Allahabad High Court
Comet Filaments (India) Ltd. vs Pradeshya Industrial And Investment ... on 8 August, 1988
Equivalent citations: [1989]66COMPCAS124(ALL)
JUDGMENT R.P. Singh, J.
1. This plaintiff's first appeal arises from order against the judgment and order dated August 22, 1987, passed by the District Judge, Tehri Garhwal, dismissing the applications for interim injunction and vacating the interim injunction passed on February 24, 1987.
2. The brief facts of the case are that the plaintiff-appellant filed Suit No. 21 of 1987 in the court of the District Judge, Tehri, for a permanent injunction restraining the defendant-respondents from recovering Rs. 70,64,360.67 with the allegations, that with a view to establish a filament factory at Tapovan in the district of Tehri Garhwal, the plaintiff company was granted a loan by the defendant for a sum of Rs. 31 86 lakhs. The building, machines, tools and plants were mortgaged by the plaintiff as security for the loan. The plaintiff's case further was that since the subsidy that was promised by the State to the plaintiff was not released, the plaintiff could not procure the raw material and suffered huge loss. It was alleged that the defendant issued a recovery certificate to the Collector of Tehri for a sum of Rs. 70,64,360.67 with interest and it is proceeding to recover the same as arrears of land revenue which is illegal and void and consequently the plaintiff filed an application praying for an ad interim injunction staying the recovery proceedings till the subsidy was released to the plaintiff. The plaintiff's case further is that after the coming into force of the Sick Industrial Companies (Special Provisions Act), 1985 (hereinafter referred to as "the Act"), the plaintiff company had been declared a sick industrial company on August 13, 1987, and hence in view of Section 22 of the Act, no proceedings for execution, distress or the like against the properties of the plaintiff company shall proceed further and hence also the recovery proceedings could not proceed against the plaintiff company.
3. The defendant contested the suit and the application for the ad-interim injunction filed by the plaintiff on the ground that the suit for injunction and the injunction application are barred by the provisions of Public Moneys (Recovery of Dues) Act. The case of the defendant is that in view of the provisions of Sub-section (5) of Section 3 of the Public Moneys (Recovery of Dues) Act, 1972 (hereinafter referred to as "the Recovery Act"), the recovery certificate sent to the Collector cannot be called in question in any suit and no injunction can be granted by any court or authority in respect of any action taken in pursuance of the recovery proceedings under the Recovery Act, and hence there is a complete bar from granting an injunction in respect of any action taken in the present recovery proceedings. The case of the defendant further is that even after the plaintiff company had been declared to be a sick industrial company, all proceedings relating to the obligation and liability of the sick industrial unit pending before any court, Tribunal or authority shall remain stayed and hence no suit for injunction would lie in the civil court and the application for ad interim injunction also is not maintainable during the pendency of the proceedings under Sections 16, 17 or 25 of the 1985 Act and hence also the defendant's case that the injunction application moved by the plaintiff is not maintainable.
4. The facts of the case are not in controversy that the plaintiff company had been given a loan by the defendant PICUP and hence recovery proceedings were started by the defendant for the recovery of the loan along with interest thereon amounting to Rs. 70,64,360.67. The plaintiff hence filed the present suit in which he filed applications for ad interim injunction restraining the defendant from proceeding with the recovery of the loan, and the plaintiff prayed for the removal of the locks and guards from the plaintiff's factory and further prayed for restoration of the attached properties. The learned District Judge, however, holding that there was an absolute bar created by Sub-section (5) of Section 3 of the Public Moneys Recovery Act for granting any injunction in respect of any action taken in the Recovery Act and that consequently no injunction could be granted by any court or other authority in respect of any action taken under the Recovery Act, held that the validity of the recovery certificate could not be challenged in the civil court and no injunction could be granted by the civil court restraining the authorities under the Recovery Act from proceeding to recover the amount of loan. The learned District Judge further held that Section 26 of the Sick Industrial Companies Act, 1985, also created an absolute bar from granting any injunction by any court or authority in respect of any action taken under the Act and hence no injunction could be granted in favour of the plaintiff. With the result, the injunction applications moved by the plaintiff were rejected by the learned District Judge. Feeling aggrieved, the plaintiff has filed the present appeal before this court.
