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TMI Blog2010 (4) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... der VII, rule 11(d), of the CPC on the ground that it had been declared a sick industrial unit in terms of section 3(1)(o) of Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA' for short). Before us, the only aspect that has been argued is that SICA places a complete prohibition on all judicial proceedings leaving no alternative to the trial judge other than ordering the rejection of the plaint. 2. It appears from a perusal of the records that summons in Form 4 under order XXXVII of the CPC were served on defendant No. 1 by affixation at Hosur, Karnataka, on 22.8.2005, and on defendant No. 2, on 30.8.2005, at Bangalore. The aforementioned applications filed on behalf of the defendants are dated 25.1.2006 and were filed on that very day; they have been supported by affidavits of defendant No. 2 who is the managing director of defendant No. 1. On 7.11.2008, the learned Single Judge directed the defendants to file, within four weeks, an affidavit stating whether or not the monies claimed by the plaintiff have been admitted by the defendant and have been reflected in the documents filed by the defendant before the Board for Industrial and Financial Reconstruction ('BIFR' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the averments made in the plaint would, in the absence of a written statement, have to be presumed to be correct. The CPC now mandates that the written statement must be filed within thirty days and in exceptional circumstances not later than ninety days of service. The rigours of this provision are not circumvented by preferring an application under order VII, rule 11, of the CPC. We, therefore, conclude that the appeal, inasmuch as it challenges the impugned judgment, is bereft of merit. 5. We think it appropriate, however, to consider the provision of SICA and analyse what it endeavours to achieve. We must immediately take note of the fact that SICA has been repealed by Sick Industrial Companies (Special Provisions) Repeal Act, 2003. While it is yet to be notified, it is significant that provisions akin to section 22 are conspicuous by their absence in the new scheme of revival of sick companies inserted in form of Part VIA, namely, 'Revival and Rehabilitation of Sick Industrial Companies'. Obviously, empirical analysis discloses that more often than not companies which have sought shelter of SICA have done so to procrastinate, delay and defer clearing its liability, with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person claiming that the company is indebted to it, the balance tilts in favour of the latter. A holistic reading of section 22(1) of SICA makes it manifestly clear that Parliament's intention was to insulate sick companies only against proceedings for winding-up or for execution, or distress or the like or for enforcement of any security or guarantee. In the case in hand, despite several opportunities granted to the appellant, it has miserably and perhaps deliberately failed to substantiate that the claim mentioned in the suit has been reflected in the scheme placed before the BIFR but even more poignantly, that a scheme was, in fact, pending before BIFR. If an appeal is pending, has BIFR failed to grant or has withdrawn registration under SICA? We see the conduct of the appellant as nothing more than an abuse of SICA. 7. The apex court has in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 2 Comp LJ 164 (SC): [1997] 10 SCC 649 enunciated the law in the context of SICA to be that a cessation of legal proceedings would be justified only if the dues in respect of which adjudication is ongoing is also included in or within the contemplation of the scheme presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as arisen in this case seems to be rather exceptional. The issue that has arisen in this appeal did not arise for consideration in the two cases decided by this court in Gram Panchayat v. Shree Vallabh Glass Works Ltd. [1992] 3 Comp LJ 346 (SC): [1990] 2 SCC 440 and Maharashtra Tubes Ltd. v State of Industrial and Investment Corporation of Maharashtra Ltd. [1994] 2 Comp , LJ 346 (SC): [1993] 2 SCC 144. It does not appear from the above two decisions of this court nor from the decisions of the various High Courts brought to our notice, that in any one of them, the liability of the sick company dealt with therein itself arose, for the first time after the date of sanctioned scheme. At any rate, in none of those cases, a situation arose whereby the sick industrial unit was enabled to collect tax due to the revenue from the customers after the 'sanctioned scheme' but the sick unit simply folded its hands and declined to pay it over to the revenue, for which proceedings for recovery, had to be taken. The two decisions of this court as also the decisions of High Courts brought to our notice are, therefore, distinguishable. They will not apply to a situation as has arisen in this case. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was the moratorium of section 22 of the SICA enforced. 10. Finally, we must consider the relevance of NGEF Ltd. v. Chandra Developers (P) Ltd. [2005] 6 Comp LJ 203 (SC): [2005] 8 SCC 219, on which reliance has been placed by learned counsel for the appellant. In the backdrop of several judgments of the Supreme Court, it is inconceivable for a bench comprising two learned Judges to charter a fresh and diametrically different view of section 22 of SICA to previous pronouncements. A careful consideration of the judgment discloses that their Lordships had countenanced a completely contrary scenario. This is clear from the following summation contained in paragraph 9 of the Judgment authored by His Lordship S.B. Sinha, J: "9. Mr. T.R. Andhiyarujina, the learned senior counsel appearing on behalf of the appellants, in civil appeal Nos. 5199-5201 of 2004, would, inter alia, contend that the learned company judge and the division bench of the High Court misdirected themselves in passing the impugned judgment and order insofar as they failed to take into consideration that BIFR retains the control over the assets of the company in terms of sub-section (4) of section 20 of SICA and, thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1985 Act, the High court was clearly in error in coming to the conclusion that the provisions thereof are not attracted only because the debt had been incurred after the company was declared to be a sick one." 12. It is in this analysis that we have reached the conclusion that the appeal calls for dismissal with costs, which we quantify at rupees 25,000 which are in addition to the sum of rupees 10,000 already imposed as costs by the learned Single Judge. The appeal is dismissed in these terms. Pending applications are also dismissed. EFA(OS) No, 33/2008 13. As the learned Single Judge has taken note of the fact that the proceedings before him were for the execution of a decree dated 19.1.2005 for a sum of rupees 1,41,28,854, along with interest passed by this court, the proceedings before him partook of the nature of execution. The judgment debtor had objected to the maintainability of those proceedings, keeping in view the sundry provisions of SICA. On behalf of the decree holder/appellant, Mr. J.C. Seth has contended that the decreetal amount does not find mention in the scheme presented to BIFR and hence there is no legal impediment in carrying the execution proceedings to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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