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TMI Blog2012 (12) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 ( in short SICA). 3. The issue as to continuation of a suit filed against a sick company is no longer res integra and is fully covered by two recent judgments one of the Division Bench of this Court in the case of Sakethh India Ltd. Vs W. Diamond 2010 (119) DRJ 190; 2010 (160) CC 562 and second is the judgment of the Supreme Court in the case of Raheja Universal Ltd. Vs. NRC Ltd. (2012) 4 SCC 148. 4. The ratio of the judgment in Saketh India Ltd.'s (supra) case is that unless the dues are admitted by the sick company in a sanctioned scheme or is admitted before the Court where the same suit is filed, no permission is required under Section 22 of SICA. More particularly it is held that before Section 22 applies the proceedings have to be in the nature of 'execution, distress or the like'. Paras 6 and 14 of the said judgment are as under:- "6. Courts, however, have always been alive to the possible mischief that invocation of SICA can lead to. In a nutshell, where the net worth of a company is reduced to a negative, and the amelioration that is sought is for reviving the company rather than winding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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 If an Appeal is pending, has BIFR failed to grant or has withdrawn registration under SICA.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. 14. The discussion contained above leads to the thesis that as soon as a claim stands admitted, either because it has been reflected in the Scheme, or because it stands favourably adjudicated in a Court of law, the protection of Section 22 of SICA would automatically have to be implemented. This is the watershed between the present and the preceding case. Having obtained a decree, further proceedings fall within the protective mantle of Section 22 of SCIA as they cannot but be in the nature of "execution, distress or the like". A plain reading of the provision cannot but lead to any other conclusion. If there are unique circumstances, which would justify the execution of the decree, even in the face of the registration of a Scheme under SICA, the proper recourse possible would be to obtain the permission or consent of the Board or the Appellate Authority as the case may be. Any other interpretation would completely annihilate and defeat the intendment of Parliament." (underlining added) In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other law, agreement, memorandum or even articles of association of the company. The purpose is so very clear that during the examination, finalization and implementation of the scheme, there should be no impediment caused to the smooth execution of the scheme of revival of the sick industrial company. It is only when the specified period of restrictions and declarations contemplated under the provisions of the Act of 1985 is over, that the status quo ante as it existed at the time of the consideration and finalization of the scheme, would become operative. This is done primarily with the object that the assets of the company are not diverted, wasted, taken away and/or disposed of in any manner, during the relevant period. 76. On the analytical analysis of the above-stated dictum of this Court and the legislative purpose and object of the Act, it has to be held that on its plain reading the provisions of Sections 22(1) and 22(3) of the Act are the provisions of wide connotation and would normally bring the specified proceedings, contractual and non-contractual liabilities, within the ambit and scope of the bar and restrictions contained in Sections 22(1) and 22(3) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for recovery of money, or for enforcement of any security against the industrial company, or any guarantee in respect of any loan or advance granted to the industrial company shall lie, or be proceeded with further without the consent of the BIFR. In other words, a suit for recovery and/or for the stated kind of reliefs cannot lie or be proceeded further without the leave of the BIFR. Again, the intention is to protect the properties/assets of the sick industrial company, which is the subject matter of the scheme. 80. It is difficult to state with precision the principle that would uniformly apply to all the proceedings/suits falling under Section 22(1) of the Act of 1985. Firstly, it will depend upon the facts and circumstances of a given case, it must satisfy the ingredients of Section 22(1) and fall under any of the various classes of proceedings stated thereunder. Secondly, these proceedings should have the impact of interfering with the formulation, consideration, finalization or implementation of the scheme. 