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2013 Supreme(Bom) 356
High Court of Judicature at Bombay
R.D. DHANUKA, J.
Tata Capital Financial Services Limited
Versus
Ramasarup Industries Limited & Others
Chamber Summons No. 60 of 2013 In Arbitration Petition No. 707 of 2012
Decided on: 13-02-2013
For the Petitioner:Dr. Birendra Saraf, a/w. Ms. Leena Desai, Arvind Singh Gautama, i/b. MDP & Partners, Advocates.
For the Respondents:R1 to R5, Dipesh Siroya, Advocate.
Headnote:
SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 - SECTION 22 - ARBITRATION AND CONCILIATION ACT, 1996 - SECTION 9 - STAY OF EXECUTION - CONSENT ORDER - APPOINTMENT OF RECEIVER - SALE OF MORTGAGED PROPERTIES - REFERENCE TO BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) - PROTECTION TO GUARANTORS - SCOPE OF SECTION 22 - DISTINCTION BETWEEN 'SUIT' AND 'PROCEEDINGS' - INTERPRETATION OF STATUTES - OBJECT OF THE ACT - EFFECT OF 1994 AMENDMENT - APPLICABILITY TO ARBITRATION PROCEEDINGS - RATIO DECIDENDI.
Fact of the Case:
The petitioner, a financial institution, had sanctioned invoice discounting facility to the respondent company. The respondent company defaulted in making repayment of the diverse amounts. The petitioner filed an arbitration petition under section 9 of the Arbitration and Conciliation Act, 1996, and the parties filed consent minutes duly signed by their respective advocates. The court disposed of the arbitration petition in terms of the consent minutes and appointed a private receiver to sell the mortgaged properties. The respondent company filed a reference before the BIFR under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), and sought a stay of the execution and implementation of the consent order passed in the arbitration petition.
Finding of the Court:
The court held that the proceedings under section 9 of the Arbitration Act, 1996, were not barred by section 22(1) of SICA. The court distinguished between the terms 'suit' and 'proceedings' used in section 22(1) of SICA and held that the bar under section 22(1) was applicable only to suits for recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loan or advances granted to the industrial company. The court further held that the steps taken by the private receiver were for the implementation of the consent order passed in the proceedings filed under section 9 of the Arbitration Act, 1996, which was not affected by any bar under section 22(1) of SICA.
Issues: Whether the proceedings under section 9 of the Arbitration and Conciliation Act, 1996, were barred by section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
Ratio Decidendi: The court held that the proceedings under section 9 of the Arbitration Act, 1996, were not barred by section 22(1) of SICA. The court distinguished between the terms 'suit' and 'proceedings' used in section 22(1) of SICA and held that the bar under section 22(1) was applicable only to suits for recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loan or advances granted to the industrial company. The court further held that the steps taken by the private receiver were for the implementation of the consent order passed in the proceedings filed under section 9 of the Arbitration Act, 1996, which was not affected by any bar under section 22(1) of SICA.
Final Decision: The court dismissed the chamber summons filed by the respondent company seeking a stay of the execution and implementation of the consent order passed in the arbitration petition.
By this Chamber Summons filed by the respondents, respondents have applied for stay of the execution and implementation of the order dated 19th June, 2012 passed in Arbitration Petition No. 707 of 2012 by which this Court had disposed of the arbitration petition filed under section 9 of the Arbitration and Conciliation Act, 1996 in terms of the consent terms filed by the parties. Some of the relevant facts for the purpose of deciding this Chamber Summons are as under:-
2. On 3rd March, 2008, petitioner had sanctioned invoice discounting facility of an amount not exceeding Rs.20,00,00,000/- in favour of the 1st respondent on the terms and conditions setout in the sanction letter. On 27th August, 2009 at the request of the 1st respondent, the petitioner sanctioned the renewal of the credit facility of an amount not exceeding Rs.20 crores to the respondent no.1. On 23rd September, 2010, the petitioner sanctioned renewal of the credit facility for further period till 31st December, 2010 and not exceeding Rs. 20 crores towards working capital requirements. Respondent No.2 executed personal guarantee in favour of the petitioner on 23rd September, 2010 guaranteeing the due repayment of all amounts payable by the respondent no.1 to the petitioner. Respondent nos. 3, 4 and 5 executed corporate guarantee on 4th November, 2010 in favour of the petitioner and also executed simple mortgage of their respective immoveable properties in favour of the petitioner. It is the case of the petitioner that the respondents committed default in making repayment of the diverse amounts.
3. By letter dated 3rd April, 2012, the 1st respondent admitted its liabilities to pay entire outstanding amount but informed that it was in discussion with some strategic investor for investment in the 1st respondent company and requested the petitioner to extend co-operation and support in that regard. The petitioner thereafter vide its advocates notice dated 4th May, 2012 called upon the respondents to repay the loan amount with interest and not to proceed with any sale of the properties without written consent of the petitioner and without first paying all outstanding dues of the petitioner. The respondents did not give any response to the said notice nor repaid any amount. By letter dated 3rd April, 2012, the 1st respondent informed the petitioner that they had proposed to enter into transaction with some strategic investor for investment in the company and requested for co-operation in respect of repayment of the outstanding amounts.
4. The petitioner thereafter came across a circular issued by the 1st respondent for its shareholders thereby proposing to pass a resolution for approval of sale and transfer of the company’s Wind Mill located in Dhule, Maharashtra and also some of its other assets. The petitioner accordingly filed petition (707 of 2012) under section 9 of the Arbitration and Conciliation Act, 1996 inter-alia praying for appointment of the Court Receiver and injunction and praying for deposit of Rs. 25,30,32,482.69/- in this court.
5. Arbitration Petition (707 of 2012) filed by the petitioner appeared on the board of S.J. Kathawala, J. on 19th June, 2012 when both parties filed consent minutes duly signed by their respective advocates. This court disposed of the said arbitration petition in terms of the said consent minutes. This court referred the disputes and difference to Mr.J.P.Sen, Advocate. By consent of both parties, this court appointed Mr.Abhijeet Deb, Advocate practicing in Kolkata as a private Receiver/Commissioner in respect of the properties described in Ex. “U” to the petition. Both parties agreed that the said private receiver shall sell the mortgaged properties by public auction or private treaty preferably, within a period of six months from the date of the said order or such extended time as the petitioner may agree. The respondents agreed and undertook that till such time, the mortgaged properties were sold, they shall not in