5. Heard Sri Rajesh Tandon, learned counsel for the appellant, and Sri Murlidhar, Senior Advocate, for the respondent.
6. The principal point urged by learned counsel for the appellant is that the plaintiff company was declared a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the Act"), and consequently, all proceedings for execution, distress or the like against the plaintiff company could not proceed except with the consent of the Board and hence the defendant was not entitled to proceed to recover the loan under the Recovery Act. It was further contended that in view of Article 254 of the Constitution, since the provisions of the Recovery Act are repugnant to the provisions of the Sick Industrial Companies Act, which is an Act made by Parliament, the law made by Parliament shall prevail and the law made by the U. P. Legislature, to the extent of the repugnancy, would be void and hence, the recovery proceedings cannot proceed under the provisions of the Recovery Act. It was further contended that the proceedings for recovery under the Recovery Act are illegal.
7. Learned counsel for the respondent, on the other hand, contended that even after the plaintiff company was declared a sick industrial company, during the pendency of the proceedings under the Act, no proceedings could be continued for obtaining any injunction or release from the attachment of the properties of the plaintiff company which shall remain suspended and stayed as the property of the company shall remain under the direct control of the Board and consequently, no proceedings in respect of such property could go on at the instance of the plaintiff except with the consent of the Board. Hence the civil suit and the application for injunction filed by the plaintiff during the continuance of the declaration of the plaintiff company as a sick industrial company cannot proceed and are not maintainable. Learned counsel for the respondent further contended that he does not dispute that during the pendency of the declaration of the plaintiff company as a sick industrial company, the proceedings under the U. P. Public Moneys Recovery Act shall not proceed but at the same time the property which is attached shall remain under the direct control of the Board and no injunction shall be granted by any court or authority in respect of such property without the consent of the Board.
8. We shall first examine the validity of the civil suit and the maintainability of the injunction application filed by the plaintiff for restoring possession of the attached properties of the plaintiff company after removal of the locks and guards from the plaintiff's factory. Sub-section (5) of Section 3 of the Recovery Act, 1972, reads as follows :
"(5) Save as otherwise expressly provided in the proviso to Sub-section (4) of this section or in Section 183 of the U. P. Land Revenue Act, 1901, or in Section 287A of the Uttar Pradesh Zamin-dari Abolition and Land Reforms Act, 1950, every certificate sent to the Collector under Sub-section (1) shall be final and shall not be called in question in any original suit, application (including any application under the Arbitration Act, 1940) or in any reference to arbitration, and no injunction shall be granted by any court or other authority in respect of any action taken or intended to be taken in pursuance of any power conferred by or under this Act."
9. A perusal of Sub-section (5) quoted above will show that a certificate sent to the Collector for proceeding to recover the amount stated therein as arrears of land revenue shall not be called in question in any suit and no injunction shall be granted by any court or other authority in respect of any action taken in pursuance of the recovery proceedings under the Act. Hence, the contention of learned counsel for the respondent that in view of Sub-section (5) of Section 3 of the Act, the application filed for obtaining ad interim injunction by the plaintiff was not maintainable must be accepted and hence the learned District Judge has rightly rejected the application for interim injunction moved by the appellant.
10. In our opinion, Sub-section (5) of Section 3 of the Recovery Act creates an absolute bar against the granting of any injunction by any court or authority in respect of any action taken under the Recovery Act for recovery of the amount which shall be recovered as arrears of land revenue. However, learned counsel for the appellant contended that during the pendency of the suit, the plaintiff company has been declared to be a sick industrial company under the Act. The plaintiff company had submitted a reference to the Board under Section 15 of the Act. Section 15 reads as follows :
" 15. Reference to Board.--(1) Where an industrial company has become a sick industrial company, the board of directors of the company shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company."
11. Learned counsel for the appellant contended that in view of Section 22 of Act No. 1 of 1986, all proceedings for execution, distress or the like against the property of the industrial company shall not proceed further except with the consent of the Board. Hence, the proceedings for execution or distress against the property of the plaintiff industrial company initiated by the defendant are liable to be stayed. Section 22 of the Act reads 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 (1 of 1956) or any 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."
