi has been pleased to advance Inter Corporate Deposit ("ICD") to the extent of Rs. 50 lakh (Rupees Fifty lakh only) for a period of 90 days at an interest of 30 per cent per annum (interest payable in advance) to our company (hereinafter referred to as the company) and for that I have executed personal guarantee to repay the entire amount of loan with interest as above in case of non-payment of the same by my company at the due date. 4.****** 5. That I am the absolute owner of the properties/assets as mentioned in the Annexure A and no dispute exists with regard to the title of ownership f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
