Madras High Court
Artson Engineering Limited vs Mr. Deendayal Ashok Kumar Goidani, ... on 5 December, 2006
Equivalent citations: (2007)1MLJ661
Author: A.P. Shah
Bench: A.P. Shah, K. Chandru
JUDGMENT A.P. Shah, C.J.
1. Admit. Learned Counsel for the respondents waives service. By consent, the writ appeal is taken up for hearing.
2. This appeal is directed against the common order dated 17.02.2006 passed by the learned single Judge in A. Nos. 1967, 1968, 2569 and 2570 of 2005 in C.S. No. 231 of 2005.
3. C.S. No. 231 of 2005 is filed by the first respondent/plaintiff for recovery of a sum of Rs. 14 lakhs and odd, which would represent the value of the goods, which were supplied by the plaintiff pursuant to an agreement between the parties. Along with the suit, two applications were filed in A. Nos. 1967 and 1968 of 2005. The learned single Judge passed an order, directing the appellant/defendant to furnish security to the extent of the suit claim and also an order prohibiting the garnishee from making payments to the appellant/defendant. On receiving notice, the appellant/defendant filed A. Nos. 2569 and 2570 of 2005 to raise the said orders contending inter alia that it is a sick industry and proceedings are pending before BIFR in Case No. 152 of 2004 and under these circumstances, the proceedings pending in this Court has got to be stayed in view of the provisions of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short 'the Act'). The learned single Judge upon hearing both side came to the conclusion that in view of the pendency of the proceedings before the BIFR, suit has to be stayed and therefore, the Application Nos. 1967 and 1968 of 2005 could not be ordered at this stage, and consequently, vacated the interim orders and granted stay of the suit proceedings until further orders. However, the learned single Judge further directed that the amounts in the hands of the garnishee shall be deposited in this Court to the credit of C.S. No. 231 of 2005.
4. Learned Counsel appearing for the appellant taking exception to the order of the learned single Judge directing the garnishee to deposit the amount before this Court to the credit of the suit, submitted that in view of the mandatory provisions of Section 22 of the Act, no proceedings for execution, distress or the like can be ordered against the properties of sick industrial company. In support of his submission, the learned Counsel placed reliance on the decision of the Supreme Court in Gram Panchayat v. Shree Vallabh Glass Works Limited and Tata Davy Limited v. State of Orissa and Ors. . On the other hand, the learned Counsel appearing for the first respondent submitted that in the facts and circumstances of the case, the learned single Judge was right in directing the garnishee to deposit the amount in this Court. He placed reliance on the judgment of the learned single Judge of this Court in Onida Savak Limited v. Muthumeera Agencies 2001 Vol. 104 Company Cases 434.
5. Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 inter alia provides as follows:
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 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.
6. Section 22(1) of the Act provides that in case the enquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration by the Board or any appeal under Section 25 is pending then certain proceedings against the sick industrial company are to be suspended or presumed to be suspended. The nature of the proceedings, which are automatically suspended are : (1) winding up of the industrial company; (2) Proceedings for execution, distress or the like against the properties of sick industrial company; and (3) Proceedings for the appointment of receiver. The proceedings in respect of these matters could, however, be continued against the sick industrial company with the consent or approval of the Board or of the appellate authority as the case may be.
7. Section 16 authorises the Board to make such enquiry as it may deem fit for determining whether any industrial company has become a sick industrial company. Where the Board is satisfied that a company has become a sick industrial company, it could give reasonable time to the company to make its net work positive Section 17(2). Where it is not practicable for sick industrial company to make its net work positive within a reasonable time, Section 17(3) steps in authorizing the Board to direct any operating agency to prepare a scheme in relation to the company. The Board may specify the various measures to be considered by the operating agency. These measures are detailed out in Section 18. The operating agency has to prepare a scheme as specified by the Board.
8. In the instant case, proceedings are pending before the BIFR in case No. 152 of 2004. By order dated 17.05.2006, the Board has appointed Bank of India, as operating agency (OA) with a direction to prepare a revival scheme for it, if feasible. The O.A. has been directed to keep in view of the provisions of Section 18 of the Act and the enclosed guidelines while carrying out this exercise. In the light of the steps taken by the Board under Sections 16 and 17 of the Act, no proceedings for execution, distress or the like proceedings against any of the properties of the company shall lie or be proceeded further except with the consent of the Board. In the light of the above provisions, there would be deeming suspension of such proceedings against the company properties Viz., Gram Panchayat v. Shree Vallabh Glass Works Limited and Tata Davy Limited v. State of Orissa and Ors. . The judgment of the learned single Judge relied upon by the learned Counsel for the respondent in Onida Savak Limited v. Muthumeera Agencies, cited supra, turns round on the peculiar facts of the case. In that case, washing machines were supplied by the defendant company and they were found to be defective and they were once again returned to the defendant company. In our opinion, the above judgment is not applicable to the facts of the present case. In view of the steps taken by BIFR, the proceedings for execution, distress or the like proceedings against any of the properties of the company are clearly not maintainable.
9. In the result, the appeal is partly allowed and the direction of the learned single Judge, ordering the garnishee to deposit the amount before this Court to the credit of suit, is hereby set aside. The order of the learned single Judge stands modified to the above ex`tend. The Registry is directed to return the amount to the Operating Agency i.e., Bank of India. No costs. Consequently, M.P. No. 1 of 2006 is closed.