Sub-section (3) of Section 22 further provides that during the period of consideration of any scheme under Section 18 for the 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 to which such sick industrial company is a party immediately before the date of such order, shall remain suspended. Learned counsel for the appellant also invited our attention to Sub-section (4) of Section 22 which also provides for stay of all proceedings relating to the sick industrial company pending before any court, Tribunal or officer or authority and hence contended that no proceedings for recovery of the said amount due against the plaintiff company can proceed during the continuance of the declaration of the plaintiff company as a sick industrial company. We see considerable force in this submission made by learned counsel for the appellant and in view of the clear provisions of Section 22 of the Act, it is clear that no proceedings for the recovery of the amount of loan can proceed against the plaintiff company during the continuance of the declaration of the plaintiff company.
12. Learned counsel for the appellant next contended that the proceedings for recovery of the loan cannot proceed under the provisions of U.P. Moneys Recovery Act as the Sick Industrial Companies Act 1985 is a Central Act and hence the provisions of the Central Act will supersede the provisions of the U.P. Moneys (Recovery of Dues) Act 1972. Learned counsel for the appellant relied on the provisions of Article 254 of the Constitution of India in support of his submission which reads as follows:
" 254(1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law With respect to one of the matters enumerated in the Concurrent List, then, subject to the provisions of Clause (2), the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void."
13. In view of this provision, learned counsel for the appellant contended that no proceedings for recovery of the loan under the Public Moneys (Recovery of Dues) Act, 1972, could proceed. Learned counsel for the respondent in reply submitted that he does not dispute the legal position of bar to the continuance of the proceedings for recovery as long as the declaration about the plaintiff company as a sick unit continues and the respondent is not going to pursue the recovery proceedings in the face of the statutory mandate of Section 22(1) of the Act which is clear and unambiguous but contended that the said provision only grants prospective stay and hence the appellant cannot claim release of the property from attachment or restoration of the property. In our opinion, in view of the clear provisions of Section 22 of the Act, further proceedings of recovery cannot proceed but at the same time during the pendency of the proceedings under the Act, no proceedings can be started or carried on by the plaintiff for release from attachment or for the restoration of the property as the property of the plaintiff company will remain under the direct control of the Board and no proceeding in respect of the property in dispute under attachment can be proceeded with except with the consent of the Board. In fact, during the continuance of these proceedings under the Act, the plaintiff's suit for injunction will remain suspended and hence no application for an interim injunction is maintainable at the instance of the appellant during the continuance of the proceedings under the Act in respect of the plaintiff company. Hence, in either case, the plaintiff is not entitled to get any relief or obtain any interim injunction during the pendency of the proceedings under the Act. In this view of the matter, the appellant is not entitled to any relief during the continuance of the said proceedings and the appeal fails on this ground alone.
14. Sub-section (4) of Section 22 of the Act provides that after the declaration of the plaintiff company as a sick unit ceases, any proceedings 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 were stayed. Hence, .after the proceedings under the Act are over and the declaration ceases to be in force regarding the plaintiff company, the proceedings for recovery of the loan under the Public Moneys (Recovery of Dues) Act shall proceed. Further, in view of Sub-section (5) of Section 3 of U.P. Act (23 of 1972), no injunction shall be granted by any court or authority in respect of any action taken in pursuance of this Act for recovery of the sum due. Hence, so long as the proceedings under the Sick Industrial Companies Act, 1985, continues in respect of the plaintiff company, the plaintiff would not be entitled to proceed with a suit for injunction or claim any relief for an interim injunction in respect of the properties so attached and after the proceedings under the Act comes to an end, the recovery proceedings under the U.P. Act 23 of 1972 can proceed and then also there is a complete bar for any court or authority from issuing any injunction in respect of any action taken under the Act for the recovery of any sum due. Hence, in any view of the matter, the plaintiff is not entitled to any relief.
15. Learned counsel for the appellant also contended that the recovery certificate had been issued by the Kurk Amin and not by the Collector. There are no merits in this submission of learned counsel for the appellant. The learned District Judge has clearly found that the recovery certificate has been issued by the Collector and the Tehsildar is only executing the same and hence there is no illegality in the Nayab Tehsildar effecting attachment of the movable property in pursuance of the recovery certificate issued by the Collector.
16. In the result there are no merits in this appeal which is, accordingly, dismissed. In the circumstances of the case, however, there will be no order as to costs.