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1991 DIGILAW 579 (MAD)

M/s. Celvel Enterprises, represented by its Managing Partner v. M/s. Elconment Limited, represented by its Executive Director, A. K. Agarwal

1991-08-16

ARUMUGHAM

body1991
Judgment :- This is an application filed under Order 14, Rule 8 of Original Side Rules, read with Order S. 38, Rule, 5 of Civil Procedure Code against the respondent and Garnishees seeking the relief of issuing a prohibitory order to the Garnishees herein not to disburse the amount payable to the defendant/respondent and direct them to deposit the amount payable by them to the credit of the suit. 2. The short facts of the applicants case is that the applicant herein is the plaintiff who in the capacity of ‘Selling Agent’ of the defendant/respondent by virtue of an appointment order issued in the year 1987, worked as an agent for marketing the products manufactured by the defendant/respondent throughout the State of Tamil Nadu, Kerala and Karnataka and with great efforts, the applicant had marketed the goods to a vast extent and that for the goods an marketed during the year 1987-88, the commissio n, as per the appointment order, comes to the extent of Rs. 1,62,557.18 which became payable to the plaintiff/applicant and that in spite of the repeated demands and requests, the said commission has not been paid to them and that consequently, the suit has been filed for the recovery of the said amount and that even so, the present application was filed for the relief prayed therein on the ground that the defendants company has become sick and than the matter has been referred to the Board for Industrial and Financial Reconstruction (BIFR), Calcutta as it become heavily indebted and that the total loss sustained by the defendant is Rs.1,31,53,640.32 as on 31-3-1989 inclusive of investment allowance of Rs. 45,52,000/- and that in such an event, the applicant hereby apprehended that he would not be in a position to realise the fruits of the decree in case if it is passed for the recovery of the suit claim and that therefore, the amount of Rs. 9,34,746.90 due by the first Garnishee to the defendant and a sum of Rs. 2,00,000/-due by the second Garnishee to the defendant still remained intact and that an interim prohibitory order was sought for prohibiting the disbursement of the said amount to the respondent, pending disposal of the suit. 9,34,746.90 due by the first Garnishee to the defendant and a sum of Rs. 2,00,000/-due by the second Garnishee to the defendant still remained intact and that an interim prohibitory order was sought for prohibiting the disbursement of the said amount to the respondent, pending disposal of the suit. Para-16 ot the affidavit disclosed the fact further that the defendant company is financially in a crippled condition, being owned by the Government Promoters and that in case a decree is passed, under such situation, the applicant/plaintiff may not be able to recover the claim made in the suit. 3. The relief asked for, was resisted by the respondent/defendant by filing a counter-affidavit with the following main contentions: Firstly, the present suit as well as the application of the plaintiff/applicant is not maintainable in view of the fact that the defendant has already moved the Board for Industrial and Financial Reconstruction (BIFR), New Delhi under S. 16 of the Sick Industrial Companies (Special Provisions) Act, 1986 and sought the relief and concession and that the enquiry is pending and that during the pendency, no proceeding can be initiated under the relevant provisions ofthe Act that even so, on the factual aspects, the defendant contends that there was no cause of action for the suit within the jurisdiction of this court, to try the same and that therefore, the suit itself is maintainable and that further, the very factum of the claim of Rs. 1,62,557.18 claimed by the plaintiff/applicant is denied and that further it was averred that the ground on which the present application was filed, was raised in the Application No. 395 of 1988, in the above suit against the present Garnishees and four other companies and that after a full enquiry, the said application was dismissed on 1-2-1989 by this Court and that even so, it was further averred that the plaintiff/applicant is having a running account with the plaintiff/applicant and that the ultimate commission payable can be determined only after the entire dues are collected as it was possible that one party may settle the entire dues and that another may commit default and that as such, this defendant can settle the accounts when the final accounts are taken and without doing so, the claim made in this suit is premature and that further it was alleged that the applicant/plaintiff is responsible for the collection of the amount due in respect of all the supplies made at the instance of the applicant/plaintiff and that therefore, the loss if any, arises out of non-collection will have to be debited in the applicants account. 