Delhi District Court
Decree Holder vs . on 22 January, 2016
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IN THE COURT OF MS. NAVITA KUMARI BAGHA, ADJ01 (SOUTH),
SAKET COURTS, NEW DELHI
Ex. No.74/12
Unique Case ID No.02406C0300252012
Maqsad Hussain
S/o late Sh. Raifuddin
R/o E106, Jaitpur Extension PartII,
Badarpur New Delhi44
................... Decree Holder
Vs.
M/s. Modi Arc Electrodes Co.
Office at - 601, Cupiya Tower,
Jashola, New Delhi
Also At : 1CGO, Comp. Kamla Nehru NGR,
Ghaziabad, U.P.
Through
Mahender Kumar Modi
(Mr. M.K. Modi)
................... Judgment Debtor
O R D E R :
1. Vide this order, I shall dispose of the application of JD filed U/Sec.22 of Sick Industrial Companies (Special Provisions) Act, 1985 for seeking stay of execution proceedings.
2. The present execution bearing no.74/12 was filed by the DH on 31.10.2012 for execution of decree dated 16.08.2012 for a sum of Ex. No.74/12 Maqsad Hussain Vs. M/s. Modi ARC Electrodes Co.
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₹3,58,855/ alongwith pendentelite interest @12% p.a. and future interest @10% p.a.
3. In the present application U/Sec.22 of Sick Industrial Companies (Special provisions) Act, 1985 (hereinafter referred to as 'SICA'), the JD has stated that it is an electrode factory unit of Modi Industries Ltd. and that Modi industries Ltd. was incorporated in the year 1932 as Modi Sugar Mills Ltd. which was subsequently named as Modi Industries Ltd. in the year 1964. It is further stated that the Modi Industries Ltd. is having following units :- Modi Sugar Mills, Modi Vanaspati Mfg. Co., Modi Paint & Varnish Works, Modi Gas & Chemicals, Modi Distillery, Modi Arc Electrodes Co. & Modi Steels. It is further stated that Modi Industries Ltd. was facing huge losses resulting into erosion of complete net worth and therefore a reference was filed in the year 1990 before the Board of Industrial and Financial Reconstruction (hereinafter referred to as 'BIFR') and on 14.03.1991, Modi Industries Ltd. was declared a sick company under the provisions of SICA and that since the affairs of Modi Arc Electrodes Co. i.e. the JD, being a division of Modi Industries Ltd., are under consideration before the BIFR where the proceedings are pending, the present execution petition is required to be stayed U/Sec.22 of SICA. It is further stated that since the DH has not obtained any permission from the BIFR, to continue the proceedings, the proceedings of the present execution petition be stayed till the Ex. No.74/12 Maqsad Hussain Vs. M/s. Modi ARC Electrodes Co.
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pendency of proceedings before the BIFR.
4. In reply to this application, the DH has stated that a legal notice dated 06.09.2011 was sent by the DH to the JD demanding remaining amount and the JD had duly replied to the said legal notice, but no such plea was taken by the JD in its reply that the company was declared sick by the BIFR on 14.03.1991. It is further stated that even in the application for seeking leave to defend or in the Written Statement, the JD/defendant had not stated anything regarding the same and that this plea has been taken for the first time in the execution petition. It is further stated that the JD had issued the purchase order dated 15.06.2010 notwithstanding the alleged declaration of being sick company.
5. I have heard the arguments from counsel Sh. Shakeel Ahmed for DH and counsel Sh. Naveen Chawla for JD and perused the record.
6. The counsel for JD has argued that the JD i.e. M/s. Modi Arc Electrodes Co. has no separate legal entity as it is a mere factory unit of Modi Industries Ltd. which has been declared sick by BIFR vide order dated 14.03.1991. The counsel for JD has further submitted that the proceedings are still pending before the BIFR as is evident from the order dated 17.07.2012. The JD has filed copy of the abovesaid orders of BIFR dated 14.03.1991 and 17.07.2012. The JD has placed on record the copy of the 77th Annual Report and Ex. No.74/12 Maqsad Hussain Vs. M/s. Modi ARC Electrodes Co.
