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2006 DIGILAW 1409 (DEL)

AUTO-PINS (INDIA) LTD. v. GRINDWELL NORTON LTD.

2006-08-22

SANJAY KISHAN KAUL

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SANJAY KISHAN KAUL, J. ( 1 ) THE respondent filed a suit for recovery against the petitioner company under the provisions of Order 37 of the Code of Civil Procedure, 1908 (hereinafter referred to as the said Code ). The petitioner, defendant in the suit, filed an application under Section 22 of the Sick Industrial (Special Provisions)Companies Act, 1985 (hereinafter referred to as, 'the SICA' ). The application was contested by the respondent and in terms of the impugned order dated 11. 3. 2005 the same was rejected. The petitioner thereafter filed an application seeking recall of that order, which was also dismissed vide order dated 2. 5. 2006. The petitioner has thus preferred the present proceedings under article 227 of the Constitution of India. ( 2 ) THE submission of the learned counsel for the petitioner is that in view of the application filed by the petitioner under Section 15 (1) of the SICA and the same being registered by the BIFR, an enquiry as contemplated under Section 16 of the SICA is now pending before the Board. It is, thus, submitted that in view of the judgement of the Apex Court in Real Value Appliances Ltd. etc. Vs. Canara Bank and Ors. (1998) 5 SCC 554 , the suit could not proceed further and was liable to be stayed. ( 3 ) A perusal of the impugned order shows that the suit had been filed for recovery of Rs. 4,85,630/- against the petitioner. The principal amount claimed in the suit is Rs. 3,63,654. 31 apart from interest. It is not disputed that the only mention in the scheme proposed by the petitioner sets out an amount of rs. 4,000/- as due to the respondent. It is, thus, obvious that the same is more in the nature of the formality rather than any admission of debt due whether in whole or in part. ( 4 ) THE Trial Court took note of the judgement of the Supreme Court in M/s. Chamundi Mopeds Ltd. Vs. Church of South India Trust Association Madras AIR 1992 sc 1439 and relied upon the observations to the effect "it would be reasonable to hold that the bar of embargo can apply to such of those dues reckoned or included in the sanctioned scheme. Church of South India Trust Association Madras AIR 1992 sc 1439 and relied upon the observations to the effect "it would be reasonable to hold that the bar of embargo can apply to such of those dues reckoned or included in the sanctioned scheme. " It, thus, came to the conclusion that the petitioner was required to bring on record at least proof to show that the due sought to be recovered by way of execution application or decree has been included in the proposal / scheme. The petitioner had failed to produce any such document. ( 5 ) IN the subsequent order dated 2. 5. 2006, the Trial Court has taken note of the judgement in Real Value Appliances Ltd. etc. case (supra ). A perusal of the judgement in Real Value Appliances Ltd. etc. case (supra)shows that the Supreme Court was primarily concerned with the stage at which the provisions of Section 22 of the SICA came into force. It was, thus, held that the proceedings under Section 16 of the SICA commences as soon as the registration of the reference is completed after scrutiny and from that time proceedings against the companies assets shall remain suspended under Section 22 of the SICA till final orders are passed by the BIFR. ( 6 ) THE question, however, raised in the present proceedings is as to the consequences of non-inclusion of the debt claimed by the respondent even in the petition filed by the petitioner. It is trite to say that if the principal amount or any amount thereupon is included as amount due to the company, the plaintiff cannot claim that the suit must proceed because interest claim is not included or some part of the claim of the plaintiff is not included. However, the situation would be different when the petitioner does not include the claim of the respondent at all in the petition submitted before the Board. It may be clarified that in the details of Court cases given with the petition the name of respondent is mentioned at serial No. 3 but an amount of Rs. 4,000/- is shown which is obviously more of a formality rather than the acknowledgement of any liability. Thus leave aside the stage at which the scheme is formulated, the petitioner does not take into account any of the amounts due to the respondent even when the petition is filed. 4,000/- is shown which is obviously more of a formality rather than the acknowledgement of any liability. Thus leave aside the stage at which the scheme is formulated, the petitioner does not take into account any of the amounts due to the respondent even when the petition is filed. It is in the context of the aforesaid that the observations in M/s. Chamundi Mopeds Ltd. case (supra) became material. ( 7 ) LEARNED counsel for the petitioner sought to refer to the judgement of the learned single Judge of this Court in S. M. Singhvi Vs. Bestavision Electronics ltd. 2003 (V) AD Delhi 73 dealing with the issue of stay of a winding up petition in view of the proceedings initiated before the Board. However a reading the the judgement shows that there is no ratio laid down or conclusion reached as to the effect of the judgement in Deputy Confidential Tax Officer Vs. Corromandal Pharmaceuticals AIR 1997 SC 2027 on such an issue, though there are some observations to that effect. In Corromandal Pharmaceuticals case (supra), it has been observed that the language of Section 22 of SICA is of wide import regarding suspension of legal proceedings from the moment an enquiry is started till after implementation of the scheme or the disposal of an appeal under section 25, but bar would apply only to such of those dues reckoned or included in the sanctioned scheme. ( 8 ) IN my considered view, the objections of SICA as laid down by the Apex Court make it clear that the same is to protect a company which has become financially unviable from recovery of amounts due till such time as a scheme for rehabilitation is worked out. The benefit is not available where the debt is not even included in any form in the petition filed by the petitioner much less under the scheme. It would also be appropriate to draw strength from the observations made in Sirmor Sudburg Auto Ltd. Vs. Kuldeep Singh Lamba (1998) 91 company Cases 727 where learned single Judge of this Court (R. C. Lahoti, J. , as he then was) had opined that in order for a party to succeed in a stay of legal proceedings under Section 22 of the SICA mere pendency of enquiry would not suffice but the dues must be reckoned in the sanctioned scheme. The view taken was followed in Cement Corporation of India Vs. Manohar Bhasin 82 (1999) DLT 443 by another learned single Judge of this Court. The same judicial trend is available in the Division Bench judgment of the Andhra Pradesh High Court in vibgyar Ink Chem (Pvt.) Ltd. v. Safe Pack Polymers Ltd. , (1998) 3 Com. Cas. 407, where Justice Umesh C. Banerjee as Chief Justice of that High Court (as he then was) has inter alia observed as follows:"it is not the intention of the law court, in our view, to expand the scope of legislation and one ought not to read anything further than one reads in plain and simple manner. Admittedly, the company, while the matter is pending before the Board, has enjoyed the benefits of these supplies. The Board has not been able to consider these claims. Obviously, the scheme as framed also has no reference to the claim of the petitioner, a creditor. Does that mean and imply the petitioner-creditor shall have to wait until after the fullest implementation of the scheme, in terms of the scheme, as sanctioned by the Board" It is an independent transaction de hors the scheme and obviously cannot thus be covered within the ambit of Section 22 of the 1985 Act. " ( 9 ) IN view of the aforesaid facts and circumstances, I am of the considered view that the impugned orders cannot be said to suffer from patent error or erroneous exercise of jurisdiction. Dismissed.