4. It was further contended that even the appeal filed in O.S.A. 35 of 1989 filed against the order of dismissal made in Application No. 395 of 1989 was dismissed and that therefore, the present application is not at all maintainable on the same ground. Then it was contended that it is true that the application was filed by this respondent to the Board for Industrial and Financial Re-construction, New Delhi, under S. 16 of the Sick Industrial Companies (Special Provisions) Act, 1986 for the relief and concession from the term lending institutions and that accordingly, the financial institutions have also agreed in principle to allow the relief and concessions asked for and as such, the respondent is fully sound financially to carry out the regular transaction and the credit worthiness of the respondent is not in doubt, in any way, and that even otherwise, the defendant company has not suffered any operational loss as it was irregular in the payment of the dues to the creditors and that it was further contended that the suit is premature and not maintainable since the final accounts have not been taken between the respondent and the applicant and that therefore, the apprehension of the applicant/plaintiff is totally unnecessary. By these above pleas taken by the defendants he has resisted the relief asked for by the plaintiff/applicant herein. 5. Upon the abovesaid pleadings, the only question now arises for consideration is, “Whether the applicant has got a prima facie case warranting the indulgence of this court to pass the Prohibitory Order against the garnishees under Order 38, Rule 5 of the Code of Civil Procedure?” 6. The very factum of the business carried on by the plaintiff/applicant for marketing and selling the products or the defendant by virtue of the Appointment Order referred to in the plaint throughout the State of Tamil Nadu, Karnataka and Kerala has not been disputed by defen dant/respondent, but the suit claim being made by the applicant towards the commission due to him is being seriously disputed by the defendant which is a public undertaking company owned by the Government Promoters on the ground that so many dues are yet to be collected by the applicant/plaintiff from the purchasers and that as per the terms of the appointment order and contract, the plaintiff has to collect large amounts from the purchasers and that the final accounts among themselves have not been arrived at and that therefore, the claim of the plaintiff being projected at this stage is premature. It is true that the tenability of the suit claim made by the plaintiff can be decided only during the trial. But in so far as the relief asked for in this application is concerned, it has to be seen as to whether there is any valid ground given in the affidavit including the passing of the Prohibitory Order against the garnishee till the disposal of the suit. As I have already adverted to, the very claim of the plaintiff/applicant is being seriously agitated and it is yet to be ascertained on tendering the relevant evidence and that can be done during the trial only. 7. In para-14 of the affidavit filed in support of the application, the plaintiff/applicant has admitted that the defendant company is a sick industrial company, financially in a crippled condition, seeking the relief by referring the matter to the Board for Industrial and Financial Re-construction under the Sick Industrial Companies (Special Provisions) Act, 1986. 7. In para-14 of the affidavit filed in support of the application, the plaintiff/applicant has admitted that the defendant company is a sick industrial company, financially in a crippled condition, seeking the relief by referring the matter to the Board for Industrial and Financial Re-construction under the Sick Industrial Companies (Special Provisions) Act, 1986. So much so, it was the case of the defendant that under S. 16 of the Sick Industrial Companies (Special Provisions) Act, 1986, proceedings were taken to the Board for Industrial and Financial Re-construction and that inasmuch as the same is pending and the reliefs are going to be granted, it was the contention of the defendant among the other pleas that no legal proceedings, including the present application and suit are entertainable in this court and that as such, the bar provided in the abovesaid Act is squarely applicable to the present case also. In this context of admitting that the defendant, public limited company is a sick industrial unit and the relief and concession for the said factory are being initiated before the Board for Industrial and Financial Re-construction, under S. 16 of the Sick Industrial Companies (Special Provisions) Act, 1986, hereinafter called the Act, S. 22 has become more relevant which reads as follows:— (1) Where in respect of an industrial company, an inquiry under S. 16 is pendingor any scheme referred to under S. 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under S. 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 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 fur ther, except with the consent of the Board or, as the case may be.” Sub-S. 3 of S. 22 provides as follows:— “During the period of consideration of any scheme under S. 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”. Then, Sub-Clause (4) provides as follows: “Any declaration made under Sub S.(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 havingeffect 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.” 