81. Once these ingredients are satisfied, normally the bar or limitation contained in Section 22(1) of the Act of 1985 would apply. For instance, execution of a decre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is a sick company, permission is required under Section 22 of the SICA, however, none of the judgments cited on behalf of the defendant no.2 deal with the proposition as incorporated in the later judgment of the Division Bench of three Judges of the Supreme Court of in the case of Raheja Universal (supra). Accordingly, it is held that the suit is maintainable. 10. In the present suit for recovery it cannot be said that the suit is of a nature which has impact of or threat to the properties of the defendant No.1 sick company to affect the scheme of revival. The suit is a simple suit for recovery under Order 37 CPC not having proceedings, whether interim or final, of execution, distress or the like and hence the suit is not hit by Section 22 of SICA. So far as defendant No.2/guarantor is concerned, the suit against him will not surely hit any assets of the sick company and hence is not barred under Section 22 of SICA. I.A.No.8605/2003 (leave to defend by D-1) 11. This is an application filed by defendant no.1-company seeking leave to defend. I have already passed an order today that the suit has to continue and no permission is required under Section 22 of the SICA i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment of the Usurious Loans Act, as applicable to Delhi, the rates of interest which can be charged by a lender are at two different rates. One rate is when the debt is a secured debt and another is when the debt is unsecured. For secured debt, interest at 7 ½% per annum simple will be payable whereas for the unsecured debt interest at 12 ½% per annum simple is payable-vide Section 3(i)(e) of the Act. In the present case, since the debt is an unsecured debt, interest at 12 ½ % will be payable. Plaintiff cannot therefore be allowed interest at 25% per annum simple in view of the aforesaid provision of Usurious Loans Act. I may state that plaintiff is not a banking company or other notified company as per the Usurious Loans Act and hence not exempted from application of the provisions of Usurious Loans Act as applicable to Delhi and therefore the contractual rate of interest cannot prevail in the face of the statute. 15. The suit of the plaintiff is hence decreed for a sum of Rs. 65,00,000/- alongwith interest at 12 ½% per annum simple from 17.11.1998 till the date of filing of the suit. Plaintiff will also be entitled to the same rate of 12 ½% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Kumar Bansal AIR 1990 SC 2218 and the second is of learned Single Judge of this Court in the case of Steel Authority of India Ltd. Vs. Century Tubes Ltd. Ors. 121 (2005) DLT 122. 20. The judgment in the case of Mrs. Raj Duggal (supra) is relied upon for the proposition that there is a triable issue if there is a fair dispute to be tried as regards the meaning of the document. In my opinion, this judgment in the case of Mrs. Raj Duggal (supra) can have no application to the facts of the present case inasmuch as, Clause 4 of the agreement dated 17.11.1998 is more than clear. Seeking to raise baseless technical interpretation, to avoid payment of dues, should not be countenanced by Courts of law and hence I hold that there can be no doubt as to the language and interpretation of clause 4 which categorically says that defendant No.2 is a guarantor and liable for dues payable of the defendant No.1. Clause-4 of the agreement dated 17.11.1998, even if it is given only a cursory reading, yet the same leaves no manner of doubt as regards the liability of the defendant no.2 as a guarantor for payment of the dues of the defendant no.1/principal borrower. Clause-4 specifically uses the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontari Industries Ltd. in his personal capacity as well as has agreed to pay the principal amount of loan to the plaintiff as per agreed schedule. The said Clause 4 of the said agreement dated 17.11.1998 is reproduced below for ready reference:- "4. It is also agreed that Bhai Manjit Singh being the promoter and Managing Director of the Party of the Second part (Montari Industries Ltd.) has in his personal capacity agreed and guaranteed the payment of Rs.67,00,000/-(Rupees Sixty seven lakhs) being the principal amount of loan to the party of the First Part and has also agreed to take over the liability from Montari Industries Ltd. in his personal capacity and has agreed to pay the Principal amount of loan to the Party of the First Part as per the agreed schedule." 14. That as per the terms and conditions of the said agreement, defendants paid a sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) on 17.11.1998 by Demand draft which was got encashed on 19.11.1998 towards the repayment of the said amounts but failed and neglected to pay the balance amounts as per schedule/Annexure A of the said agreement dated 17.11.1998, as such the plaintiff is entitled to recover the entire amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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