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Accounts 201011 of Modi Industries Ltd. wherein JD i.e. Modi Arc Electrodes Co. has been mentioned as one of the units of Modi Industries Ltd. The JD has also placed on record an affidavit of Mahender Kumar Modi, Managing Director of Modi Industries Ltd. wherein he has stated that M/s. Modi Arc Electrodes Co. is not a company and has not been registered separately as a company under the Companies Act and thus has no separate legal entity in the eyes of law. He has further submitted that the Modi Arc Electrodes Ltd. is a manufacturing unit/factory of Modi Industries Ltd. which derives all its rights and liabilities from the Modi Industries Ltd. and that the JD has also placed on record copy of Form ST2 issued by the Ministry of Finance showing M/s. Modi Arc Electrodes Co. as factory unit of Modi Industries Ltd. The DH has not placed on record anything contrary to the fact that the JD is just a factory unit of Modi Industries Ltd. which has been declared sick by BIFR vide order dated 14.03.1991. The DH's contention is that this plea was neither taken at the time of giving reply to legal notice nor at the time of filing application for leave to defend nor at the time of filing Written Statement and further that even after being declared a sick company as alleged, it had placed purchase order with the DH on 15.06.2010. But I do not find any merit in the contention raised by the DH. As per Sec.22 of SICA, no suit for recovery of money or for enforcement of any security or for execution, distress, etc. could be proceeded with Ex. No.74/12 Maqsad Hussain Vs. M/s. Modi ARC Electrodes Co.
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except with the consent of the BIFR. There is no bar for moving application U/Sec.22 of SICA during the execution proceedings even if the said plea was not raised during the pendency of the suit. While dealing with Sec.22 SICA, it was held by Hon'ble Supreme Court in Jay Engineering Works Ltd. Vs. Industry Facilitation Council & Anr. AIR 2006 SC 3252: "The said provision, thus, mandates that no proceeding inter alia for execution, distress or the like against any of the properties of the industrial company and no suit for recovery of money or for the enforcement of any security, shall lie or be proceeded with further, except with the consent of the Board or as the case may be, the Appellate Authority. The said statutory injunction will operate when an inquiry had been initiated under Section 16 or a scheme referred to under Section 17 is under preparation and/or inter alia a sanctioned scheme is under implementation."
7. It is undisputed fact that the DH has not sought any permission from the BIFR for continuation of the execution proceedings. Hence, as per the mandate of Sec.22 SICA, the proceedings of the present execution petition are required to be stayed. The stay of the proceedings could not be denied merely on the ground that the JD had placed purchase order with the DH after the abovesaid declaration. Upon being declared a sick company, the operations of Ex. No.74/12 Maqsad Hussain Vs. M/s. Modi ARC Electrodes Co.
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the company are not closed down or the company is not barred from doing its business; in fact the reference is made before the BIFR to help the company to come out of the sickness and for making efforts for its rehabilitation. Thus, the JD was not debarred from conducting any business after the Modi Industries Ltd. was declared a sick company. Even the Hon'ble Supreme Court in Jay Engineering Works Ltd. Vs. Industry Facilitation Council & Anr. (supra) has held that the execution proceedings cannot be proceeded with in view of Sec.22 SICA and the fact that debt was incurred by the company after being declared sick is not relevant. Hence, in view of the aforesaid analysis, the application of JD U/Sec.22 SICA is allowed and the proceedings of present execution petition are stayed till the pendency of the proceedings before the BIFR or till the permission is sought from the BIFR by the DH for continuation of proceedings of this execution petition.
8. Till then, file be consigned to Record Room.
(Announced in open Court on 22.01.2016) (Navita Kumari Bagha) ADJ01, South District, Saket Courts, New Delhi Ex. No.74/12 Maqsad Hussain Vs. M/s. Modi ARC Electrodes Co.
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22.01.2016 Present : None.
Vide separate order, the application of JD U/Sec.22 SICA is allowed and the proceedings of present execution petition are stayed till the pendency of the proceedings before the BIFR or till the permission is sought from the BIFR by the DH for continuation of proceedings of this execution petition.
Till then, file be consigned to Record Room.
(Navita Kumari Bagha) ADJ01 (South), New Delhi.
22.01.2016 Ex. No.74/12 Maqsad Hussain Vs. M/s. Modi ARC Electrodes Co.