8. It was the specific contention of the defendant made in Para 8 of his counter-affidavit that the defendant company has submitted an application to the Board for Industrial and Financial Reconstruction, under S. 16 of the Act for the relief and concession from the term loan institutions and that accordingly, the financial institutions have also agreed in principle to allow the relief and concession sought therein and has issued a letter to this effect and that therefore, the defendant is financially sound to carry out its regular business transaction and that as such, the trade creditors are fully secured and insured and that the creditworthiness of the respondent is not in stake in any manner as the plant and machineries of the defendant have been imported from foreign countries taking huge value and that in accordance with the same, the averments of the plaintiff/applicant are quite baseless. 9. Having perused the provisions of Ss. 16 and 22 of the Sick Industrial Companies (Special Provisions) Act, I am of the firm view that masmuch as, the proceedings before the Board for Industrial and Financial Re-construction is pend ing and that the claim of the defendant has not been refuted so far, the embargo provided in S. 22 is squarely made applicable to the present proceedings initiated by the plaintiff/applicant and that accordingly, the proceedings in this court, for the relief of the prohibitory order against the garnishees from paying the amount due to the defendant cannot be entertained. It is not that the applicant/plaintiff is remedyless. But, he has to wait till the proceedings initiated under the Act are over. It is not that the applicant/plaintiff is remedyless. But, he has to wait till the proceedings initiated under the Act are over. But, in the meanwhile, the present ap plication squarely comes under the mischief of S. 22 of the Act above referred. On a careful perusal of the relevant provisions of S. 22 of the Act makes it clear that it has not been intended to subjugate the remedial measures contemplated under the provisions of order 38, Rule 5 and take away the rights of the affected party like the plain tiff herein, but to mellow down the rigour by suspending the proceedings for the limited period in furtherance of the remedies to be worked out in favour of a sick industrial company. Therefore, remedy provided under the Act is to be given priority in such circumstances, while considering the availability of extra-remedial measures provided under Order 38, Rule 5 of Civil Proce dure Code to the affected party. 10. One other aspect assumes significance in this case is that the suit itself is for the recovery of Rs. 1,62,557.18 against the defendant which is being seriously disputed. But, in para 15 of the affidavit, it has been averred that a sum of Rs. 9,34,746.90 approximately and another sum of Rs. 20,000/-totalling about 11,34,746.90 is payable by the garnishees herein to the defendant were sought to be prohibited for the claim of Rs. 1,62,557.18 which in my view is not proper and justifiable in the eye of law on the one hand in the context that the very claim of the plaintiff made in the suit is yet to be decided. 11. It may be noted that a similar relief was asked in an Application No. 395 of 1989 filed by the plaintiff against the present garnishees and other four companies and that as the same was agitated with more or less the same contentions, it was dismissed on 1-2-1989 by this court and that even in the appeal filed in O.SA. 35 of 1989, the order of rejection was confirmed. Having perused the grounds urged in this application by the plaitiff/applicant, I do not find any difference in the grounds urged between the one now made and the another made in Application No. 395 of 1989. 35 of 1989, the order of rejection was confirmed. Having perused the grounds urged in this application by the plaitiff/applicant, I do not find any difference in the grounds urged between the one now made and the another made in Application No. 395 of 1989. Regarding the contentions raised in the counter-affidavit that the finality of the accounts between the plaintiff and the defendant have not been arrived and yet to be looked into and that the various dues remained in the hands of the purchasers are to be collected by the plaintiff and so on which may have an effect in fixing the quantum of commission to the plaintiff/applicant has not been controverted on behalf of the applicant herein. So much so, having heard the counsel for both parties herein and the respective pleadings, established circumstances and the entire gamut of provisions of law, particularly provided in the Sick Industrial Company (Special Provisions) Act 4.986, I am not satisfied with the materials placed for granting the indulgence of this Court in issuing the prohibitory orders against the garnishees as asked for; but on the other hand, I am able to see that the bar provided in the said Act is squarely made applicable to the present proceedings initiated by the plaintiff and that further in the context of the suit claim is being seriously disputed, I am not inclined to accept the contentions made on behalf of the applicant herein. I am inclined to hold that the grounds urged in the affidavit filed in support of the petition is not adequate and sufficient, warranting to pass any order under Order 38, Rule 5 of Civil Procedure Code. 12. In the result, the application must fail and hence it is dismissed, but there will be no order as to costs.