IMPORTANT POINT
Execution of award made by Council under Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 would attract Section 22 of Sick Industrial Companies Act.

Headnote:Sick Industrial Companies (Special Provisions) Act, 1985—Section 22—Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993—Sections 6(2) and 10—Respondent No. 2, a small scale industry supplied goods to appellant—Appellant Company was declared as sick unit by Board for Industrial and Financial Construction and rehabilitation scheme was framed—Respondent No. 2 filed claim petition before Industry Facilitation Council—Council passed award in favour of respondent No. 2 rejecting objection of appellant—Execution of award—Civil Court attached bank account of appellant—Writ petition filed by appellant was dismissed by High Court and order was upheld in appeal by Division Bench—High Court proceeded on premise that 1993 Act would prevail over 1985 Act—Appeal—Amount awarded in favour of Respondent by Council found mention in the sanctioned scheme which was under implementation—Once award amount was included in Scheme approved by Board, Section 22 of 1985 Act would apply—Impugned judgment was liable to be set aside.
       Held : The 1993 Act was enacted to provide for and regulate the payment of interest on delayed payments to small scale and ancillary industrial undertakings and for matters connected therewith.(Para 13)
       The provisions of the 1993 Act, therefore, do not envisage a situation where an industrial company becomes sick and requires framing of a scheme for its revival.(Para 14)
       It is no doubt true that an award in relation to a claim of a small-scale industry if made by the Council would be governed by the provisions of the Arbitration and Conciliation Act, 1996 (for short "the 1996 Act").(Para 15)
       The 1985 Act is a complete code by itself. Section 22 of the 1985 Act provides for special provisions. Sub-section (1) of Section 22 was amended in the year 1994 by Act No. 12 of 1994 which reads as under:
       "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 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."(Para 16)
       The said provision, thus, mandates that no proceeding inter alia for execution, distress or the like against any of the properties of the industrial company and no suit for recovery of money or for the enforcement of any security, shall lie or be proceeded with further, except with the consent of the Board or as the case may be, the Appellate Authority. The said statutory injunction will operate when an inquiry had been initiated under Section 16 or a scheme referred to under Section 17 is under preparation and/or inter alia a sanctioned scheme is under implementation. It is not disputed before us that the amount awarded in favour of the Respondent by the Council finds specific mention in the sanctioned scheme which is under implementation.(Para 17)
       The award of the Council being an award, deemed to have been made under the provisions of the 1996 Act, indisputably is being executed before a Civil Court. Execution of an award, beyond any cavil of doubt, would attract the provisions of Section 22 of the 1985 Act. Whereas an adjudicatory process of making an award under the 1993 Act may not come within the purview of the 1985 Act but once an award made is sought to be executed, it shall come into play. Once the awarded amount has been included in the Scheme approved by the Board, in our opinion, Section 22 of the 1985 Act would apply. (Para 18)
       For the reasons aforementioned, the impugned judgment cannot be sustained. Before parting with this case, however, we may observe that we have not adverted to the question raised by the learned counsel for the Respondents as to whether the Board while implementing the scheme could reduce the quantum of the liability of creditors, as we are of the opinion that such a contention need not be gone into at this stage. It will, therefore, further be open to the Respondent No. 2 to approach the Board, if any occasion arises therefor. (Para 35)

JUDGMENT

S.B. Sinha, J.—Leave granted.

2. The Appellant herein is a public limited company engaged in business of manufacturing electronic fans and fuel injection equipments. Respondent No. 2 is a small scale industry. It manufactures copper wires. It supplied its products to the Appellant herein during the period 28th December, 1996 and 3rd June, 2000. As the Appellant Company became sick, its Board of Directors made a reference in terms of Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short ‘the 1985 Act’) on 8.4.1994. The Appellant Company was declared as sick unit by the Board for Industrial and Financial Construction (for short "the Board"). A rehabilitation scheme was framed by the Board but it was declared to have failed by an order on 12.7.2001. By reason of the said order, however, Industrial Development Bank of India (IDBI) was appointed as an operating agency. A fresh report was submitted by the said operating agency on 20th March, 2003 which was accepted by the Board whereupon a fresh rehabilitation scheme was sanctioned on 8.4.2003.

3. In the meanwhile, the Respondent No. 2 herein filed a claim petition before the Industry Facilitation Council (for short "the Council") Respondent No. 1 herein in terms of the provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (for short "the 1993 Act"). Before the Council, the Appellant herein raised a plea that it had been declared to be a sick company by the Board and as such the matter should not be proceeded further. The Council, however, opined that only because the Appellant Company has been declared sick by the Board, it would not bind the Council to take a decision in the matter. It passed an award directing:

"That upon the submissions made by both the parties in the above case and in the light of contentions raised it is prayed that the delay of two years to four years was caused by the respondents for making the payment to the petitioner, which is enough. Therefore, Council has passed the order that an amount of Rs. 10,92,253.00 and one and half percent interest of PLR of State Bank of India is due to the Petitioner Messrs. Diamond Wire Industries, Ratlam, of the Respondent Messrs. Jay Engineering Works Limited, New Delhi."

4. The said award of the Council was put in execution. The bank account of the Appellant was attached by the District Court, Ratlam. A writ petition was filed by the Appellant herein before the Madhya Pradesh High Court questioning the same which by reason of the impugned judgment has been dismissed by a learned Single Judge. A Letters Patent Appeal preferred thereagainst was dismissed by the impugned judgment.

5. The High Court in its impugned judgment proceeded on the premise that the 1993 Act could prevail over the 1985 Act.

6. Mr. S. Ganesh, learned senior counsel appearing on behalf of the Appellant, at the outset, drew our attention to the fact that the award made by the Council in favour of the Respondent had been taken into consideration in the revised Scheme itself and as such the award of the Council was non-executable. It was urged that both the 1985 Act and 1993 Act operate in different fields and in that view of the matter, the question that the 1993 Act prevailing over the 1985 Act would not arise in the instant case.

7. Mr. Sushil Kumar Jain, learned counsel appearing on behalf of the Respondents, on the other hand, submitted that the Scheme approved by the Board in 2003 is not applicable to the case of the Respondents. It was submitted that in any event by reason of the said Scheme the liability of the creditors could not be reduced.

8. It is not in dispute that the award was made by the Council in favour of the Respondent No. 2. However, it is also not in dispute that the Board in terms of its order dated 8.4.2003 approved the Scheme which inter alia envisaged the following:

"(xi) Rs. 462 lakhs for Settlement of "Dormant Trade Creditors" on the bas

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2006 Supreme(SC) 854

IMPORTANT POINT Execution of award made by Council under Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 would attract Section 22 of Sick Industrial Companies Act.

Cases Referred (6)

IMPORTANT POINT
Execution of award made by Council under Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 would attract Section 22 of Sick Industrial Companies Act.