IMPORTANT POINT
The date of making reference is relevant u/s 22 SICA, not the date of registration of reference by BIFR.

Judgment :-

S.B. Sinha, J.

1. Leave granted.

2. This appeal is directed against a judgment and order dated 29.1.2008 passed by the High Court of Karnataka at Bangalore in RFA No.982 of 2007 whereby and whereunder judgment and decree dated 21.12.2006 passed by the Civil Judge, Senior Division, decreeing the suit being OS No.728 of 2002 filed by the respondent was affirmed.

3. A partnership firm known as M/s. Kashmiri Rice Industries has its place of business at Hangal. The said firm entered into a contract for supply of paddy husk with the appellant. Inter alia, on the premise that appellant herein, despite supply of the agreed quantity of paddy husk, failed and/or neglected to pay the price therefore, the respondent filed a suit for recovery of a sum of Rs.2,61,696/-in the Court of Civil Judge, Hangal.

One of the contentions raised by the appellant in the said suit was that as the appellant-company has become a sick industry within the meaning of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, `the Act) and a reference having been made to the Board of Industrial and Financial Reconstruction (BIFR) in terms of the provisions of the Act, the suit was not maintainable.

The learned Trial Judge, inter alia, framed the following issue :

"Do defendants prove that suit is also hit by Section 22 of Industrial Companies (Special Provisions) Act as contended in Para 7 of W.S. Preliminary issue?"

From a perusal of the judgment, it appears that no argument was advanced before the learned Trial Judge on the said issue. However, it was opined that Section 22 of the Act provides for suspension of the proceedings and in view of the fact that no final order has been passed by the BIFR declaring the appellant as a sick industry, mere reference would not suffice. A finding of fact furthermore was arrived at that the transaction in question being subsequent to the reference, Section 22 of the Act would have no application.

4. An appeal preferred thereagainst has been dismissed by the High Court by reason of the impugned order. The High Court, although noticed issue No.3, did not record any positive finding thereupon.

5. Mr. R.S. Hegde, learned counsel appearing on behalf of the appellant, would urge that the learned Trial Judge as also the High Court committed a serious error insofar as they entered into a wrong finding of fact that the transaction in question is subsequent to the reference. It was furthermore contended that a plain reading of Section 22 of the Act would clearly establish that the jurisdiction of the Civil Court is ousted thereby.

6. Mr. Kashi Vishweshwar, learned counsel appearing on behalf of the respondent, however, would support the impugned judgment.

7. Before adverting to the rival contentions of the parties, we may notice the following admitted facts.

Supply of husk during the period 17.9.2001 and 28.11.2001, the agreement wherefor was entered into on or about 6.9.2001. Reference to BIFR in terms of Section 16 of the Act was made on 27.12.2001. The said reference was registered by the BIFR on 20.03.2002. Respondent filed the suit on 17.12.2002. The learned Trial Judge, therefore, committed a manifest error in opining that the transaction in question was subsequent to the reference. It is also apparent from the record that respondent was aware of the fact that the appellant had made reference to the BIFR in terms of the provisions Act.

8. The Act was enacted to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto.

Indisputably, thus, appellant is an industrial undertaking. Chapter I