Delhi District Court
M/S G.S. Graphic Arts vs M/S Weston Components on 21 December, 2011
IN THE COURT OF MS.RUCHIKA SINGLA
CIVIL JUDGE-01(NORTH) : DELHI
Suit No. 1175/09
Unique ID No. 02401C0095631999
M/s G.S. Graphic Arts
A-18, Naraina Industrial Area Phase-I
New Delhi-110028.
...... Plaintiff
Versus
M/s Weston Components
A-43, Okhla Industrial Estate Phase-III
New Delhi-110020.
...... Defendant
Date of institution of suit : 11.02.1999
Date on which reserved for judgment : 03.11.2011
Date of Judgment : 21.12.2011
JUDGMENT:
1. This is a suit for recovery of money.
2. Briefly stated, the facts of the case as alleged by the Plaintiff are as follows.
2.1. The Plaintiff is a registered partnership firm carrying out different job works such as colour duplicating, colour scanning, colour planning etc. The present suit has been filed through Sh. Sanjeev Wadhwa, who is registered partner of the Plaintiff firm. The Plaintiff carried out various jobs works for the Defendant on credit basis. Hence, a sum of Rs. 24,224/- became due from the Defendant whose details are as under:
SI No. Bill No. Date Amount (Rs)
1. 140/96-97 10-04-1996 1,425-00
M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 1 of 9
2. 1682/96-97 18-08-1996 1,600-00
3. 1842/96-97 31-08-1996 4,800-00
4. 1889/96-97 08-09-1996 3,200-00
5. 2124/96-97 20-09-1996 3,277-00
6. 2135/96-97 20-09-1996 3,125-00
7. 2273/96-97 20-09-1996 3,957-00
8. 2450/96-97 09-10-1996 2,040-00
9. 2692/96-97 29-10-1996 800-00
24,224-00
2.2. The Plaintiff made several requests to the Defendant to clear these dues but in vain. Hence, Plaintiff served upon the Defendant a legal notice dated 25.06.98 for the payment of these dues but still the Defendant did not do so. Hence Plaintiff filed the present suit.
3. Summons of the suit have been served upon the Defendant. The Defendant resisted the present suit on the ground that a winding up petition of the Defendant company was pending in the Hon'ble High Court of Punjab and Haryana. On the merits of the case, the Defendant denied that the suit amount was outstanding in favour of the Plaintiff. it was submitted that the Defendant always used to give the money in advance. On these grounds,the Defendant prayed for dismissal of the suit.
4. Replication was filed by the Plaintiff to the Written Statement of the Defendant wherein the Plaintiff denied the facts as alleged by the Defendant and reiterated the facts as alleged in the plaint. Thereafter, on the pleadings of the parties following issues were framed vide order dated 02.11.2001:
1. Whether the Plaintiff is entitled for the recovery of Rs.34,522/- alongwith interest, as claimed?OPP M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 2 of 9
2. Whether the suit of the Plaintiff is not maintainable, as alleged?OPD
3. Whether the suit is barred by limitation?OPD
4. Whether the suit has been instituted by duly authorized person?OPD
5. Whether the Plaintiff has no cause of action to file the suit?OPD
6. Relief
5. Thereafter, the matter was fixed for Plaintiff's evidence. The Plaintiff got examined Sh. Sanjeev Wadhwa as PW1 and had exhibited the following documents :
Ex.PW1/1A Copy of the certificate of registration (OSR) Ex.PW1/1 to Bills Ex.PW1/9 Ex.PW1/10 Carbon copy of the notice Ex.PW1/11 Postal receipt Ex.PW1/12 Certificate of posting
6. Thereafter, the matter was fixed for Defendant's evidence.
However, the Defendant failed to lead any evidence. Hence, the Defendant's evidence was closed vide order dated 18.4.2011.
7. Thereafter, the matter was fixed for final arguments. I have heard the arguments of both the parties and have gone through the record carefully. My issue-wise findings are as follows.
Issue no.2 Whether the suit of the Plaintiff is not maintainable, as alleged?OPD
8. Onus to prove this issue was upon the Defendant.
9. The Defendant had not come forward to argue the present suit. Perusal of the Written Statement shows that this issue was framed M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 3 of 9 on the basis of the objection taken by the Defendant that the present suit is not maintainable in view of the winding up petition pending before the Hon'ble High Court of Punjab and Haryana. The copy of the order dated 02.05.2001 passed by the Board for Industrial and Financial Reconstruction (hereinafter referred to as the Board) is on record by which the Defendant company was declared a Sick Company and a rehabilitation scheme was directed to be prepared. The Defendant has also filed on record the certified copy of the order dated 30.10.2003 passed by the Hon'ble High Court of Punjab and Haryana wherein the winding up of the Defendant company was ordered. In cases where the winding up of a company has been ordered, there is an automatic stay on legal proceedings by or against such a company by virtue of Section 436 of the Companies Act.
10. The counsel for the Plaintiff rightly pointed out that section 22 of the Sick Industrial Companies Act, 1986 applies in the present matter as the Defendant company has been declared as a Sick Company. The section is reproduced as under for ready reference:
"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 and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority.
(2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned under section 181, notwithstanding anything contained in the Companies Act, 1956, or any other law or in the memorandum and articles of association of such company or any M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 4 of 9 instrument having effect under the said Act or other law-
(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company;
(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board.
(3) Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under preparation or during the period of consideration of any scheme under section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board :
PROVIDED that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate.
(4) Any declaration made under sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956, or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a court, Tribunal, officer or other authority or of any submission, settlement or standing order and accordingly-
(a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any court, Tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and
(b) on the declaration ceasing to have effect-
(i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made; and
(ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed.M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 5 of 9
(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded."
