Bombay High Court
Special Steels Ltd. vs Jay Prestressed Products Ltd. on 1 December, 1988
Equivalent citations: [1991]72COMPCAS277(BOM)
JUDGMENT
H. Suresh J.
1. This is a notice of motion taken out by the defendant-company for stay of the above suit on the ground that an enquiry is pending before the Board for Industrial and Financial Reconstruction (hereinafter referred to as "the Board") under section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the said Act") under Case No. 223 of 1988. Mr. Mehta, appearing for the defendants, has mainly relied on section 22, sub-section (1) of the said Act, in support of this application.
2. The relevant portion of section 22 of the said Act is as follows:
"22. Suspension of legal proceedings, contracts, etc. - (1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956, or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority."
3. If one has regard to the plain meaning of the language of this provision, the said Act does not contemplate stay of every proceeding pending in any court of law. In fact, Mr. Vahanvati, appearing for the plaintiffs, has drawn my attention to a judgment and order of the Division Bench of this court consisting of Bharucha and Parekh JJ. in Appeal No. 1270 of 1981, Star Industrial and Textile Enterprises Ltd. v. Suresh Manharlal Mehta, dated November 23, 1987, wherein the Division Bench has expressed an opinion that, having regard to the terms of section 22, they cannot agree that all further proceedings in a summary suit be stayed.
4. However, Mr. Mehta persists and for that he relies on the Statement of Objects and Reasons and points out that the intention of the Legislature is to stay all proceedings including any suit against the company, once the enquiry begins under section 16 of the Act. The Statement of Objects and Reasons for enacting the Sick Industrial Companies (Special Provisions) Act, 1985, states that in order to fully utilise the productive industrial assets, to afford maximum protection of employment and to optimise the use of the funds of the banks and financial institutions, it would be imperative to revive and rehabilitate the potentially viable sick industrial companies as quickly as possible. It also states that it would also be equally imperative to salvage any productive assets and realise the amounts due to the banks and financial institutions, to the extent possible, from the non-viable sick industrial companies through liquidation of these companies. Having the above facts in mind, the Statement of Objects and Reasons for enacting the said law states that a need has, therefore, been felt to enact in the public interest a legislation to provide for timely detection of sickness in industrial companies and for expeditious determination, by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with the utmost practical despatch. Thus, it is clear that it is not that any suit is required to be stayed or not to be proceeded with. The object is to see that the company is given a chance to survive in the public interest. In that, the law contemplates that public institutions such as banks and financial institutions should play an active role not only in detecting that the company has become sick but also to determine the incidence of sickness in industrial companies and to devise suitable remedial measures through appropriate schemes or other proposals. When such an enquiry is pending, there should be no winding up proceedings or execution of any decree or attachment of any property or any distress sale of the property belonging to the company.
5. The stress is on the assets of the company and on the functioning of the company. The law does not contemplate any restraint on any suit which is pending against such a company. However, if, in a given suit, a decree is passed and the decree is required to be executed, either by way of attachment, distress "or the like against any of the properties of the industrial company", then, in such a case section 22 prohibits such a procedure at that stage. Mr. Mehta submitted that the words "or the like" appearing in section 22, subsection (1) of the said Act, includes proceedings in the nature of a suit and that, therefore, such a proceeding shall not lie or be proceeded with further, except with the consent of the Board. I am not prepared to accept this submission of Mr. Mehta. The words "or the like" appearing in the context of the words preceding, namely, "execution, distress" and the words appearing subsequent thereto, namely, "against any of the properties of the industrial company or for the appointment of a receiver in respect thereof" would make the meaning clear. They are to be understood ejusdem generis, meaning thereby such coercive proceeding as may have the effect of seizure and sale of the properties of the company, making it imposible to revive it or to rehabilitate it.
6. Mr. Mehta submitted that, if the intention of the Legislature is not clearly expressed in the statute or provisions thereof, it is open to the court to look into the Statement of Objects and Reasons. In that context, he relied on Girdhari Lal and Sons v. Balbir Nath, . It is obvious that where the words are clear and unambiguous, no question of construction may arise. Such words ordinarily speak for themselves. In my view, the intention of the Legislature is very clear and is clearly expressed in section 22. The intention is to provide for restraint as against proceedings in relation to the properties of the company which is sick and not as against any other liability which may have to be determined in a suit. Mr. Mehta submitted that, if a decree is passed, the decree-holder might proceed against the company and it may jeopardise the functioning of the company. It is a purely hypothetical argument; whether a decree can be passed or not, I cannot say at this stage. Even if a decree is passed and if the company is in a position to pay, there is no question of winding up or execution of any decree as such. If, for some reason, may be because the company is sick, the decree has to be executed, then, in such an event, it is open to the company to invoke the provisions of section 22(1) of the said Act if, by that time, the enquiry is not over and the Board has not preferred any scheme.
7. In the result, this motion does not survive and it is, therefore, dismissed. However, there will be no order as to costs.