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TMI Blog2010 (5) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... e and irreparable loss, the manner in which the above referred pending proceedings of the civil nature or those likely to be commenced are going to affect the cause of the applicant-company vis-a-vis proposed scheme is not clear, application is accordingly rejected - CA NO. 111313 OF 2010 - - - Dated:- 17-5-2010 - PANKAJ MITHAL, J. Manu Khare, B.K.V. Subrahmanyam, Sharad Mandhyan and Vikram Chandra for the Appearing Parties. ORDER 1. Alps Industries Ltd., a company incorporated under the Companies Act, 1956 ('the Act') has applied under sections 391-394 of the Act for acceptance of a scheme of arrangement between the company and its creditors for its nourishment and rehabilitation by means of Company Application No. 3 of 2010. 2. The Company Judge vide order dated 18th February, 2010 in the aforesaid application directed for convening meeting of the creditors of the company on 11th March, 2010 and another meeting of the shareholders of the company on 6th May, 2010. 3. The matter is posted for 27th May, 2010 and in the meantime it is said that the aforesaid two meetings have taken place and majority of the creditors and the shareholders have expressed opinion in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of the DBS Bank and Kotak Mahindra Bank on the ground that the application is vague, it does not discloses the exact stage at which the proceedings mentioned above are pending and the manner in which the applicant company is likely to suffer any loss if these proceedings are permitted to be continued. 8. I have heard Sri B.K.V. Subrahmanyam, senior advocate assisted by Sri Saurabh and Sri Manu Khare, learned counsel appearing for the applicant/company, Sri Naveen Sinha, senior advocate assisted by Sri Vikram Chauhan, learned counsel appearing for DBS Bank and Sri Amit Sthalekar, learned counsel appearing for Kotak Mahindra Bank. 9. It has been argued that this court has power under section 391(6) of the Act to stay the commencement or continuation of any suit or proceedings including criminal proceedings against the applicant-company pending an application for consideration of arrangement/scheme under section 391 of the Act. It has also been submitted that as the scheme has cleared the first stage and the meetings of the creditors as well as shareholders have already taken place for accepting the scheme and there is no opposition to the scheme by most of the major creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a civil nature. Thus, excluding from its ambit all criminal proceedings. 14. It is also of importance to note that had there been any intention of the Legislature to embrace within the expression "suit or proceeding" the proceedings of criminal nature it would have said so clearly or would have used the word 'proceedings' only instead of "suit or proceeding". The word 'proceeding' independently would have been of a very wide amplitude. Therefore, the protection permissible under the aforesaid provision is only in respect of civil liabilities of the company or its officers. 15. In Uma Investments (P.) Ltd., In re [1977] 47 Comp. Cas. 242 (Bom.) High Court while considering this very provision of section 391(6) of the Act held that a proposal by the company for any arrangement to be forwarded under section 391 is concerning the civil liabilities and, as such, it is not possible that the power under section 391(6) can be used for freezing criminal proceedings as well. The object of the aforesaid provision is not to provide an umbrella of protection to a company and its directors facing punishment, fine or both for an offence or for violation of any law, rule or regulation and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f wide import and includes within its sweep criminal proceeding also cannot be of any help to the petitioner as the said view has been expressed by taking into consideration the decision of the Gujarat High Court in Divya Vasundhara Financiers (P.) Ltd. (supra) without any reference or consideration of two comprehensive judgments of the Bombay High Court referred to above on the subject. The reasoning of the Bombay High Court in the above decision appears to be more sound and logical and, therefore, I prefer to follow the same coupled with my own reasoning expressed above. 21. An attempt has been made to draw a distinction between criminal proceedings which may entail punishment and those which may result in financial implications. I am afraid that such a distinction cannot be approved as the commission of an offence ultimately ends in imposition of a punishment or fine or both but that would not be of financial nature and the criminal proceedings under section 138 of the Negotiable Instruments Act with which the court is presently concerned also has no financial implication particularly of the nature which may obstruct or jeopardise any scheme of compromise or arrangement under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings. 26. So far the apprehension of the applicant-company that on the basis of certain legal notices already issued fresh proceedings may be initiated, I am of the view that they may at best lead to institution of fresh winding up petitions before this court, all of which may be clubbed and dealt with harmoniously along with the pending company petition and the Company Application No. 3 of 2010 without adversely affecting the merits of the scheme/arrangement. 27. The purpose of granting interim stay/injunction is ordinarily to preserve the subject-matter under litigation and to ensure that no irreparable loss or injustice is caused to the litigating party pending the litigation. The grant of such interim relief ought not to be arbitrary and unreasonable. To avoid any arbitrary or fanciful exercise of discretion it is necessary that the discretion has to be guided by law. It must be governed by rule and must appeal to reason on the touchstone of well established judicial principles based upon equity. In this view of the matter the fundamental principles for grant of interim stay or injunction as enshrined in order XXXIX, rule 1, Code of Civil Procedure, 1908 ('CPC') ..... X X X X Extracts X X X X X X X X Extracts X X X X
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