11. The said section provides for suspension of legal proceedings in case where 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. In the present matter, the scheme has been sanctioned.
12. However, the counsel for the Plaintiff argued that this provision shall not apply in the present matter as the Plaintiff is not included in the list of creditors which has been filed before the Hon'ble High Court of Punjab and Haryana. It is submitted that if the same had been filed, then Defendant would have filed the copy of the same in view of the repeated directions of this court. The counsel for the Plaintiff has relied on a judgment passed by the Hon'ble Supreme Court in "Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals AIR 1997 SC 2027" in which the Hon'ble Court has held that:
"In order to see that the scheme is successfully implemented and no impediment is caused for the successful carrying out of the scheme, the Board is enabled to have a say when the steps for recovery of the amounts or other coercive proceedings are taken against sick industrial company which, during the relevant time, acts under the guidance/control or supervision of the Board (BIFR). Any step for execution, distress or the like against the properties of the industrial company of other similar steps should not be pursued which will cause delay or impediment in the implementation of the sanctioned scheme. In order to safeguard such state of affairrs, an embargo or bar is placed under Section 22 of the Act against any step for execution, distress or the like or other similar proceedings against the company without the consent of the Board or, as the case may be, the appellate authority. The language of Section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by Section 22 of the Act. So, we are of the view that though the language of Section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after the implementation of the scheme or the disposal of an appeal under Section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in Section 22(1) of the Act can apply only to such of those dues reckoned or M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 6 of 9 included in the" sanctioned scheme. Such amounts like sales tax, etc. which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the Act. Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the Revenue and withhold it indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against spirit of the statutes in a business sense, should be avoided."
13. The counsel for the Plaintiff has stressed upon the last portion of the above-mentioned para. However, in the opinion of the court, this judgment does not apply to the facts of the present suit. In that case, the revenue authority had filed its claim against the Defendant company seeking recovery of the sales tax realized by it. The claim was resisted by the Defendant company seeking protection under Section 22 stating that the legal proceedings can not sustain in view of the company having been declared sick. The Hon'ble Court discussed in detail the scope and applicability of the Section 22. It was held that Section 22 creates a bar/embargo on legal proceedings against a sick company when a scheme has been sanctioned by the Board. The Hon'ble Apex Court discussed the purpose behind Section 22 and concluded that it had been so enacted to safeguard against any impediment likely to be caused in the implementation of the scheme. For this reason, the Board is empowered to take all steps for recovery etc.
14. The Hon'ble Apex Court carved out an exception to the applicability of Section 22 which was that a government department is entitled to sue even a sick company for the revenue which has been collected by that company after the implementation of the scheme. However, this revenue must legitimately belong to the revenue authority. The Hon'ble Apex Court, later on, stressed upon the point that exclusion from the application of Section 22 should be rather exceptional. It further clarified that in ordinary cases, the bar under Section 22 shall apply. In M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 7 of 9 view of the same, the court is of the opinion that the present case is attracted under the general application of Section 22 and does not fall within the ambit of the exception carved out in the above-mentioned judgment by the Hon'ble Apex Court.
15. There is another rationale for this reasoning. When a scheme has been sanctioned for a sick company, the scheme covers all creditors of that company, whether secured or unsecured. If a creditor is not included in the list filed by the company, then that creditor has a remedy to approach the Board for inclusion of his name in the list so that he can also recover his dues. This procedure has been established so that the debts and liabilities of the company can be dealt with at a single place. Again, the purpose behind Section 22 should be kept in mind which is to safeguard against the impediment likely to be caused in the implementation of the scheme. In the present case the Defendant had informed about the pendency of the scheme before the Hon'ble High Court of Punjab and Haryana ever since it filed its Written Statement. As discussed above, Section 22 applies in the present matter. Hence, this court has no jurisdiction to entertain the present suit as the grievance of the Plaintiff can be addressed only by the Board/Hon'ble High Court. Hence the present suit is not maintainable. By virtue of Section 22, the proceedings are liable to be suspended immediately. The Plaintiff has the remedy to approach the Board/ Official Liquidator for redressal of its claim. Hence, this issue is decided against the Plaintiff.
Issue no.1,3, 4 & 5 Whether the Plaintiff is entitled for the recovery of Rs.34,522/- alongwith interest, as claimed?OPP Whether the suit is barred by limitation?OPD Whether the suit has been instituted by duly authorized person?OPD Whether the Plaintiff has no cause of action to file the suit?OPD
16. Onus to prove issue no.1 was upon Plaintiff and onus to prove M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 8 of 9 issues no.3 to 5 was upon Defendant.
17. As discussed in the issue no.2, this court lacks the jurisdiction to try the present suit. The claim of the Plaintiff could be addressed only before the forum where the winding up petition is pending. Hence, these issues have become redundant and they are disposed off accordingly.
Relief In view of the above discussion, the suit of the Plaintiff is dismissed.
No order as to costs.
Decree-sheet be prepared accordingly.
File be consigned to record room.
Announced in the Open Court [RUCHIKA SINGLA]
Today on 21.12.2011 CIVIL JUDGE-01 (NORTH)
DELHI
Certified that this judgment contains 09 number of pages and all pages are signed by me.
[RUCHIKA SINGLA]
CIVIL JUDGE-01 (NORTH)
DELHI
M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 9 of 9
Suit No.1175/09
21.12.2011
Present : None
Vide separate judgment of even date, the suit of Plaintiff stands dismissed.
No order as to costs.
Decree sheet be prepared accordingly.
File be consigned to record room.
[RUCHIKA SINGLA] CIVIL JUDGE01 (NORTH) DELHI M/s G.S. Graphic Arts v. Weston Components Suit No.1175/2009 Page 10 of 9